UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1996
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _____ to _____
Commission File Number 0-25230
FIRST WASHINGTON REALTY TRUST, INC.
(Exact name of registrant as specified in its charter)
Maryland 52-1879972
(State of Incorporation or Organization) (I.R.S. employer
identification no.)
4350 East-West Highway (301) 907-7800
Suite 400 (Registrant's telephone
Bethesda, MD 20814 number, including area code)
(Address of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
Common Stock, $.01 par value New York Stock Exchange
9.75% Series A Cumulative Participating
Convertible Preferred Stock
Liquidation Preference of $25 per Share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. X
The aggregate market value of the voting stock held by non-affiliates of the
Registrant was approximately $119 million based on the closing price of such
shares on the New York Stock Exchange as of March 25, 1997.
The number of shares of the Registrant's Common Stock outstanding was 4,946,245
on March 25, 1997
DOCUMENTS INCORPORATED BY REFERENCE
Part III - Portions of the definitive proxy statement for the Annual Meeting of
Shareholders presently scheduled to be held on May 16, 1997, to be filed
pursuant to Regulation 14A.
This report including Exhibits, contains 61 pages.
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC.
1996 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
Item
No. Page
PART I
1. Business......................................................... 1
2. Properties....................................................... 9
3. Legal Proceedings................................................ 16
4. Submission of Matters to a Vote of Security Holders.............. 16
PART II
5. Market for the Registrant's Common Equity and Related
Shareholder Matters.......................................... 17
6. Summary of Selected Financial Data............................... 21
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................ 22
8. Consolidated Financial Statements and Supplementary Data......... 28
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure..................................... 28
PART III
10. Directors and Executive Officers of the Registrant............... 29
11. Executive Compensation........................................... 29
12. Security Ownership of Certain Beneficial Owners and Management... 29
13. Certain Relationships and Related Transactions................... 29
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K......................................................... 29
<PAGE>
PART I
Item 1. Business
General
First Washington Realty Trust, Inc. (the "Company") is a fully integrated
real estate organization with expertise in acquisitions, property management,
leasing, renovation and development of principally supermarket-anchored
neighborhood shopping centers. The Company owns a portfolio of 39 retail
properties (the "Retail Properties") containing a total of approximately 4.1
million square feet of gross leasable area ("GLA") and two related multifamily
properties (the "Multifamily Properties") located in the Mid-Atlantic region
(the Retail Properties and the Multifamily Properties are collectively referred
to as the "Properties").
The Retail Properties are strategically located neighborhood shopping
centers principally anchored by well known tenants such as Giant Food, Safeway,
Shoppers Food Warehouse, Food Lion, A&P Superfresh, Winn Dixie, Weis Markets,
Acme Market, CVS/Pharmacy and Rite Aid. Neighborhood shopping centers are
typically open-air centers ranging in size from 50,000 to 150,000 square feet of
GLA and anchored by supermarkets and/or drug stores. The Retail Properties range
in size from approximately 3,000 square feet of GLA to approximately 335,000
square feet of GLA, and average approximately 100,000 square feet of GLA. The
anchor tenants typically offer daily necessity items rather than specialty
goods. Eight of the Retail Properties are relatively small in size, with less
than 50,000 square feet of GLA. Such properties do not have a large supermarket
or drug store anchor tenant, and as such may be subject to greater variability
in consumer traffic and operating performance.
Organization
The Company was formed in April 1994 to continue and expand the
neighborhood shopping center acquisition, management and renovation strategies
of First Washington Management, Inc. ("FWM"), which has been engaged in the
business since 1983. FWM was founded by Stuart D. Halpert, the Company's
Chairman, William J. Wolfe, President and Chief Executive Officer, and Lester
Zimmerman, an Executive Vice President (the "Principals").
On June 27, 1994, the Company consummated the private placement of
1,920,000 shares of 9.75% Series A Cumulative Participating Convertible
Preferred Stock, par value $0.01 per share ("Preferred Stock") and 1,282,051
shares of Common Stock, par value $0.01 per share ("Common Stock")
(collectively, the "June 1994 Offering"). Concurrently with the June 1994
Offering, the Company consummated a series of transactions that transferred
ownership of the Properties to First Washington Realty Limited Partnership, a
limited partnership in which the Company is the sole general partner (the
"Operating Partnership"). In addition, the Operating Partnership issued in
private placements the following securities convertible or exchangeable into
Common Stock or Preferred Stock of the Company: (i) Common Units of the
Operating Partnership ("Common Units"), exchangeable for shares of Common Stock;
(ii) Exchangeable Preferred Units of the Operating Partnership ("Exchangeable
Preferred Units"), exchangeable for shares of Preferred Stock; (iii) $25 million
in aggregate principal amount of 8.25% Exchangeable Debentures due 1999 (the
"Exchangeable Debentures"), exchangeable for shares of Preferred Stock; (iv) a
$2.0 million promissory note of the Operating Partnership (the "VC Note"),
exchangeable for shares of Preferred Stock; and (v) a $4.8 million promissory
note of the Operating Partnership (the "FS Note"), for shares of Common Stock.
The Properties acquired by the Company in the formation transactions include (i)
14 Retail Properties and two Multifamily Properties (together, the "FWM
Properties") that were managed by FWM prior to formation of the Company and
which were acquired from partnerships affiliated with FWM (the "FWM
Partnerships") and (ii) six Retail Properties (two of which were managed by FWM
prior to formation of the Company) that were acquired from third parties.
The Company currently owns approximately 83.8% of the partnership
interests in the Operating Partnership. All of the Company's operations are
conducted through the Operating Partnership. The Operating Partnership owns 27
Properties directly and 14 Properties are owned by lower tier partnerships or
limited liability companies in which the Operating Partnership owns a 99%
partnership interest and the Company (or a wholly-owned subsidiary of the
Company) owns a 1% partnership interest.
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The Operating Partnership also owns 100% of the non-voting Preferred Stock
of FWM (entitled to 99% of the cash flow from FWM). FWM provides management,
leasing and related services for the Properties. In addition to the Properties,
as of December 31, 1996, FWM provides management, leasing and related services
to 30 properties comprising approximately 3.2 million square feet of GLA for 16
third-party clients, including individual, institutional and corporate property
owners. FWM is referred to herein as the "Management Company".
The Company is incorporated in the State of Maryland with its headquarters
located at 4350 East-West Highway, Suite 400, Bethesda, Maryland. The telephone
number is (301) 907-7800. The Company has regional property management offices
located in North Carolina, Pennsylvania and Virginia. The Company has
approximately 70 employees.
Operating Strategies
The Company seeks to increase cash flow and distributions, as well as the
value of its portfolio, through intensive property management and strategic
renovation and expansion of its properties and the opportunistic acquisition of
additional neighborhood shopping centers within the Mid-Atlantic region, where
the Company has extensive knowledge of local market growth patterns and economic
conditions.
Intensive Management. A key aspect of the Company's strategy is improving
the operating performance of its properties over time through intensive property
management. The Company seeks to increase operating margins through a
combination of increasing revenues (through increased occupancy and/or rental
rates), maintaining high tenant retention rates (i.e., the percentage of tenants
who renew their leases upon expiration), and aggressively managing operating
expenses.
The Company believes that, as a fully integrated real estate organization
with both owned and third-party managed properties, it enjoys significant
operating efficiencies relative to many of its competitors that operate smaller,
fragmented portfolios. These operating efficiencies are the result of economies
of scale in operating expenses, more effective leasing and marketing efforts,
and enhanced tenant retention levels. The Company also benefits from effectively
spreading certain fixed property management and leasing costs over its entire
owned and third-party managed portfolio. Management believes that the scope of
the Company's portfolio, combined with the Principals' professional and
community ties to the Mid-Atlantic region, enables the Company to develop
long-term relationships with national and regional tenants which occupy multiple
properties in its portfolio, which improves occupancy rates and tenant retention
levels.
Strategic Renovation and Expansion. The Company seeks to increase
operating results through the strategic renovation and expansion of certain of
the Properties. The Retail Properties are typically adaptable for varied tenant
layouts and can be reconfigured to accommodate new tenants or the changing space
needs of existing tenants. In determining whether to proceed with a renovation
or expansion, the Company considers both the cost of such expansion or
renovation and the increase in rent attributable to such expansion or
renovation. The Company believes that the Retail Properties will provide
opportunities for renovation and expansion.
The following table sets forth information with respect to the Company's
recent and ongoing renovations and expansions:
<TABLE>
<S> <C> <C> <C> <C>
Estimated
Completion Estimated Additional
Name Description Date Cost Square Feet
1996 Completed
Projects:
Centre Ridge Expansion -
Sears Paint & Hardware Completed $950,000 24,500
Fox Mill Expansion -
Giant Food Completed -(1) 10,560
Glen Lea Facade and
common area renovation Completed 182,500 -
Kenhorst Plaza Expansion -
Sears Paint & Hardware Completed 1,250,000 24,440
Laburnum Square Facade and
common area renovation Completed 182,600 -
Potomac Plaza Facade and
common area renovation Completed 400,000 -
Takoma Park Expansion -
Shoppers Food Warehouse Completed -(1) -
</TABLE>
2
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
1997 Projects:
Centre Ridge Expansion -
In-line retail First Quarter 1997 $ 455,000 9,900
Firstfield Facade and
common area renovation First Quarter 1997 122,000 -
First State Expansion -
Shop Rite Supermarket First Quarter 1997 -(1) 2,075
Laburnum Square Expansion -
Hannaford Bros. First Quarter 1997 700,000 14,000
Takoma Park Facade and
common area renovation Second Quarter 1997 868,000 -
Valley Centre Expansion -
T.J. Maxx First Quarter 1997 625,000 8,000
Brafferton Facade and
common area renovation Second Quarter 1997 212,000 -
Kenhorst Plaza Expansion -
Redner's Supermarket Second Quarter 1997 -(1) 8,000
Southside
Marketplace Facade and
common area renovation Second Quarter 1997 208,000 -
Laburnum Park Expansion -
Ukrops Supermarket Fourth Quarter 1997 -(1) 10,000
Valley Centre Purchase of land
and development
of pad site Fourth Quarter 1997 1,058,000 6,800
</TABLE>
(1) Paid by tenant.
As a fully-integrated real estate organization, the Company maintains
expertise in the development of new retail properties, having developed three of
the FWM Properties containing approximately 525,000 square feet of GLA.
Management believes the Company's principal anchor tenants and others present
the Company with development opportunities which the Company may pursue.
Opportunistic Acquisitions. Another principal component of the Company's
strategy is the acquisition of additional neighborhood shopping centers within
the Mid-Atlantic region. The Company will seek to acquire properties which are
strategically located along major traffic arteries in well-established, densely
populated communities. The Company typically selects properties in locations
where it believes the supply of developable land and zoning restrictions impede
the development of competing shopping centers and where tenants' location
alternatives are limited.
Through its third-party management, leasing and related service business
and network of regional management and leasing offices, the Company is familiar
with local conditions in its given markets. Because the Company's third-party
clients frequently seek assistance with the revitalization and disposition of
the properties, the Company believes it is in a unique position to ultimately
acquire such properties. For example, prior to the formation of the Company, FWM
provided property management and leasing services for two of the six properties
acquired in the June 1994 offering and has subsequently acquired another
property from a third-party client. The Company believes opportunities for
neighborhood shopping center acquisitions are particularly attractive at this
time because of the fragmentation in ownership of such properties, the limited
amount of available capital for non-institutional owners of retail property, and
the decline in the construction of new retail properties.
When evaluating potential acquisitions, the Company will consider such
factors as: (i) economic, demographic, and regulatory conditions in the
property's local and regional market; (ii) the location, construction quality,
and design of the property; (iii) the current and projected cash flow of the
property and the potential to increase cash flow; (iv) the potential for capital
appreciation of the property; (v) the terms of tenant leases, including the
relationship between the property's current rents and market rents and the
ability to increase rents upon lease rollover; (vi) the occupancy and demand by
tenants for properties of a similar type in the market area; (vii) the potential
to complete a strategic renovation, expansion, or retenanting of the property;
(viii) the property's current expense structure and the potential to increase
operating margins; (ix) the ability of the Company to subsequently sell or
refinance the property; and, (x) competition from comparable retail properties
in the market area. The Company successfully completed the acquisition of six
new properties in connection with the June 1994 Offering, purchased an
additional seven properties during 1995 and an additional nine properties in
1996. In addition, the Company has acquired four new properties as described
below in "Recent Developments".
Recent Developments
On December 2, 1996, the Company completed a public offering of 1,500,000
shares of Common Stock (the "December 1996 Offering"). The shares of stock were
priced at $21.75 per share, resulting in gross offering proceeds of $32.6
million. The Company netted $30.2 million after deducting the underwriters
discount and offering expenses of $2.4 million.
On December 30, 1996, an additional 155,000 shares of Common Stock were
issued pursuant to the exercise of a portion of the underwriters over-allotment
option. The Company received additional proceeds of $3.2 million net of
underwriters discount.
3
<PAGE>
On December 19, 1996, the Company acquired Kings Park Shopping Center
located in Burke, Virginia for an approximate price of $5.7 million. The center
is anchored by Giant Food and CVS/Pharmacy. The acquisition was financed through
the assumption of a $4.3 million first trust mortgage, issuance of approximately
36,000 Common Units to the seller of the property with a value of $0.8 million
and $0.6 million cash. The mortgage loan bears interest at 9.00% per annum, is
self amortizing over a 17 year period, and is due November 2014.
On December 27, 1996, the Company acquired Newtown Square Shopping Center
located in Newtown Square, Pennsylvania, for an approximate price of $11.7
million. The center is anchored by Acme Markets and Thrift Drug.
The property was financed from the proceeds of the December 1996 Offering.
On December 30, 1996, the Company acquired Northway Shopping Center located
in Millersville, Maryland for an approximate price of $9.1 million. The center
is anchored by Metro Foods and Rite Aid. The acquisition was financed through
the assumption of a $7.8 million mortgage, issuance of approximately 48,000
Common Units to the seller of the property with a value of approximately $1.1
million and $0.2 million in cash. The mortgage loan of $7.8 million was
subsequently split into two loans. A first trust mortgage loan in the amount of
$6.0 million bears interest at 8.5% per annum and is payable monthly based on a
25 year amortization schedule. The loan is due in January 2007. A second trust
mortgage in the amount of $1.8 million bears interest at 10.25% per annum and is
payable monthly based on a 28 year amortization schedule. The loan is due in
August 1999.
On January 24, 1997, the Company acquired City Line Shopping Center,
located in Philadelphia, Pennsylvania for an approximate price of $14.8 million.
The shopping center is anchored by Acme Market and Thrift Drugs. The acquisition
was financed through the issuance of approximately 143,000 Common Units to the
seller of the property with a value of approximately $3.4 million, assumed
mortgage indebtedness of approximately $10.0 million, new indebtedness of $1.0
million and $0.4 million in cash. The mortgage loan bears interest at 8.00% per
annum and is payable monthly based on a 24 year amortization schedule. The loan
is due in October 2005.
On January 28, 1997, the Company acquired Four Mile Fork Shopping Center
located in Fredericksburg, Virginia for an approximate price of $5.7 million.
The center is anchored by Safeway and CVS/Pharmacy. The acquisition was financed
with proceeds of the December 1996 Offering.
On January 28, 1997, the Company sold Thieves Market located in Alexandria,
Virginia. The center was sold for an approximate price of $1.2 million.
On January 31, 1997, the Company acquired Shoppes of Graylyn located in
Wilmington, Delaware. The price of the property was $7.2 million. The center is
anchored by Rite Aid. The acquisition was financed by a $3.8 million draw on the
Company's line of credit, $.4 million from the proceeds of the sale of Thieves
Market and $3.0 million in cash from the proceeds of the December 1996 Offering.
On March 19, 1997 (effective March 1, 1997), the Company acquired Ashburn
Farms Village Center located in Ashburn, Virginia for an approximate price of
$9.2 million. The center is anchored by Superfresh Supermarket. The acquisition
was financed with mortgage debt of $6.8 million, the issuance of approximately
55,000 Common Units to the seller of the property with a value of approximately
$1.2 million, the issuance of approximately 9,500 Preferred Units to the seller
of the property with a value of approximately $0.2 million and approximately
$1.0 million in cash. The mortgage loan bears interest at LIBOR + 1.5% per annum
and has an annual amortization of approximately $.1 million. The loan is due in
January 2001.
Financing Strategies
The Company intends to finance its acquisition and development activities
with the most appropriate sources of capital available at the time, which may
include undistributed funds from operations, the net proceeds from issuance of
equity securities (including Operating Partnership units), bank and other
institutional borrowings, sale of investments, and the issuance of debt
securities.
4
<PAGE>
Future borrowings may be either on a secured or unsecured basis. The
Company's ratio of debt to total market capitalization as of December 31, 1996
was approximately 47.0% (including the Exchangeable Debentures) and 40.3%
excluding the Exchangeable Debentures. The Company is subject to a number of
risks associated with borrowing, including the uncertainty associated with the
ability of the Company to refinance mortgage indebtedness of approximately
$110.1 million (including Exchangeable Debentures) at maturity dates ranging
from 1998 to 2002, that the indebtedness might be refinanced on less favorable
terms, that there is a lack of limitations on the amount of indebtedness that
the Company may incur, that interest rates might increase on variable rate or
refinanced indebtedness and that the Company's level of leverage may limit its
ability to grow through additional debt financing.
Marketing and Promotion
The Company engages in various marketing and promotional activities
designed to increase consumer traffic, retail sales and percentage rents at its
Properties.
Environmental Regulations
The Company, as an owner of real estate, is subject to various
environmental laws of Federal and local governments. Compliance by the Company
with existing laws has not had a material adverse effect on its financial
condition and management does not believe it will have such an effect in the
future. However, the Company cannot predict the impact of new or changed laws or
regulations on its current Properties.
All of the Properties have been subjected to Phase I environmental audits.
Such audits have not revealed, nor is management aware of any environmental
liability that management believes would have a material adverse impact on the
consolidated financial position, results from operations or liquidity, including
the three situations discussed below. Management is unaware of any instances in
which it would incur and be financially responsible for any material
environmental costs if any or all Properties were sold, disposed or abandoned.
Contamination caused by dry cleaning solvents has been detected in ground
water below the Penn Station Shopping Center. The source of the contamination
has not been determined. Potential sources include a dry cleaner tenant at the
Penn Station Shopping Center and a dry cleaner located in an adjacent property.
Sampling conducted at the site indicates that the contamination is limited and
is unlikely to have any effect on human health. The Company has made a request
for closure to the State of Maryland. Management believes that there is minimal
exposure at this time, and therefore has not recorded an accrued environmental
clean-up liability.
Petroleum has been detected in the soil of a parcel adjacent to Fox Mill
Shopping Center on property occupied by Exxon Corporation ("Exxon") for use as a
gas station (the "Exxon Station"). Exxon has taken steps to remediate the
petroleum in and around the Exxon Station, which is located down gradient from
the Fox Mill Shopping Center. Exxon has agreed to take full responsibility for
the remediation of such petroleum. Currently, the company is not aware of any
contamination of the Company's property and none is expected to occur. In
addition, a dry cleaning solvent has been detected in the groundwater below the
Fox Mill Shopping Center. A groundwater pump and treatment system, approved by
the Virginia Water Control Board, was installed in July 1992, and was operating
until recently when the Control Board ordered quarterly sampling to determine if
further remediation is necessary. The total cost of running the pumps and
monitoring the contamination is estimated to be approximately $75,000 and will
be expended over the course of the next three to four years. The previous owner
of the Fox Mill Shopping Center has agreed to pay for these costs and has agreed
to fully remediate the groundwater contamination to the extent required by the
applicable regulatory authority. Management believes that there is minimal
exposure at this time and, therefore, has not recorded an accrued environmental
clean-up liability.
A dry cleaning solvent has been detected in the soil and water below the
Four Mile Fork Shopping Center. Testing conducted at the site indicates that the
contamination is limited and is unlikely to have any effect on human health. In
addition, the previous owner of the Four Mile Fork Shopping Center has provided
an indemnification for all costs and expenses to obtain closure from the
responsible regulatory authority. Management believes that there is minimal
exposure at this time and, therefore, has not recorded an accrued environmental
clean-up liability.
5
<PAGE>
Insurance
Under their leases, the Company's tenants are generally responsible for
providing adequate insurance on the Properties they lease. The Company believes
the Properties are covered by adequate fire, flood and property insurance
provided by reputable companies. However, some of the Properties are not covered
by disaster insurance with respect to certain hazards (such as earthquakes) for
which coverage is not available or available only at rates which, in the opinion
of the Company, are prohibitive.
Policies with Respect to Certain Activities
The following is a discussion of certain investment, financing, conflicts
of interest and other policies of the Company. These policies have been
determined by the Company's Board of Directors and generally may be amended or
revised from time to time by the Board of Directors without a vote of the
stockholders.
Investment Policies
Investments in Real Estate or Interests in Real Estate. The Company intends
to conduct all its investment activities through the Operating Partnership for
as long as the Operating Partnership exists. The Company's investment objective
is to achieve stable and increasing cash flow available for distributions and,
over time, to increase portfolio value through the intensive management,
expansion and renovation of its properties, by developing or selectively
acquiring additional retail properties, or by expanding its third-party
management, leasing and related service business.
The Company expects to pursue its investment objectives through the direct
or indirect ownership of properties. The Company intends to primarily invest in
or acquire retail properties concentrated in the Mid-Atlantic region. However,
future development or investment activities will not be limited to any
geographic area or product type or to a specified percentage of the Company's
assets. The Company will not have any limit on the amount or percentage of its
assets invested in one property. Subject to the percentage ownership limitations
and gross income tests necessary for REIT qualification, the Company also may
invest in securities of entities engaged in real estate activities or securities
or other issuers, including for the purpose of exercising control over such
entities, although it has not done so in the past. The Company may acquire all
or substantially all of the securities or assets of other REITs or similar
entities where such investments would be consistent with the Company's
investment policies.
Investments in Others. The Company also may participate with other entities
in property ownership, through joint ventures or other types of ownership.
Equity investments may be subject to existing mortgage financing and other
indebtedness which have priority over the equity of the Company. The Company
will not enter into a joint venture or partnership to make an investment that
would not otherwise meet its investment policies.
Investments in Real Estate Mortgages. While the Company has emphasized
equity real estate investments, it may, in its discretion, invest in mortgages
and other real estate and related interests, including securities of other
REITs. The Company has not previously invested in mortgages or securities of
other REITs and the Company does not presently intend to invest to a significant
extent in mortgages or securities of other REITs. The Company may invest in
participating or convertible mortgages if it concludes that it may benefit from
the cash flow or any appreciation in the value of the subject property.
Interim Investments. The Company may invest funds in deposits at commercial
banks, money market accounts, certificates of deposit, government securities or
other liquid investments (including GNMA, FNMA, and FHLMC mortgage-backed
securities) as the Board of Directors deems appropriate.
Financing Policies
The Company's current policy is to maintain a ratio of debt (excluding the
Exchangeable Debentures) to total market capitalization of approximately 50% or
less. As of December 31, 1996, the ratio of the Company's debt (including the
Exchangeable Debentures) to total market capitalization was approximately 47.0%
and the ratio of the Company's debt (excluding the Exchangeable Debentures) to
total market capitalization was approximately 40.3%. The Company may, however,
from time to time re-evaluate its borrowing policies in light of then current
economic conditions, relative costs of debt and equity capital, the market value
of its properties, growth and acquisition opportunities and other factors. There
is no limit on the Company's ratio of debt-to-total market capitalization, and
6
<PAGE>
accordingly the Company may modify its borrowing policy and may increase or
decrease its ratio of debt-to-total market capitalization. The Company may raise
such capital through additional equity offerings, debt financing or retention of
cash flow subject to provisions in the Code concerning transferability of
undistributed REIT income, or a combination of these methods.
The Company presently anticipates that most additional borrowings would be
made through the Operating Partnership, although the Company may incur
indebtedness, the proceeds of which may be reloaned to the Operating
Partnership. Borrowings may be unsecured or may be secured by any or all of the
Properties and may have full or limited recourse to all or any assets of the
Company, the Operating Partnership or any new property-owning partnership. The
Company anticipates that all or substantially all of the proceeds of any future
sale of shares of capital stock will be transferred to the Operating Partnership
in exchange for Units in the Operating Partnership.
The Company intends to finance future acquisitions with the most
advantageous sources of capital available at the time, which may include
undistributed cash or the reinvestment of the proceeds from the disposition of
assets. The Company may incur additional indebtedness to finance acquisitions
through secured or unsecured borrowings. The Company may finance the properties
through the issuance of additional partnership units in the Operating
Partnership, shares of Common Stock, shares of Preferred Stock or other
securities. In addition to the Exchangeable Debentures, which rank senior to the
Common Stock and the Convertible Preferred Stock, the Company may also issue
additional securities senior to the shares of Common Stock and Convertible
Preferred Stock, including preferred shares and debt securities (either of which
may be convertible into beneficial interests in the Company or be accompanied by
warrants to purchase beneficial interest in the Company). The Company may
acquire properties subject to seller financing, existing loans secured by
mortgages, deeds of trust or similar liens. The Company may also obtain mortgage
financing for properties it acquires and refinance its existing properties.
To the extent the Company determines to obtain additional debt financing,
the Company may do so generally through mortgage loans secured by liens on
Properties. These mortgage loans may be recourse or non-recourse and may be
cross-collateralized or contain cross-default provisions. The Company does not
have a policy limiting the number or amount of mortgages that may be placed on
any particular property, but mortgage financing instruments usually limit
additional liens on such properties. Future credit facilities and lines of
credit may be used for the purpose of making acquisitions or capital
improvements or to provide working capital.
The Company may incur indebtedness for purposes other than the acquisition
of properties when it deems it advisable to do so. For example, the Company may
borrow to meet the REIT taxable income distribution requirement under the Code
if the Company has taxable income without receipt of cash sufficient to meet
these distribution requirements. For short-term purposes, from time to time the
Company may borrow under lines of credit or arrange for other short-term
borrowings from banks or other sources. The Company's financing strategy may be
reviewed from time to time and changed by the Board of Directors without a vote
of the stockholders.
Conflict of Interest Policies
The Company has adopted certain policies designed to reduce potential
conflicts of interest. In general, the Company will not: (i) engage in any
transaction with any director, officer or affiliate thereof involving the sale
or disposition of any equity interest in Company property to such person; or
(ii) sell any of the FWM Properties, without approval of a majority of the
Company's disinterested directors, and other transactions between the Company
and any director or officer, or affiliate thereof, generally must be approved by
a majority vote (or in certain cases by a unanimous vote) of the disinterested
directors (including a majority of the independent directors) as being fair,
competitive, and commercially reasonable and no less favorable to the Company
than similar transactions between unaffiliated parties under the same
circumstances. Such restrictions do not apply where such director, officer or
affiliate has acquired the property for the sole purpose of facilitating its
acquisition by the Company, and the total consideration paid by the Company does
not exceed the cost of the property to such person (where the cost is increased
by the person's holding costs and decreased by any income received by the person
from the property) and no special benefit results to such person.
Stuart D. Halpert, the Company's Chairman of the Board, and William J.
Wolfe, the Company's President and Chief Executive Officer, are subject to
certain conflict of interest restrictions as set forth in their employment
agreements with the Company. Certain of the Company's independent directors
generally may engage in real estate transactions which may be of the type
conducted by the Company, but it is not anticipated that such transactions will
have a material affect upon the Company's operations.
7
<PAGE>
There can be no assurance that these conflicts of interest policies will
successfully eliminate the influence of potential conflicts of interest, and, if
they are not successful, decisions could be made that might fail to reflect
fully the interests of all stockholders.
Development Policies
The Company anticipates that it will invest primarily in existing retail
properties, although it also may invest in newly constructed properties or
properties under development.
Policies with Respect to Other Activities
The Company has authority to offer shares of Common Stock and Convertible
Preferred Stock or other securities and to repurchase or otherwise reacquire its
shares of Common Stock and Convertible Preferred Stock or any other securities
and may engage in such activities in the future. The Company expects (but is not
obligated) to issue shares of Common Stock to holders of Common Units in the
Operating Partnership upon exercise of their exchange rights. The Company has no
outstanding loans to other entities or persons, including its officers and
trustees. The Company may in the future make loans to other persons with the
approval of the independent directors. The Company has not engaged in trading,
underwriting or agency distribution or sale of securities of other issues other
than the Operating Partnership, nor has the Company invested in the securities
of other issuers other than the Operating Partnership and Management Company for
the purpose of exercising control, and does not intend to do so.
The Company intends to make investments in such a way that it will not be
treated as an Investment Company under the Investment Company Act of 1940.
The Company has delivered and intends to continue to deliver annual reports
to its stockholders. At all times, the Company intends to make investments in
such a manner as to qualify as a REIT, unless because of circumstances or
changes in the Code (or the Treasury Regulations), the Board of Directors
determines that it is no longer in the best interest of the Company to qualify
as a REIT.
The Company's policies with respect to all of the above activities may be
reviewed and modified from time to time by the Company's Board of Directors
without a vote of the stockholders.
Certain statements in this Form 10-K may be deemed to be "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors which may cause the actual results of the Company to be
materially different from historical results or from any results expressed or
implied by such forward-looking statements. Such risks, uncertainties and other
factors include, but are not limited to, the following risks: risks associated
with borrowing; limitations on the level of distributions payable on the Common
Stock; the level of distributions on Common Stock that represent a return of
capital for federal income tax purposes; general real estate investment and
financing risks; risks associated with the Company's third-party business;
possible conflicts of interest; limitations on the stockholders' ability to
change control of the Company and failure of the Company to qualify as a REIT.
8
<PAGE>
Item 2 Properties
The following table sets forth certain information relating to the
Properties as of December 31, 1996.
FIRST WASHINGTON REALTY TRUST, INC.
PROPERTY SUMMARY TABLE
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Significant
Tenants
Land (Lease
Year Area Leasable % Expiration
Property Location Constructed (acr) Area(Sf) Leased Date)
Maryland
Bryans Road Bryans Road, Safeway(2014),
Shopping Center MD 1972 11.8 118,676 95.8 CVS/Pharmacy
(1998)
Capital Corner Landover,
Shopping Center MD 1987 4.1 42,625 93.4 Burger King
(2007), Dollar
Bills (2001),
Gallo Clothing
(2001)
Clinton Square Clinton,
Shopping Center MD 1979 2.0 18,961 100.0 Mattress
Discounters
(1997)
Clopper's Mill Germantown,
Shopping Center MD 1995 14.2 137,952 100.0 Shoppers Food
Warehouse
(2015, CVS/
Pharmacy(2006)
Festival At Baltimore,
Woodholme MD 1986 7.1 81,027 100.0 Sutton Place
Gourmet(2006),
Pier One
Imports(1999)
Firstfield Gaithersburg,
Shopping Center MD 1978 2.4 22,504 93.3 Jerry's Sub
(2010)
Northway Millersville,
Shopping Center MD 1987 9.6 91,276 100.0 Metro Foods
(2007), Rite
Aid (1997)
P.G. County Beltsville,
Commercial Park MD 1988 9.7 146,438 94.1 Montgomery
Automotive
(2006)
Penn Station District Heights,
Shopping Center(2) MD 1989 22.5 334,970 99.1 Safeway (N/A),
Service
Merchandise
(2006), Kid
City Clothing
(2003)
Rosecroft Temple Hills,
Shopping Center MD 1963 8.3 119,010 90.3 Food Lion
(2015), Rite
Aid (1998)
Southside Baltimore,
Marketplace MD 1990 9.1 125,146 95.1 Metro Foods
(2016), Rite
Aid (2001)
Takoma Park Takoma Park,
Shopping Center MD 1960 9.8 105,156 87.7 Shoppers Food
Warehouse(2011)
Valley Centre Owings Mills,
MD 1987 33.0 229,449 95.9 Weis Markets
(2002), TJ Maxx
(2007), Ross
(1998), Sony
Theatre (2005)
Virginia
Brafferton Center Garrisonville,
VA 1974 9.4 94,731 98.4 Giant Food
(2009)
Centre Ridge Centreville,
Marketplace VA 1996 10.9 107,354 100.0 A&P Superfresh
(2016), Sears
Paint&Hardware
(2007)
Chesapeake Alexandria,
Bagel Building VA Late 1800's 0.1 11,288 100.0 Chesapeake
Bagel Bakery
(1998)
Davis Ford Manassas,
Crossing VA 1988 20.8 147,622 88.5 Weis Markets
(2010), CVS/
Pharmacy(2000)
Fox Mill Reston,
Shopping Center VA 1977 14.0 97,119 97.0 Giant Food
(2018),
Blockbuster
(2001)
Glen Lea Richmond,
Shopping Center VA 1969 9.2 78,823 100.0 Winn Dixie
(2005), Revco
(2000)
Hanover Village Mechanicsville,
Shopping Center VA 1971 9.5 95,331 95.3 Rack `N Sack
(2008), Rite
Aid (1998)
Kings Park Burke, VA 1966 8.6 76,212 100.0 Giant (2013),
CVS/Pharmacy
(1998)
</TABLE>
9
<PAGE>
Item 2 Properties
FIRST WASHINGTON REALTY TRUST, INC.
PROPERTY SUMMARY TABLE
(Continued)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Significant
Tenants
Land (Lease
Year Area Leasable % Expiration
Property Location Constructed (acr) Area (Sf) Leased Date)
Laburnum Park(3) Richmond,
VA 1988 9.3 113,992 100.0 Ukrops
Supermarket
(N/A), Rite
Aid (2007)
Laburnum Square Richmond,
VA 1975 11.4 109,405 98.2 Hannaford
Brothers
(2013),CVS/
Pharmacy
(1999)
Potomac Plaza Woodbridge,
VA 1963 5.4 85,400 92.3 Western
Sizzlin
(2000),
Aaron Rents
(2001)
Thieves Market(6) Alexandria,
VA 1946 2.3 15,835 75.3
North Carolina
Shoppes Of Kildaire Cary,
NC 1986 14.0 148,205 98.9 Winn Dixie
(2006)
Pennsylvania
Colonial Square
Shopping Center York,
PA 1955 2.9 27,488 98.8 Minich
Pharmacy
(1999),York
National
Bank (1999)
15th & Allen
Shopping Center Allentown,
PA 1958 4.1 46,503 98.1 Laneco
(2003),
Thrift Drug
(2004)
Kenhorst Plaza
Shopping Center Reading,
PA 1990 19.2 161,434 99.2 Redners
(2009),Rite
Aid (2000)
Mayfair
Shopping Center Philadelphia,
PA 1988 5.7 112,275 93.4 Shop 'N Bag
Supermarket
(2013),
Thrift Drug
(2006)
Newtown Square Newtown
Square, PA 1960's-70's 14.4 137,569 91.7 Acme Market
(1999),
Thrift Drug
(1999)
Stefko Boulevard Bethlehem,
PA 1958-60-75 10.3 135,864 95.6 Laneco
(2003),
McCrory
(1998)
Delaware
First State Plaza New Castle
County,DE 1988 21.0 162,404 100.0 Shop Rite
Supermarket
(2009),
Cinemark
USA (2011)
South Carolina
Branchwood Apts Charleston,
SC 1986 5.4 96 units 93.0
Broadmoor Apts Charleston,
SC 1973 21.2 305 units 95.0
James Island
Shopping Center Charleston,
SC 1967 6.5 88,557 100.0 Piggly
Wiggly
(2010),Rite
Aid (1997)
</TABLE>
10
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Significant
Tenants
Land (Lease
Year Area Leasable % Expiration
Property Location Constructed (acr) Area(Sf) Leased Date)
Washington,DC
The Georgetown
Shops(1) Washington,
DC Late 1800's 0.3 22,052 100.0 Radio Shack
(1999)
Connecticut
Avenue Shops Washington,
DC 1954 0.1 3,000 100.0 Mill End
Shop(1997)
Subtotal/
Average(4) 379.6 3,651,653 96.4
Post December 31, 1996
Acquisitions:
City Line
Shopping Center(5) Philadelphia,
PA 1950's-60's 12.2 153,899 89.1 Acme Market
(1999),
Thrift Drug
(1999),
T.J. Maxx
(2001),
Rickels
(1998)
Four Mile Fork Fredericksburg,
VA 1975 10.3 101,262 91.8 Safeway
(2000),
CVS/
Pharmacy
(2001)
Shopping Center(5)
Shoppes of Graylyn(5) Wilmington,
DE 1971 5.0 65,746 92.9 Rite Aid
(2016)
Ashburn Farm
Village Center(7) Ashburn,VA 1996 10.2 88,948 98.6 A&P
Superfresh
(2016)
Subtotal/
Average 27.5 409,855 90.8
Total/Average 417.3 4,061,508 96.0
</TABLE>
(1) Represents five (5) historic retail shops all clustered in close proximity
in the central shopping district in Georgetown, Washington, D.C. (2) Includes
Safeway (50,000 sq.ft) and Bowling Alley (40,000 sq.ft) pad sites owned by
others.
(3) Includes Ukrops Supermarket (43,500 sq ft) pad site owned by the tenant.
(4) Based on square footage of Retail Properties only.
(5) Under firm contract in December 1996, actual closing took place in January
1997.
(6) Sold in January 1997 for $1,200,000.
(7) Closed March 19, 1997.
11
<PAGE>
Competition
There are numerous commercial developers, real estate companies and other
owners of real estate that operate in the Mid-Atlantic region and compete with
the Company in seeking acquisition opportunities and tenants for its properties.
In addition, retailers at the shopping centers face increasing competition from
malls, factory outlet centers, discount shopping clubs, direct mail,
telemarketing and the Internet.
Retail Properties. The Properties consist of 39 Retail Properties and two
Multifamily Properties located in Maryland, Virginia, North Carolina,
Pennsylvania, Delaware, South Carolina and the District of Columbia. The Retail
Properties are primarily neighborhood shopping centers containing a total of
approximately 4.1 million square feet of GLA occupied by approximately 796
tenants. The Retail Properties range in size from approximately 3,000 square
feet of GLA to approximately 335,000 square feet of GLA, and average
approximately 100,000 square feet of GLA. A substantial portion of the income
from the Properties consists of rent received under long term leases. Most of
these leases provide for the payment of fixed minimum rent monthly in advance
and for the payment by tenants of a pro-rata share of the real estate taxes,
insurance, utilities and common area maintenance of the shopping centers.
Certain of these tenant leases provide for exclusion from some or all of these
expenses. The Company's portfolio is comprised of a diversified tenant base,
with no single tenant representing more than 2.7% of the Company's annualized
minimum rent. All of the Retail Properties are managed by the Company. As of
December 31, 1996, 60% of the Retail Properties' annualized minimum rents were
derived from lease payments by national and regional tenants. As of December 31,
1996, the Retail Properties were 96.4% leased.
Lease Expirations. The majority of leases on the Retail Properties provide
for lease terms of between three and 20 years. The following table shows lease
expirations (excluding renewal options) for the calendar years 1997 through 2035
and thereafter:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Percent
Approx Percent of of Total Average
GLA in Total GLA Annualized Annualized Annual
No. of Square Represented Minimum Minimum Rent
Year Leases Feet by Expiring Rent Rent per SF
(in 000's)Leases (in 000's)
1997 147 334 9.1% $3,433 8.8% $10.28
1998 137 426 11.6% 4,213 10.8% 9.89
1999 125 399 10.9% 4,488 11.5% 11.25
2000 103 354 9.7% 3,875 9.9% 10.95
2001 106 343 9.4% 4,467 11.4% 13.02
2002 38 147 4.0% 1,984 5.1% 13.50
2003 26 193 5.3% 1,851 4.7% 9.59
2004 16 66 1.8% 913 2.3% 0.00
2005 20 160 4.4% 2,004 5.1% 12.53
2006 27 220 6.0% 2,589 6.6% 11.77
Thereafter 51 1,018 27.8% 9,210 23.6% 9.05
-- ----- ----- ----- ----- ----
796 3,660 100.0% $39,028 100.0% $10.66
=== ===== ====== ======= ====== ======
</TABLE>
12
<PAGE>
Tenant Diversification. The following table sets forth information
regarding the Company's leases with its 20 largest tenants based upon annualized
minimum rents:
<TABLE>
<S> <C> <C> <C> <C>
Number Percentage of Aggregate
of Annualized Annualized Minimum
Tenant GLA (SF) Properties Minimum Rent Minimum Rents
(in 000's)
A&P Superfresh 112,167 2 $ 1,080 2.7%
Shoppers Food
Warehouse 129,113 2 1,075 2.7%
Metro Foods 93,292 2 847 2.2%
Weis Markets 86,890 2 786 2.0%
Rite Aid 92,168 8 693 1.8%
Giant Food 121,518 3 607 1.5%
CVS/Pharmacy 77,350 7 528 1.3%
Safeway 74,851 2 485 1.2%
Winn Dixie 79,000 2 482 1.2%
Hollywood Video 22,366 3 425 1.1%
Redner's
Supermarket 52,570 1 417 1.1%
Shop Rite
Supermarket 55,244 1 387 1.0%
Sony Theatres 32,058 1 385 1.0%
Thrift Drug 36,662 4 380 1.0%
T.J. Maxx 46,686 2 360 0.9%
Laneco
Supermarket 95,075 2 323 0.8%
Blockbuster
Video 17,715 3 330 0.8%
Service
Merchandise 50,000 1 325 0.8%
Cinemark USA 29,452 1 302 0.8%
Sutton Place
Gourmet 14,207 1 298 0.8%
Total 1,318,384 $10,519 26.7%
</TABLE>
Multifamily Properties. The two Multifamily Properties, comprising 401
units, are located in Charleston, South Carolina, in close proximity to one of
the Retail Properties, effectively forming a single economic unit for management
purposes. The Multifamily Properties comprise a relatively small portion of the
Company's revenues (4.2% as of December 31, 1996), and the Company anticipates
that its principal strategic focus will be the acquisition of additional retail
properties.
Significant Properties. As of December 31, 1996, two of the Properties,
Penn Station Shopping Center and Valley Centre, either had a book value equal to
or greater than 10% of the total assets of the Company or gross revenues which
accounted for more than 10% of the Company's aggregate gross revenues. Set forth
below is additional information with respect to such Properties.
Penn Station Shopping Center. Penn Station is a 334,970 square foot
shopping center occupied by 48 tenants and located at the intersection of
Pennsylvania Avenue and Silver Hill Road in Prince George's County, Maryland,
two miles outside of Washington, D.C. and one and one-half miles inside of the
Capital Beltway. The center is fully-integrated with a Safeway Supermarket
(50,000 square feet) and a bowling alley (40,000 square feet), both of which are
owned by third parties. Other tenants include Service Merchandise, Blockbuster
Video and Kid City Clothing. Penn Station was 99.1% leased as of December 31,
1996.
13
<PAGE>
Service Merchandise, a catalogue showroom and retailer, is the only tenant
which occupies more than ten percent of the GLA at Penn Station, occupying
50,000 square feet of GLA under a lease which expires in February 2006 and
having five renewal options of five years each. The annual minimum rent of the
Service Merchandise lease is $325,000.
The following table sets forth a schedule of lease expirations at Penn
Station, assuming none of the tenants exercise renewal options:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Percent of Percent of Avg Annual
No. of GLA Total GLA Annualized Total Minimum
Year Leases in SF Represented by Minimum Annualized Rent
(in 000's) Expiring Leases Rent Minimum Rent per SF
(in 000's)
1997 4 12 5.0% $ 188 6.6% $15.67
1998 8 19 8.0% 275 9.6% 14.47
1999 13 36 15.1% 606 21.2% 16.83
2000 8 37 15.5% 411 14.4% 11.11
2001 5 16 6.7% 238 8.3% 14.88
2002 2 6 2.5% 97 3.4% 16.17
2003 2 20 8.4% 245 8.6% 12.25
2004 2 21 8.8% 186 6.5% 8.86
2005 2 16 6.7% 207 7.3% 12.94
2006 1 50 21.0% 325 11.4% 6.50
Thereafter 1 5 2.1% 78 2.7% 15.60
-- -- ---- ----- ----- ------
48 238 100.0% $2,855 100.0% $12.00
== === ====== ====== ====== ======
</TABLE>
The following table sets forth the average annual rents per square foot
of GLA and the percentage of GLA leased at Penn Station:
<TABLE>
<S> <C> <C>
Average Annual
Minimum Rent Percentage
per Square Foot Leased
1992 $11.64 90.0%
1993 $11.68 94.7%
1994 $11.64 97.8%
1995 $11.94 98.3%
1996 $11.70 99.1%
</TABLE>
Depreciation (for tax purposes) on the Penn Station Property is taken on a
straight line basis over 39 years, resulting in a rate of approximately 2.56%
per year. Depreciation for book purposes in calculated on a straight-line basis
over 31 1/2 years. At December 31, 1996, the federal tax basis of the Penn
Station Shopping Center was approximately $21.4 million. The realty tax rate on
the property is $3.45 per $100 of assessed value, resulting in a 1996 realty tax
of approximately $269,000.
Valley Centre. Valley Centre is a 229,449 square foot shopping center
occupied by 27 tenants and located on U.S. Route 140, approximately two miles
from the Baltimore Beltway (1-695) in Owings Mills, Maryland. The major tenants
are Weis Supermarket, T.J. Maxx, Ross Stores, Annie Sez, Cosmetic Center and
Sony Theatre. Valley Centre was 95.9% leased as of December 31, 1996.
14
<PAGE>
Four tenants, Weis Markets, T.J. Maxx, Ross Stores and Sony Theaters, each
occupy in excess of 10% of the GLA at Valley Centre. Weis Markets, a
supermarket, occupies 41,350 square feet of GLA under a lease which expires in
May 2002 and has three renewal options of five years each. The annual minimum
rent is $330,800, which is subject to a $1.00 per square foot increase for each
option period. T.J. Maxx, a ladies apparel retailer, occupies 32,148 square feet
of GLA under a lease which expires in May 2007 and has two renewal options of
five years each. The annual minimum rent of the T.J. Maxx lease is $297,369,
plus percentage rent equal to 2% of gross sales over $7.5 million. The rent
increases $0.50 per square foot for each option period. Ross Stores, a ladies
apparel retailer, occupies 27,618 square feet of GLA under a lease which expires
January 1998 and has two renewal options of five years each. The annual minimum
rent of the Ross Stores lease is $220,944, plus percentage rent equal to 2% of
gross sales over approximately $11 million. The rental amounts for the renewal
options are set at fixed amounts which average approximately 9.25% increase per
option period. Sony Theaters, a movie theatre operator, occupies 32,058 square
feet of GLA under a lease which expires February, 2005 and has three renewal
options of five years each. The annual minimum rent of the Sony Theaters lease
is $384,696 with an increase of $1.00 per square foot in the year 2000. Under
the terms of the lease, the tenant pays percentage rent equal to 8% of gross
sales over $4.8 million. The lease provides for rental increases of $0.50 per
square foot for each option period.
The following table sets forth a schedule of lease expirations at Valley
Centre for the next ten years, assuming none of the tenants exercise renewal
options.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Percent of % of Total Avg Annual
No. of GLA Total GLA Annualized Annualized Minimum Rent
Year Leases in SF Represented by Minimum Minimum Rent per SF
(in 000's)Expiring Leases Rent Rent (in 000's)
1997 5 34 15.5% $ 312 12.1% $9.18
1998 3 39 17.8% 367 14.2% 9.41
1999 2 7 3.2% 123 4.8% 17.57
2000 5 18 8.2% 344 13.3% 19.11
2001 3 19 8.7% 233 9.0% 12.26
2002 5 61 27.9% 627 24.2% 10.28
2003 1 2 0.9% 36 1.4% 18.00
2004 0 0 0.0% 0 0.0% 0.00
2005 1 32 14.6% 417 16.1% 13.03
2006 0 0 0.0% 0 0.0% 0.00
Thereafter 2 7 3.2% 126 4.9% 18.00
-- --- ---- ------- ----- -----
27 219 100.0% $ 2,586 100.0% 11.81
== === ====== ====== ====== =====
</TABLE>
The following table sets forth the average rents per square foot of GLA
and the percentage of GLA leased at Valley Centre:
<TABLE>
<S> <C> <C>
Average Rent Percentage
per Square Foot leased
1992 $10.55 98.0%
1993 $10.86 100.0%
1994 $11.10 99.4%
1995 $11.42 100.0%
1996 $11.40 95.9%
</TABLE>
15
<PAGE>
Depreciation (for tax purposes) on Valley Centre is taken on a
straight-line basis over 39 years, resulting in a rate of approximately 2.56%
per year. At December 31, 1996, the federal tax basis of Valley Centre was
approximately $22.5 million. Depreciation for book purposes is calculated on a
straight-line basis over 31 1/2 years. The realty tax rate on Valley Centre is
approximately $3.07 per $100 of assessed value, resulting in a 1996 realty tax
of approximately $293,000.
Mortgages, Notes and Loans Payable
Information relating to future maturities of mortgages, notes and loans
payable at December 31, 1996 is set forth in Management's Discussion and
Analysis of Financial Condition and Results of Operation and footnotes 5 and 6
to the Consolidated Financial Statements included with this Form 10-K and is
incorporated by reference herein.
Item 3. Legal Proceedings
The Company is not presently involved in any material litigation nor, to
its knowledge, is any material litigation threatened against the Company or its
properties, other than routine litigation arising in the ordinary course of
business or which is expected to be covered by the Company's liability
insurance. In the opinion of management of the Company, such litigation is not
expected to have a material adverse effect on the business, financial condition
or results of operations of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders through the
solicitation of proxies or otherwise during the fourth quarter of fiscal year
1996.
16
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related
Shareholder Matters
(a) Market Information
The Company's Common Stock and Preferred Stock began trading on the NASDAQ
National Market System on June 27, 1995. On August 13, 1996, the Company's
common and preferred stock began trading on the New York Stock Exchange under
the symbol FRW. The high and low market values of the Company's Common Stock for
1995 and 1996 are as follows:
<TABLE>
<S> <C> <C> <C> <C>
Distributions
High Low Per Share
1995
Third Quarter $18.00 $17.00 $.4875
Fourth Quarter 18.50 17.00 .4875
1996
First Quarter 19.00 17.75 .4875
Second Quarter 20.50 18.25 .4875
Third Quarter 21.25 19.25 .4875
Fourth Quarter 23.63 20.13 .4875
</TABLE>
(b) Holders of Record
As of March 25, the approximate number of holders of record of the
Common Stock was 73.
(c) Dividends
The Company intends to make quarterly distributions to its common and
preferred stockholders. Quarterly distributions made during 1996 are as follows:
<TABLE>
<S> <C> <C>
Record Date Payment Date Amount Per Share
Common Stock
February 1, 1996 February 15, 1996 $0.4875
May 1, 1996 May 15, 1996 $0.4875
August 1, 1996 August 15, 1996 $0.4875
November 1, 1996 November 15, 1996 $0.4875
Preferred Stock
February 1, 1996 February 15, 1996 $0.6094
May 1, 1996 May 15, 1996 $0.6094
August 1, 1996 August 15, 1996 $0.6094
November 1, 1996 November 15, 1996 $0.6094
</TABLE>
The actual cash flow that the Company will realize will be affected by a
number of factors, including the revenues received from rental properties, the
operating expenses of the Company, the interest expense on its borrowing, the
ability of lessee's to meet their obligations to the Company, unanticipated
capital expenditures and dividends received from the Company's interest in FWM.
Future distributions paid by the Company will be at the discretion of the
Directors of the Company and will depend on the actual cash flow of the Company,
its financial condition, capital requirements, the annual distribution
requirements under the REIT provisions of the Internal Revenue Code of 1986, as
amended (the "Code") and such other factors as the Directors of the Company deem
relevant.
For the fiscal year ended December 31, 1996, 75.6% of the distributions
made on the Common Stock represented a return of capital for federal income tax
purposes.
17
<PAGE>
Recent Sales of unregistered equity securities
(a) Securities sold
The following table sets forth the date of sale, title and amount
of unregistered securities sold by the Company since its
incorporation on April 25, 1994:
<TABLE>
<S> <C> <C>
Date of Sale Title Amount
04/28/94 Common Stock 100 shares
06/27/94 Common Stock 1,574,359 shares
06/27/94 Preferred Stock 1,920,000 shares
06/27/94 Preferred Units 352,000 units
06/27/94 Common Units 347,056 units
06/01/95 Common Units 95,877 units
06/30/95 Preferred Stock 358,000 shares
11/15/95 Preferred Stock 36,189 shares
01/04/96 Common Units 120,785 units
03/20/96 Common Units 171,910 units
03/20/96 Preferred Units 67,609 units
12/19/96 Common Units 36,266 units
12/30/96 Common Units 48,013 units
01/24/97 Common Units 143,385 units
03/19/97 Common Units 55,335 units
03/19/97 Preferred Units 9,538 units
</TABLE>
(b) Underwriters and other purchasers
i. April 28, 1994 Sales. Underwriters were not retained in
connection with the sale of these securities. These shares were "founders
shares" sold to officers and directors of the Company.
ii. June 27, 1994 Sales. Friedman, Billings, Ramsey & Co., Inc.
("FBR") acted as placement agent and as the initial purchaser with respect
to such sales of Common Stock and Preferred Stock. Such sales were made in
a private placement to "accredited investors". Underwriters were not
retained in connection with the sale of Common Units and Preferred Units.
The Preferred Units were issued to the sellers of Davis Ford Crossing and
Mayfair Shopping Center, "accredited investors". The Common Units were
issued to certain investors in the partnership that owned certain of the
properties that were transferred to the Company at its formation.
iii.June 1, 1995 Sales. Underwriters were not retained in
connection with the sale of these securities. These units were sold to the
seller of Festival at Woodholme Shopping Center, an "accredited investor".
iv. June 30, 1995 Sales. Underwriters were not retained in
connection with the sale of these securities. These shares were issued to
the sellers of The UDR Properties, an "accredited investor".
v. November 15, 1995 Sales. Underwriters were not retained in
connection with the sale of these securities. These shares were issued to
the seller of Firstfield Shopping Center, an "accredited investor".
vi. January 4, 1996 Sales. Underwriters were not retained in
connection with the sale of these securities. These units were sold to the
seller of Stefko Boulevard Shopping Center and 15th and Allen Shopping
Center, an "accredited investor".
vii.March 20, 1996 Sales. Underwriters were not retained in
connection with the sale of these securities. These units were sold to the
seller of Clopper's Mill Village Shopping Center, an "accredited
investor".
viii. December 19, 1996 Sales. Underwriters were not
retained in connection with the sale of these securities. These units
were sold to the seller of Kings Park Shopping Center, an "accredited
investor".
18
<PAGE>
ix. December 30, 1996 Sales. Underwriters were not retained in
connection with the sale of these securities. These units were sold to the
seller of Northway Shopping Center, an "accredited investor".
x. January 26, 1997 Sales. Underwriters were not retained in
connection with the sale of these securities. These units were sold to the
seller of City Line Shopping Center, an "accredited investor".
xi. March 19, 1997 Sales. Underwriters were not retained in
connection with the sale of these securities. These units were sold to the
seller of Ashburn Farm Village Shopping Center, an "accredited investor".
(c) Consideration
i. April 28, 1994 Sales. The aggregate offering price of the
shares of Common Stock was $100. There were no underwriting discounts or
commissions with respect to such securities.
ii. June 27, 1994.
a) The Company received approximately $73.0 million in
consideration for the sale of 1,282,051 shares of Common Stock and
1,920,000 shares of Convertible Preferred Stock. As compensation for
acting as initial purchaser and placement agent in connection with the
sale of such shares, FBR received from the Company an initial purchaser
discount, placement agent fees and a financial advisory fee which totaled
$5.0 million in the aggregate. The shares of Common Stock and Convertible
Preferred Stock were sold to "accredited investors".
b) 189,744 shares of Common Stock were issued to four executive
officers and directors of the Company in exchange for the contribution of
promissory notes (the "FWM Notes") having a value of approximately $3.7
million. No underwriting fees or commissions were paid in connection with
the issuance of such shares.
c) 102,564 shares of Common Stock were issued to Farallon and its
affiliate in consideration for Farallon's agreement to fund approximately
$2.0 million of the expenses of June 1994 Offering. Concurrent with the
issuance of such shares the Company also made a cash reimbursement of
approximately $1.1 million to Farallon.
d) The Preferred Units were issued, in addition to debt assumption
of $16.3 million, in consideration for the purchase of two shopping
centers. These units were valued, at such time, at $8.8 million.
e) The Common Units were issued in consideration for certain
properties transferred to the Company at the time of its formation. These
units were valued, at such time, at approximately $6.8 million.
iii.June 1, 1995 Sales. These units were issued in exchange for
property having a value of approximately $1.6 million, net of assumed
indebtedness. There were no underwriting discounts or commissions with
respect to such securities.
iv. June 30, 1995 Sales. These shares were issued, in addition to
cash payment of $12.2 million, in consideration for the UDR Properties.
These shares were valued, at such time, at $8.1 million. There were no
underwriting discounts or commissions with respect to such securities.
v. November 15, 1995 Sales. These shares were issued, in addition
to a seller purchase note of $2.5 million and a cash payment of $100,000,
in consideration for the purchase of Firstfield Shopping Center. These
shares were valued, at such time, at $0.8 million. There were no
underwriting discounts or commissions with respect to such securities.
vi. January 4, 1996 Sales. These units were issued, in addition to
cash payments of $9.4 million, in consideration for the purchase of two
shopping centers. These units were valued, at such time, at approximately
$2.2 million. There were no underwriting discounts or commissions with
respect to such securities.
vii.March 20, 1996 Sales. These units were issued, in addition to
cash payments of $14.5 million, in consideration for the purchase of
Clopper's Mill Village Shopping Center. These units were valued, at such
time, at approximately $3.3 million (Common Units) and $1.6 million
(Preferred Units).
19
<PAGE>
viii. December 19, 1996 Sales. These units were issued in exchange
for property having a value of approximately $1.4 million, net of assumed
indebtedness. There were no underwriting discounts or commissions with
respect to such securities.
ix. December 30, 1996 Sales. These units were issued in exchange
for property having a value of approximately $1.3 million, net of assumed
indebtedness. There were no underwriting discounts or commissions with
respect to such securities.
x. January 24, 1997 Sales. These units were issued in exchange for
property having a value of approximately $4.8 million, net of assumed
indebtedness. There were no underwriting discounts or commissions with
respect to such securities.
xi. March 19, 1997 Sales. These units were issued in exchange for
property having a value of approximately $3.8 million, net of assumed
indebtedness. There were no underwriting discounts or commissions with
respect to such securities.
(d) Exemption from registration claimed.
Each of the transactions is exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the "Act").
(e) Terms of Conversion
The Preferred Units are exchangeable for Preferred Stock on a one
for one basis. The Common Units are exchangeable, at the Company's option,
for cash equal to the fair market value of a share of Common Stock at the
time of exchange or one share of Common Stock. Holders of the Convertible
Preferred Stock have the right, exercisable on or after May 31, 1999, to
convert shares of Convertible Preferred Stock (with each share of
Convertible Preferred Stock valued at the current Liquidation Preference
Amount of $25.00 per share) into shares of Common Stock at a conversion
price of $19.50 per share of Common Stock, subject to adjustment upon the
occurrence of certain events.
Item 6. Summary of Selected Financial Data
The following table sets forth selected financial and portfolio
information on the Company, and on a combined basis for its predecessor
business, and should be read in conjunction with the discussion set forth in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and all of the consolidated financial statements and notes thereto
included in this Form 10-K.
20
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION (1)
<TABLE>
<S> <C> <C> <C> <C> <C>
Year Ended December 31,
1996 1995 1994 1993 1992
(dollars in thousands, except per share data)
OPERATING DATA
Revenues:
Minimum Rent $31,925 $23,276 $14,701 $10,594 $10,242
Tenant reimbursements 6,704 4,362 2,823 1,889 1,642
Percentage rent 664 495 255 68 114
Third-party fees - 1,912 4,396 3,095 1,400
Other income 1,672 1,447 508 245 310
------- ------- ------- ------- -------
Total revenues 40,965 29,580 20,199 17,192 15,403
------ ------ ------- ------- -------
Expenses:
Operating and maintenance 10,270 7,229 6,299 5,137 4,726
General and administrative 3,137 2,831 1,356 2,665 2,115
Interest 14,986 11,230 9,301 7,909 8,144
Depreciation and amortization 8,019 5,808 4,579 2,721 2,514
------ ------ ------- ------- -------
Total expenses 36,412 27,098 21,535 18,432 17,499
------ ------ ------- ------- -------
Income (Loss) before
income from Management
Company, extraordinary
item, minority interest
and distributions to
Preferred Stockholders 4,553 2,482 (1,336) (1,240) (2,096)
Income from Management Company 221 449 500 - -
------ ------ ------- -------- -----
Income (Loss) before
extraordinary item, minority
interest and distribution
to Preferred Stockholders 4,774 2,931 (836) (1,240) (2,096)
Extraordinary item - - 2,251 2,665 -
------- ------ ------- -------- -----
Net income $ 1,425 $(2,096)
======= =======
Income before minority interest
and distributions
to Preferred Stockholders 4,774 2,931 1,415
Income allocated to
minority interest (694) (602) (1,101)
Income before distributions
to Preferred Stockholders 4,080 2,329 314
Distributions to Preferred
Stockholders (5,641) (5,117) (1,811)
-------- -------- ---------
Loss allocated to
Common Stockholders $(1,561) $(2,788) $(1,497)
======== ======== =======
Net loss per Common
Share (2) ($0.46) ($1.19) ($0.95)
======== ======= ======
Shares of Common Stock
(in thousands) 3,367 2,351 1,574
======= ====== =======
BALANCE SHEET DATA:
Rental properties, gross $314,235 $228,092 $175,213 $87,749 $87,299
Total assets $313,613 $227,405 $172,487 $81,056 $82,798
Mortgage and other
notes payable $167,047 $116,182 $ 89,858 $92,382 $93,918
Debentures $25,000 $25,000 $ 25,000 - -
Total Liabilities $198,375 $145,241 $117,925 $96,216 $99,235
Minority Interest $16,661 $11,088 $ 8,580 - -
Stockholders equity
(deficit) $98,577 $71,076 $ 45,982 $(15,160)$(16,437)
PORTFOLIO PROPERTY DATA
(end of period):
Retail Occupancy 96.4% 96.0% 96.2% 95.4% 94.6%
Number of retail
properties 36 27 20 14 14
Number of multi-family
properties 2 2 2 2 2
Average rent (3):
Retail properties
(per square feet) $10.44 $10.28 $10.08 $9.16 $9.07
Multi-family properties
(per unit) $392 $ 407 $ 407 $407 $401
Retail Properties GLA
(thousands of sf) 3,652 2,668 2,014 1,186 1,186
Multi-family properties
(number of units) 401 401 401 401 401
OTHER DATA:
Funds From Operations(4)(5) $14,290 $10,539
Cash flow from operating
activities $11,616 $10,003 $3,164 $831 $1,037
Cash flow (used in)
investing
activities (56,994) (29,884) (56,236) (450) (1,636)
Cash flow provided by
(used in)
financing activities 49,352 26,574 53,615 (529) 367
</TABLE>
(1) See Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operation.
(2) Net loss per share is based on the weighted average total shares of Common
Stock outstanding. Because the Company's income is based on its percentage
interest in the Operating Partnership's income, the net loss per share would be
unchanged for the periods presented even if the Common Units were exchanged for
Common Stock of the Company.
(3) Represents base rent divided by square feet or units, as applicable, for
the annualized 12-month period.
(4) The Company considers Funds From Operations to be an appropriate measure of
the performance of an equity REIT. On March 3, 1995, NAREIT adopted the NAREIT
White Paper on Funds From Operations (the "NAREIT White Paper") which provided
additional guidance on the calculation of Funds From Operations. Funds From
Operations is defined by NAREIT as net income (computed in accordance with
generally accepted accounting principles), excluding gains (or losses) from debt
restructuring and sales of property, plus depreciation and amortization and
after adjustments for unconsolidated partnerships and joint ventures.
Adjustments for unconsolidated partnerships and joint ventures are calculated to
reflect Funds of Operations on the same basis. Funds From Operations does not
represent cash generated from operating activities in accordance with generally
accepted accounting principles and is not necessarily indicative of cash
available to fund cash needs and should not be considered an alternative to net
income as an indicator of the Company's operating performance or as an
alternative to cash flow as a measure of liquidity or of ability to make
distributions. (5) Before minority interest and distributions to Preferred
Stockholders.
21
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Overview
The following discussion should be read in conjunction with the
"Selected Consolidated Financial Information" and the Financial Statements and
notes thereto of the Company appearing elsewhere in this Form 10-K.
Comparison of the year ended December 31, 1996 to the year ended December 31,
1995
For the year ended December 31, 1996, net loss allocated to common
shareholders decreased by $1,227,000 from a net loss of $2,788,000 to a net loss
of $1,561,000, when compared to the year ended December 31, 1995, primarily due
to an increase in revenues offset by increases in expenses and distributions to
holders of Convertible Preferred Stock.
Total revenues increased by $11,385,000 or 38.5%, from $29,580,000 to
$40,965,000, due primarily to an increase in minimum rents of $8,649,000 and
tenant reimbursements of $2,342,000. The increases were primarily due to the
acquisition of Festival at Woodholme on June 1, 1995 (resulting in only seven
months revenues being included in the year ended December 31, 1995), Glen Lea,
Hanover Village, Laburnum Park and Laburnum Square on July 1, 1995 (resulting in
only six months revenues being included in the year ended December 31, 1995),
Kenhorst Plaza on October 12, 1995 (resulting in only three months revenues
being included in the year ended December 31, 1995), and Firstfield Shopping
Center on November 15, 1995 (resulting in only one and a half months revenues
being included in the year ended December 31, 1995) (together the "1995
Acquisitions"), Stefko Boulevard and 15th & Allen Shopping Centers on January 4,
1996, Clopper's Mill Village on March 20, 1996, Centre Ridge Marketplace on
March 29, 1996, Takoma Park on April 29, 1996, Southside Marketplace on June 7,
1996, Kings Park on December 19, 1996, Newtown Square on December 28, 1996 and
Northway Shopping Center on December 30, 1996 (together the "1996
Acquisitions").
Property operating and maintenance expense increased by $3,041,000, or
42.1%, from $7,229,000 to $10,270,000, due primarily to the purchase of the 1995
and 1996 Acquisitions.
General and administrative expenses increased by $306,000, or 10.8%,
from $2,831,000 to $3,137,000, due primarily to the accrual of performance
bonuses of $155,000 and an initial NYSE listing fee of $115,000.
Interest expense increased by $3,756,000, or 33.4%, from $11,230,000 to
$14,986,000, due primarily to the financing of the 1995 and 1996 Acquisitions.
Depreciation and amortization expenses increased by $2,211,000, or
38.1%, from $5,808,000 to $8,019,000, primarily due to an increase in
depreciable basis due to the purchase of the 1995 and 1996 Acquisitions.
During 1996, distributions payable to owners of the Convertible
Preferred increased by $524,000 from $5,117,000 to $5,641,000 primarily due to
the issuance of an additional 358,000 shares in June 1995 and the issuance of
36,189 shares of Preferred Stock in November 1995.
Net cash flow provided by operating activities increased from $10.0
million in 1995 to $11.6 million in 1996, primarily due to the acquisition of
new properties during 1996 and realizing the full years operations from
properties purchased in 1995 and improved property performance. Net cash flows
used in investing activities increased from $29.9 million in 1995 to $57.0
million in 1996 primarily due to an increase in the amount of property
acquisitions during 1996. Net cash flow provided by financing activities
increased from $26.6 million to $49.4 million primarily due to an increase in
the amount of equity capital raised and an increase in proceeds from mortgage
notes due to an increase in acquisitions in 1996 resulting in more financing
needs.
Comparison of the year ended December 31, 1995 to the year ended December 31,
1994
For the year ended December 31, 1995, net loss allocated to common
shareholders increased by $1,291,000 from a net loss of $1,497,000 to a net loss
of $2,788,000, when compared to the year ended December 31, 1994, primarily due
to an increase in expenses and distributions to holders of Convertible Preferred
Stock, offset by increases in revenues and a decrease in income allocated to
minority interest.
22
<PAGE>
Total revenues increased by $9,381,000 or 46.4%, from $20,199,000 to
$29,580,000, due primarily to an increase in minimum rents of $8,575,000 and
tenant reimbursements of $1,539,000, partially offset by a decrease in
third-party fees of $1,912,000 due to the change in the ownership of the
Management Company from voting to nonvoting stock and the related change in the
method of accounting for the Management Company, effective June 27, 1994. The
increases were primarily due to the purchase of the six properties (" 1994
Acquisitions") on June 27, 1994 resulting in only six months revenues being
included in the year ended December 31, 1994 and the acquisition of the 1995
Acquisitions.
Property operating and maintenance expense increased by $930,000, or
14.8%, from $6,299,000 to $7,229,000, due primarily to the purchase of the 1994
Acquisitions on June 27, 1994 resulting in only six months of expenses being
included in the year ended December 31, 1994 and the purchase of the 1995
Acquisitions. Property operating and maintenance expenses as a percentage of
total revenues decreased from 31% in 1994 to 24% in 1995 primarily due to
savings in property management fee expenses due to the increased size of the
Company's portfolio and a reduction in the reserve for allowance for doubtful
accounts.
General and administrative expenses increased by $1,475,000, or 108.8%,
from $1,356,000 to $2,831,000, due primarily to compensation paid or payable in
company stock in the amount of $1,800,000 to key employees.
Interest expense increased by $1,929,000, or 20.7%, from $9,301,000 to
$11,230,000, due primarily to the 1995 Acquisitions.
Depreciation and amortization expenses increased by $1,229,000, or
26.8%, from $4,579,000 to $5,808,000, primarily due to an increase in
depreciable basis due to the purchase of the 1995 Acquisitions and a full years
depreciation on the 1994 Acquisitions.
During 1995, distributions payable to owners of the Convertible
Preferred increased by $3,306,000 from $1,811,000 to $5,117,000 primarily due to
the preferred stock being outstanding for only six months in 1994 and the
issuance of an additional 358,000 shares during 1995. Income allocated to
minority interest decreased by $499,000 from $1,101,000 to $602,000 for the year
ended December 31, 1995 primarily because all pre-June 27, 1994 income was
allocated to minority interests in 1994, partially offset by increased earnings
in 1995. During 1994 there was extraordinary income of $2,251,000. There was no
such item during 1995.
Potomac Plaza's occupancy rate as of December 31, 1995 was 75.3%. The
Company has recently completed a renovation of the shopping center which should
increase the marketability of the property. As of December 1996, the occupancy
increased to 92.3%. Broadmoor Apartments occupancy was 71.9% as of December 31,
1995 primarily due to the closing of the Charleston, South Carolina Naval Base.
Broadmoor has historically relied on the Navy Base as a source of tenants. The
Company has completed an exterior renovation of the property and has renamed the
property Park Place. These activities have increase the marketability of the
apartment. The occupancy is currently 95%.
Net cash flow provided by operating activities increased from $3.2
million in 1994 to $10.0 million in 1995, primarily due to the acquisition of
new properties during 1995 and realizing the full years operations from
properties purchased in 1994 and improved property performance. Net cash flows
used in investing activities decreased from $56.2 million in 1994 to $29.9
million in 1995 primarily due to a decrease in the amount of property
acquisitions during 1995. Net cash flow provided by financing activities
decreased from $53.6 million to $26.6 million primarily due to a decrease in the
amount of equity capital raised and a decrease in proceeds from mortgage notes
due to a decrease in acquisitions in 1995 resulting in less financing needs.
Comparison of the year ended December 31, 1994 to the year ended December 31,
1993
For the year ended December 31, 1994, net income decreased by
$2,922,000 from a net income of $1,425,000 to a net loss of $1,497,000, when
compared to the year ended December 31, 1993, primarily due to an increase in
depreciation and amortization expense, interest expense, distributions to
holders of Convertible Preferred Stock, and an allocation of income to minority
interests, offset by an increase in revenues.
Total revenues increased by $3,007,000 or 17.5%, from $17,192,000 to
$20,199,000, due primarily to an increase in minimum rents of $4,107,000 and
tenant reimbursements of $934,000, partially offset by a decrease in third-party
fees of $2,484,000 due to the change in the ownership of the Management Company
from voting to nonvoting stock and the related change in the method of
accounting for the Management Company, effective June 27,
23
<PAGE>
1994. The increases were primarily due to the purchase of the 1994 Acquisitions
on June 27, 1994 resulting in six months revenues being included in the year
ended December 31, 1994.
Property operating and maintenance expense increased by $1,162,000, or
22.6%, from $5,137,000 to $6,299,000, due primarily to the purchase of the 1994
Acquisitions on June 27, 1994 resulting in six months expenses being included in
the year ended December 31, 1994.
General and administrative expenses decreased by $1,309,000, or 49.1%,
from $2,665,000 to $1,356,000, due primarily to the change in accounting for the
Management Company on June 27, 1994, resulting from the change in ownership from
voting to non-voting stock. Prior to June 27, 1994, the expenses of the
Management Company were consolidated with the properties. Subsequent to June 27,
1994, activity of the Management Company is being reflected using the equity
method of accounting.
Interest expense increased by $1,392,000, or 17.6%, from $7,909,000 to
$9,301,000, due primarily to the amortization of loan costs associated with the
$38,500,000 Nomura loan (including amortization of the interest rate cap in the
amount of $510,000), issuance of $25,000,000 Debentures, assumption of
$14,400,000 of debt related to the 1994 Acquisitions and amortization of
deferred loan costs associated with the modification of existing debt.
Depreciation and amortization expenses increased by $1,858,000, or
68.3%, from $2,721,000 to $4,579,000, primarily due to an increase in
depreciable basis due to the purchase of the 1994 Acquisitions. During 1994,
there were distributions of $1,811,000 payable to owners of the Convertible
Preferred Stock. There was no similar item during the year ended December 31,
1993. There was $1,101,000 of income allocated to the minority interests during
the year ended December 31, 1994. There was no similar item during the year
ended December 31, 1993.
Net cash flow provided by operating activities increased from $0.8
million in 1993 to $3.2 million in 1994, primarily due to improved property
performance and income from the Management Company. Net cash flows used in
investing activities increased from $0.5 million in 1993 to $56.2 million in
1994 due primarily to the purchase of the 1994 Acquisitions in the amount of
$76.1 million (net of debt assumed of $14.4 million) and the issuance of
Exchangeable Preferred Units of $8.8 million. Net cash flow provided by
financing activities increased from a use of $0.5 million in the 1993 to a
source of $53.6 million in 1994. The increase was primarily due to proceeds from
the Exchangeable Debentures, sale of Common Stock, sale of Convertible Preferred
Stock and new mortgage borrowings, offset by repayments of mortgage notes.
Liquidity and Capital Resources
In 1996, the Company continued to expand its portfolio of neighborhood
shopping centers. During the year, the Company acquired nine shopping centers
for an aggregate acquisition cost of $81.5 million. The acquisitions were
primarily located in the metropolitan areas of Philadelphia, Baltimore and
Washington, D.C. The acquisitions increased the Company's portfolio by 963,000
square feet. The Company financed the acquisitions through the issuance of both
Common and Preferred Units of $9.0 million, new or assumed mortgage indebtedness
of $51.3 million and cash of $21.2 million. The cash was provided by both draws
on the Company's lines of credit ($9.5 million) and from proceeds of the June
1995 and December 1996 offerings ($11.7 million).
Since January 1, 1997, the Company acquired four additional properties
for an aggregate acquisition cost of $36.9 million. The acquisitions were
financed through the issuance of Common and Preferred units of $4.8 million, new
or assumed mortgage indebtedness of $17.8 million and cash of $14.3 million. The
cash was provided by both draws on the Company's lines of credit ($5.2 million),
proceeds from the sale of a property ($0.4 million) and the remaining proceeds
of the December 1996 Offering ($8.7 million).
During 1996, the Company renovated four of its properties for an
aggregate cost of approximately $1.6 million. The company also expanded two
properties (Kenhorst Plaza and Centre Ridge Marketplace) for an aggregate cost
of $2.2 million. These expansions added 48,940 square feet to the properties.
During 1997, the Company expects to renovate a minimum of three
properties for an aggregate cost of $.5 million. The Company also plans to
expend at a minimum approximately $2.8 million for the purchase of an out-
parcel and the expansion of two of its properties (Centre Ridge Marketplace and
Valley Centre). These expansions will add approximately 24,700 quare feet to the
properties. These expansions and renovations are expected to be financed
primarily through a combination of draws on the Company's lines of credit and
mortgage financing.
24
<PAGE>
The Company expects to continue its renovation and acquisition program
for the remainder of 1997. However, the level of future acquisitions is
dependent on the Company's ability to raise additional capital through equity
offerings.
On March 26, 1997, the Company filed a $175 million shelf registration
statement with the Securities and Exchange Commission, which allows for the
issuance of debt or equity.
Indebtedness
The following table sets forth certain information regarding the
indebtedness of the Company (excluding the Exchangeable Debentures) as of
December 31, 1996:
<TABLE>
<S> <C> <C> <C> <C> <C>
Projected
Annual
Face Interest Balance Due
Interest Amount Payments Maturity at Maturity (5)
Mortgage Loans Rate (in thous) (in thous) Date (1) (in thousands)
- -------------- -------- -------- ---------- --------- ---------------
Branchwood
Apartments(11) 6.50% $ 2,121 $ 138 01/01/97 $2,121
Broadmoor
Apartments 6.50% 3,826 249 06/30/99 3,826
Bryans Road
Shopping Center(11) 8.00% 150 12 01/29/97 150
Capital Corner
Shopping Center 6.50% 3,587 233 05/25/99 3,587
Centre Ridge
Marketplace(11) 7.67% 7,853 602 03/28/02 7,853
Chesapeake
Bagel Building 6.50% 735 48 07/01/01 735
Clinton Square
Shopping Center 6.50% 1,312 85 05/25/99 1,312
Clopper's
Mill Village 7.18% 14,358 1,031 03/21/06 11,599
Colonial
Shopping Center(2) 8.25% 1,528 126 02/20/20 1,528
Connecticut
Avenue Shops 6.50% 626 41 05/25/99 626
Davis Ford;
First State Plaza;
James Island;
Valley Centre
and Bryans Road(3) 7.09% 38,500 2,730 07/01/99 38,500
Festival at Woodholme 9.60% 11,589 1,113 04/30/00 11,196
Fifteenth & Allen
and Stefko
Boulevard(9) 7.75% 6,002 465 01/11/06 4,891
Firstfield
Shopping Center 7.50% 2,497 187 12/01/05 2,233
FSNote(6) 5.00% 4,800 240 07/01/00 4,800
Glen Lea,
Hanover Village,
Laburnum Park
and Laburnum
Square(7) 8.57% 13,952 1,196 10/31/05 10,746
Kings Park
Shopping Center 9.00% 4,315 388 11/30/14 -
Mayfair
Shopping
Center(4)(8) 6.10% 7,265 443 06/24/10 3,235
Northway
Shopping Center 8.50% 6,000 510 01/01/07 4,920
Northway
Shopping Center 10.25% 1,759 180 08/01/99 1,718
Penn Station
(Phase II) 7.50% 3,500 263 07/01/99 3,500
P.G. County 7.31% 4,150 303 06/06/98 4,150
Potomac Plaza
Shopping Center 7.00% 3,656 256 07/01/99 3,656
Rosecroft
Shopping Center 6.50% 2,000 130 05/25/99 2,000
Shoppes of
Kildaire(12) 6.50% 7,919 515 05/31/06 5,524
Southside
Marketplace 8.75% 8,065 706 07/01/05 7,244
Takoma Park(10) 8.50% 2,945 250 04/01/99 3,150
The Georgetown
Shops 6.50% 1,654 108 07/01/99 1,654
Thieves
Market(11) 7.08% 734 52 04/30/99 734
------- ------ -------
TOTALS $167,398 $12,600 $147,188
======== ======== ========
</TABLE>
(1) Except for Centre Ridge Marketplace, Colonial Shopping Center, Penn
Station (Phase II), Potomac Plaza Shopping Center, Takoma Park Shopping
Center, the FS Note and the Lines of Credit, all the properties are
subject to mortgages which contain prepayment penalties, typically
calculated using a yield maintenance formula.
(2) The debt service on this mortgage loan floats at 2.75% above the
applicable one-year treasury bill rate.
(3) This debt (the Nomura Mortgage Loan) is collateralized by these five
properties. The Company has entered into an interest rate swap
agreement which fixes the rate at 7.09% for the period July 1, 1996
through June 30, 1999.
(4) The debt service on this mortgage loan is determined based upon a
variable rate of interest, plus a credit enhancement fee of 2.0%. The
variable interest rate is determined weekly at the rate necessary to
produce a bid in the process of remarketing the Bond Obligations equal
to par plus accrued interest, based on comparable issues in the market.
(5) Branchwood Apartments, P.G. County Commercial Park, Shoppes of Kildaire
and Thieves Market amounts reflect a reduction of the outstanding
balances of the mortgages due to amortization which was escrowed at the
closing of the June 1994 Offering for the remaining loan term in the
amounts of $36,000, $507,000, $259,000 and $66,000, respectively.
25
<PAGE>
(6) Excludes a $351,000 discount recorded on the FS Note due to its below
market interest rate. Such discount is being amortized over the life of
the loan using the effective interest method.
(7) This debt is collateralized by these four properties.
(8) This debt matures in the year 2010. However, the letter of credit
enhancer expires in June 1998.
(9) This debt is collateralized by these two properties. The loan can be
extended through January 11, 2021. The interest rate adjusts to the
greater of the initial interest rate plus five percentage points or the
T-bill rate plus five percentage points.
(10) The interest rate on this mortgage floats at 0.25% above the prime
rate.
(11) Subsequently paid off in 1997.
(12) The interest rate adjusts to 7.75% effective July 1, 1997.
As of December 31, 1996, the Company had total mortgage notes of
approximately $167.0 million, which consisted of approximately $159.7 million in
indebtedness collateralized by 35 of the Properties and tax-exempt bond
financing obligations issued by the Philadelphia Authority for Industrial
Development (the "Bond Obligations") of approximately $7.3 million
collateralized by one of the properties. Of the Company's indebtedness, $19.6
million (11.7%) is variable rate indebtedness and $147.4 million (88.3%) is at a
fixed rate. The fixed rate indebtedness has interest rates ranging from 5.0% to
10.25%, with a weighted average interest rate (excluding the Bond Obligations)
of 7.7%, and will mature between 1997 and 2021, with a weighted average
remaining term to maturity of 5.8 years. A large portion of the Company's
indebtedness will become due by 2000, requiring balloon payments of $2.3
million in 1997, $4.1 million in 1998, $63.2 million in 1999 and $16.0 million
in 2000.
From 1997 through 2021, the Company will have to refinance an aggregate of
approximately $147.2 million. Since the Company anticipates that only a small
portion of the principal of such indebtedness will be repaid prior to maturity
and the Company will likely not have sufficient funds on hand to repay such
indebtedness, the Company will need to refinance such indebtedness through
modification or extension of existing indebtedness, additional debt financing or
through an additional offering of equity securities.
On June 27, 1994, the Company borrowed $38.5 million under new mortgage
loans (collectively, the "Nomura Mortgage Loan") collateralized by five of the
Properties. These loans, which bear interest at 30-day LIBOR (5.375% at December
31, 1996) plus 2.0% and mature on July 1, 1999, are closed to prepayment for 48
months and can be prepaid thereafter based on a 1.50% declining prepayment
penalty. To mitigate its exposure to these variable rate loans, the Company
entered into a five year interest rate protection agreement for a notional
amount of $38.5 million that is effective through the loans maturity, and caps
the interest rate at 6.20% for year one, 6.70% for year two, and 7.70% for years
three through five. The financing cost of the interest rate protection agreement
of approximately $3.2 million, is being amortized over the life of the agreement
using the effective interest rate method resulting in an effective interest rate
on the Nomura Mortgage Loan of approximately 8.9% per annum. The estimated fair
market value of the interest rate protection agreement, as determined by the
issuing financial institution, was approximately $0.5 million at December 31,
1996.
In December 1995, the Company entered into two interest rate swap
contracts with a notional amount of $38.5 million. The Company intends to hold
such contracts, the first of which commences in July 1996 and expires in June
1999 and the second of which commences in July 1999 and expires in December
2003, until their expiration dates. The purpose of the swaps is to fix the
interest rate on the $38.5 million Nomura loan through its expiration date of
June 1999 at 7.09% and to mitigate any interest rate exposure upon refinancing
the loan by fixing the LIBOR rate at 6.375% for the period beginning July 1999
through December 2003. Under the terms of the interest rate contract, the
Company will be paying a fixed rate of 5.09% to the other party to the contract
(the "Counter Party") through June 1999 and a fixed rate of 6.375% through
December 2003. The Company will be receiving variable payments from the Counter
Party based on 30-day LIBOR through December 2003. The Counter Party has as
collateral a $2.4 million restriction on the $5.8 million line of credit it
provided the Company (see below). The fair market value of each of the interest
rate swaps is determined by the amounts at which they could be settled. If the
Company had settled these agreements with the Counter Party on December 31,
1996, the Company would have received approximately $0.8 million.
Concurrently with the June 1994 Offering, the Operating Partnership
effected a private placement of $25.0 million aggregate principal amount of
Exchangeable Debentures. The Debentures are exchangeable in the aggregate for
1,000,000 shares of Preferred Stock of the Company, subject to adjustment.
Interest on the Debentures is payable
26
<PAGE>
quarterly, in arrears. The Debentures mature on June 27, 1999. The rights of
holders of Common Stock and Preferred Stock are effectively subordinated to the
rights of holders of Debentures. The Debentures are collateralized by a first
mortgage on two of the Properties.
The Company currently has three collateralized revolving lines of
credit (the "Lines of Credit"). The Company has a collateralized revolving line
of credit of up to $5.8 million from First Union Bank. Loans under the line of
credit will bear interest at LIBOR plus two percent (2%) per annum, and will
mature on June 30, 1998. Loans under the line of credit will be collateralized
by a first mortgage lien on Brafferton Shopping Center. The Company has an
additional collateralized revolving line of credit of approximately $8.25
million with Mellon Bank. This line is collateralized by Kenhorst Plaza and
expires March 29, 1998. Loans under this line will bear interest at LIBOR plus
two percent (2%). As of December 31, 1996, there were no outstanding balances
under the Lines of Credit.
On January 31, 1997, the Company closed a $25 million line of credit
with Corestates Bank. The line is collateralized by Shoppes of Graylyn, Newtown
Square, Four Mile Fork and Centre Ridge Marketplace, bears interest at LIBOR
plus 1.50% and expires January 31, 2000.
The Lines of Credit are available to fund acquisitions, renovations,
expansions and other working capital requirements. Definitive agreements with
respect to the Lines of Credit contain customary representations, warranties and
covenants.
The Company expects to meet its short-term liquidity requirements
generally through its working capital, net cash provided by operations and draws
on its Lines of Credit. The Company believes that the foregoing sources of
liquidity will be sufficient to fund liquidity needs through 1997.
The Company expects to meet certain long-term liquidity requirements
such as development, property acquisitions, scheduled debt maturities,
renovations, expansions and other non-recurring capital improvements through
long-term secured and unsecured indebtedness, including the Lines of Credit and
the issuance of additional equity securities. The Company also expects to use
funds available under the Lines of Credit to fund acquisitions, development
activities and capital improvements on an interim basis.
During 1999, $88.2 million of the Company's indebtedness becomes due,
including the $25.0 million Exchangeable Debentures. The Company believes that
it will be able to retire this debt through either a refinancing of the debt
using the properties as collateral, an equity offering or a combination of both.
The Company currently believes that the loan-to-values on the properties are at
a level that will enable the Company to fully refinance the loans without an
additional requirement for capital.
The Company has elected to qualify as a REIT for federal income tax
purposes. To maintain its status as a REIT, the Company is required, among other
items, to pay dividends to its shareholders of at least 95% of its taxable
income. The Company intends to make quarterly distributions to its shareholders
from operating cash flow.
Inflation, Economic Conditions
Most of the Company's leases contain provisions designed to partially
mitigate the adverse impact of inflation. Such provisions include clauses
enabling the Company to receive percentage rents based on tenant's gross sales
above predetermined levels, which rents generally increase as prices rise, or
escalation clauses which are typically related to increases in the Consumer
Price Index or similar inflation indices. Most of the Company's leases require
the tenant to pay its share of operating expenses, including common area
maintenance, real estate taxes and insurance, thereby reducing the Company's
exposure to increases in costs and operating expenses resulting from inflation.
In addition, the Company periodically evaluates its exposure to interest rate
fluctuations, and may enter into interest rate protection agreements which
mitigate, but do not eliminate, the effect of changes in interest rates on its
floating rate loans. The Company, as a general policy, endeavors to obtain fixed
rate financing.
27
<PAGE>
The Company's financial results are affected by general economic
conditions in the markets in which its properties are located. An economic
recession, or other adverse changes in general or local economic conditions,
could result in the inability of some existing tenants of the Company to meet
their lease obligations and could otherwise adversely affect the Company's
ability to attract or retain tenants. The Retail Properties are typically
anchored by supermarkets, drug stores and other consumer necessity and service
retailers which usually offer day-to-day necessities rather than luxury items.
These types of tenants, in the experience of the Company, generally maintain
more consistent sales performance during periods of adverse economic conditions.
Recent Accounting Developments
In February of 1997, Statement of Financial Accounting Standard No. 128
"Earnings per share" (FAS 128) was issued. The statement establishes standards
for computing and presenting earnings per share and will be effective for
financial statements issued for periods ending after December 15, 1997.
Management has yet to assess the impact of the standard on the Company's
financial statements.
Item 8. Financial Statements and Supplementary Data
The Consolidated Financial Statements and Supplementary Data of First
Washington Realty Trust, Inc. and Subsidiaries are listed and included
under Item 14 of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures.
None.
28
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Company*
Item 11. Executive Compensation*
Item 12. Security Ownership of Certain Beneficial Owners and Management*
Item 13. Certain Relationships and Related Transactions*
*The information called for by Part III, Items 10, 11, 12 and 13, is
hereby incorporated by reference to the Company's definitive Proxy Statement to
be filed with the Securities and Exchange Commission within 120 days after the
year covered by this Form 10-K with respect to the Company's Annual Meeting of
Shareholders presently scheduled for May 16, 1997.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
A. The following documents are filed as part of this report.
1. The Consolidated Financial Statements of First Washington
Realty Trust, Inc. and Subsidiaries.
See Index to Financial Statements on Page F-1 included
herein.
2. Financial Statement Schedules.
B. Reports on Form 8-K
There was an 8-K report filed November 5, 1996.
C. Exhibits - pursuant to Item 601 of Regulation S-K
3.1 Articles of Incorporation of the Company (4)
(amendment and originals)
3.2 Bylaws of the Company. (5)
10.1 First Amended and Restated Agreement of Limited Partnership
of First Washington Realty Limited Partnership. (5)
10.2 Promissory Note in the principal amount of $38.5 million
dated June 27, 1994 from the Company
in favor of Nomura Asset Capital Corporation. (5)
10.3 Cash Collateral Account Security, Pledge and Assignment
Agreement among JFD Limited
Partnership, Greenspring Associates Limited Partnership
and FW-Bryans Road Limited Partnership
as borrowers, and Nomura Asset Capital Corporation,
as Lender. (5)
10.4 Indemnity, Pledge and Security Agreement dated
June 27, 1994 between the Operating
Partnership, Stuart D. Halpert, William J. Wolfe,
Lester Zimmerman and Jack E. Spector. (5)
10.5 Term Loan Agreement dated as of June 27, 1994 between
the Company and First State Plaza
Associates Limited Partnership. (5)
29
<PAGE>
10.6 Letter Agreement dated February 22, 1995, between
First Washington Realty Limited Partnership
and Woodholme Properties Limited Partnership. (5)
10.7 Purchase Agreement dated March 30, 1995, between First
Washington Realty Trust, Inc. and
United Dominion Realty Trust, Inc. (5)
10.8 Contribution Agreement dated May 3, 1995, between
First Washington Realty Limited Partnership
and Woodholme Properties Limited Partnership (5)
10.9 Real Estate Purchase Agreement dated May 1, 1995 between
First Washington Realty Trust, Inc.
and United Dominion Realty Trust, Inc. (2)
10.10 Form of Registration Rights Agreement between First
Washington Realty Trust, Inc. and United
Dominion Realty Trust, Inc. (2)
10.11 Commitment Letter dated May 29, 1995 from the Lutheran
Brotherhood to First Washington
Realty Trust, Inc. (2)
10.12 Real Estate Purchase Agreement dated August 18, 1995
between First Washington Realty Limited
Partnership and Kenhorst Plaza Associates, L.P. (3)
10.13 Deed of Trust and Security Agreement dated
October 6, 1995 between First Washington Realty
Limited Partnership and Luthern Brotherhood and
Deed of Trust Note of even date therewith. (3)
10.14 Real Estate Purchase Agreement dated August 18, 1995
between First Washington Realty Limited
Partnership and Kenhorst Plaza Associates, L.P. (*)
10.15 Deed of Trust and Security Agreement dated October 6, 1995
between First Washington Realty
Limited Partnership and Lutheran Brotherhood and Deed of
Trust Note of even date therewith. (*)
10.16 Real Estate Purchase Agreement dated November 15, 1995,
by and between First Washington
Realty Trust, Inc. and Firstfield Center Duncan Limited
Partnership. (*)
10.17 Contribution Agreement dated October 30, 1995, by and
between First Washington Realty Limited
Partnership and Carriage Associates Limited Partnership.(*)
10.18 Purchase Money Deed of Trust dated November 15, 1995,
by and between First Washington
Realty Limited Partnership and Army and Air Force Mutual
Aid Association. (*)
10.19 Mortgage, Assignment of Leases and Rents and Security
Agreement dated January 4, 1996, by and
between Allenbeth Associates Limited Partnership
(First Washington Realty Trust, Inc. is the sole
general partner) and Nomura Asset Capital Corporation. (*)
10.20 Real Estate Purchase Agreement dated February 1, 1996,
by and between First Washington Realty
Limited Partnership and Centre Ridge Development L.P. (*)
10.21 Agreement to Sell Real Estate dated March 28, 1996, by
and between First Washington Realty
Limited Partnership and Super Fresh Food Markets of
Virginia, Inc. (*)
30
<PAGE>
10.22 Contribution Agreement dated March 20, 1996
(effective as of March 1, 1996), by and between
First Washington Realty Limited Partnership and Brian G.
McElwee, Richard W. Ireland, John
H. Donegan, Stacy C. Hornstein, Sweet Gum Tree, L.L.C.
and Wendy A. Seher. (*)
10.23 Amendment and Restatement of Deed of Trust, Assignment
and Security Agreement dated March
21, 1996 by and between Clopper's Mill Village Center,
J.C. Timothy R. Casgar and Margaret
Everson-Fischer, Trustees, and Jackson National Life
Insurance Company. (*)
10.24 Credit Line Deed of Trust and Security Agreement dated
March 28, 1996, by and between First
Washington Realty Limited Partnership, Sam T. Beale
and Barry Musselman, as Trustees, and
South Trustees, and South Trust Bank of Alabama, N.A. (*)
10.25 Real Estate Purchase Agreement dated October 23, 1995,
by and between First Washington Realty
Limited Partnership and 6875 New Hampshire Avenue
Partnership. (*)
10.26 Purchase Money Deed of Trust and Security Agreement
dated April 24, 1996, by and between First
Washington Realty Limited Partnership and Nicoletta R.
Parker and Margaret H. Biewin, as
Trustees. (*)
10.27 Purchase Agreement dated April 4, 1996, by and between
First Washington Realty Limited
Partnership and Michael F. Klein, Philip E. Klein,
Jeffrey F. Klein, George Arconti, Professional
Real Estate Services, Inc., H.S. Taylor White, Rick C.
Klein and William S. Berman. (*)
10.28 Indemnity Deed of Trust, Security Agreement, and
Assignment of Rents and Leases dated June 28,
1995, by and between Southside Marketplace Limited
Partnership in favor of Fleet Management
and Recovery Corporation. (*)
10.29 First Washington Realty Trust, Inc. Restricted
Stock Plan. (*)
10.30 The Contingent Stock Agreement dated June 30, 1996,
by and between First Washington Realty
Trust, Inc. and William J. Wolfe. (*)
10.31 The Contingent Stock Agreement dated June 30, 1996,
by and between First Washington Realty
Trust, Inc. and Stuart D. Halpert. (*)
10.32 Restricted Stock Agreement dated June 30, 1996, by and
between First Washington Realty Trust,
Inc. and William J. Wolfe. (*)
10.33 Restricted Stock Agreement dated June 30, 1996, by and
between First Washington Realty Trust,
Inc. and Stuart D. Halpert. (*)
10.34 Contribution Agreement dated October 21, 1996, by and
between Contingent Realty Investor
Corp., JHP Development Company, Inc., J. Mark Shapiro,
John A. Luetkemeyer, Jr., James Stone
Trustee for Mary Luetkemeyer, James Stone Trustee for
Julia Luetkemeyer, James Stone Trustee
for Anne Luetkemeyer, Tripec Associates, J.P. Herbert
Rochlin and JHJ Investment Limited
Partnership and First Washington Realty Limited
Partnership. (*)
10.35 Contribution Agreement dated October 22, 1996, by and
between Isadore Shooster, Harry
Shooster, Donald Shooster, David Shooster, Daniel
Shooster, Myra Gerson, Richard and Helaine
Gordon, David and Michele Saland and Fairless Hills
S.C. Associates and First Washington Realty
Limited Partnership. (*)
10.36 Real Estate Purchase Agreement dated October 15, 1996,
by and between Graylyn Shopping
Center Associates, L.P. and First Washington Realty
Limited Partnership. (*)
10.37 Real Estate Purchase Agreement dated October 3, 1996,
by and between VOL Properties
Corporation and First Washington Realty Limited
Partnership. (*)
31
<PAGE>
10.38 Real Estate Purchase Agreement dated September 23, 1996,
by and between Newtown Square
Associates, L.P. and First Washington Realty Limited
Partnership.(*)
10.39 Contribution Agreement dated October 22, 1996, by
and between Kings Park Associates and First
Washington Realty Limited Partnership. (*)
10.40 Revolving Credit Loan Agreement dated January 31, 1997
between Corestates Bank, N.A. and
First Washington Realty Limited Partnership. (4)
10.41 Contribution Agreement dated March 19, 1997, by and
between Ashburn Farms Village Center, L.L.C. and First
Washington Realty Limited Partnership. (4)
21.1 List of Subsidiaries (4)
23.1 Consent of Coopers & Lybrand L.L.P. (4)
27 Financial Data Schedule (4)
Executive Compensation Plans and Arrangements
10.43 The 1994 Stock Option Plan of First Washington
Realty Trust, Inc., First Washington Realty
Limited Partnership and First Washington
Management, Inc. (5)
10.45 Employment Contract, dated June 30, 1996,
between the Company and Stuart D. Halpert (*)
10.46 Employment Contract, dated June 30, 1996,
between the Company and William J. Wolfe (*)
10.52 Stock Option Agreement between the Company and
William J. Wolfe (1)
10.53 Stock Option Agreement between the Company and
Stuart D. Halpert (1)
10.54 Stock Option Agreement between the Company
and Jeffrey S. Distenfeld (1)
10.55 Stock Option Agreement between the Company
and James G. Blumenthal (1)
10.56 Stock Option Agreement between the Company
and James G. Pounds (1)
10.57 Stock Option Agreement between the Company
and Stanley T. Burns (1)
10.58 Stock Option Agreement between the Company
and Matthew J. Hart (1)
10.59 Stock Option Agreement between the Company
and William M. Russell (1)
10.60 Stock Option Agreement between the Company
and Heywood Wilansky (1)
(*) Incorporated herein by reference from the Company's
Registration Statement on Form S-11 (No. 333-15423).
(1) Incorporated herein by reference from the Company's
Form 10-K filed on March 31, 1995.
(2) Incorporated herein by reference from Amendment No.2 to the
Company's Registration Statement on Form S-11 (No. 33-93188).
(3) Incorporated herein by reference to the Company's Form 10-Q
filed on November 11, 1995 for the quarter ended September 30, 1995.
(4) Filed herewith.
(5) Incorporated herein by reference from the Company's
Registration Statement on Form S-11 (No. 33-83960).
32
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FIRST WASHINGTON REALTY TRUST, INC.
By: /s/ William J. Wolfe
William J. Wolfe
President and Chief Executive Officer
March 28, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Signature Title Date
/s/ Stuart D. Halpert Chairman of the Board of Directors March 28, 1997
- --------------------------
Stuart D. Halpert
/s/ William J. Wolfe President, Chief Executive Officer, March 28, 1997
- --------------------------
William J. Wolfe Director
/s/ Lester Zimmerman Executive Vice President, Director March 28, 1997
- --------------------------
Lester Zimmerman
/s/ James G. Blumenthal Chief Financial Officer March 28, 1997
- --------------------------
James Blumenthal
/s/ Stanley T. Burns Director March 28, 1997
- --------------------------
Stanley T. Burns
/s/ Matthew J. Hart Director March 28, 1997
- --------------------------
Matthew J. Hart
/s/ William M. Russell Director March 28, 1997
- --------------------------
William J. Russell
/s/ Heywood Wilansky Director March 28, 1997
- --------------------------
Heywood Wilansky
33
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
- -- Report of Independent Accountants................................... F- 2
- -- Consolidated Balance Sheets as of December 31, 1996 and 1995........ F- 3
- -- Consolidated Statements of Operations for the years ended
December 31, 1996, 1995 and 1994.................................. F- 4
- -- Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1996,
1995 and 1994..................................................... F- 5
- -- Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994.................................. F- 6
- -- Notes to the Consolidated Financial Statements...................... F- 7
- -- Schedule II -- Valuation and Qualifying Accounts.................... F-26
- -- Schedule III -- Real Estate and Accumulated Depreciation............ F-27
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of First Washington Realty Trust, Inc.
We have audited the consolidated financial statements and the financial
statement schedules of First Washington Realty Trust, Inc. and Subsidiaries, as
more fully described in Note 1, listed in the index on page F-1 of the Form
10-K. These financial statements and financial statement schedules are the
responsibility of the management of First Washington Realty Trust, Inc. and
Subsidiaries. Our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of First
Washington Realty Trust, Inc. and Subsidiaries as of December 31, 1996 and 1995,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedules referred to above, when considered in relation to
the basic financial statements taken as a whole, present fairly, in all material
respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Washington, D.C.
January 31, 1997, except for Note 16,
as to which the date is March 26, 1997
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
as of December 31, 1996 and 1995
(dollars in thousands except share data)
-----------
<TABLE>
<S> <C> <C>
1996 1995
-------- ------
ASSETS
Rental properties:
Land $61,959 $ 42,420
Buildings and improvements 252,276 185,672
------- --------
314,235 228,092
Accumulated depreciation (30,450) (22,775)
-------- --------
Rental properties, net 283,785 205,317
Cash and equivalents 11,780 7,806
Tenant receivables, net 4,639 3,214
Deferred financing costs, net 4,403 5,690
Other assets 9,006 5,378
-------- --------
Total assets $313,613 $227,405
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $167,047 $116,182
Debentures 25,000 25,000
Accounts payable and accrued expenses 6,328 4,059
---------- ---------
Total liabilities 198,375 145,241
Minority interest 16,661 11,088
Stockholders' equity:
Common stock $.01 par value;
90,000,000 shares
authorized; 4,946,245 and 3,189,549
shares issued and
outstanding, respectively 49 32
Convertible preferred stock $.01 par value;
3,750,000 shares designated; 2,314,189 shares
issued and outstanding
(aggregate liquidation preference
of $57,855) 23 23
Additional paid-in capital 116,068 80,699
Accumulated distributions in excess of
earnings (17,563) (9,678)
---------- -----------
Total stockholders' equity 98,577 71,076
--------- ---------
Total liabilities and
stockholders' equity $313,613 $227,405
======== ========
</TABLE>
The accompanying notes are an integral
part of these consolidated financial
statements.
F-3
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended December 31, 1996, 1995 and 1994
(dollars in thousands, except share data)
-----------
<TABLE>
<S> <C> <C> <C>
1996 1995 1994
------- -------- ------
Revenues:
Minimum rents $31,925 $23,276 $14,701
Tenant reimbursements 6,704 4,362 2,823
Percentage rents 664 495 255
Other income 1,672 1,447 2,420
------ ------- ---------
Total revenues 40,965 29,580 20,199
------- ------- -------
Expenses:
Property operating and
maintenance 10,270 7,229 6,299
General and administrative 3,137 2,831 1,356
Interest 14,986 11,230 9,301
Depreciation and amortization 8,019 5,808 4,579
------ ------ ------
Total expenses 36,412 27,098 21,535
------- ------- -------
Income (loss) before income
from Management Company,
extraordinary item,
minority interest and
distributions to
Preferred Stockholders 4,553 2,482 (1,336)
Income from Management Company 221 449 500
------- ------- -------
Income (loss) before
extraordinary item,
minority interest and
distributions to
Preferred Stockholders 4,774 2,931 (836)
Extraordinary item - Gain on
early extinguishment
of debt and debt
restructuring - - 2,251
--------- --------- -------
Income before minority
interest and distributions
to Preferred Stockholders 4,774 2,931 1,415
Income allocated to minority
interest (694) (602) (1,101)
--------- -------- ----------
Income before distributions
to Preferred Stockholders 4,080 2,329 314
Distributions to
Preferred Stockholders (5,641) (5,117) (1,811)
--------- --------- ----------
Loss allocated to Common
Stockholders $(1,561) $(2,788) $(1,497)
======== ======= =========
Net loss per Common Share $(0.46) $(1.19) $(0.95)
======== ====== =========
Weighted average shares of
Common Stock, in thousands 3,367 2,351 1,574
====== ====== =======
</TABLE>
The accompanying notes are an integral
part of these consolidated financial
statements.
F-4
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for the years ended December 31, 1996, 1995 and 1994
(dollars in thousands)
---------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Addtl Accumul
Convert Paid Distrib
Common Prefrd in in Excess Accumul
Stock Stock Capital of Earnings Deficit Total
Balance,
December 31, 1993 $(15,160) $(15,160)
Common stock
issued in
connection
with June 1994
Offering
(1,282,051 shares) $13 $24,987 25,000
Common stock
issued in
exchange for
$4 million
note due from
Management
Company (189,744 shares) 2 (2)
Stock issued
to Farallon
(102,564 shares) 1 1,999 2,000
Convertible
Preferred Stock
issued in
connection with
June 1994 Offering
(1,920,000 shares) $19 47,981 48,000
Cost of
raising capital (11,902) (11,902)
Net income $314 875 1,189
Cash distributions (2,612) (2,039) (4,651)
Pre-reorganization
contributions 1,772 1,772
Adjustment for
deconsolidation
of Management
Company (204) (204)
Reclassification
of accumulated
deficit upon
reorganization (14,756) 14,756 -
Reclassification
of minority
interest (62) (62)
-- -- ------- ------- ------ -------
Balance,
December 31, 1994 16 19 48,245 (2,298) - 45,982
Net Income 2,329 2,329
Issuance of
Common Stock
(1,528,393 shares) 15 27,114 27,129
Issuance of
Preferred Stock
(358,000 shares) 4 8,051 8,055
Issuance of
Common Stock for
compensation
(66,666 shares) 1 1,182 1,183
Issuance of
Preferred Stock
(36,189 shares) 0 787 787
Cost of raising
capital (2,808) (2,808)
Cash distributions (9,709) (9,709)
Exchange of
common units for
common shares
(20,131 shares) 119 119
Adjustment for
minority interest's
ownership of the
Operating Partnership (1,991) (1,991)
-- -- ------- ------- ------- -------
Balance,
December 31, 1995 32 23 80,699 (9,678) - 71,076
Net Income 4,080 4,080
Issuance of
Common Stock
(1,655,000 shares) 17 35,979 35,996
Cost of raising
capital (2,561) (2,561)
Cash distributions (11,965) (11,965)
Exchange of
common units for
common shares
(17,416 shares) 83 83
Adjustment for
minority interest's
ownership of the
Operating Partnership 1,868 1,868
--- --- -------- ---------- -------- --------
Balance,
December 31, 1996 $49 $23 $116,068 $(17,563) $ - $98,577
=== ==== ======== ========= ========= ========
</TABLE>
The accompanying notes are an integral
part of these consolidated financial
statements.
F-5
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1996, 1995 and 1994
(Dollars in thousands)
--------
<TABLE>
<S> <C> <C> <C>
Year Ended December 31,
1996 1995 1994
-------- -------- ------
Operating activities:
Income before distributions
to Preferred Stockholders $4,080 $2,329 $314
Adjustment to reconcile net
cash provided by
operating activities:
Income allocated to
minority interest 694 602 1,101
Depreciation and
amortization 8,019 5,808 4,579
Amortization of deferred
financing costs and
loan discounts 2,167 2,260 1,308
Compensation paid or
payable in company stock 1,649 1,800 -
Provision for uncollectible
accounts 527 483 941
Gain on early extinguishment
of debt and debt restructuring - - (2,251)
Recognition of deferred rent (921) (855) 537
Net changes in:
Tenant receivables (1,032) (292) (1,336)
Other assets (4,230) (2,160) (1,048)
Account payable and
accrued expenses 404 (3) (981)
Equity in earnings of
Management Company 259 31 -
--------- --------- ------
Net cash provided by
operating activities 11,616 10,003 3,164
-------- ------- --------
Investing activities:
Additions to
rental properties (4,476) (2,067) (3,301)
Purchase of
rental properties (52,518) (27,917) (52,935)
Distributions from
Management Company - 100 -
---------- --------- ------
Net cash used in
investing activities (56,994) (29,884) (56,236)
--------- -------- ----------
Financing activities:
Proceeds from line
of credit draws 9,867 - -
Proceeds from
mortgage notes 31,376 16,720 40,834
Proceeds from Debentures - - 25,000
Proceeds from sale
of Common Stock 35,996 27,129 25,000
Proceeds from sale
of Preferred Stock - - 48,000
Cost of raising capital (2,345) (2,680) (8.962)
Repayment of line
of credit (9,867) - -
Repayment on
mortgage notes (823) (2,260) (63,800)
Additions to deferred
financing costs (739) (581) (8,032)
Reduction in Advances
due Principals - (447) -
Establishment of
Lender escrows - - (737)
Prepayment penalties - - (276)
Distributions paid -
Pre-reorganization - - (2,039)
Distributions paid to
Preferred Stockholders (5,641) (5,117) (1,811)
Distributions paid to
Common Stockholders (6,324) (4,593) (801)
Distributions paid to
minority interest (2,148) (1,597) (509)
Contributions -
Pre-reorganization - - 1,772
Deconsolidation of
Management Company - - (24)
---------- ---------- --------
Net cash provided
by financing
activities 49,352 26,574 53,615
------- ------- --------
Net increase in cash
and equivalents 3,974 6,693 543
Cash and equivalents,
beginning of period 7,806 1,113 570
-------- ---------- -------
Cash and equivalents,
end of period $11,780 $ 7,806 $ 1,113
======= ======= =======
</TABLE>
The accompanying notes are an integral
part of these consolidated financial
statements.
F-6
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
1. Organization and Business
First Washington Realty Trust, Inc. and subsidiaries
(collectively, the "Company") is the successor to substantially all of
the interests of First Washington Management, Inc. ("FWM"), its
affiliates and certain others in a portfolio of 14 retail and two
multifamily properties owned by FWM and its affiliates (collectively,
the "Existing Properties"), all located in the Mid-Atlantic region and
the economic beneficiary of the related acquisition, property
management, renovation and third-party businesses (together with the
Existing Properties, the "FWM Group" or "Predecessor") through the
issuance of 1,282,051 and 1,920,000 shares of Common and Convertible
Preferred Stock, respectively, of the Company.
The Company, incorporated in Maryland in April 1994, is
self-managed and self-administered and has elected to be taxed as a real
estate investment trust ("REIT") under the Internal Revenue Code of
1986, as amended (the "Code").
On June 27, 1994, the Company completed a private
placement offering (the "June 1994 Offering") of 1,920,000 shares of
9.75% Series A Cumulative Participating Convertible Preferred Stock
("Preferred Stock") with a $0.01 par value per share and a liquidation
preference of $25.00 per share, and 1,282,051 shares of $0.01 par value
Common Stock. The June 1994 Offering price per share of Preferred Stock
and Common Stock was $25.00 and $19.50, respectively, resulting in gross
offering proceeds of $73.0 million. Net of Initial Purchaser's
Discount/Placement Agent's fee and total estimated offering expenses,
the Company received approximately $63.1 million in proceeds.
Simultaneously with the June 1994 Offering, the Company
was admitted as the sole general partner of First Washington Realty
Limited Partnership (the "Operating Partnership"). The transactions
leading to the admittance of the Company into the Operating Partnership
were as follows:
The Operating Partnership was formed via the contribution
of substantially all the assets of or interests in the FWM
Properties by the owners, net of related mortgage
indebtedness. In addition, certain owners of FWM
("Principals") contributed a $4.0 million promissory note
with no cost basis (the "FWM Note") due from FWM, the
operator of the related acquisition, property management,
leasing and brokerage business, to the Company in exchange
for 189,744 shares of Common Stock. The Company was
admitted as the sole general partner of the Operating
Partnership, receiving an approximate ownership interest
of 83.5% in exchange for contributing the net June 1994
Offering proceeds and the FWM Note.
The net proceeds of the June 1994 Offering, together with
borrowings of $38.5 million under new mortgage loans
collateralized by certain properties and the issuance of
$25.0 million of Exchangeable Debentures, were used to
repay indebtedness of $68.1 million including
approximately $3.1 million for prepaid interest and
amortization, prepayment penalties and term extension
fees; to purchase six properties at a cost of $51.9
million; to pay expenses in connection with the formation
transactions of $6.5 million; and, to fund working
capital. The original owners' interests in the properties
were converted into 337,732 limited partnership units,
including 2,564 units received by the Principals in
connection with their contribution of all of the
non-voting preferred stock entitled to 99% of the cash
flow of FWM, which are exchangeable on a one-for-one basis
for shares of the Company's common stock.
F-7
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
Farallon Capital Management, Inc. ("Farallon"), a
previously unrelated third party, along with certain of its affiliates
were reimbursed approximately $1.1 million advanced in connection with
their funding of certain expenses relating to the Offering and received
102,564 shares of Common Stock with a value of approximately $2.0
million based upon the June 1994 Offering price of $19.50 per share. The
Common Stock issued was recorded at its fair value with a corresponding
increase in costs of raising capital.
The accompanying financial statements for the periods
prior to the REIT formation are presented on a combined historical cost
basis due to their common control and management. The exchange of the
Predecessor for interests in the Operating Partnership was accounted for
as a reorganization of entities under common control. As such, these
assets and liabilities were transferred and accounted for at historical
cost in a manner similar to that in a pooling of interests.
The Company's assets are held by, and all its operations
conducted through, the Operating Partnership and FWM. As of December 31,
1996, the Company and the Operating Partnership, including subsidiary
partnerships, collectively owned 100% of the properties. Due to the
Company's ability, as the general partner, to exercise both financial
and operational control over the Operating Partnership, the Operating
Partnership is consolidated for financial reporting purposes. Subsequent
to the admittance of the Company, allocation of net income to the
limited partners of the Operating Partnership is based on their
respective partnership interests and is reflected in the accompanying
Consolidated Financial Statements as minority interests. Losses
allocable to the limited partners in excess of their basis are allocated
to the Common Stockholders as the limited partners have no requirement
to fund losses.
On June 27, 1995, the Company completed a public offering
of 1,450,000 shares of Common stock (the "June 1995 offering"). The
shares of stock were priced at $17.75 per share, resulting in gross
offering proceeds of $25.7 million. The Company netted $23.0 million
after deducting the underwriters discount and estimated offering
expenses of $2.7 million.
On July 27, 1995, an additional 78,393 shares of Common
Stock were issued pursuant to the exercise of a portion of the
underwriters over-allotment option. The Company received additional
proceeds of $1.3 million net of the underwriters discount.
On July 26, 1996, the New York Stock Exchange accepted the
Company's shares for trading. Trading commenced on August 13, 1996 under
the symbol FRW and FRWPr.
On December 2, 1996, the Company completed a public
offering of 1,500,000 shares of Common Stock (the "December 1996
Offering"). The shares of stock were priced at $21.75 per share,
resulting in gross offering proceeds of $32.6 million. The Company
netted $30.2 million after deducting the underwriters discount and
offering expenses of $2.4 million.
On December 30, 1996, an additional 155,000 shares of
Common Stock were issued pursuant to the exercise of a portion of the
underwriters over-allotment option. The Company received additional
proceeds of $3.2 million net of underwriters discount.
The Company's financial results are affected by general
economic conditions in the markets in which its properties are located.
An economic recession, or other adverse changes in general or local
economic
F-8
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
conditions, could result in the inability of some existing tenants of
the Company to meet their lease obligations and could otherwise
adversely affect the Company's ability to attract or retain tenants. The
Retail Properties are typically anchored by supermarkets, drug stores
and other consumer necessity and service retailers which usually offer
day-to-day necessities rather than luxury items. These types of tenants,
in the experience of the Company, generally maintain more consistent
sales performance during periods of adverse economic conditions.
2. Acquisition of Rental Properties
With the proceeds from the June 1994 Offering, the Company
acquired six additional retail properties, net of mortgage debt assumed,
for an aggregate purchase price of approximately $83.8 million. The
properties were acquired for approximately $60.6 million in cash, the
assumption of approximately $14.4 million of debt, including purchase
money notes exchangeable into either shares of Convertible Preferred
Stock or Common Stock (see Note 3), and issuance of 352,000 Exchangeable
Preferred Units to the sellers of two of the properties with a value of
approximately $8.8 million.
On June 1, 1995, the Company acquired the Festival at
Woodholme Shopping Center located in Baltimore, Maryland for an
approximate price of $14.3 million. The acquisition was financed through
the issuance of approximately 96,000 Operating Partnership common units
to the seller of the property with a value of approximately $1.6 million
and assumed mortgage of indebtedness of $12.7 million. Concurrent with
the closing, the Company made a $1.0 million mortgage curtailment. The
mortgage bears interest at 9.6% per annum and is payable monthly based
on a 28 year amortization schedule. The loan is due in April 2000.
The center is anchored by Sutton Place Gourmet and Pier One Imports.
On June 30, 1995 (effective July 1, 1995), the Company
acquired four shopping centers located in Richmond, Virginia for an
approximate price of $20.3 million. The shopping centers are Glen Lea,
anchored by Winn-Dixie Supermarket; Hanover Village, anchored by Rack `N
Sack Supermarket; Laburnum Square, anchored by Hannaford Brothers; and
Laburnum Park, anchored by Ukrops Supermarket. The acquisition was
financed through the issuance of approximately 358,000 shares of
Preferred Stock to the seller of the property with a value of
approximately $8.1 million, and cash of approximately $12.2 million.
The Company obtained a loan commitment using the four
Richmond properties as collateral, in the amount of $14.2 million which
has a term of ten years, and bears interest at 8.57% per annum, with
monthly payments based on a 22 year amortization schedule. The loan
closed on October 6, 1995.
On October 12, 1995, the Company acquired Kenhorst Plaza
Shopping Center in Reading, Pennsylvania for an approximate price of
$11.0 million. The center is anchored by Redner's Supermarket and
Rite-Aid Drugs. The acquisition was financed from the proceeds of the
$14.2 million loan discussed above.
On November 15, 1995, the Company acquired Firstfield
Shopping Center located in Gaithersburg, Maryland for an approximate
price of $3.4 million. The acquisition was financed through the issuance
of approximately 36,000 shares of Preferred Stock to the seller of the
property with a value of approximately $0.8 million, a seller provided
7.5% purchase money note in the amount of approximately $2.5 million due
in December 2005 and $0.1 million cash.
F-9
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
On January 4, 1996, the Company acquired two shopping
centers, Stefko Boulevard Shopping Center, located in Bethlehem,
Pennsylvania and 15th & Allen Shopping Center, located in Allentown,
Pennsylvania, from one seller for an approximate price of $9.4 million.
The shopping centers are each anchored by Laneco Supermarket. The
acquisition was financed through the issuance of approximately 121,000
Common Units to the seller of the properties with a value of
approximately $2.2 million, mortgage indebtedness of approximately $6.1
million and $1.1 million cash. The mortgage loan bears interest at
7.745% per annum and is self amortizing over a 25 year period.
On March 20, 1996, the Company acquired the Clopper's Mill
Village Shopping Center located in Germantown, Maryland for an
approximate price of $19.9 million. The center is anchored by Shoppers
Food Warehouse and CVS/Pharmacy. The acquisition was financed with new
mortgage debt of $14.5 million, the issuance of approximately 172,000
Common Units to the seller of the property with a value of approximately
$3.3 million, the issuance to the seller of the property of
approximately 68,000 Preferred Units with a value of approximately $1.6
million and approximately $.5 million cash. The mortgage loan bears
interest at 7.18% per annum, amortizes over a 25 year period and matures
in March 2006.
On March 29, 1996, the Company acquired Centre Ridge
Marketplace located in Centreville Virginia. The price of the property
was $5.5 million. On June 1, 1996, the Company acquired the Superfresh
Supermarket building, which anchors the shopping center for $3.0
million. The Company subsequently spent approximately $1.6 million for
the construction of an additional 34,000 square feet. The total cost of
the project when completed will be approximately $11.0 million which was
financed through a $9.0 million construction loan and $2.0 million of
cash. The construction loan was paid off in January 1997 with proceeds
from the December 1996 Offering.
On April 29, 1996, the Company acquired Takoma Park
Shopping Center located in Takoma Park, Maryland for an approximate
price of $4.6 million. The center is anchored by Shoppers Food
Warehouse. The acquisition was financed with new mortgage debt of $2.4
million and a draw on the Company's line of credit in the amount of $2.1
million and $0.1 million cash. The Company is renovating the shopping
center at a cost of approximately $.8 million. The work is expected to
be completed by June 1997 and will be financed through additional
proceeds from the current first trust lender. The loan bears interest at
prime plus .25% and matures in April 1999.
On June 7, 1996, the Company acquired Southside
Marketplace shopping center located in Baltimore, Maryland for an
approximate price of $11.0 million. The center is anchored by Metro
Foods and Rite Aid Drugs. The acquisition was financed through the
assumption of an $8.1 million first trust mortgage and a draw on the
Company's line of credit in the amount of approximately $2.9 million.
The mortgage loan bears interest at 8.75% per annum and is payable
monthly based on a 29 year amortization schedule. The loan is due in
July 2005.
On December 19, 1996, the Company acquired Kings Park
Shopping Center located in Burke, Virginia for an approximate price of
$5.7 million. The center is anchored by Giant Food and CVS/Pharmacy. The
acquisition was financed through the assumption of a $4.3 million first
trust mortgage, issuance of approximately 36,000 Common Units to the
seller of the property with a value of $0.8 million and $0.6 million
cash. The mortgage loan bears interest at 9.00% per annum, is self
amortizing over a 17 year period, and is due November 2014.
F-10
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
On December 27, 1996, the Company acquired Newtown Square
Shopping Center located in Newtown Square, Pennsylvania, for an
approximate price of $11.7 million. The center is anchored by Acme
Markets and Thrift Drug. The property was financed from the proceeds of
the December 1996 Offering.
On December 30, 1996, the Company acquired Northway
Shopping Center located in Millersville, Maryland for an approximate
price of $9.1 million. The center is anchored by Metro Foods and Rite
Aid. The acquisition was financed through the assumption of a $7.8
million mortgage, issuance of approximately 48,000 Common Units to the
seller of the property with a value of approximately $1.1 million and
$0.2 million in cash. The mortgage loan of $7.8 million was subsequently
split into two loans. A first trust mortgage loan in the amount of $6.0
million bears interest at 8.5% per annum and is payable monthly based on
a 25 year amortization schedule. The loan is due in January 2007. A
second trust mortgage in the amount of $1.8 million bears interest at
10.25% per annum and is payable monthly based on a 28 year amortization
schedule. The loan is due in August 1999.
All the acquisitions were accounted for using the purchase
method of accounting.
The following unaudited pro forma condensed combined
results of operations for the years ended December 31, 1996 and 1995 are
presented as if the acquisitions of the rental properties occurred on
January 1 of the period presented. In preparing the pro forma data,
adjustments have been made to assume that the December 1996 and June
1995 Offering occurred on January 1, of the periods presented. The
proforma statements are provided for information purposes only. They are
based on historical information and do not necessarily reflect the
actual results that would have occurred nor are they necessarily
indicative of future results of operations of the Company.
<TABLE>
<S> <C> <C>
1996 1995
-------- ------
(unaudited)
Total revenues $45,855 $41,739
Expenses:
Property operating and maintenance 11,563 9,876
General and administrative 3,137 2,831
Interest 16,475 15,574
Depreciation and amortization 8,966 8,119
------- -------
40,141 36,400
Income before income from Management
Company, minority interest and distributions
to Preferred Stockholders 5,714 5,339
Income from Management Company 221 449
------ -------
Income before minority interest and
distributions to Preferred Stockholders 5,935 5,788
Income allocated to minority interest (908) (891)
-------- --------
Income before distributions to Preferred
Stockholders 5,027 4,897
Distributions to Preferred Stockholders (5,641) (5,641)
------- -------
Loss allocated to Common Stockholders $(614) $(744)
======= =======
Net loss per common share $(0.13) $(0.15)
======= =======
F-11
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
3. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of the
Company and its majority owned partnerships, including the Operating
Partnership. All significant intercompany balances and transactions have
been eliminated. Combined financial statements, including the accounts
after elimination of all transactions between business entities included
in the FWM Group, are presented prior to the June 1994 Offering.
The Company's investment in the preferred stock of FWM is
accounted for under the equity method of accounting. In addition to
receiving fees under third-party management, leasing and brokerage
agreements, FWM manages and leases all the properties owned by the
Operating Partnership in exchange for a fee.
Use of Accounting Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. These estimates involve
judgments with respect to, among other things, various future economic
factors which are difficult to predict and are beyond the control of the
Company. Therefore, actual amounts could differ from these estimates.
Rental Properties
Rental properties are carried at the lower of cost less
accumulated depreciation or net realizable value. Depreciation is
computed on the straight-line basis over the estimated useful lives of
the assets. The Company uses a 27.5- to 31.5-year estimated life for
buildings and 5- to 31.5-year estimated life for capital improvements.
Tenant improvement expenditures are depreciated over the term of the
related lease. Expenditures for ordinary maintenance and repairs are
charged to operations as incurred while significant renovations and
improvements that improve and/or extend the useful life of the asset are
capitalized and depreciated over the estimated useful life.
In determining whether there has been any impairment losses, the
Company determines that the property's net projected undiscounted cash
flow before debt service is sufficient to recover the cost of the asset.
An impairment loss would result if the carrying value were greater than
the cumulative undiscounted net cash flow. The amount of an impairment
would be calculated by determining the difference between the carrying
value and the cumulative discounted net cash flow.
F-12
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
Cash and Equivalents
All demand, money market accounts, certificates of deposit and
repurchase agreement accounts with an original maturity of three months
or less at date of purchase are considered to be cash and equivalents.
The Company places its temporary cash investments with high quality
financial institutions. The deposits at such financial institutions are
guaranteed by the Federal Deposit Insurance Corporation ("FDIC") up to
$100. At various times during the year, the Company has deposits in
excess of the FDIC insurance limit. In addition, the Company is required
to maintain escrow deposits with certain lenders. Such amounts which are
included in other assets, are also in excess of FDIC insurance limits.
Deferred Lease Costs
Deferred lease costs consist of fees and costs incurred to
initiate and renew operating leases, including amounts paid to FWM, are
amortized over the lease term and are included in other assets.
Deferred Financing Costs
Deferred financing costs include costs of interest rate caps,
interest rate buydowns and fees incurred to obtain long-term financing.
They are being amortized over the terms of the respective loans using
the effective interest method. Unamortized deferred financing costs are
charged to expense when debt is retired before the maturity date.
Accumulated amortization of deferred financing costs at December 31,
1996 and 1995 was $5,518 and $3,492, respectively. Deferred financing
cost amortization expense is included in interest expense and amounted
to $2,167, $2,260 and $1,308 during 1996, 1995, and 1994 respectively.
Revenue Recognition
Rental income attributable to leases is recorded when due from
tenants. Certain of the leases provide for escalating base rents, which
are recognized on a straight-line basis over the term of the agreement.
Rents accrued, but not yet paid, are included in accounts receivable. As
of December 31, 1996 and 1995, the amounts of these straight-line
receivables were $3,317 and $2,396, respectively. The amount of rental
income from the straight-lining of rents amounted to $921, $855 and
($603) for the years ended 1996, 1995 and 1994, respectively. Certain of
the leases also provide for additional revenue to be paid based upon the
level of sales achieved by the lessee and are recorded as percentage
rents. Most leases provide for tenant reimbursement of common area
maintenance and other operating expenses.
An allowance for doubtful accounts has been provided against the
portion of tenant accounts receivable which is estimated to be
uncollectible. Tenant accounts receivable in the accompanying
consolidated balance sheets are shown net of an allowance for doubtful
accounts of $683 and $418 as of December 31, 1996, and 1995,
respectively.
F-13
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
Income Taxes
The Company operates and intends to continue to operate in a
manner intended to qualify as a REIT under the Code. A trust which
distributes at least 95% of its taxable income to its shareholders each
year and which meets certain other conditions will not be taxed on that
portion of its taxable income which is distributed to its shareholders.
During 1996, common and preferred distributions paid of $0.48 and
$2.4375 per share were treated as ordinary income, respectively. During
1996, common distributions paid of $1.47 were treated as a return of
capital. During 1996, all preferred distributions paid were treated as
ordinary income.
If the Company fails to qualify as a REIT in any tax year, the
Company will be subject to Federal income tax (including any applicable
alternative minimum tax) on its taxable income at regular corporate
rates. Even if the company qualifies for taxation as a REIT, the Company
may be subject to certain state and local taxes on its income and
property and federal income and excise taxes on its undistributed
income.
Loss per Share
Loss per share is calculated by dividing income after minority
interest, less preferred distributions by the weighted average number of
common shares outstanding during the respective periods. The assumed
conversion of the partnership units held by the limited partners of the
Operating Partnership as of the REIT formation, which would result in
the elimination of earnings and losses allocated to minority interests
would have no effect for 1996 and 1995 and would have been anti-dilutive
in 1994, as the allocation of losses to limited partners was suspended
due to their lack of responsibility to fund losses.
Minority Interest
Minority interest represents the limited partners' interest of
782,360, and 422,802 common units as of December 31, 1996 and 1995,
respectively, and 419,609 and 352,000 Exchangeable Preferred Units in
the Operating Partnership as of December 31, 1996 and 1995,
respectively. The Exchangeable Preferred Units have an aggregate
liquidation preference of $10,490. At the date of formation, the
minority interest was established based on their interest in the value
of the Operating Partnership. Annually, the income is assigned to
Preferred Stockholders to the extent of their distributions and amounts
necessary to maintain their balance at its liquidation value. Any
remaining income is assigned to minority Common Stockholders based on
their percentage interest during the period the income is generated.
Losses of the Operating Partnership are allocated to minority Common
Stockholders based on their percentage interest to the extent that they
have capital available. In the event that consolidated net assets
decrease below the Preferred Stock liquidation value, operating losses
are allocated to the Preferred minority interest based on their
percentage ownership. Additionally, the impact on stockholders equity of
changes in minority interest percentage ownership caused by the issuance
of common stock or conversions of preferred stock are reflected in
additional paid in capital.
F-14
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
4. Rental Properties
Depreciation expense for each of the years ended December
31, 1996, 1995, and 1994 was $7,675, $5,534, and $4,223, respectively.
For each of the years ended December 31, 1996, 1995, and
1994, maintenance and repairs expense was $2,767, $1,872 and $1,552,
respectively, and real estate taxes were $3,070, $2,044 and $1,484,
respectively. Such amounts are included in property operating and
maintenance expense in the accompanying consolidated statements of
operations.
5. Mortgage Debt
Mortgage and other notes payable consisted of the
following as of December 31, 1996 and 1995, respectively:
</TABLE>
<TABLE>
<S> <C> <C>
1996 1995
-------- ------
Mortgage notes with fixed interest at:
7.31%, maturing June 1998 4,151 4,151
6.50%, maturing May 1999 3,587 3,587
6.50%, maturing July 1999 (f) 3,826 3,826
7.09%, maturing July 1999 (a)(b)(c) 38,500 38,500
7.50%, maturing June 1999 3,500 3,500
7.00%, maturing July 1999 3,656 3,656
10.25% maturing August 1999 1,759 -
9.60% maturing April 2000 11,588 11,671
5.00%, maturing July 2000 (d) 4,449 4,308
6.50% to 8.00%, maturing through July 2001 9,332 9,332
8.75% maturing July 2005 8,065 -
8.57% maturing October 2005 13,952 14,163
7.50% maturing December 2005 2,497 2,520
7.745% maturing January 2006 6,002 -
7.18% maturing March 2006 14,358 -
6.50%, maturing May 2006 7,919 7,998
8.50% maturing January 2007 6,000 -
9.00% maturing January 2014 4,315 -
--------- --------
Total fixed rate notes 147,456 107,212
------- --------
Mortgage notes with variable rates:
Variable maturing June 1998 (e) 7,265 7,440
Variable maturing February 2020
(1 year T-bill + 2.75%) 1,530 1,530
Variable maturing March 2002 (libor + 2.25%) 7,851 -
Variable maturing April 1999 (prime + .25%) 2,945 -
------- -----
Total variable rate notes 19,591 8,970
------ ------
$167,047 $116,182
</TABLE>
F-15
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
(a) As part of this loan the lender required the Company to establish escrow
accounts for real estate taxes, insurance and a replacement reserve.
These escrows, totaling $734 at December 31, 1996, are included in other
assets.
(b) The Company borrowed $38.5 million under new mortgage loans
(collectively, the "Nomura Mortgage Loan") collateralized by five
of the Properties. These loans, which bear interest at 30-day
LIBOR (5.375% at December 31, 1996) plus 2.0% and mature on July 1,
1999, are closed to prepayment until July 1, 1998 and can be prepaid
thereafter based on a 1.50% declining prepayment
penalty. To mitigate its exposure to these variable rate loans,
the Company entered into a five year interest rate protection
agreement for a notional amount of $38.5 million that is effective
through the loans maturity, and caps the interest rate at 6.20% for
year one, 6.70% for year two, and 7.70% for years three through five.
The financing cost of the interest rate protection agreement of
approximately $3.2 million, is being amortized over the life of the
agreement using the effective interest rate method resulting in an
effective interest rate on the Nomura Mortgage Loan of
approximately 8.9% per annum. The estimated fair market value of the
interest rate protection agreement, as determined by the issuing
financial institution, was approximately $0.5 million at
December 31, 1996.
(c) In December 1995, the Company entered into two interest rate swap
contracts with a notional amount of $38.5 million. The Company
intends to hold such contracts, the first of which commences in July
1996 and expires in June 1999 and the second of which commences
in July 1999 and expires in December 2003, until their expiration dates.
The purpose of the swaps is to fix the interest rate on
the $38.5 million Nomura loan through its expiration date of
June 1999 at 7.09% and to mitigate any interest rate exposure upon
refinancing the loan by fixing the LIBOR rate at 6.375% for the period
beginning July 1999 through December 2003. Under the terms of the
interest rate contract, the Company will be paying a fixed rate of
5.09% to the Counter Party through June 1999 and a fixed
rate of 6.375% through December 2003. The Company will be receiving
variable payments from the Counter Party based on 30 day libor through
December 2003. The Counter Party has as collateral
a $2.4 million restriction on the $5.8 million line of credit it
provided the Company (see below). The contracts are accounted for
on the accrual basis with net payments/receipts due on the swaps
recognized as an adjustment to interest expense. The fair market
value of each of the interest rate swaps is determined by the amounts
at which they could be settled. If the Company had settled these
agreements with the counter party on December 31, 1996, the Company
would have received approximately $0.8 million.
(d) In connection with the acquisition of First State Plaza and Valley
Centre, the Company issued a $4.8 million note (the "FS Note") bearing
interest at 5.0% per annum, plus a participation under certain
circumstances as described in the agreement, and is exchangeable for
shares of Common Stock. The FS Note was recorded net of a discount of
$703 of which $351 remains outstanding, reflecting an effective interest
rate of approximately 8.2% as the stated interest rate represented a
below market rate. This discount is being amortized over the life of the
loan using the effective interest method.
F-16
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
(e) The Company assumed Bond Obligations of $7.6 million collateralized by
Mayfair Shopping Center. The Bond Obligations bear interest at a
variable rate, plus a credit enhancement fee of 2.0%. The variable rate
is determined weekly at the rate necessary to produce a bid in the
process of remarketing the Bond Obligations equal to par plus accrued
interest, based on comparable issues in the market. The interest rate,
including the 2.0% credit enhancement fee, was 6.350% at December 31,
1996. The Bond Obligations have a stated maturity of February 1, 2010,
however, the letter of credit supporting the Bond Obligations expires on
June 24, 1998.
(f) $1,750 of this loan was repaid with proceeds from the June 1994
Offering. As part of this transaction, the lender waived $0.8 million of
accrued interest. This has been recorded as an extraordinary item during
1994.
A portion of the net proceeds from the June 1994 Offering, along with
proceeds from the aforementioned new borrowings were used to repay
indebtedness of $68.1 million, including approximately $3.1 million for
prepaid and escrowed interest and principal amortization, prepayment
penalties and loan extension fees. The Operating Partnership recorded
extraordinary gains of approximately $2.3 million, including $0.8
million of accrued interest, resulting from the early extinguishment of
debt at a discount.
In August 1992, an FWM-affiliated partnership owning the Penn Station
Shopping Center was voluntarily placed in Chapter 11 under the United
States Bankruptcy Code as a result of the lender's unwillingness to
extend the loan in the ordinary course on terms and conditions
acceptable to the partnership. Among other matters, the lender, as a
condition to the extension, endeavored to convert the loan from
non-recourse to personal recourse. In July 1993, a consensual plan was
approved by all parties and the loan was modified and extended, on a
non-recourse basis, to provide for capitalization of $0.8 million of
accrued interest, bringing the principal balance to $20.0 million,
waiver of approximately $0.9 million of accrued interest and an
extension of the maturity through August 1998. Interest would accrue at
the rate of 8% per annum through August 1995, increasing to 8.5% for the
year ending August 1996 and increasing to 8.75% for the remainder of the
term, resulting in an effective rate of approximately 8.4% per annum.
Principal amortization, based on a 30-year amortization schedule, would
begin in September 1995. The original note of $19.2 million had accrued
interest outstanding of $1.7 million at July 30, 1993. Accordingly, the
Company reflected an extraordinary gain of $0.9 million in 1993 for the
forgiveness of interest on the debt pursuant to the plan of
reorganization. The note was repaid in June 1994 from proceeds of the
June 1994 Offering and an extraordinary gain was recognized during 1994
for $1.2 million less the write-off of unamortized deferred charges of
$0.2 million.
The Nomura Mortgage Loan, the Debentures (see Note 6), the Bond
Obligations, and the FS Note contain affirmative and negative covenants,
events of default and other provisions as are customarily required for
such instruments. The most restrictive covenants require the Company to
maintain a leverage ratio (total indebtedness divided by net worth) of
at least 2.50, maintain a debt service coverage ratio (net income before
interest and depreciation divided by scheduled debt service payments) of
at least 1.50 and require the Operating Partnership to maintain a net
worth of at least $75 million. Management believes that the Company is
in compliance with all restrictive covenants. In the case of mortgage
loans on four of the Properties, scheduled principal amortization for
the five years subsequent to June 27, 1994 of approximately $0.9 million
was escrowed in an irrevocable trust at closing of the June 1994
Offering with the corresponding note balances reduced for reporting
purposes. As of December 31, 1996, $0.6 million was considered
extinguished.
F-17
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
Maturities of the existing indebtedness at December 31, 1996 are as
follows:
<TABLE>
<S> <C>
Amount
1997 $3,736
1998 5,740
1999 64,724
2000 17,768
2001 3,645
Thereafter 71,785
-----------
167,398
Less: Unamortized loan discount (351)
$167,047
</TABLE>
The Company currently has three collateralized revolving
lines of credit (the "Lines of Credit"). The Company has a revolving
line of credit of up to $5.8 million from First Union Bank. Loans under
the line of credit are collateralized by a first mortgage lien on
Brafferton Shopping Center, bears interest at LIBOR plus two percent
(2%) per annum, and will mature on June 30, 1998. The Company has an
additional revolving line of credit of approximately $8.25 million with
Mellon Bank. This line is collateralized by Kenhorst Plaza and expires
March 29, 1998. Loans under this line will bear interest at LIBOR plus
two percent (2%) per annum. As of December 31, 1996, there were no
outstanding balances under the Lines of Credit.
On January 31, 1997, the Company closed a $25 million line
of credit with Corestates Bank. The line is collateralized by Shoppes of
Graylyn, Newtown Square, Four Mile Fork and Centre Ridge Marketplace,
bears interest at LIBOR plus 1.50% and expires January 31, 2000.
The Lines of Credit are available to fund acquisitions,
renovations, expansions and other working capital requirements.
Definitive agreements with respect to the Lines of Credit contain
customary representations, warranties and covenants.
Interest paid for the years ended December 31, 1996,
1995, and 1994 was $12,471, $8,965, and $9,114, respectively.
F-18
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
6. Debentures
Simultaneous with the June 1994 Offering, the Company
effected a private placement with respect to $25.0 million of aggregate
principal amount of 8.25% Debentures due June 27, 1999, with interest
payable quarterly beginning September 27, 1994. The Debentures are
exchangeable in the aggregate for one million shares of Convertible
Preferred Stock, representing approximately 12.2% of all shares of
Common Stock (assuming exchange/conversion of all Common Units and
Convertible Preferred Stock (or securities exchangeable into Convertible
Preferred Stock or Common Stock)). The Debentures are collateralized by
two of the Properties.
7. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consisted of the
following as of December 31, 1996 and 1995, respectively:
<TABLE>
<S> <C> <C>
1996 1995
Tenant Security Deposits $1,224 $ 993
Accrued compensation payable in Company stock 2,266 617
Accounts payable and other accrued expenses 2,841 1,749
Accrued tenant improvements - 700
---------- --------
$6,328 $4,059
</TABLE>
8. Preferred Stock
The Company's charter authorizes the issuance of up to
10,000,000 shares of preferred stock, par value $.01 per share. In
connection with the June 1994 Offering, the Company designated 3,500,000
(subsequently increased to 3,750,000) shares of preferred stock as
Convertible Preferred Stock, of which 2,314,189 shares are issued and
remain outstanding. The Convertible Preferred Stock has a liquidation
preference equal to $25.00 per share plus an amount equal to any accrued
and unpaid dividend, (the "Convertible Preferred Liquidation Preference
Amount"). Holders of the Convertible Preferred Stock are entitled to
receive cumulative preferential cash dividends in an amount per share of
Convertible Preferred Stock equal to $0.6094 per quarter plus a
participating dividend equal to the amount, if any, of dividends in
excess of $0.4875 per quarter with respect to the number of shares of
Common Stock into which a share of Convertible Preferred Stock is then
convertible. Shares of Convertible Preferred are convertible on or after
May 31, 1999 into 1.282051 shares of Common Stock, at a conversion price
equal to $19.50.
F-19
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
9. Summary of Noncash Investing and Financing Activities
Significant noncash transactions for the years ended
December 31, 1996, 1995, and 1994 were as follows:
<TABLE>
<S> <C> <C> <C>
1996 1995 1994
-------- -------- -------
Liabilities assumed in
purchase of rental properties $20,171 $11,723 $22,428
Common and Preferred
units in the Operating
Partnership issued in
connection with the
purchase of rental properties $8,978 $1,630 $8,800
Convertible Preferred Stock
issued in
connection with the
purchase of rental properties - $8,842 -
Common Stock issued as a fee
for the funding of
offering costs - - $2,000
Accrual of cost of raising capital $216 $128 $940
Reclassification of accumulated
deficit at June 27, 1994,
to additional paid-in capital - - $14,756
Decrease (increase) in adjustment
for minority interest's
ownership of the
Operating Partnership $(1,868) $1,991 $8,862
Deconsolidation of
Management Company - - $204
Accrual of tenant
improvements - $700 -
</TABLE>
The above information supplements the disclosures required
by Statement of Financial Accounting Standards No. 95-"Statement of
Cash Flows."
F-20
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
10. Lease Agreements
The Company is the lessor of retail properties with
initial lease terms expiring through the year 2020. Many leases are
renewable for three to five years at the lessee's option. Future minimum
lease receipts under noncancelable operating leases as of December 31,
1996 are as follows:
<TABLE>
<S> <C>
1997 $32,752
1998 29,485
1999 26,016
2000 22,493
2001 18,625
Thereafter 109,044
--------
$238,415
</TABLE>
These future rentals do not include additional rent which
may be received from tenants for pass-through provisions in leases
related to increases in operating expenses and percentage rentals or
rentals on the multifamily properties due to their short duration.
11. Commitments and Contingencies
Environmental
The Company, as an owner of real estate, is subject to
various environmental laws of Federal and local governments. Compliance
by the Company with existing laws has not had a material adverse effect
on its financial condition and management does not believe it will have
such an effect in the future. However, the Company cannot predict the
impact of new or changed laws or regulations on its current Properties.
All of the Properties have been subjected to Phase I
environmental audits. Such audits have not revealed, nor is management
aware of any environmental liability that management believes would have
a material adverse impact on the consolidated financial position,
results from operations or liquidity, including the two situations
discussed below. Management is unaware of any instances in which it
would incur and be financially responsible for any material
environmental costs if any or all Properties were sold, disposed or
abandoned.
12. Related-Party Transactions
The Operating Partnership owns 100% of the non-voting
Preferred stock of First Washington Management, Inc. (FWM), which
entitles it to 99% of the cash flow of FWM, which amounted to $0, $100
and $255 in 1996, 1995 and 1994 respectively. Certain of the officers of
the Company own 100% of the Common Stock of FWM which entitles them to
1% of the cash flow of FWM, which amounted to approximately $0, $1 and
$3 in 1996, 1995 and 1994 respectively. In addition, the Company
received $480, $480 and $245 of interest income, included in income from
F-21
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
Management Company, on the FWM Note in 1996, 1995 and 1994 respectively.
The Company's equity in earnings of FWM for the year ended December 31,
1996, 1995 and 1994 was ($259), ($31) and $0 respectively.
FWM provides property management, leasing and other
related services to the Company. Management and other fees paid by the
Company in 1996 and 1995 amounted to $1,955 and $1,178, respectively.
Management and other fees paid by the Company during the period from
June 27, 1994 through December 31, 1994 amounted to $350. Fees for such
services were eliminated in the combined financial statements for the
periods prior to the REIT formation.
13. Stock and Stock Option Plans
Stock Option Plans
Under various plans and agreements, the Company has
authorized the issuance of stock and stock options to certain officers
and employees of the Company. In 1995, the FASB issued FAS No. 123
"Accounting for Stock Based Compensation" (FAS 123). As permitted by FAS
123, the Company continues to apply APB Opinion No. 25 and related
Interpretations in accounting for its plans. Recognizing stock based
compensation for the Company's 1996 and 1995 awards based upon the
provisions of FAS 123 would not result in a significant difference from
reported net income.
The Company established a Stock Option Plan (the "Stock
Option Plan") for the Company's directors, executive officers and other
key employees. The Stock Option Plan provides that the compensation
committee of the Board of Directors (or Board, in the case of options
granted to independent directors) may grant or issue stock options. Each
grant or issuance will be set forth in a separate agreement with the
person receiving the award and will indicate the type, terms and
conditions of the award. The plan provides for both non-qualified and
incentive stock options.
The non-qualified stock options will provide for the right
to purchase Common Stock at a specified price which may be less than
fair market value on the date of grant (but no less than par value), and
usually will become exercisable in installments after the grant date.
Non-qualified stock options may be granted for any reasonable term.
The incentive stock options, if granted, will be designed
to comply with the provisions of the Internal Revenue Code ("IRC") and
will be subject to restrictions contained in the IRC, including exercise
prices equal to at least 100% of the fair market value of Common Stock
on the grant date and a ten-year restriction on their term, but may be
subsequently modified to disqualify them from treatment as an incentive
stock option.
The Stock Option Plan provides that 351,540 shares of
Common Stock will be reserved for issuance. Concurrently, with the
closing of the June 1994 Offering, the Company issued options to two
officers to purchase 146,475 Shares of Common Stock each, pursuant to
their respective employment agreements. Such options vest 33 1/3% per
years over 3 years, have a life of ten years and are exercisable at
$19.50 per Share. No options were granted under the plan in 1996 and
1995.
As of December 31, 1996, no options were exercised.
F-22
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
In December 1994, the Company issued options to certain
officers, directors and employees under the non-qualified stock option
plan. 46,698 options are outstanding. The options have an exercise price
of $19.50 and have a term of ten years. The option rights vest 33 1/3%
per year beginning with the first anniversary date of the grant if the
employee continues to be employed by the Company. No options were
granted under the plan in 1995. During 1996, 3,500 options were issued.
As of December 31, 1996 no options were exercised. During 1996 and 1995,
2,670 and 9,801 options were forfeited, respectively.
Contingent and Restricted Stock Plans
Two of the Company's officers have entered into three year
employment agreements. The agreements call for a base salary plus an
incentive compensation arrangement based on the Company meeting certain
operating result requirements. The incentive compensation is in the form
of common stock grants. Up to 100,000 shares of stock may be issued to
each of the two officers (or their designees). These additional shares
of stock will be recorded as additional compensation in the period
earned. During 1995, 22,417 shares were issued to each of the two
officers. The weighted average fair value of the shares issued was $0.4
million. No additional shares were issued during 1996. Total
compensation cost recognized under this plan was $1.5 million and $1.8
million for the years ended December 31, 1996 and 1995, respectively.
In April 1996, the stockholders of the Company approved a
contingent stock and a restricted stock plan for each of these officers.
The contingent stock agreements have reserved for grant 60,000 shares of
stock (30,000 shares each) for the period July 1, 1997 through December
31, 1999. The agreements are administered by the Compensation Committee
of the Board of Directors ("Committee"). The grants will be awarded if
the Committee determines that the Company has materially met certain
targeted performance criteria. The two officers were issued 39,200
shares each under the restricted stock plan, which is also administered
by the Compensation Committee. The shares issued under this plan are
subject to a vesting schedule as follows:
<TABLE>
<S> <C>
Vesting Date Number of Shares Vested
July 1, 1997 5,000
March 31, 1998 11,400
March 31, 1999 11,400
March 31, 2000 11,400
------
TOTAL 39,200
</TABLE>
An additional 50,000 shares of common stock are reserved
under this plan for grants to officers and employees of the Company, of
which 5,880 were issued.
F-23
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
14. Condensed Quarterly Financial Information (Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
1996 First Second Third Fourth
---- ----- ------ ----- ------
Total Revenues $9,361 $10,238 $10,514 $10,852
Net Income (loss) before
Preferred Distributions
and Minority Interest $1,160 $984 $1,287 $1,343
Net Income (loss) allocated
to Common Stockholders $(422) $(552) $(311) $(276)
Net Income (loss) per
Common Share $(0.13) $(0.17) $(0.09) $(0.07)
1995 First Second Third Fourth
---- ----- ------ ----- ------
Total Revenues $6,480 $6,608 $7,704 $8,788
Net Income (loss) before
Preferred Distributions
and Minority Interest $979 $918(1) $(78)(1) $1,112
Net Income (loss) allocated
to Common Stockholders $(536) $224(1) $(1,684)(1) $(792)
Net Income (loss) per
Common Share $(0.34) $0.14 $(0.55) $(0.25)
</TABLE>
(1) The decrease in net income allocated to Common Shareholders in the
third quarter was due to increases in general and administrative
expenses, operating and maintenance expenses, depreciation and
amortization expense and interest expense. The increase in these
expenses were partially offset by increased revenues. General and
administrative expenses increased due to the awarding of
performance bonuses in the form of stock grants during the third
quarter. The increases in other expenses and revenues were due to
the acquisition of five properties. In addition, there was an
increase in the amount of income allocated to minority interests
in the third quarter when compared to the previous quarter. This
occurred because the common minority interests were allocated
losses in the second quarter which were suspended from previous
quarters due to lack of basis. The common minority interests are
not allocated losses if their basis would fall below zero because
they are not required to fund losses. The common minority
interests currently have basis.
F-24
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
15. Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair
values of the Company's financial instruments:
Cash and Equivalents: The carrying amount approximates fair value.
Mortgage notes payable and Debentures: The fair values were estimated
by discounting the future cash flows using the current rates for
similar types of borrowing arrangements.
Interest Rate Swaps: The fair value of these contracts was estimated
based upon the amount the Company would have received/paid to terminate
the swaps.
The estimated fair values of the Company's financial instruments at
December 31 are as follows:
<TABLE>
<S> <C> <C> <C> <C>
1996 1995
---------------------------------------------------
Financial Assets: Carrying Value Fair Value Carrying Value Fair Value
Cash and Equivalents $11,780 $11,780 $7,806 $7,806
Financial Liabilities:
Mortgage notes payable 167,047 167,300 116,182 116,600
Debentures 25,000 27,300 25,000 24,500
Off-Balance Sheet
Assets/Liabilities:
Interest Rate Swaps
and Caps receive/(pay) - 1,200 - 800
</TABLE>
16. Subsequent Events
On January 19, 1997, the Board of Directors declared a distribution of
$0.4875 and $.6094 per Common and Preferred share of stock,
respectively to shareholders of record as of February 1, 1997. On
February 18, 1997, distributions in the amount of $4,418 were paid.
On January 24, 1997, the Company acquired City Line Shopping Center,
located in Philadelphia, Pennsylvania for an approximate price of $14.8
million. The shopping center is anchored by Acme Market and Thrift
Drugs. The acquisition was financed through the issuance of
approximately 143,000 Common Units to the seller of the property with a
value of approximately $3.4 million, assumed mortgage indebtedness of
approximately $10.0 million, new indebtedness of $1.0 million and $0.4
million in cash. The mortgage loan bears interest at 8.00% per annum
and is payable monthly based on a 24 year amortization schedule. The
loan is due in October 2005.
F-25
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
On January 28, 1997, the Company acquired Four Mile Fork Shopping
Center located in Fredericksburg, Virginia for an approximate price of
$5.7 million. The center is anchored by Safeway and CVS/Pharmacy. The
acquisition was financed with proceeds of the December 1996 Offering.
On January 28, 1997, the Company sold Thieves Market located in
Alexandria, Virginia. The center was sold for an approximate price of
$1.2 million.
On January 31, 1997, the Company acquired Shoppes of Graylyn located in
Wilmington, Delaware. The purchase price of the property was $7.2
million. The center is anchored by Rite Aid. The acquisition was
financed by a $3.8 million draw on the Company's line of credit, $.4
million from proceeds raised through the sale of Thieves Market and
$3.0 million in cash from the proceeds of the December 1996 Offering.
On March 19, 1997 (effective March 1, 1997), the Company acquired
Ashburn Farms Village Center located in Ashburn, Virginia for an
approximate price of $9.2 million. The center is anchored by Superfresh
Supermarket. The acquisition was financed with mortgage debt of $6.8
million the issuance of approximately 55,000 Common Units to the seller
of the property with a value of approximately $1.2 million, the
issuance of approximately 9,500 Preferred Units to the seller of the
property with a value of approximately $0.2 million and approximately
$1.0 million in cash. The mortgage loan bears interest at LIBOR + 1.5%
per annum and has an annual amortization of approximately $.1 million.
The loan is due in January 2001.
On March 26, 1997, the Company filed a $175 million shelf registration
statement with the Securities and Exchange Commission, which allows for
the issuance of debt or equity.
F-26
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
for the years Ended December 31, 1996, 1995 and 1994
--------
<TABLE>
<S> <C> <C> <C> <C>
Additions
Balance at Charged Deduction Balance
Beginning to Bad Amounts at End of
Description of Year Debt Expense Written Off Year
----------- ------- ------------ ----------- -----------
Allowance for
Doubtful Accounts:
Year Ended December 31, 1996 $418 $527 $(262) $683
==== ==== ====== ====
Year Ended December 31, 1995 $391 $483 $(456) $418
==== ==== ====== ====
Year Ended December 31, 1994 $185 $941 $(735) $391
==== ==== ====== ====
</TABLE>
F-27
<PAGE>
SCHEDULE III - REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1996
(dollars in thousands)
<TABLE>
<S> <C> <C> <C> <C> <C>
Capitalized
Initial Cost Subsequent to
Building & Acquisition -
Property Location Encumbrance Land Improvements Improvements
Retail:
Brafferton(3) Garrisonville,
VA - $1,595 $6,385 $158
Bryans Road(1) Bryans Road,
MD 150 1,214 3,314 3,721
Capital Corner Landover,
MD 3,587 966 0 3,441
Centre Ridge
Marketplace(3) Centreville,
VA 7,853 4,847 3,807 272
Chesapeake
Bagel Building Alexandria,
VA 735 191 804 648
Clinton Square Clinton,
MD 1,313 242 1,437 122
Clopper's Mill Germantown,
MD 14,358 4,011 16,006 49
4483 Connecticut Washington,
DC 626 91 932 140
Colonial Square York,PA 1,528 639 1,678 180
Davis Ford
Crossing Manassas,
VA 38,500 2,574 10,092 215
Fifteen &
Allen(7) Allentown,
PA 6,002 867 2,404 966
Firstfield Gaithersburg,
MD 2,497 699 2,797 43
First State
Plaza(1) New Castle,
DE 4,449 2,575 10,358 532
Fox Mill Reston, VA 25,000 2,752 11,019 267
Georgetown
Shops(4) Washington,
D.C. 1,653 949 3,174 321
Glen Lea(5) Richmond,VA 13,952 757 3,027 183
Hanover Vllg(5) Mechanicsville,
VA - 1,081 4,323 87
James Island(1) Charleston,SC - 1,321 2,758 364
Kenhorst Plaza(3)Reading,PA - 2,253 9,013 1,169
Kings Park Burke,VA 4,315 1,153 4,613 0
Laburnum Park(5) Richmond,VA - 1,194 4,774 24
Laburnum Sq(5) Richmond,VA - 1,104 4,418 133
Mayfair Philadelphia,
PA 7,265 2,463 9,860 163
Newtown Sq(3) Newtown Square,
PA - 2,508 10,031 0
Northway Millersville,
MD 7,759 1,838 7,400 0
Penn Station(2) District
Heights,MD 3,500 4,275 0 21,132
P.G. County
Comm & Tech Pk. Beltsville,
MD 4,150 1,309 972 5,344
Potomac Plaza Woodbridge,
VA 3,656 795 4,235 1,165
Rosecroft Temple
Hills,MD 2,000 664 2,723 2,407
Shoppes of
Kildaire Cary,NC 7,919 2,202 8,833 530
Southside
Marketplace Baltimore,
MD 8,065 2,209 8,835 39
Stefko
Boulevard(7) Bethlehem,
PA - 1,149 3,187 1,293
Takoma Park Takoma Park 2,945 957 3,829 16
Thieves Market Alexandria,VA 734 246 1,065 118
Valley Center(1) Owings Mills,
MD - 4,719 18,937 111
Festival at
Woodholme Baltimore,MD 11,589 2,915 11,660 157
Multi-family:
Branchwood
Apartments Charleston,SC 2,121 142 2,521 223
Broadmoor
Apartments Charleston,SC 3,826 387 4,396 926
----- --- ----- ---
$192,047 $61,853 $205,617 $46,659
======== ======= ======== =======
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Gross amounts at
which carried at
the close of period Accumulated
Property Location Land Improvement Total Depreciation
Retail:
Brafferton(3) Garrisonville,
VA $1,595 $6,543 $8,138 $519
Bryans Road(1) Bryans Road,
MD 1,230 7,035 8,265 1,323
Capital Corner Landover,
MD 989 3,441 4,430 1,252
Centre Ridge
Marketplace(3) Centreville,
VA 4,847 4,079 8,962 101
Chesapeake
Bagel Building Alexandria,
VA 192 1,452 1,644 597
Clinton Square Clinton,
MD 251 1,559 1,810 640
Clopper's Mill Germantown,
MD 4,011 16,055 20,066 409
4483 Connecticut Washington,
DC 95 1,072 1,167 349
Colonial Square York,PA 646 1,858 2,504 409
Davis Ford
Crossing Manassas,
VA 2,574 10,307 12,881 816
Fifteen &
Allen(7) Allentown,
PA 867 3,370 4,237 107
Firstfield Gaithersburg,
MD 699 2,840 3,539 101
First State
Plaza(1) New Castle,
DE 2,575 10,890 13,465 904
Fox Mill Reston, VA 2,752 11,286 14,038 890
Georgetown
Shops(4) Washington,
D.C. 970 3,495 4,465 1,262
Glen Lea(5) Richmond,VA 757 3,210 3,967 151
Hanover Vllg(5) Mechanicsville,
VA 1,081 4,410 5,491 212
James Island(1) Charleston,SC 1,324 3,122 4,446 678
Kenhorst Plaza(3)Reading,PA 2,253 10,182 12,435 365
Kings Park Burke,VA 1,153 4,613 5,766 -
Laburnum Park(5) Richmond,VA 1,194 4,798 5,992 232
Laburnum Sq(5) Richmond,VA 1,104 4,551 5,655 212
Mayfair Philadelphia,
PA 2,463 10,023 12,486 798
Newtown Sq(3) Newtown Square,
PA 2,508 10,031 12,539 -
Northway Millersville,
MD 1,838 7,400 9,238 -
Penn Station(2) District
Heights,MD 4,285 21,132 25,417 4,953
P.G. County
Comm & Tech Pk. Beltsville,
MD 1,342 6,136 7,658 2,104
Potomac Plaza Woodbridge,
VA 733 5,400 6,133 1,512
Rosecroft Temple
Hills,MD 688 5,130 5,818 1,582
Shoppes of
Kildaire Cary,NC 2,208 9,363 11,571 3,136
Southside
Marketplace Baltimore,
MD 2,209 8,874 11,083 165
Stefko
Boulevard(7) Bethlehem,
PA 1,149 4,480 5,629 143
Takoma Park Takoma Park 957 3,845 4,802 81
Thieves Market Alexandria,VA 247 1,183 1,430 303
Valley Center(1) Owings Mills,
MD 4,719 19,048 23,767 1,534
Festival at
Woodholme Baltimore,MD 2,915 11,817 14,732 600
Multi-family:
Branchwood
Apartments Charleston,SC 144 2,744 2,888 733
Broadmoor
Apartments Charleston,SC 395 5,322 5,717 1,277
--- ----- ----- -----
$61,959 $252,276 $314,235 $30,450
======= ======== ======== =======
</TABLE>
<TABLE>
<S> <C> <C> <C>
Date
Property Location Construction Acquired
Retail:
Brafferton(3) Garrisonville,
VA 1974 1994
Bryans Road(1) Bryans Road,
MD 1972 1990
Capital Corner Landover,
MD 1987 1986
Centre Ridge
Marketplace(3) Centreville,
VA 1996 1996
Chesapeake
Bagel Building Alexandria,
VA 1800's 1983
Clinton Square Clinton,
MD 1979 1984
Clopper's Mill Germantown,
MD 1995 1996
4483 Connecticut Washington,
DC 1954 1986
Colonial Square York,PA 1955 1990
Davis Ford
Crossing Manassas,
VA 1988 1994
Fifteen &
Allen(7) Allentown,
PA 1958 1996
Firstfield Gaithersburg,
MD 1978 1995
First State
Plaza(1) New Castle,
DE 1988 1994
Fox Mill Reston, VA 1988 1994
Georgetown
Shops(4) Washington,
D.C. 1800's 1983-1989
Glen Lea(5) Richmond,VA 1969 1995
Hanover Vllg(5) Mechanicsville,
VA 1971 1995
James Island(1) Charleston,SC 1967 1990
Kenhorst Plaza(3)Reading,PA 1990 1995
Kings Park Burke,VA 1966 1996
Laburnum Park(5) Richmond,VA 1988 1995
Laburnum Sq(5) Richmond,VA 1975 1995
Mayfair Philadelphia,
PA 1988 1994
Newtown Sq(3) Newtown Square,
PA 1960's-70's 1996
Northway Millersville,
MD 1987 1996
Penn Station(2) District
Heights,MD 1989 1986
P.G. County
Comm & Tech Pk. Beltsville,
MD 1985 1985
Potomac Plaza Woodbridge,
VA 1963 1985
Rosecroft Temple
Hills,MD 1963 1985
Shoppes of
Kildaire Cary,NC 1986 1986
Southside
Marketplace Baltimore,
MD 1990 1996
Stefko
Boulevard(7) Bethlehem,
PA 1958-60-75 1996
Takoma Park Takoma Park 1960 1996
Thieves Market Alexandria,VA 1946 1986
Valley Center(1) Owings Mills,
MD 1987 1994
Festival at
Woodholme Baltimore,MD 1986 1995
Multi-family:
Branchwood
Apartments Charleston,SC 1989 1989
Broadmoor
Apartments Charleston,SC 1990 1990
</TABLE>
(1) These properties are also encumbered by first deeds of trust as collateral
for the $38,500 Nomura mortgage loan. (2) This property (phase I only) also
serves as collateral for the $25,000 Exchangeable Debentures.
(3) These properties serve as collateral for the line of credit facilities.
(4) Consists of five locations in the shopping district of Georgetown in
Washington, D.C.
(5) These properties are also encumbered by first deeds of trust a collateral
for a $13,952 mortgage loan.
(6) The retail properties and the multi-family properties have depreciable lives
of 31.5 years and 27.5 years respectively. (7) These properties are also
encumbered by first deeds of trust as collateral for a $6,002 mortgage loan.
F-28
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 11,780
<SECURITIES> 0
<RECEIVABLES> 4,639
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 314,235
<DEPRECIATION> 30,450
<TOTAL-ASSETS> 313,613
<CURRENT-LIABILITIES> 0
<BONDS> 192,047
0
23
<COMMON> 49
<OTHER-SE> 98,505
<TOTAL-LIABILITY-AND-EQUITY> 313,613
<SALES> 0
<TOTAL-REVENUES> 40,965
<CGS> 0
<TOTAL-COSTS> 10,270
<OTHER-EXPENSES> 11,156
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,986
<INCOME-PRETAX> (1,561)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,561)
<EPS-PRIMARY> (0.46)
<EPS-DILUTED> (0.46)
</TABLE>
FIRST WASHINGTON REALTY TRUST, INC.
ARTICLES OF RESTATEMENT
THIS IS TO CERTIFY THAT:
FIRST: First Washington Realty Trust, Inc., a Maryland corporation (the
"Corporation"), desires to restate its charter as currently in effect.
SECOND: The following provisions are all the provisions of the charter
currently in effect:
ARTICLE I
Name
The name of the Corporation (the "Corporation") is First
Washington Realty Trust, Inc.
ARTICLE II
Principal Office, Registered Office, and Agent
The address of the Corporation's principal office in the State
of Maryland is c/o The Prentice Hall Corporation System, Maryland, 11 East Chase
Street, Baltimore, Maryland 21202. The name and address of the Corporation's
resident agent in the State of Maryland are The Prentice Hall Corporation
System, Maryland, 11 East Chase Street, Baltimore, Maryland 21202. The
registered agent is a corporation located in the State of Maryland.
ARTICLE III
Purpose
The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the Maryland General
Corporation Law as now or hereafter in force (the "MGCL").
ARTICLE IV
Capitalization
4.1 STOCK
Section 4.1.1 Authority to Issue Stock. The Board of
Directors of the Corporation may authorize the issuance from time to time of
shares of its stock, whether now
K:\AJB\CLI\64676.1
- 1 -
<PAGE>
or hereafter authorized, for such consideration as the Board of Directors may
deem advisable, subject to such limitations as may be set forth in the Charter
or the Bylaws of the Corporation.
Section 4.1.2 Shares and Par Value. The total number of shares
of all classes of stock that the Corporation has authority to issue is one
hundred million (100,000,000), consisting of (i) ninety million (90,000,000)
shares of common stock having a par value of one cent ($.01) per share (the
"Common Stock") and (ii) ten million (10,000,000) shares of preferred stock
having a par value of one cent ($.01) per share (the "Preferred Stock"), of
which three million five hundred thousand (3,500,000) shares shall be designated
as 9.75% Series A Cumulative Participating Convertible Preferred Stock (the
"Series A Preferred Stock"). The aggregate par value of all authorized shares of
stock having par value is one million dollars ($1,000,000). Subject to the
express terms of any other classes of Common Stock or of any other series of
Preferred Stock outstanding at the time and notwithstanding any other provision
of the Charter, the Board of Directors of the Corporation may increase or
decrease the number of shares of, or alter the designation of, or classify or
reclassify into one or more classes or series, any unissued shares of Common
Stock or Preferred Stock by setting or changing, in any one or more respects,
from time to time before issuing the shares, the terms, preferences, conversion
or other rights, voting powers, restrictions, limitations as to dividends or
other distributions, qualifications or terms or conditions of redemption of
shares of Common Stock or of Preferred Stock.
Section 4.1.3 Declaration of Dividends. To the extent declared
by the Board of Directors of the Corporation out of assets legally available
therefor, dividends payable in respect of the Series A Preferred Stock and the
Common Stock will have identical record and payment dates.
Section 4.1.4 Determination of Funds Legally Available for
Distribution. In determining whether a distribution (other than upon voluntary
or involuntary liquidation) by dividend, redemption or other acquisition of
shares or otherwise of Capital Stock is permitted under the MGCL, no effect
shall be given to amounts that would be needed, if the Corporation were to be
dissolved at the time of the distribution, to satisfy the preferential rights
upon dissolution of holders of shares of Capital Stock whose preferential rights
upon dissolution are superior to those receiving the distribution.
Section 4.1.5 Preemptive Rights. No holder of shares of stock
of the Corporation shall, as such holder, have any preemptive or other right to
purchase or subscribe for any shares of Series A Preferred Stock, Common Stock
or any other class of Capital Stock which the Corporation may issue or sell.
K:\AJB\CLI\64676.1
- 2 -
<PAGE>
4.2 CERTAIN DEFINITIONS
Unless the context otherwise requires, the terms defined in
this Section 4.2 shall have, for all purposes of this Charter, the meanings
herein specified (with terms defined in the singular having comparable meanings
when used in the plural).
Acquire. The term "Acquire" shall mean the acquisition of
Beneficial Ownership or Constructive Ownership of shares of Capital Stock by any
means including, without limitation, a Transfer, the exercise of or right to
exercise any rights under any option, warrant, convertible security, pledge or
other security interest or similar right to acquire shares, but shall not
include the acquisition of any such rights unless, as a result, the acquiror
would be considered a Beneficial Owner or Constructive Owner, as defined below.
The term "Acquisition" shall have the correlative meaning.
Aggregate Stock Ownership Limit. The term "Aggregate Stock
Ownership Limit" shall mean not more than 9.8% (in value) of the aggregate of
the outstanding shares of Capital Stock. The number and value of shares of the
outstanding shares of Capital Stock shall be determined by the Board of
Directors of the Corporation in good faith, which determination shall be
conclusive for all purposes hereof.
Beneficial Ownership. The term "Beneficial Ownership" shall
mean ownership of Capital Stock by a Person who is or would be an actual owner
of such shares of Capital Stock or who is or would be treated as a constructive
owner of such shares through the application of Section 544 of the Code, as
modified by Section 856(h)(1)(B) of the Code (except where expressly provided
otherwise). The terms "Beneficial Owner," "Beneficially Owns" and "Beneficially
Owned" shall have the correlative meanings.
Business Day. The term "Business Day" shall mean any day,
other than a Saturday or Sunday, that is neither a legal holiday nor a day on
which banking institutions in New York City are authorized or required by law,
regulation or executive order to close.
Capital Stock. The term "Capital Stock" shall mean all classes
or series of stock of the Corporation, including, without limitation, Common
Stock, Preferred Stock and Series A Preferred Stock.
Capital Gains Amount. The term "Capital Gains Amount" shall have the
meaning set forth in Section 4.3.1(g) hereof.
Charitable Beneficiary. The term "Charitable Beneficiary"
shall mean one or more beneficiaries of the Trust as determined pursuant to
Section 4.4.6 or Section 4.6.6 each of which shall be an organization described
in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code.
K:\AJB\CLI\64676.1
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<PAGE>
Code. The term "Code" shall mean the Internal Revenue Code
of 1986, as amended from time to time.
Common Stock. The term "Common Stock" shall have the meaning
set forth in Section 4.1.2.
Common Stock Affected Persons. The term "Common Stock
Affected Persons" shall have the meaning set forth in Section 4.5.5(c) herein.
Common Stock Ownership Limit. The term "Common Stock Ownership
Limit" shall mean not more than 9.8% (in value or in number of shares, whichever
is more restrictive) of the aggregate of the outstanding shares of Common Stock
of the Corporation. The number and value of outstanding shares of Common Stock
of the Corporation shall be determined by the Board of Directors of the
Corporation in good faith, which determination shall be conclusive for all
purposes hereof.
Common Stock Constructive Ownership Event. The term "Common
Stock Constructive Ownership Event" shall have the meaning set forth in Section
4.5.5(c).
Constructive Ownership. The term "Constructive Ownership"
shall mean ownership of Capital Stock by a Person who is or would be an actual
owner of Capital Stock or who is or would be treated as a constructive owner of
such shares through the application of Section 318(a) of the Code, as modified
by Section 856(d)(5) of the Code. The terms "Constructive Owner,"
"Constructively Owns" and "Constructively Owned" shall have the correlative
meanings.
Conversion. The term "Conversion" shall mean a conversion of
shares of Series A Preferred Stock into shares of Common Stock, as provided in
Section 4.3.6 hereof.
Conversion Commencement Date. The term "Conversion Commencement
Date" shall mean May 31, 1999.
Conversion Holder. The term "Conversion Holder" shall mean any
Person who is the Beneficial or Constructive Owner of shares of Common Stock in
excess of the Common Stock Ownership Limit by reason of the Conversion of (or
the right to convert) shares of Series A Preferred Stock into shares of Common
Stock.
Conversion Price. The term "Conversion Price" shall have the
meaning set forth in Section 4.3.6(a) hereof.
Dividend Payment Date. The term "Dividend Payment Date"
shall have the meaning set forth in Section 4.3.1(b) hereof.
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<PAGE>
Dividend Period. The term "Dividend Period" shall mean the
period from, and including, the Initial Issuance Date to, but not including, the
first Dividend Payment Date and thereafter each quarterly period from, and
including, the Dividend Payment Date to, but not including, the next Dividend
Payment Date (or earlier date on which dividends are paid), as the case may be.
Funds from Operations of the Operating Partnership. The term
"Funds from Operations of the Operating Partnership" shall have the meaning set
forth in Section 4.3.6(e)(ix) hereof.
Initial Issuance Date. The term "Initial Issuance Date" shall
mean the date that shares of Series A Preferred Stock and Common Stock are
issued by the Corporation pursuant to the Private Placement.
Market Price. The term "Market Price" on any date shall mean,
with respect to any class or series of outstanding shares of Capital Stock, the
Closing Price for such Capital Stock on such date. The "Closing Price" on any
date shall mean the last sale price for such Capital Stock, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, for such Capital Stock in either case as reported in
the principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the NYSE or, if such Capital Stock
is not listed or admitted to trading on the NYSE, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which such Capital Stock is listed
or admitted to trading or, if such Capital Stock is not listed or admitted to
trading on any national securities exchange, the last quoted price, or, if not
so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System or, if such system is no longer in use,
the principal other automated quotation system that may then be in use or, if
such Capital Stock is not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in such Capital Stock selected by the Board of Directors of the
Corporation.
MGCL. The term "MGCL" shall have the meaning set forth in Article III.
NYSE. The term "NYSE" shall mean the New York Stock Exchange.
Operating Partnership. The term "Operating Partnership" shall mean First
Washington Realty Limited Partnership, a Maryland limited partnership.
Partnership Agreement. The term "Partnership Agreement" shall mean the
Agreement of Limited Partnership of First Washington Realty Limited Partnership,
of which
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<PAGE>
the Corporation is the sole general partner, dated as of April 28, 1994, as such
agreement may be amended from time to time.
Person. The term "Person" shall mean an individual,
corporation, partnership, estate, trust (including a trust qualified under
Sections 401(a) or 501(c)(17) of the Code), a portion of a trust permanently set
aside for or to be used exclusively for the purposes described in Section 642(c)
of the Code, association, private foundation within the meaning of Section
509(a) of the Code, joint stock company or other entity and also includes a
group as that term is used for purposes of Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended.
Preferred Stock Affected Persons. The term "Preferred Stock
Affected Persons" shall have the meaning set forth in Section 4.3.7(c) herein.
Preferred Stock Constructive Ownership Event. The term
"Preferred Stock Constructive Ownership Event" shall have the meaning set forth
in Section 4.3.7(c).
Private Placement. The term "Private Placement" means the
closing of the sale of shares of Series A Preferred Stock and Common Stock on or
about June 27, 1994.
Purported Beneficial Transferee. The term "Purported
Beneficial Transferee" shall mean, with respect to any purported Transfer or
Acquisition which results in a transfer to a Trust, as provided in Section 4.4
or Section 4.6, the purported beneficial transferee for whom the Purported
Record Transferee would have acquired shares of Capital Stock if such Transfer
or Acquisition had not violated the provisions of Sections 4.3.7 or 4.5.5. The
Purported Beneficial Transferee and the Purported Record Transferee may be the
same Person.
Purported Record Transferee. The term "Purported Record
Transferee" shall mean, with respect to any purported Transfer or Acquisition
which results in a transfer to a Trust, as provided in Section 4.4 or Section
4.6, the Person who would have been the record holder of the Capital Stock if
such Transfer or Acquisition had not violated the provisions of Sections 4.3.7
or 4.5.5. The Purported Beneficial Transferee and the Purported Record
Transferee may be the same Person.
Record Date. The term "Record Date" shall mean, for any class
or series of Capital Stock, the date designated by the Board of Directors of the
Corporation at the time a dividend is declared as the date for determining
holders of record entitled to such dividend; provided, however, that, to the
extent permitted by the MGCL, such Record Date shall be the first day of the
calendar month in which the applicable Dividend Payment Date falls or such other
date designated by the Board of Directors for the payment of dividends that is
not more than thirty (30) days nor less than ten (10) days prior to such
Dividend Payment Date.
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<PAGE>
Registration Rights Agreement. The term "Registration Rights
Agreement" shall have the meaning set forth in Section 4.3.1(h) hereof.
REIT. The term "REIT" shall mean a real estate investment trust
within the meaning of Section 856 of the Code.
Restriction Termination Date. The term "Restriction
Termination Date" shall mean the first day after the date of the Private
Placement on which the Corporation determines pursuant to Section 5.1 hereof
that it is no longer in the best interests of the Corporation to attempt to, or
continue to, qualify as a REIT or that compliance with the restrictions and
limitations on Beneficial Ownership, Constructive Ownership and Transfers and
Acquisitions of shares of Capital Stock set forth herein is no longer required
in order for the Corporation to qualify as a REIT.
Series A Preferred Liquidation Preference. The term "Series A
Preferred Liquidation Preference" shall have the meaning set forth in Section
4.3.2(a) hereof.
Series A Preferred Stock Limitation Price. The term "Series A
Preferred Stock Limitation Price" shall have the meaning set forth in Section
4.4.5(a) hereof.
Series A Preferred Stock Ownership Limit. The term "Series A
Preferred Stock Ownership Limit" shall mean not more than 9.8% (in value or in
number of shares, whichever is more restrictive) of the aggregate of the
outstanding Series A Preferred Stock of the Corporation. The number and value of
outstanding shares of Series A Preferred Stock of the Corporation shall be
determined by the Board of Directors of the Corporation in good faith, which
determination shall be conclusive for all purposes hereof.
Series A Redemption Date. The term "Series A Redemption Date"
shall have the meaning set forth in Section 4.3.3(b) hereof.
Series A Redemption Price. The term "Series A Redemption
Price" shall have the meaning set forth in Section 4.3.3(a) hereof.
Special Triggering Event. The term "Special Triggering Event"
shall mean either (i) the election by one or more holders of shares of Series A
Preferred Stock to convert all or a portion of such Series A Preferred Stock
into shares of Common Stock, (ii) the redemption or purchase by the Corporation
of all or a portion of the outstanding shares of Capital Stock, or (iii) a
change in the relative values of classes of Capital Stock.
Total Dividends. The term "Total Dividends" shall have the
meaning set forth in Section 4.3.1(g) hereof.
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<PAGE>
Transfer. The term "Transfer" shall mean any sale, transfer,
gift, assignment, devise or other disposition of Capital Stock or the right to
vote or receive dividends on Capital Stock including (i) the granting of any
option or entering into any agreement for the sale, transfer or other
disposition of Capital Stock or the right to vote or receive dividends on
Capital Stock or (ii) the sale, transfer, assignment or other disposition of any
securities or rights convertible into or exchangeable for Capital Stock, in each
case whether voluntary or involuntary, whether of record or Beneficially or
Constructively Owned (including without limitation Transfers of interests in
other entities which result in changes in Beneficial or Constructive Ownership
of Capital Stock), and whether by operation of law or otherwise. The terms
"Transferring" and "Transferred" shall have the correlative meanings.
Trust. The term "Trust" shall mean each of the trusts
provided for in Sections 4.4.1 and 4.6.1.
Trustee. The term "Trustee" shall mean the Person unaffiliated
with the Corporation, or the Purported Beneficial Transferee, or the Purported
Record Transferee, that is appointed by the Corporation to serve as trustee of
the Trust.
Units. The term "Units" shall mean units of convertible
preferred partnership interests and common partnership interests in the
Operating Partnership.
4.3 SERIES A PREFERRED STOCK
Section 4.3.1 Dividends.
(a) Subject to the preferential rights of any series of
Preferred Stock ranking senior as to dividends to the Series A Preferred Stock
and to Section 4.4.2, the record holders of shares of Series A Preferred Stock
shall be entitled to receive dividends, when and as declared by the Board of
Directors of the Corporation, out of assets legally available for the payment of
dividends. Subject to the provisions of Section 4.3.1(h), such dividends shall
be payable by the Corporation in an amount per share equal to (i) $0.6094 per
quarter ($2.4375 per annum) (or such higher number as is determined under
Section 4.3.1(h)) plus (ii) a participating dividend equal to the amount, if
any, of dividends in excess of $0.4875 payable on the applicable Dividend
Payment Date with respect to the number of shares of Common Stock (or fraction
thereof) into which a share of Series A Preferred Stock is then (or will be)
convertible. The amount of participating dividend referred to in clause (ii)
payable on any Dividend Payment Date shall equal the number of shares of Common
Stock, or fraction thereof, into which a share of Series A Preferred Stock is
then convertible, multiplied by the quarterly dividend in excess of $0.4875 per
share paid with respect to a share of Common Stock on such Dividend Payment
Date.
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(b) Dividends on shares of Series A Preferred Stock shall
accrue and be cumulative from the Initial Issuance Date and will be payable
quarterly in arrears on the fifteenth day of each August, November, February,
and May (each, a "Dividend Payment Date"), beginning August 15, 1994. If any
Dividend Payment Date occurs on a day that is not a Business Day, any accrued
dividends otherwise payable on such Dividend Payment Date shall be paid on the
next succeeding Business Day. Dividends payable in respect of any Dividend
Period which is less than a full Dividend Period in length will be computed from
the immediately preceding Dividend Payment Date (or the Initial Issuance Date in
the case of the first Dividend Period) to, but not including the date on which
dividends are paid, on the basis of a 360-day year consisting of twelve 30-day
months. Dividends shall be paid to the holders of record of shares of Series A
Preferred Stock as their names shall appear on the stock transfer records of the
Corporation at the close of business on the Record Date for such dividend.
Dividends in respect of any past Dividend Period that is in arrears may be
declared and paid at any time to holders of record on the Record Date thereof.
No interest, or sum of money in lieu of interest, shall be payable in respect of
any dividend payment or payments on the Series A Preferred Stock that may be in
arrears.
(c) Notwithstanding anything herein to the contrary, no
dividends on shares of Series A Preferred Stock shall be declared by the Board
of Directors of the Corporation or paid or set apart for payment by the
Corporation at such time as, and to the extent that, the terms and provisions of
any agreement of the Corporation, including any agreement relating to its
indebtedness, or any provisions of this Charter relating to any series of
Preferred Stock ranking senior to the Series A Preferred Stock as to dividends,
prohibit such declaration, payment or setting apart for payment or provide that
such declaration, payment or setting apart for payment would constitute a breach
thereof or a default thereunder, or if such declaration or payment shall be
restricted or prohibited by law.
(d) If any shares of Series A Preferred Stock are outstanding,
no full dividends shall be declared or paid or set apart for payment on any
series of Capital Stock ranking, as to dividends, junior to or on a parity with
the Series A Preferred Stock as to dividends for any period unless full
cumulative dividends have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for such payment
on the Series A Preferred Stock for all past Dividend Periods and the then
current Dividend Period. When dividends are not paid in full (or a sum
sufficient for such full payment is not so set apart) upon the shares of the
Series A Preferred Stock and the shares of any other series of Preferred Stock
ranking on a parity as to dividends with the Series A Preferred Stock, all
dividends declared upon shares of Series A Preferred Stock and any other series
of Preferred Stock ranking on a parity as to dividends with the Series A
Preferred Stock shall be declared pro rata so that the amount of dividends
declared per share on the Series A Preferred Stock and such other series of
Preferred Stock shall in all cases bear to each other the same ratio that
accrued and unpaid dividends per share on the shares of the Series A Preferred
Stock and such other series of Preferred Stock bear to each other.
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(e) Except as provided in Section 4.3.1(d), unless full
cumulative dividends on the Series A Preferred Stock have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for all past Dividend Periods and the then
current Dividend Period, no dividends (other than dividends payable in Common
Stock or other Capital Stock ranking junior to the Series A Preferred Stock as
to dividends and upon liquidation, dissolution or winding up) shall be declared
or paid or set aside for payment, and no other distribution shall be declared or
made, upon any series or class of Capital Stock ranking junior to or on a parity
with the Series A Preferred Stock as to dividends, nor, subject to the
Corporation's right to purchase shares of stock held in Trust for one or more
Charitable Beneficiaries as otherwise provided in this Charter and subject to
the automatic repurchase by the Corporation of shares of stock pursuant to
Section 4.3.7(d) or Section 4.5.5(d), shall shares of any series of Capital
Stock ranking junior to or on a parity with the Series A Preferred Stock as to
dividends or upon liquidation, dissolution or winding up be redeemed, purchased
or otherwise acquired for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any shares of any such
stock), by the Corporation (except by conversion into or exchange for other
Capital Stock ranking junior to the Series A Preferred Stock as to dividends and
upon liquidation, dissolution or winding up).
(f) Notwithstanding anything contained herein to the contrary,
dividends on the Series A Preferred Stock, if not paid on a Dividend Payment
Date, shall accrue whether or not dividends are declared for such Dividend
Payment Date, whether or not the Corporation has earnings and whether or not
there are assets legally available for the payment of such dividends. Any
dividend payment made on shares of Series A Preferred Stock shall first be
credited against the earliest accrued but unpaid dividend due with respect to
shares of such Series A Preferred Stock which remains payable.
(g) If, for any taxable year, the Corporation elects to
designate as "capital gain dividends" (as defined in Section 857 of the Code)
any portion (the "Capital Gains Amount") of the dividends (within the meaning of
the Code) paid or made available for the year to holders of all classes of stock
(the "Total Dividends"), then the portion of the Capital Gains Amount that shall
be allocable to the holders of Series A Preferred Stock shall be the Capital
Gains Amount multiplied by a fraction, the numerator of which shall be the total
dividends (within the meaning of the Code) paid or made available to the holders
of the Series A Preferred Stock for the year and the denominator of which shall
be the Total Dividends.
(h) In the event that the Corporation fails to file a
registration statement within the period of time required by the Registration
Rights Agreement dated as of the Initial Issuance Date (the "Registration Rights
Agreement"), or the required registration statement does not become effective
within the period of time required by the Registration Rights Agreement, or the
Corporation fails to maintain the effectiveness of the registration statement as
required by the Registration Rights Agreement, (i) the stated quarterly dividend
rate set
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forth in clause (i) of Section 4.3.1(a) will be increased by an additional
$0.0625 for each Dividend Period (or fraction thereof) during which any such
registration statement is not filed or declared effective, as applicable (which
number shall not increase if the registration statement delay continues for more
than one Dividend Period), and such increased stated dividend rate shall remain
in effect until such registration statement is filed or declared effective, as
applicable, and (ii) the amount per share of Common Stock set forth in clause
(ii) of Section 4.3.1(a) (in excess of which a participating dividend is
payable) will be increased by an additional $0.04875 for each dividend period
(or fraction thereof) during which any such registration statement is not filed
or declared effective, as applicable (which number shall not increase if the
registration statement delay continues for more than one Dividend Period), and
such increased stated dividend rate shall remain in effect until such
registration statement is filed or declared effective, as applicable.
Section 4.3.2 Liquidation Rights.
(a) In the event of any liquidation, dissolution or winding up
of the Corporation, subject to the prior preferences or other rights of any
series of Capital Stock ranking senior to the Series A Preferred Stock upon
liquidation, dissolution or winding up, the holders of shares of Series A
Preferred Stock shall be entitled to be paid out of the assets of the
Corporation legally available for distribution to its stockholders a liquidating
distribution in cash or property at its fair market value as determined by the
Board of Directors of the Corporation in an amount equal to the sum of $25.00
per share plus an amount equal to any accrued and unpaid dividends thereon
(whether or not earned or declared) to the date of payment (the "Series A
Preferred Liquidation Preference"), before any distribution or payment shall be
made to the holders of any shares of Capital Stock that rank junior to the
Series A Preferred Stock in the distribution of assets upon liquidation,
dissolution or winding up. After payment of the full amount of the liquidating
distributions to which they are entitled, the holders of shares of Series A
Preferred Stock shall have no right or claim to any of the remaining assets of
the Corporation and shall not be entitled to any other distribution in the event
of liquidation, dissolution or winding up of the affairs of the Corporation.
(b) In the event that, upon any such voluntary or involuntary
liquidation, dissolution or winding up, the legally available assets of the
Corporation are insufficient to pay the Series A Preferred Liquidation
Preference on all outstanding shares of Series A Preferred Stock and the
corresponding amounts payable on all shares of other classes or series of
Capital Stock ranking on a parity with the Series A Preferred Stock in the
distribution of assets upon liquidation, dissolution or winding up, then the
holders of the Series A Preferred Stock and all other such classes or series of
Capital Stock shall share ratably in any such distribution of assets in
proportion to the full liquidating distributions to which they would otherwise
be respectively entitled.
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(c) Neither the consolidation or merger of the Corporation
with or into any other entity, nor the sale, lease, transfer or conveyance of
all or substantially all of the property or business of the Corporation to any
other entity, shall be deemed to constitute a liquidation, dissolution or
winding up of the Corporation within the meaning of this Section 4.3.2.
Section 4.3.3 Redemption by the Corporation.
(a) The Series A Preferred Stock may be redeemed, in whole or
from time to time in part, at any time on and after July 15, 1999 at the option
of the Corporation at the price per share set forth below (the "Series A
Redemption Price"):
<TABLE>
<S> <C>
If the Redemption Date is: Price Per Share
- -------------------------- ---------------
On or after July 15, 1999 but prior to July 14, 2000............. $ 27.4375
On or after July 15, 2000 but prior to July 14, 2001............. $ 26.9500
On or after July 15, 2001 but prior to July 14, 2002............. $ 26.4625
On or after July 15, 2002 but prior to July 14, 2003............. $ 25.9750
On or after July 15, 2003 but prior to July 14, 2004............. $ 25.4875
On or after July 15, 2004........................... ............. $ 25.00
</TABLE>
in each case in cash plus all accrued and unpaid dividends thereon to the Series
A Redemption Date, except as may be provided below, without interest.
(b) Each date fixed for redemption pursuant to Section
4.3.3(d) below is called a "Series A Redemption Date." If the Series A
Redemption Date is after a Record Date and before the related Dividend Payment
Date, the dividend payable on such Dividend Payment Date shall be paid to the
holder in whose name the Series A Preferred Stock to be redeemed is registered
at the close of business on such Record Date notwithstanding the redemption
thereof between such Record Date and the related Dividend Payment Date or the
Corporation's default in the payment of the dividend due.
(c) In case of redemption of less than all shares of Series A
Preferred Stock at the time outstanding, the shares to be redeemed shall be
selected pro rata from the holders of record of such shares in proportion to the
number of shares held by such holders (with adjustments to avoid redemption of
fractional shares) or, if a pro rata redemption would result in a violation of
the Series A Preferred Stock Ownership Limit, the Common Stock Ownership Limit,
or the Aggregate Stock Ownership Limit, by any other equitable method determined
by the Board of Directors of the Corporation, to the extent practicable, that
would not result in such a violation.
(d) Notice of any redemption will be given by publication
in a newspaper of general circulation in the City of New York, such publication
to be made once a week for two
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successive weeks commencing not less than 30 nor more than 60 days prior to the
Series A Redemption Date. A similar notice will be mailed by the Corporation,
postage prepaid, not less than 30 nor more than 60 days prior to the Series A
Redemption Date, addressed to the respective holders of record of the Series A
Preferred Stock to be redeemed at their respective addresses as they appear on
the stock transfer records of the Corporation. No failure to give such notice or
any defect therein or in the mailing thereof shall affect the validity of the
proceedings for the redemption of any shares of Series A Preferred Stock except
as to the holder to whom the Corporation has failed to give notice or except as
to the holder to whom notice was defective. In addition to any information
required by law or by the applicable rules of any exchange upon which Series A
Preferred Stock may be listed or admitted to trading, such notice shall state:
(i) the Series A Redemption Date; (ii) the Series A Redemption Price; (iii) the
aggregate number of shares of Series A Preferred Stock to be redeemed and, if
less than all shares held by such holder are to be redeemed, the number of such
shares to be redeemed; (iv) the place or places where certificates for such
shares are to be surrendered for payment of the Series A Redemption Price; (v)
that dividends on the shares to be redeemed will cease to accrue on the Series A
Redemption Date; and (vi) that any conversion rights with respect to such shares
shall terminate at the close of business on the third Business Day immediately
preceding the Series A Redemption Date.
(e) If notice has been mailed in accordance with Section
4.3.3(d) above and provided that on or before the Series A Redemption Date
specified in such notice all funds necessary for such redemption shall have been
set aside by the Corporation, separate and apart from its other funds in trust
for the pro rata benefit of the holders of the shares so called for redemption,
so as to be and to continue to be available therefor, then, from and after the
Series A Redemption Date, dividends on the shares of the Series A Preferred
Stock so called for redemption shall cease to accrue, and such shares shall no
longer be deemed to be outstanding and shall not have the status of shares of
Series A Preferred Stock, and all rights of the holders thereof as stockholders
of the Corporation (except the right to receive from the Corporation the Series
A Redemption Price) shall cease. Notwithstanding the foregoing, upon the
Corporation's default in the payment of the dividend due, the holders of shares
of Series A Preferred Stock at the close of business on any Record Date will be
entitled to receive the dividend payable with respect to such Series A Preferred
Stock on the corresponding Dividend Payment Date, although such Series A
Preferred Stock shall have been redeemed between such Record Date and such
corresponding Dividend Payment Date. Upon surrender, in accordance with the
redemption notice, of the certificates for any shares of Series A Preferred
Stock so redeemed (properly endorsed or assigned for transfer, if the
Corporation shall so require and the notice shall so state), such shares shall
be redeemed by the Corporation at the Series A Redemption Price. In case fewer
than all the shares represented by any such certificate are redeemed, a new
certificate or certificates shall be issued representing the unredeemed shares
without cost to the holder thereof.
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(f) Any deposit of funds with a bank or trust company for the
purpose of redeeming Series A Preferred Stock shall be irrevocable except that:
(i) the Corporation shall be entitled to receive from
such bank or trust company the interest or other earnings, if any,
earned on any money so deposited in trust, and the holders of any
shares redeemed shall have no claim to such interest or other earnings;
and
(ii) any balance of monies so deposited by the
Corporation and unclaimed by the holders of the Series A Preferred
Stock entitled thereto at the expiration of two (2) years after the
applicable Series A Redemption Date shall be repaid, together with any
interest or other earnings earned thereon, to the Corporation, and
after such repayment, the holders of the shares entitled to the funds
so repaid to the Corporation shall look only to the Corporation for
payment without interest or other earnings.
(g) No Series A Preferred Stock may be redeemed except with
funds legally available for the payment of the Series A Redemption Price.
(h) Unless full cumulative dividends on all outstanding shares
of Series A Preferred Stock shall have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment thereof set apart for
payment for all past Dividend Periods and the then current Dividend Period, no
shares of any Series A Preferred Stock shall be redeemed unless all outstanding
shares of Series A Preferred Stock are simultaneously redeemed, provided,
however, that the foregoing shall not prevent the purchase or acquisition of
shares of Series A Preferred Stock pursuant to a purchase or exchange offer made
on the same terms to holders of all outstanding shares of Series A Preferred
Stock; and, unless full cumulative dividends on all outstanding shares of Series
A Preferred Stock have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment for
all past Dividend Periods and the then current Dividend Period, the Corporation
shall not purchase or otherwise acquire directly or indirectly, through a
subsidiary or otherwise, any shares of Series A Preferred Stock (except by
conversion into or exchange for Capital Stock ranking junior to the Series A
Preferred Stock as to dividends and upon liquidation, dissolution or winding
up).
(i) All shares of Series A Preferred Stock redeemed pursuant
to this Section 4.3.3 shall be retired and shall be restored to the status of
authorized and unissued shares of Preferred Stock, without designation as to
series, and may thereafter be reissued as shares of any series of Preferred
Stock.
(j) Notwithstanding any other provision of this Section 4.3.3,
the Corporation shall not , pursuant to this Section 4.3.3, redeem shares of
Series A Preferred
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Stock held by any holder of such shares if such holder (i) has provided notice
of conversion with respect to such shares pursuant to Section 4.3.6(b) and (ii)
such holder could not, at the time of such redemption, convert such shares of
Series A Preferred Stock into shares of Common Stock pursuant to Section 4.3.6
due to the restriction set forth in Section 4.3.6(l).
Section 4.3.4 Voting Rights.
(a) The holders of record of shares of Series A Preferred
Stock shall not be entitled to any voting rights or to notice of any meeting of
stockholders except as hereinafter provided in this Section 4.3.4. The
Corporation shall not, without the affirmative vote or consent of the holders of
at least a majority of the shares of the Series A Preferred Stock outstanding at
the time, given in person or by proxy, either in writing or at a meeting (such
Series A Preferred Stock voting separately as a class), (i) authorize, create,
or increase the authorized or issued amount of, any class or series of Capital
Stock ranking senior to the Series A Preferred Stock as to dividends or upon
liquidation, dissolution or winding up, or reclassify any authorized shares of
Capital Stock into shares of any such senior Capital Stock, or create, authorize
or issue any obligation or security convertible into or evidencing the right to
purchase shares of any such senior Capital Stock; or (ii) amend, alter or repeal
the provisions of this Charter, whether by merger, consolidation or otherwise,
so as to materially and adversely affect any right, preference, privilege or
voting power of the Series A Preferred Stock or the holders thereof; provided,
however, that any increase in the amount of the authorized Preferred Stock or
the creation or issuance of any other series of Preferred Stock, or any increase
in the amount of authorized shares of the Series A Preferred Stock or any other
series of Preferred Stock, in each case ranking on a parity with or junior to
the Series A Preferred Stock with respect to payment of dividends and the
distribution of assets upon liquidation, dissolution or winding up, shall not be
deemed to materially and adversely affect such rights, preferences, privileges
or voting powers.
(b) If and whenever dividends payable on Series A Preferred
Stock shall be in arrears for six (6) or more consecutive quarterly periods,
then the holders of shares of Series A Preferred Stock, voting separately as a
class (together with any certain other series of preferred stock as provided in
Section 4.3.4(f) below), shall be entitled at the next annual meeting of the
stockholders or at any special meeting of stockholders to elect two (2)
additional directors. Upon election, such directors shall become additional
directors of the Corporation and the authorized number of directors of the
Corporation shall thereupon be automatically increased by such number of
directors.
(c) Whenever the voting right under Section 4.3.4(b) shall
have vested, such right may be exercised initially either at a special meeting
of the holders of Series A Preferred Stock, called as hereinafter provided, or
at any annual meeting of stockholders held for the purpose of electing
directors, and thereafter at such annual meetings or by the written consent of
holders of Series A Preferred Stock. Such right of the holders of Series A
Preferred Stock
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to elect directors may be exercised until all dividends to which the holders of
Series A Preferred Stock shall have been entitled for all previous Dividend
Periods and the current Dividend Period shall have been paid in full or declared
and a sum of money sufficient for the payment thereof set aside for payment, at
which the time the right of the holders of Series A Preferred Stock to elect
such number of directors shall cease, the term of such directors previously
elected shall thereupon terminate, and the authorized number of directors of the
Corporation shall thereupon return to the number of authorized directors
otherwise in effect, but subject always to the same provisions for the renewal
and divestment of such special voting rights in the case of any such future
dividend default or defaults and subject to the rights of any other series of
preferred stock to vote for the election of directors, together with the Series
A Preferred Stock, as described in Section 4.3.4(f), that shall not have then
expired.
(d) At any time when the voting right described under Section
4.3.4(b) shall have vested in the holders of shares of Series A Preferred Stock
and if such right shall not already have been initially exercised, the Secretary
of the Corporation shall, upon the written request of holders of record of at
least ten percent (10%) of the shares of Series A Preferred Stock or any other
series of Preferred Stock entitled to vote on such matter as described in
Section 4.3.4(f) then outstanding, addressed to the Secretary of the
Corporation, call a special meeting of holders of Series A Preferred Stock. Such
meeting shall be held in accordance with Maryland law at the earliest
practicable date at a place designated by the Secretary of the Corporation. If
such meeting shall not be called by the Secretary of the Corporation within
thirty (30) days after the personal service of such written request upon the
Secretary of the Corporation, or within thirty (30) days after mailing the same
within the United States, by registered mail, addressed to the Secretary of the
Corporation at its principal office (such mailing to be evidenced by the
registry receipt issued by the postal authorities), then the holders of record
of at least ten percent (10%) of the shares of Series A Preferred Stock or of
other Preferred Stock entitled to vote on such matter as described in Section
4.3.4(f) then outstanding may designate in writing a holder of Series A
Preferred Stock or such other Preferred Stock to call such meeting at the
expense of the Corporation, and such meeting may be called by such person so
designated upon the notice required for annual meetings of stockholders and
shall be held in accordance with Maryland law at a place designated by such
holder. Any holder of shares of Series A Preferred Stock that would be entitled
to vote at such meeting shall have access to the stock books of the Corporation
for the purpose of causing a meeting of stockholders to be called pursuant to
the provisions of this Section 4.3.4(d). Notwithstanding the provisions of this
Section 4.3.4(d), however, no such special meeting shall be called if any such
request is received less than ninety (90) days before the date fixed for the
next ensuing annual or a special meeting of stockholders.
(e) If any director so elected by the holders of shares of
Series A Preferred Stock shall cease to serve as a director before such
director's term shall expire, the holders of shares of Series A Preferred Stock
(and any other series of Preferred Stock, if any, entitled to vote on such
matter, as described in Section 4.3.4(f)) then outstanding may, at a special
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meeting of the holders called as provided above, elect a successor to hold
office for the unexpired term of the director whose place shall be vacant.
(f) If, at any time when the holders of shares of Series A
Preferred Stock are entitled to elect directors pursuant to the foregoing
provisions of this Section 4.3.4, the holders of shares of any one or more
additional series of Preferred Stock are entitled to elect directors by reason
of any default or event specified in this Charter, as in effect at the time
(including the articles supplementary for such series), and if the terms for
such other additional series so permit, then the voting rights of the two or
more series then entitled to vote shall be combined (with each series having a
number of votes proportional to the aggregate liquidation preference of its
outstanding shares). In such case, the holders of shares of Series A Preferred
Stock and of all such other series then entitled so to vote, voting as class,
shall elect such directors. If the holders of shares of any such other series
have elected such directors prior to the happening of the default or event
permitting the holders of shares of Series A Preferred Stock to elect directors,
or prior to a written request for the holding of a special meeting being
received by the Secretary of the Corporation as required in Section 4.3.4(d)
above, then a new election shall be held with holders of shares of all such
other series of Preferred Stock and the Series A Preferred Stock voting together
as a single class for such directors, resulting in the termination of the term
of such previously elected directors upon the election of such new directors. If
the holders of shares of any such other series are entitled to elect in excess
of two directors, the Series A Preferred Stock shall not participate in the
election of more than two such directors, and those directors whose terms first
expire shall be deemed to be the directors elected by the holder of shares of
Series A Preferred Stock; provided that, if at the expiration of such terms, the
holders of shares of Series A Preferred Stock are entitled to vote in the
election of directors pursuant to the provisions of this Section 4.3.4, then the
Secretary of Corporation shall call a meeting (which meeting may be the annual
meeting or special meeting of stockholders referred to in Section 4.3.4(c)
above) of holders of shares of Series A Preferred Stock for the purpose of
electing replacement directors (in accordance with the provisions of this
Section 4.3.4) to be held at or prior to the time of expiration of the expiring
terms referred to above.
(g) The holders of record of shares of Series A Preferred
Stock then outstanding shall be entitled to vote, together with any other class
or series of Capital Stock entitled to vote then outstanding, on any resolution
presented by the Board of Directors pursuant to Section 5.1.
(h) In any matter in which holders of shares of Series A
Preferred Stock may vote, including any action by written consent, each share of
Series A Preferred Stock shall be entitled to one (1) vote (except as expressly
provided herein or as may be required by law).
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(i) Except as required by law, the foregoing voting provisions
shall not apply if, at or prior to the time when the act with respect to which
such vote would otherwise be required shall be effected, all outstanding shares
of the Series A Preferred Stock shall have been redeemed or shall have been
called for redemption upon proper notice and sufficient funds shall have been
deposited in trust to effect such redemption.
Section 4.3.5 Ranking.
The Series A Preferred Stock shall, with respect to dividend
rights and distributions upon liquidation, dissolution, and winding up, rank (i)
senior to the Common Stock, and shares of all other Capital Stock issued from
time to time by the Corporation the terms of which specifically provide that the
shares of such series rank junior to the Series A Preferred Stock with respect
to dividend rights and distributions upon liquidation, dissolution, or winding
up of the Corporation, (ii) on a parity with the shares of all other Capital
Stock issued by the Corporation the terms of which specifically provide that the
shares of such series rank on a parity with the Series A Preferred Stock with
respect to dividends and distributions upon liquidation, dissolution, or winding
up of the Corporation or make no specific provision as to their ranking; and
(iii) junior to all other Capital Stock issued by the Corporation the terms of
which specifically provide that the shares rank senior to the Series A Preferred
Stock with respect to dividends and distributions upon liquidation, dissolution
or winding up of the Corporation (the issuance of which must have been approved
by a vote of holders of at least a majority of the outstanding shares of Series
A Preferred Stock).
Section 4.3.6 Conversion Rights.
Subject to any other provisions of this Article IV and Article
V hereof, the holders of shares of Series A Preferred Stock shall have the
right, at their option, to convert such shares into shares of Common Stock on
the following terms and conditions:
(a) Shares of Series A Preferred Stock shall be convertible at
any time and from time to time on or after the Conversion Commencement Date into
fully paid and nonassessable shares of Common Stock at a conversion price of
$19.50 per share of Common Stock (as such price may be adjusted from time to
time, the "Conversion Price"). For purposes of this Section 4.3.6, references to
shares of Series A Preferred Stock shall apply equally to fractional shares
thereof. The Conversion Price shall be subject to adjustment from time to time
as hereinafter provided. For purposes of such conversion, each share of Series A
Preferred Stock will be valued at $25.00 plus an amount equal to any accrued and
unpaid dividends on such share to the date of conversion. No payment or
adjustment shall be made on account of any accrued and unpaid dividends on
shares of Series A Preferred Stock surrendered for conversion prior to the
Record Date for the determination of stockholders entitled to such dividends or
on account of any dividends on the shares of Common Stock issued upon such
conversion subsequent to the Record Date for the determination of
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stockholders entitled to such dividends. If any shares of Series A Preferred
Stock shall be called for redemption, the right to convert the shares designated
for redemption shall terminate at the close of business on the third Business
Day immediately preceding the date fixed for redemption unless default is made
in the payment of the Series A Redemption Price. In the event of default in the
payment of the Series A Redemption Price, the right to convert the shares
designated for redemption shall terminate at the close of business on the
Business Day immediately preceding the date that such default is cured.
(b) In order to convert shares of Series A Preferred Stock
into shares of Common Stock, the holder thereof shall, on or after the
Conversion Commencement Date, surrender the certificates therefor, duly endorsed
if the Corporation shall so require, or accompanied by appropriate instruments
of transfer satisfactory to the Corporation, at the office of the transfer agent
for the Series A Preferred Stock or at such other office as may be designated by
the Corporation, together with written notice that such holder irrevocably
elects to convert such shares. Such notice shall also state the name and address
in which such holder wishes the certificate for the shares of Common Stock
issuable upon conversion to be issued. As soon as practicable after receipt of
the certificates representing the shares of Series A Preferred Stock to be
converted and the notice of election to convert the same, the Corporation shall
issue and deliver at said office a certificate for the number of whole shares of
Common Stock issuable upon conversion of the shares of Series A Preferred Stock
surrendered for conversion, together with a cash payment in lieu of any fraction
of a share, as hereinafter provided, to the person entitled to receive the same.
If more than one stock certificate for Series A Preferred Stock shall be
surrendered for conversion at one time by the same holder, the number of full
shares of Common Stock issuable upon conversion thereof shall be computed on the
basis of the aggregate number of shares represented by all the certificates so
surrendered. Shares of Series A Preferred Stock shall be deemed to have been
converted immediately prior to the close of business on the date such shares are
surrendered for conversion and notice of election to convert the same is
received by the Corporation in accordance with the foregoing provision, and the
person entitled to receive the Common Stock issuable upon such conversion shall
be deemed for all purposes as the record holder of such shares of Common Stock
as of such date.
(c) In the case of any share of Series A Preferred Stock which
is converted after any Record Date with respect to the payment of a dividend on
the Series A Preferred Stock and on or prior to the corresponding Dividend
Payment Date, the dividend due on such Dividend Payment Date shall be payable on
such Dividend Payment Date to the holder of record of such shares on such
preceding Record Date notwithstanding such conversion. Shares of Series A
Preferred Stock surrendered for conversion during the period from the close of
business on any Record Date with respect to the payment of a dividend on the
Series A Preferred Stock next preceding any Dividend Payment Date to the opening
of business on such Dividend Payment Date shall (except in the case of shares of
Series A Preferred Stock which have been called for redemption on a Series A
Redemption Date within such period) be
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accompanied by payment in New York Clearing House funds or other funds
acceptable to the Corporation of an amount equal to the dividend payable on such
Dividend Payment Date on the shares of Series A Preferred Stock being
surrendered for conversion. The dividend with respect to a share of Series A
Preferred Stock called for redemption on a Series A Redemption Date during the
period from the close of business on any Record Date with respect to the payment
of a dividend on the Series A Preferred Stock next preceding any dividend
payment to the opening of business on such Dividend Payment Date shall be
payable on such Dividend Payment Date to the holder of record of such share on
such Record Date, notwithstanding the conversion of such share of Series A
Preferred Stock after such Record Date and prior to such Dividend Payment Date,
and the holder converting such share of Series A Preferred Stock called for
redemption need not include a payment of such dividend amount upon surrender of
such share of Series A Preferred Stock for conversion.
(d) No fractional shares of Common Stock shall be issued upon
conversion of any shares of Series A Preferred Stock. If more than one share of
Series A Preferred Stock is surrendered at one time by the same holder, the
number of full shares issuable upon conversion thereof shall be computed on the
basis of the aggregate number of shares so surrendered. If the conversion of any
shares of Series A Preferred Stock results in a fractional share of Common
Stock, the Corporation shall pay cash in lieu thereof in an amount equal to such
fraction multiplied by the closing price of the Common Stock, determined as
provided in Section 4.3.6(e)(vi) below, on the date on which the shares of
Series A Preferred Stock were duly surrendered for conversion, or if such date
is not a trading date, on the next succeeding trading date.
(e) The Conversion Price shall be adjusted from time to time as follows:
(i) In case the Corporation shall pay or make a
dividend or other distribution on shares of Common Stock in Common
Stock, the Conversion Price in effect at the opening of business on the
date following the date fixed for the determination of stockholders
entitled to receive such dividend or other distribution shall be
reduced by multiplying such Conversion Price by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at
the close of business on the date fixed for such determination and the
denominator shall be the sum of such number of shares and the total
number of shares of Common Stock constituting such dividend or other
distribution, such reduction to become effective immediately after the
opening of business on the day following the date fixed for such
determination. For purposes of this subsection, the number of shares of
Common Stock at any time outstanding shall not include authorized but
unissued shares but shall include shares issuable in respect to scrip
certificates issued in lieu of fractions of shares of Common Stock. The
Corporation will not pay any dividend or make any distribution on
authorized but unissued shares of Common Stock.
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(ii) In case the Corporation shall issue additional
rights or warrants to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per share
less than the then current market price per share (determined as
provided in Section 4.3.6(e)(vi) below) of the Common Stock on the date
fixed for the determination of stockholders entitled to receive such
rights or warrants (other than pursuant to a dividend reinvestment
plan), the Conversion Price in effect at the opening of business on the
day following the date fixed for such determination shall be reduced by
multiplying such Conversion Price by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding at the close
of business on the date fixed for such determination plus the number of
shares of Common Stock which the aggregate of the offering price of the
total number of shares of Common Stock so offered for subscription or
purchase would purchase at such current market price (determined as
provided in Section 4.3.6(e)(vi) below) and the denominator shall be
the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination plus the number of
shares of Common Stock so offered for subscription or purchase, such
reduction to become effective immediately after the opening of business
on the day following the date fixed for such determination. For the
purposes of this Section 4.3.6(e)(ii), the number of shares of Common
Stock at any time outstanding shall not include authorized but unissued
shares but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock. The
Corporation will not issue any rights or warrants in respect of shares
of authorized but unissued Common Stock.
(iii) In case outstanding shares of Common Stock
shall be subdivided into a greater number of shares of Common Stock,
the Conversion Price in effect at the opening of business on the date
following the day upon which such subdivision becomes effective shall
be proportionately reduced, and, conversely, in case outstanding shares
of Common Stock shall be combined into a smaller number of shares of
Common Stock, the Conversion Price in effect at the opening of business
on the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after the
opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(iv) In case the Corporation shall, by dividend or
otherwise, distribute to all holders of its Common Stock evidence of
its indebtedness or assets (including securities, but excluding (1) any
rights or warrants referred to in Section 4.3.6(e)(ii) above, (2) any
dividend described in Section 4.3.6(e)(ix) below, and (3) any dividend
or distribution referred to in Section 4.3.6(e)(i) above), the
Conversion Price shall be adjusted so that the same shall equal the
price determined by multiplying the Conversion Price in effect
immediately prior to the close of business on the date fixed for the
determination of stockholders entitled to receive such distributions by
a
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fraction of which the numerator shall be the current market price per
share (determined as provided in Section 4.3.6(e)(vi) below) of the
Common Stock on the date fixed for such determination less the fair
market value (as determined by the Board of Directors, whose
determination shall be conclusive and shall be described in a statement
filed with the transfer agent for the Series A Preferred Stock) of the
portion of the evidences of the indebtedness or assets so distributed
applicable to one share of Common Stock and the denominator shall be
such current market price per share of Common Stock, such adjustment to
become effective immediately prior to the opening of business on the
day following the date fixed for the determination of stockholders
entitled to receive such distribution.
(v) For the purposes of this Section 4.3.6, the
reclassification of Common Stock into securities including securities
other than Common Stock (other than any reclassification upon a
consolidation or merger to which Section 4.3.6(g) below applies) shall
be deemed to involve (A) a distribution of such securities other than
Common Stock to all holders of Common Stock (and the effective date of
such reclassification shall be deemed to be "the date fixed for the
determination of stockholders entitled to receive such distribution"
and the "date fixed for such determination" within the meaning of
Section 4.3.6(e)(vi) above), and (B) a subdivision or combination, as
the case may be, of the number of shares of Common Stock outstanding
immediately thereafter (and the effective date of such reclassification
shall be deemed to be "the day upon which such subdivision became
effective" and "the day upon which such subdivision or combination
becomes effective," as the case may be) within the meaning of Section
4.3.6(e)(iii) above.
(vi) For the purpose of any computation under Section
4.3.6 and (iv) above, the "current market price per share" of Common
Stock on any day shall be deemed to be the average of the daily closing
prices for the thirty (30) consecutive trading days commencing
forty-five (45) days before the day in question. The closing price for
each day shall be the reported last sale price or, in case no such
reported sale takes place on such day, the average of the reported
closing bid and asking prices, in either case on the NYSE, or, if the
Common Stock is not quoted on such exchange, on the principal national
securities exchange on which the Common Stock is then listed or
admitted to trading or, if the Common Stock is not quoted on any
national securities exchange, the average of the closing bid and asked
prices in the Nasdaq Stock Market, or in the over-the-counter market as
furnished by a NYSE member first selected from time to time by the
Board of Directors of the Corporation for that purpose.
(vii) Notwithstanding the foregoing, no adjustment in
the Conversion Price for the Series A Preferred Stock shall be required
unless such adjustment would require an increase or decrease of at
least 1% in such price; provided, however, that any adjustment which by
reason of this Section 4.3.6(e)(vii) is not required to be made
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shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 4.3.6 shall be made to
the nearest cent or to the nearest one-hundredth of a share, as the
case may be.
(viii)In the event of a distribution of evidences of
indebtedness or other assets (as described in Section 4.3.6(e)(iv)) or
a dividend to all holders of Common Stock of rights to subscribe for
additional shares of Capital Stock (other than those referred to in
Section 4.3.6(e)(ii) above), the Corporation may, instead of making an
adjustment of the Conversion Price, make proper provision so that each
holder who converts such shares will be entitled to receive upon such
conversion, in addition to shares of Common Stock, an appropriate
number of such rights, warrants, evidences of indebtedness or other
assets.
(ix) No adjustment will be made for Ordinary Cash
Dividends (defined as dividends or other distributions to holders of
Common Stock in an amount not exceeding the accumulated Funds from
Operations of the Operating Partnership including for this purpose
consolidated partnerships since the Initial Issuance Date, after
deducting cumulative dividends or other distributions (A) paid in
respect of all classes of Capital Stock and in respect of Units held by
persons other than the Corporation or (B) accrued in respect of Series
A Preferred Stock and any other shares of Preferred Stock of the
Corporation ranking on a parity with or senior to the Series A
Preferred Stock as to dividends, in each case since the Initial
Issuance Date). For this purpose, "Funds from Operations of the
Operating Partnership" shall mean net income (loss) (computed in
accordance with generally accepted accounting principles consistently
applied), excluding gains (or losses) from debt restructuring and sales
of property, plus depreciation and amortization of, and after
adjustments for unconsolidated partnerships and joint ventures of the
Operating Partnership.
(f) Whenever the Conversion Price shall be adjusted as herein
provided, (i) the Corporation shall forthwith make available at the office of
the transfer agent for the Series A Preferred Stock a statement describing in
reasonable detail the adjustment, the facts requiring such adjustment and the
method of calculation used; and (ii) the Corporation shall cause to be mailed by
first class mail, postage prepaid, as soon as practicable to each holder of
record of shares of Series A Preferred Stock a notice stating that the
Conversion Price has been adjusted and setting forth the adjusted Conversion
Price.
(g) In the event of any consolidation of the Corporation with
or merger of the Corporation into any other corporation (other than a merger in
which the Corporation is the surviving corporation) or a sale, lease (other than
in the ordinary course of business) or conveyance of the assets of the
Corporation as an entirety or substantially as an entirety, or any statutory
exchange of securities with another corporation, the holder of each share of
Series A Preferred Stock shall, notwithstanding anything in this Section 4.3.6
to the contrary,
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have the right, after such consolidation, merger, sale, lease, conveyance or
exchange, to convert such share into the number and kind of shares of stock or
other securities and the amount and kind of property which such holder would
have been entitled to receive immediately upon such consolidation, merger, sale,
lease, conveyance or exchange for the number of shares of Common Stock that
would have been issued to such holder had such shares of Series A Preferred
Stock been converted immediately prior to such consolidation, merger, sale,
lease, conveyance or exchange. The provisions of this Section 4.3.6(g) shall
similarly apply to successive consolidations, mergers, sales, leases,
conveyances or exchanges.
(h) The Corporation shall pay any taxes that may be payable in
respect of the issuance of shares of Common Stock upon conversion of shares of
Series A Preferred Stock, but the Corporation shall not be required to pay any
taxes which may be payable in respect of any transfer involved in the issuance
of shares of Common Stock in a name other than that in which the shares of
Series A Preferred Stock so converted are registered, and the Corporation shall
not be required to issue or deliver any such shares unless and until the person
requesting such issuance shall have paid to the Corporation the amount of any
such taxes or shall have established to the satisfaction of the Corporation that
such taxes have been paid.
(i) The Corporation may (but shall not be required to) make
such reductions in the Conversion Price, in addition to those required by
Sections 4.3.6(e)(i) through (iv) above, as it considers to be advisable in
order that any event treated for federal income tax purposes as a dividend of
stock or stock rights shall not be taxable to the recipients.
(j) The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock the full
number of shares of Common Stock issuable upon the conversion of all shares of
Series A Preferred Stock then outstanding.
(k) In the event that:
(i) the Corporation shall declare a dividend or
any other distribution on its Common Stock, other than an Ordinary Cash
Dividend; or
(ii) the Corporation shall authorize the granting to
the holders of its Common Stock of rights to subscribe for or purchase
any shares of Capital Stock of any class or of any other rights; or
(iii) any capital reorganization of the Corporation,
reclassification of the Capital Stock, consolidation or merger of the
Corporation with or into another corporation (other than a merger in
which the Corporation is the surviving corporation), or sale, lease
(other than in the ordinary course of business) or
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conveyance of the assets of the Corporation as an entirety or
substantially as an entirety to another corporation occurs; or
(iv) the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation shall occur;
the Corporation shall cause to be mailed to the holders of record of shares of
Series A Preferred Stock at least fifteen (15) days prior to the applicable date
hereinafter specified a notice stating (A) the date on which a record is to be
taken for the purpose of such dividend, distribution or grant of rights or, if a
record is not to be taken, the date as of which the holders of shares of Common
Stock of record to be entitled to such dividend, distribution. or grant of
rights are to be determined or (B) the date on which such reorganization,
reclassification, consolidation, merger, sale, lease (other than in the ordinary
course of business), conveyance, dissolution, liquidation or winding up is
expected to take place, and the date, if any is to be fixed, as of which holders
of shares of Common Stock of record shall be entitled to exchange their shares
of Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, lease,
conveyance, dissolution, liquidation or winding up. Failure to give such notice,
or any defect therein, shall not affect the legality of such dividend,
distribution, grant, reorganization, reclassification, consolidation, merger,
sale, lease, conveyance, dissolution, liquidation or winding up.
(l) No shares of Series A Preferred Stock may be converted
into shares of Common Stock if such conversion would result in any violation of
the applicable restrictions set forth in Section 4.5.5.
Section 4.3.7 Series A Preferred Stock Ownership Limitations.
(a) During the period commencing on the Initial Issuance
Date and prior to the Restriction Termination Date:
(i) except as provided in Section 4.3.13, no Person
shall Acquire any shares of Series A Preferred Stock if, as the result
of such Acquisition, such Person shall Beneficially or Constructively
Own shares of Series A Preferred Stock in excess of the Series A
Preferred Stock Ownership Limit;
(ii) except as provided in Sections 4.3.13 and
4.5.11, no Person shall Acquire or Beneficially Own or Constructively
Own shares of Series A Preferred Stock or Common Stock in excess of the
Aggregate Stock Ownership Limit; and
(iii) no Person shall Acquire or Beneficially or
Constructively Own shares of Capital Stock to the extent that such
Acquisition or Beneficial or Constructive Ownership of Capital Stock
would result in the Corporation being "closely held" within
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the meaning of Section 856(h) of the Code, or otherwise failing to
qualify as a REIT (including, but not limited to, an Acquisition or
Beneficial or Constructive Ownership that would result in the
Corporation owning (actually or Constructively) an interest in a tenant
that is described in Section 856(d)(2)(B) of the Code if the income
derived by the Corporation from such tenant would cause the Corporation
to fail to satisfy any of the gross income requirements of Section
856(c) of the Code).
(b) If, during the period commencing on the Initial Issuance
Date and prior to the Restriction Termination Date, any Transfer or Acquisition
of shares of Series A Preferred Stock (other than a Transfer or Acquisition to
which Section 4.3.7(c) applies) (whether or not such Transfer or Acquisition is
the result of a transaction entered into through the facilities of the NYSE or
any other national securities exchange or automated inter-dealer quotation
system) occurs which, if effective, would result in any Person Acquiring shares
of Series A Preferred Stock in violation of Section 4.3.7(a), (i) then that
number of shares of the Series A Preferred Stock being Transferred or Acquired
that otherwise would cause such Person to violate Section 4.3.7(a) (rounded up
to the nearest whole share) shall be automatically transferred to a Trust for
the benefit of a Charitable Beneficiary, as described in Section 4.4, effective
as of the close of business on the Business Day prior to the date of such
Transfer or Acquisition, and such Person shall acquire no rights in such shares;
or (ii) if the transfer to the Trust described in clause (i) of this sentence
would not be effective for any reason to prevent any Person from Acquiring or
Transferring Series A Preferred Stock in violation of Section 4.3.7(a), then the
Transfer or Acquisition of that number of shares of Series A Preferred Stock
that otherwise would cause any Person to violate Section 4.3.7(a) shall be void
ab initio, and the intended transferee shall acquire no rights in such shares of
Series A Preferred Stock.
(c) If, during the period commencing on the Initial Issuance
Date and prior to the Restriction Termination Date, a change in the relationship
between two or more Persons ("Preferred Stock Affected Persons") results in any
of such Preferred Stock Affected Persons Beneficially or Constructively Owning
shares of Series A Preferred Stock in violation of Section 4.3.7(a) because of
the application of Section 318(a) of the Code (as modified by Section 856(d)(5)
of the Code) or Section 544 of the Code (as modified by Section 856(h)(1)(B) of
the Code) (a "Preferred Stock Constructive Ownership Event"), then that number
of shares of Series A Preferred Stock Beneficially or Constructively Owned by
the Preferred Stock Affected Persons (rounded up to the nearest whole share)
that otherwise would violate Section 4.3.7(a) shall be automatically transferred
to a Trust for the benefit of a Charitable Beneficiary, as described in Section
4.4, effective as of the close of business on the Business Day prior to such
Preferred Stock Constructive Ownership Event, and such Preferred Stock Affected
Person or Persons shall acquire no rights in such shares.
(d) Notwithstanding anything to the contrary in Section
4.3.3, if during the period commencing on the Initial Issuance Date and prior to
the Restriction Termination Date,
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a Special Triggering Event (if effective) or other event or occurrence (if
effective), other than a Transfer or Acquisition described in Section 4.3.7(b)
or a Preferred Stock Constructive Ownership Event described in Section 4.3.7(c),
would result in any violation of Section 4.3.7(a), then (i) the number of shares
of Series A Preferred Stock (rounded up to the nearest whole share) that would
(but for this Section 4.3.7(d)) cause any Person to Beneficially or
Constructively Own Series A Preferred Stock in violation of Section 4.3.7(a)
shall be automatically repurchased by the Corporation from the actual owner of
such shares of Series A Preferred Stock, effective as of the close of business
on the Business Day prior to the date of such Special Triggering Event or other
event or occurrence; or (ii) if the automatic repurchase described in clause (i)
of this sentence would not be effective for any reason to prevent any Person
from Beneficially or Constructively Owning Series A Preferred Stock in violation
of Section 4.3.7(a), then that number of shares of Series A Preferred Stock
(rounded up to the nearest whole share) that otherwise would cause any Person to
violate Section 4.3.7(a) shall be automatically transferred to a Trust for the
benefit of a Charitable Beneficiary, as described in Section 4.4, effective as
of the close of business on the Business Day prior to the date of such Special
Triggering Event or other event or occurrence, and the actual owner shall retain
no rights in such shares of Series A Preferred Stock; or (iii) if the transfer
to the Trust described in clause (ii) of this sentence would not be effective
for any reason to prevent any Person from Beneficially or Constructively Owning
Series A Preferred Stock in violation of Section 4.3.7(a), then the Special
Triggering Event or other event or occurrence that would otherwise cause such
Person to violate Section 4.3.7(a) shall be void ab initio. The repurchase price
of each share of Series A Preferred Stock automatically repurchased pursuant to
this Section 4.3.7(d) shall be a price per share equal to the Market Price on
the date of the Special Triggering Event or other event or occurrence that
resulted in the repurchase. Dividends which were accrued but unpaid with respect
to the repurchased shares as of the date of the Special Triggering Event or
other event or occurrence that resulted in the repurchase shall be paid. Any
dividend or other distribution paid after the Special Triggering Event or other
event or occurrence that resulted in the repurchase, but prior to the discovery
by the Corporation that shares of Series A Preferred Stock have been
automatically repurchased by the Corporation, shall be paid to the Corporation
upon demand.
(e) Notwithstanding any other provisions contained herein,
during the period commencing on the Initial Issuance Date and prior to the
Restriction Termination Date, any Transfer or Acquisition of shares of Series A
Preferred Stock (whether or not such Transfer or Acquisition is the result of a
transaction entered into through the facilities of the NYSE or any other
national securities exchange or automated inter-dealer quotation system) that,
if effective, would result in the Capital Stock being beneficially owned by less
than 100 Persons (determined without reference to any rules of attribution)
shall be void ab initio, and the intended transferee shall acquire no rights in
such shares of Series A Preferred Stock.
Section 4.3.8 Remedies for Breach. If the Board of Directors
of the Corporation or any duly authorized committee thereof shall at any time
determine in good faith
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that a Transfer or other event has taken place that results in a violation of
Section 4.3.7 or that a Person intends to Acquire or has attempted to Acquire
Beneficial or Constructive Ownership of any shares of Series A Preferred Stock
in violation of Section 4.3.7 (whether or not such violation is intended), the
Board of Directors or a committee thereof shall take such action as it deems
advisable, subject to Section 5.2 hereof, to refuse to give effect to or to
prevent such Transfer or other event, including, but not limited to, causing the
Corporation to redeem shares, refusing to give effect to such Transfer on the
books of the Corporation or instituting proceedings to enjoin such Transfer;
provided, however, that any Transfers or attempted Transfers or, in the case of
an event other than a Transfer, Beneficial or Constructive Ownership, in
violation of Section 4.3.7 shall automatically result in the transfer to the
Trust described above (or the automatic repurchase) and, where applicable, such
Transfer (or other event) shall be void ab initio as provided above irrespective
of any action (or non-action) by the Board of Directors or a committee thereof.
Section 4.3.9 Notice of Restricted Transfer. Any Person who
Acquires or attempts or intends to Acquire shares of Series A Preferred Stock in
violation of Section 4.3.7 or any Person who is a transferee in a Transfer or is
otherwise affected by an event other than a Transfer that results in a violation
of Section 4.3.7 shall immediately give written notice to the Corporation of
such Acquisition, Transfer or other event and shall provide to the Corporation
such other information as the Corporation may request in order to determine the
effect, if any, of such Acquisition, Transfer or attempted, intended or
purported Acquisition, Transfer or other event on the Corporation's status as a
REIT.
Section 4.3.10 Owners Required To Provide Information.
From the Initial Issuance Date and prior to the Restriction Termination Date:
(a) every owner of more than five percent (5%) (or such lower
percentage as required by the Code or the Treasury Regulations promulgated
thereunder) of the outstanding shares of Series A Preferred Stock, within 30
days after December 31 of each year, shall give written notice to the
Corporation stating the name and address of such owner, the number of shares of
Series A Preferred Stock and other shares of the Capital Stock Beneficially
Owned, and a description of the manner in which such shares are held. Each such
owner shall provide to the Corporation such additional information as the
Corporation may request in order to determine the effect, if any, of such
Beneficial Ownership on the Corporation's status as a REIT and to ensure
compliance with the Series A Preferred Stock Ownership Limit; and
(b) each Person who is a Beneficial or Constructive Owner of
Series A Preferred Stock and each Person (including the stockholder of record)
who is holding Series A Preferred Stock for a Beneficial or Constructive Owner
shall provide to the Corporation such information as the Corporation may
request, in good faith, in order to determine the
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Corporation's status as a REIT and to comply with requirements of any taxing
authority or governmental authority or to determine such compliance.
Section 4.3.11 Remedies Not Limited. Subject to Section 5.1,
nothing contained in this Section 4.3 shall limit the authority of the Board of
Directors of the Corporation to take such other action as it deems necessary or
advisable to protect the Corporation and the interests of its stockholders in
preserving the Corporation's status as a REIT.
Section 4.3.12 Ambiguity. In the case of an ambiguity in the
application of any of the provisions of this Section 4.3, Section 4.4, or any
definition contained in Section 4.2, the Board of Directors of the Corporation
shall have the power to determine the application of the provisions of this
Section 4.3 or Section 4.4 with respect to any situation based on the facts
known to it. In the event Section 4.3 or 4.4 requires an action by the Board of
Directors and this Charter fails to provide specific guidance with respect to
such action, the Board of Directors shall have the power to determine the action
to be taken so long as such action is not contrary to the provisions of Sections
4.2, 4.3 or 4.4. Absent a decision to the contrary by the Board of Directors
(which the Board may make in its sole and absolute discretion), the shares to be
affected by the remedies set forth in Section 4.3.7(b), (c), and (d) shall be as
follows: (1) if a Person would have (but for the remedies set forth in Section
4.3.7(b), (c), and (d) as applicable) Acquired shares of Series A Preferred
Stock in violation of Section 4.3.7(a), such remedies (as applicable) shall
apply first to the shares which, but for such remedies, would have been Acquired
and actually owned by such Person, second to shares which, but for such
remedies, would have been Acquired by such Person and which would have been
Beneficially Owned or Constructively Owned (but not actually owned) by such
Person, pro rata among the Persons who actually own such shares based upon the
relative value of the shares held by each such Person; and (2) if a Person is in
violation of Section 4.3.7(a) as a result of an event other than an Acquisition
of shares of Series A Preferred Stock by such Person, the remedies set forth in
Section 4.3.7(b), (c), or (d) (as applicable) shall apply first to shares which
are actually owned by such Person and second to shares which are Beneficially or
Constructively Owned (but not actually owned) by such Person, pro rata among the
Persons who actually own such shares based upon the relative value of the shares
held by each such Person.
Section 4.3.13 Exceptions.
(a) Subject to Section 4.3.7(a)(iii), the Board of Directors
of the Corporation, in its sole discretion, may exempt a Person from the Series
A Preferred Stock Ownership Limit or the Aggregate Stock Ownership Limit, as the
case may be, if: (A) such Person is not (i) an individual for purposes of
Section 542(a)(2) of the Code as modified by Section 856(h) of the Code, or (ii)
treated as the owner of such stock for purposes of Section 542(a)(2) of the Code
as modified by Section 856(h) of the Code, and the Board of Directors
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obtains such representations and undertakings from such Person as are reasonably
necessary to ascertain that no individual's Beneficial or Constructive Ownership
of such shares of Series A Preferred Stock will violate Section 4.3.7; (B) such
Person does not and represents that it will not own, actually or Constructively,
an interest in a tenant of the Corporation (or a tenant of any entity owned or
controlled by the Corporation) that would cause the Corporation to own, actually
or Constructively, more than a 9.9% interest (as set forth in Section
856(d)(2)(B) of the Code) in such tenant and the Board of Directors obtains such
representations and undertakings from such Person as are reasonably necessary to
ascertain this fact; and (C) such Person agrees that any violation or attempted
violation of such representations or undertakings (or other action which is
contrary to the restrictions contained in Sections 4.3.7 through 4.3.12) will
result in such shares of Series A Preferred Stock being automatically
transferred to a Trust or automatically repurchased in accordance with Section
4.3.7. Solely for purposes of clause (B) above, a tenant from whom the
Corporation (or an entity owned or controlled by the Corporation) derives (and
is expected to continue to derive) a sufficiently small amount of revenue such
that, in the opinion of the Board of Directors of the Corporation, rent from
such tenant would not adversely affect the Corporation's ability to qualify as a
REIT, shall not be treated as a tenant of the Corporation.
(b) Prior to granting any exception pursuant to Section
4.3.13(a), the Board of Directors of the Corporation may require a ruling from
the Internal Revenue Service, or an opinion of counsel, in either case in form
and substance satisfactory to the Board of Directors in it sole discretion, as
it may deem necessary or advisable in order to determine or ensure the
Corporation's status as a REIT. Notwithstanding the receipt of any ruling or
opinion, the Board of Directors may impose such conditions or restrictions as it
deems appropriate in connection with granting such exception.
(c) Subject to Section 4.3.7(a)(iii), an underwriter which
participates in a public offering or a private placement of Capital Stock (or
securities convertible into or exchangeable for Capital Stock) may Acquire or
Beneficially Own or Constructively Own shares of Capital Stock (or securities
convertible into or exchangeable for Capital Stock) in excess of the Series A
Preferred Stock Ownership Limit or the Aggregate Stock Ownership Limit, but only
to the extent necessary to facilitate such public offering or private placement.
Section 4.3.14 Legend. Each certificate for shares of Series
A Preferred Stock shall bear the following legend:
"The shares represented by this certificate are subject to restrictions
on Beneficial and Constructive Ownership and Transfer for the purpose
of the Corporation's maintenance of its status as a Real Estate
Investment Trust under the Internal Revenue Code of 1986, as amended
(the "Code"). Subject to certain further restrictions and except as
expressly provided in the Corporation's Charter, (i) no Person may
Beneficially or Constructively Acquire shares of the
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Corporation's Series A Preferred Stock in excess of 9.8% of the
outstanding shares of Series A Preferred Stock of the Corporation; (ii)
no Person (other than a Conversion Holder with respect to such holder's
conversion rights) may Beneficially or Constructively Own shares of the
Corporation's Common Stock in excess of 9.8% of the outstanding shares
of Common Stock of the Corporation; (iii) no Person may Beneficially or
Constructively Own shares of Capital Stock of the Corporation which has
an aggregate value in excess of 9.8% of the value of the total
outstanding shares of Capital Stock of the Corporation; (iv) no Person
may Beneficially or Constructively Own Series A Preferred Stock or
Common Stock that would result in the Corporation being "closely held"
under Section 856(h) of the Code or otherwise cause the Corporation to
fail to qualify as a REIT; and (v) no Person may Transfer or Acquire
shares of Series A Preferred Stock if such Transfer or Acquisition
would result in the Capital Stock of the Corporation being owned by
fewer than 100 Persons. Any Person who Beneficially or Constructively
Owns or attempts to Beneficially or Constructively Own shares of Series
A Preferred Stock or Common Stock which causes or will cause a Person
to Beneficially or Constructively Own shares of Series A Preferred
Stock or Common Stock in excess of the above limitations must
immediately notify the Corporation. If any of the restrictions on
transfer or ownership are violated, the shares of Series A Preferred
Stock represented hereby will be automatically transferred to a Trustee
of a Trust for the benefit of one or more Charitable Beneficiaries, or
in certain circumstances such shares will be automatically repurchased
by the Corporation. In addition, the Corporation may redeem shares upon
the terms and conditions specified by the Board of Directors in its
sole discretion if the Board of Directors determines that ownership or
a Transfer or other event may violate the restrictions described above.
Furthermore, upon the occurrence of certain events, attempted Transfers
in violation of the restrictions described above may be void ab initio.
All capitalized terms in this legend have the meanings defined in the
charter of the Corporation, as the same may be amended from time to
time, a copy of which, including the restrictions on transfer and
ownership, will be furnished to each holder of Series A Preferred Stock
on request and without charge."
4.4 TRANSFER OF SERIES A PREFERRED STOCK IN TRUST
Section 4.4.1 Ownership in Trust. Upon any purported Transfer,
Acquisition, or other event described in 4.3.7(b), (c) or (d) that is to result
in a transfer of shares of Series A Preferred Stock to a Trust, such shares of
Series A Preferred Stock shall be deemed to have been transferred to the Trustee
in his capacity as trustee of a Trust for the exclusive benefit of one or more
Charitable Beneficiaries. Such transfer to the Trustee shall be deemed to be
effective as of the close of business on the Business Day prior to the purported
Transfer,
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Acquisition, or other event that results in the transfer to the Trust pursuant
to Section 4.3.7. The Trustee shall be appointed by the Corporation and shall be
a Person unaffiliated with the Corporation, any Purported Beneficial Transferee,
or any Purported Record Transferee. Each Charitable Beneficiary shall be
designated by the Corporation as provided in Section 4.4.6.
Section 4.4.2 Status of Shares Held by the Trustee. Shares of
Series A Preferred Stock held by the Trustee shall be issued and outstanding
shares of Capital Stock. The Purported Beneficial Transferee or Purported Record
Transferee shall have no rights in the shares held by the Trustee. The Purported
Beneficial Transferee or Purported Record Transferee shall not benefit
economically from ownership of any shares held in trust by the Trustee, shall
have no rights to dividends and shall not possess any rights to vote or other
rights attributable to the shares held in the Trust.
Section 4.4.3 Dividend and Voting Rights. The Trustee shall
have all voting rights and rights to dividends with respect to shares of Series
A Preferred Stock held in the Trust, which rights shall be exercised for the
exclusive benefit of the Charitable Beneficiary. Any dividend or distribution
paid prior to the discovery by the Corporation that the shares of Series A
Preferred Stock have been transferred to the Trustee shall be paid with respect
to such shares of Series A Preferred Stock to the Trustee upon demand, and any
dividend or distribution declared but unpaid shall be paid when due to the
Trustee. Any dividends or distributions so paid over to the Trustee shall be
held in trust for the Charitable Beneficiary. The Purported Record Transferee
shall have no voting rights with respect to shares held in the Trust and any
vote cast by a Purported Record Transferee prior to the discovery by the
Corporation that the shares of Series A Preferred Stock have been transferred to
the Trustee will be rescinded as void and shall be recast in accordance with the
desires of the Trustee acting for the benefit of the Charitable Beneficiary.
Section 4.4.4 Sale of Shares by Trustee. Within 20 days of
receiving notice from the Corporation that shares of Series A Preferred Stock
have been transferred to the Trust, the Trustee of the Trust shall sell the
shares held in the Trust to a person, designated by the Trustee, whose ownership
of the shares will not violate the ownership limitations set forth in Section
4.3.7(a). Upon such sale, the interest of the Charitable Beneficiary in the
shares sold shall terminate and the Trustee shall distribute the net proceeds of
the sale to the Purported Record Transferee and to the Charitable Beneficiary as
provided in this Section 4.4.4. The Purported Record Transferee shall receive
the lesser of (1) the price paid by the Purported Record Transferee for the
shares or, if the Purported Record Transferee did not give value for the shares
(through a gift, devise or other transaction), the Market Price of the shares on
the day of the event causing the shares to be held in the Trust and (2) the
price per share received by the Trustee from the sale or other disposition of
the shares held in the Trust. Any net sales proceeds in excess of the amount
payable to the Purported Record Transferee shall be immediately paid to the
Charitable Beneficiary. If, prior to the discovery by the Corporation that
shares of Series A Preferred Stock have been transferred to the Trustee, such
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shares are sold by a Purported Record Transferee then (i) such shares shall be
deemed to have been sold on behalf of the Trust and (ii) to the extent that the
Purported Record Transferee received an amount for such shares that exceeds the
amount that such Purported Record Transferee was entitled to receive pursuant to
this Section 4.4.4, such excess shall be paid to the Trustee upon demand.
Section 4.4.5 Purchase Right in Stock Transferred to the
Trustee. Shares of Series A Preferred Stock transferred to the Trustee shall be
deemed to have been offered for sale to the Corporation, or its designee, at a
price per share equal to the lesser of (i) the price per share in the
transaction that resulted in such transfer to the Trust (or, in the case of a
devise or gift, the Market Price at the time of such devise or gift) and (ii)
the Market Price on the date the Corporation, or its designee, accepts such
offer. The Corporation shall have the right to accept such offer until the
Trustee has sold the shares held in the Trust pursuant to Section 4.4.4. Upon
such a sale to the Corporation, the interest of the Charitable Beneficiary in
the shares sold shall terminate and the Trustee shall distribute the net
proceeds of the sale to the Purported Record Transferee.
Section 4.4.6 Designation of Charitable Beneficiaries. By
written notice to the Trustee, the Corporation shall designate one or more
nonprofit organizations to be the Charitable Beneficiary of the interest in the
Trust such that (i) the shares of Series A Preferred Stock held in the Trust
would not violate the restrictions set forth in Section 4.3.7(a) in the hands of
such Charitable Beneficiary and (ii) each Charitable Beneficiary is an
organization described in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the
Code.
4.5 COMMON STOCK
Section 4.5.1 Dividends. Subject to the preferential rights of
any class or series within any such class of Capital Stock ranking senior as to
dividends to the Common Stock, including the Series A Preferred Stock, and to
the provisions of Section 4.6 of this Charter, each record holder of shares of
Common Stock shall be entitled to receive, out of the assets of the Corporation
which are legally available therefor, such dividends as from time to time may be
declared by the Board of Directors of the Corporation. All such holders shall
share ratably, in accordance with the number of shares of Common Stock held by
each such holder, in all dividends paid on the Common Stock.
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Section 4.5.2 Distribution Upon Liquidation, Dissolution or
Winding Up. In the event of any dissolution, liquidation or winding up of the
affairs of the Corporation, after payment or provision for payment of the debts
and other liabilities of the Corporation and subject to the preferential rights
of any class of Capital Stock ranking senior to the Common Stock as to
liquidation preferences and to the provisions of Articles IV and V of this
Charter (including Series A Preferred Stock and all classes or series of
Preferred Stock), the holders of shares of Common Stock shall be entitled to
receive, ratably with each other holder of shares of Common Stock, a portion of
the assets of the Corporation available for distribution to the holders of its
Common Stock calculated by dividing the number of shares of Common Stock held by
such holder by the total number of shares of Common Stock then outstanding.
Section 4.5.3 Voting Rights. Except as otherwise provided in
this Charter or required by applicable law, each holder of shares of Common
Stock shall be entitled to notice of, and the right to vote at, any meeting of
the stockholders of Common Stock and each outstanding share of Common Stock
shall be entitled to one vote on each matter submitted to a vote at a meeting of
stockholders. The holders of record of shares of Common Stock shall be entitled
to vote, together with any other class or series of Capital Stock entitled to
vote then outstanding, on any resolution presented by the Board of Directors of
the Corporation pursuant to Section 5.1.
Section 4.5.4 Exclusion of Other Rights. Except as may
otherwise be required by law, the shares of Common Stock shall not have any
preferences or relative, participating, optional or other special rights, other
than those specifically set forth in this Charter.
Section 4.5.5 Common Stock Ownership Limitations.
(a) During the period commencing on the Initial Issuance
Date and prior to the Restriction Termination Date:
(i) except as provided in Section 4.5.11, no Person,
other than a Conversion Holder, shall Acquire or Beneficially or
Constructively Own any shares of Common Stock if, as the result of such
Acquisition or Beneficial or Constructive Ownership, such Person shall
Beneficially or Constructively Own shares of Common Stock in excess of
the Common Stock Ownership Limit, provided, however, a Conversion
Holder shall only be permitted to Acquire or Beneficially Own or
Constructively Own shares of Common Stock in excess of the limitation
provided herein to the extent that such excess Beneficial or
Constructive Ownership was caused by a conversion of (or the right to
convert) Series A Preferred Stock into Common Stock and, provided
further, solely for purposes of facilitating the exercise of stock
options pursuant to the Stock Option Plan, and subject to Sections
4.5.5(a)(ii) and 4.5.5(a)(iii) below, the Operating Partnership may
Constructively Own Common Stock in excess of the Common Stock Ownership
Limit;
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(ii) except as provided in Sections 4.5.11 and
4.3.13, no Person, including but not limited to a Conversion Holder,
shall Acquire or Beneficially or Constructively Own shares of Series A
Preferred Stock or Common Stock in excess of the Aggregate Stock
Ownership Limit; however, solely for purposes of facilitating the
exercise of stock options pursuant to the Stock Option Plan, the
Operating Partnership may Constructively Own Common Stock to the extent
that as a result of such Constructive Ownership, the value of the
shares of Capital Stock Constructively Owned by the Operating
Partnership, in the aggregate, does not exceed 9.9% of the aggregate
value of the outstanding shares of Capital Stock; and
(iii) no Person shall Acquire or Beneficially or
Constructively Own shares of Capital Stock to the extent that such
Acquisition or Beneficial or Constructive Ownership of Capital Stock
would result in the Corporation being "closely held" within the meaning
of Section 856(h) of the Code, or otherwise failing to qualify as a
REIT (including, but not limited to, an Acquisition or Beneficial or
Constructive Ownership that would result in the Corporation owning
(actually or Constructively) an interest in a tenant that is described
in Section 856(d)(2)(B) of the Code if the income derived by the
Corporation from such tenant would cause the Corporation to fail to
satisfy any of the gross income requirements of Section 856(c) of the
Code).
(b) If, during the period commencing on the Initial Issuance
Date and prior to the Restriction Termination Date, any Transfer or Acquisition
of shares of Common Stock (other than a Transfer or Acquisition to which Section
4.5.5(c) applies) (whether or not such Transfer or Acquisition is the result of
a transaction entered into through the facilities of the NYSE or any other
national securities exchange or automated inter-dealer quotation system) occurs
which, if effective, would result in any Person Acquiring shares of Common Stock
in violation of Section 4.5.5(a), (i) then that number of shares of the Common
Stock being Transferred or Acquired that otherwise would cause such Person to
violate Section 4.5.5(a) (rounded up to the nearest whole share) shall be
automatically transferred to a Trust for the benefit of a Charitable
Beneficiary, as described in Section 4.6, effective as of the close of business
on the Business Day prior to the date of such Transfer or Acquisition, and such
Person shall acquire no rights in such shares or (ii) if the transfer to the
Trust described in clause (i) of this sentence would not be effective for any
reason to prevent any Person from Acquiring or Transferring Common Stock in
violation of Section 4.5.5(a), then the Transfer or Acquisition of that number
of shares of Common Stock that otherwise would cause any Person to violate
Section 4.5.5(a) shall be void ab initio, and the intended transferee shall
acquire no rights in such shares of Common Stock.
(c) If, during the period commencing on the Initial Issuance
Date and prior to the Restriction Termination Date, a change in the relationship
between two or more Persons ("Common Stock Affected Persons") results in any of
such Common Stock Affected Persons Beneficially or Constructively Owning shares
of Common Stock in violation of Section
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4.5.5(a) because of the application of Section 318(a) of the Code (as modified
by Section 856(d)(5) of the Code) or Section 544 of the Code (as modified by
Section 856(h)(1)(B) of the Code) (a "Common Stock Constructive Ownership
Event"), then that number of shares of Common Stock Beneficially or
Constructively Owned by the Common Stock Affected Persons (rounded up to the
nearest whole share) that otherwise would violate Section 4.5.5(a) shall be
automatically transferred to a Trust for the benefit of a Charitable
Beneficiary, as described in Section 4.6, effective as of the close of business
on the Business Day prior to such Common Stock Constructive Ownership Event, and
such Common Stock Affected Person or Persons shall acquire no rights in such
shares.
(d) If during the period commencing on the Initial Issuance
Date and prior to the Restriction Termination Date, a Special Triggering Event
(if effective) or other event or occurrence (if effective), other than a
Transfer or Acquisition described in Section 4.5.5(b) or a Common Stock
Constructive Ownership Event described in Section 4.5.5(c), would result in any
violation of Section 4.5.5(a), then: (i) the number of shares of Common Stock
(rounded up to the nearest whole share) that would (but for this Section
4.5.5(d)) cause any Person to Beneficially or Constructively Own Common Stock in
violation of Section 4.5.5(a) shall be automatically repurchased by the
Corporation from the actual owner of such shares of Common Stock, effective as
of the close of business on the Business Day prior to the date of such Special
Triggering Event or other event or occurrence; or (ii) if the automatic
repurchase described in clause (i) of this sentence would not be effective for
any reason to prevent any Person from Beneficially or Constructively Owning
Common Stock in violation of Section 4.5.5(a), then that number of shares of
Common Stock (rounded up to the nearest whole share) that otherwise would cause
any Person to violate Section 4.5.5(a) shall be automatically transferred to a
Trust for the benefit of a Charitable Beneficiary, as described in Section 4.6,
effective as of the close of business on the Business Day prior to the date of
such Special Triggering Event or other event or occurrence, and the actual owner
shall retain no rights in such shares of Common Stock; or (iii) if the transfer
to the Trust described in clause (ii) of this sentence would not be effective
for any reason to prevent any Person from Beneficially or Constructively Owning
Common Stock in violation of Section 4.5.5(a), then the Special Triggering Event
or other event or occurrence that would otherwise cause such Person to violate
Section 4.5.5(a) shall be void ab initio. The repurchase price of each share of
Common Stock automatically repurchased pursuant to this Section 4.5.5(d) shall
be a price per share equal to the Market Price on the date of the Special
Triggering Event or other event or occurrence that resulted in the repurchase.
Dividends which were accrued but unpaid with respect to the repurchased shares
as of the date of the Special Triggering Event or other event or occurrence that
resulted in the repurchase shall be paid. Any dividend or other distribution
paid after the Special Triggering Event or other event or occurrence that
resulted in the repurchase, but prior to the discovery by the Corporation that
shares of Common Stock have been automatically repurchased by the Corporation,
shall be paid to the Corporation upon demand.
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(e) Notwithstanding any other provisions contained herein,
during the period commencing on the Initial Issuance Date and prior to the
Restriction Termination Date, any Transfer or Acquisition of shares of Common
Stock (whether or not such Transfer or Acquisition is the result of a
transaction entered into through the facilities of the NYSE or any other
national securities exchange or automated inter-dealer quotation system) that,
if effective, would result in the Capital Stock being beneficially owned by less
than 100 Persons (determined without reference to any rules of attribution)
shall be void ab initio, and the intended transferee shall acquire no rights in
such shares of Common Stock.
Section 4.5.6 Remedies for Breach. If the Board of Directors
of the Corporation or any duly authorized committee thereof shall at any time
determine in good faith that a Transfer or other event has taken place that
results in a violation of Section 4.5.5 or that a Person intends to Acquire or
has attempted to Acquire Beneficial or Constructive Ownership of any shares of
Common Stock in violation of Section 4.5.5 (whether or not such violation is
intended), the Board of Directors or a committee thereof shall take such action
as it deems advisable, subject to Section 5.2 hereof, to refuse to give effect
to or to prevent such Transfer or other event, including, but not limited to,
causing the Corporation to redeem shares, refusing to give effect to such
Transfer on the books of the Corporation or instituting proceedings to enjoin
such Transfer; provided, however, that any Transfers or attempted Transfers or,
in the case of an event other than a Transfer, Beneficial or Constructive
Ownership in violation of Section 4.5.5 shall automatically result in the
transfer to the Trust described above (or the automatic repurchase), and, where
applicable, such Transfer (or other event) shall be void ab initio as provided
above irrespective of any action (or non-action) by the Board of Directors or a
committee thereof.
Section 4.5.7 Notice of Restricted Transfer. Any Person who
Acquires or attempts or intends to Acquire shares of Common Stock in violation
of Section 4.5.5 or any Person who is a transferee in a Transfer or is otherwise
affected by an event other than a Transfer that results in a violation of
Section 4.5.5 shall immediately give written notice to the Corporation of such
Acquisition, Transfer or other event and shall provide to the Corporation such
other information as the Corporation may request in order to determine the
effect, if any, of such Acquisition, Transfer or attempted, intended or
purported Acquisition, Transfer or other event on the Corporation's status as a
REIT.
Section 4.5.8 Owners Required To Provide Information. From
the Initial Issuance Date and prior to the Restriction Termination Date:
(a) every owner of more than five percent (5%) (or such lower
percentage as required by the Code or the Treasury Regulations promulgated
thereunder) of the outstanding shares of Common Stock shall, within 30 days
after December 31 of each year, give written notice to the Corporation stating
the name and address of such owner, the number of shares of Common Stock and
other shares of the Common Stock Beneficially or
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Constructively Owned, and a description of the manner in which such shares are
held. Each such owner shall provide to the Corporation such additional
information as the Corporation may request in order to determine the effect, if
any, of such Beneficial or Constructive Ownership on the Corporation's status as
a REIT and to ensure compliance with the Common Stock Ownership Limit; and
(b) each Person who is a Beneficial or Constructive Owner of
Common Stock and each Person (including the stockholder of record) who is
holding Common Stock for a Beneficial or Constructive Owner shall provide to the
Corporation such information as the Corporation may request, in good faith, in
order to determine the Corporation's status as a REIT and to comply with
requirements of any taxing authority or governmental authority to determine such
compliance.
Section 4.5.9 Remedies Not Limited. Subject to Section 5.1,
nothing contained in this Section 4.5 shall limit the authority of the Board of
Directors of the Corporation to take such other action as it deems necessary or
advisable to protect the Corporation and the interests of its stockholders in
preserving the Corporation's status as a REIT.
Section 4.5.10 Ambiguity. In the case of an ambiguity in the
application of any of the provisions of this Section 4.5, Section 4.6, or any
definition contained in Section 4.2, the Board of Directors of the Corporation
shall have the power to determine the application of the provisions of this
Section 4.5 or Section 4.6 with respect to any situation based on the facts
known to it. In the event Section 4.5 or 4.6 requires an action by the Board of
Directors of the Corporation, and the Charter fails to provide specific guidance
with respect to such action, the Board of Directors of the Corporation shall
have the power to determine the action to be taken so long as such action is not
contrary to the provisions of Sections 4.2, 4.5 or 4.6. Absent a decision to the
contrary by the Board of Directors (which the Board may make in its sole and
absolute discretion), the shares to be affected by the remedies set forth in
Section 4.5.5(b), (c), and (d) shall be as follows: (1) if a Person would have
(but for the remedies set forth in Section 4.5.5(b), (c), and (d) as applicable)
Acquired shares of Common Stock in violation of Section 4.5.5(a), such remedies
(as applicable) shall apply first to the shares which, but for such remedies,
would have been Acquired and actually owned by such Person, second to shares
which, but for such remedies, would have been Acquired by such Person and which
would have been Beneficially Owned or Constructively Owned (but not actually
owned) by such Person, pro rata among the Persons who actually own such shares
based upon the relative value of the shares held by each such Person; and (2) if
a Person is in violation of Section 4.5.5(a) as a result of an event other than
an Acquisition of shares of Common Stock by such Person, the remedies set forth
in Section 4.5.5(b), (c), or (d) (as applicable) shall apply first to shares
which are actually owned by such Person and second to shares which are
Beneficially or Constructively Owned (but not actually owned) by such Person,
pro rata among the Persons who actually own such shares based upon the relative
value of the shares held by each such Person.
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Section 4.5.11 Exceptions.
(a) Subject to Section 4.5.5(a)(iii), the Board of Directors
of the Corporation, in its sole discretion, may exempt a Person from the Common
Stock Ownership Limit or the Aggregate Stock Ownership Limit, as the case may
be, if: (A) such Person is not (i) an individual for purposes of Section
542(a)(2) of the Code as modified by Section 856(h) of the Code, or (ii) treated
as the owner of such stock for purposes of Section 542(a)(2) of the Code as
modified by Section 856(h) of the Code, and the Board of Directors obtains such
representations and undertakings from such Person as are reasonably necessary to
ascertain that no individual's Beneficial or Constructive Ownership of such
shares of Common Stock will violate Section 4.5.5; (B) such Person does not and
represents that it will not own, actually or Constructively, an interest in a
tenant of the Corporation (or a tenant of an entity owned or controlled by the
Corporation) that would cause the Corporation to own, actually or
Constructively, more than a 9.8% interest (as set forth in Section 856(d)(2)(B)
of the Code) in such tenant and the Board of Directors obtains such
representations and undertakings from such Person as are reasonably necessary to
ascertain this fact; and (C) such Person agrees that any violation or attempted
violation of such representations or undertakings (or other action which is
contrary to the restrictions contained in Sections 4.5.5 through 4.5.10) will
result in such Common Stock being automatically transferred to a Trust or
automatically repurchased in accordance with Section 4.5.5. Solely for purposes
of clause (B) above, a tenant from whom the Corporation (or an entity owned or
controlled by the Corporation) derives (and is expected to continue to derive) a
sufficiently small amount of revenue such that, in the opinion of the Board of
Directors of the Corporation, rent from such tenant would not adversely affect
the Corporation's ability to qualify as a REIT, shall not be treated as a tenant
of the Corporation.
(b) Prior to granting any exception pursuant to Section
4.5.11(a), the Board of Directors of the Corporation may require a ruling from
the Internal Revenue Service, or an opinion of counsel, in either case in form
and substance satisfactory to the Board of Directors in it sole discretion, as
it may deem necessary or advisable in order to determine or ensure the
Corporation's status as a REIT. Notwithstanding the receipt of any ruling or
opinion, the Board of Directors may impose such conditions or restrictions as it
deems appropriate in connection with granting such exception.
(c) Subject to Section 4.5.5(a)(iii), an underwriter which
participates in a public offering or a private placement of Capital Stock (or
securities convertible into or exchangeable for Capital Stock) may Acquire or
Beneficially Own or Constructively Own shares of Capital Stock (or securities
convertible into or exchangeable for Capital Stock) in excess of the Common
Stock Ownership Limit or the Aggregate Stock Ownership Limit, but only to the
extent necessary to facilitate such public offering or private placement.
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Section 4.5.12 Legend. Each certificate for shares of Common
Stock shall bear the following legend:
"The shares represented by this certificate are subject to restrictions
on Beneficial and Constructive Ownership and Transfer for the purpose
of the Corporation's maintenance of its status as a Real Estate
Investment Trust under the Internal Revenue Code of 1986, as amended
(the "Code"). Subject to certain further restrictions and except as
expressly provided in the Corporation's Charter, (i) no Person (other
than a Conversion Holder with respect to such holder's conversion
rights) may Beneficially or Constructively Acquire shares of the
Corporation's Common Stock in excess of 9.8% of the outstanding shares
of Common Stock of the Corporation; (ii) no Person may Beneficially or
Constructively Own shares of Capital Stock of the Company which has an
aggregate value in excess of 9.8% of the value of the total outstanding
shares of Capital Stock of the Corporation; (iii) no Person may
Beneficially or Constructively Own Common Stock that would result in
the Corporation being "closely held" under Section 856(h) of the Code
or otherwise cause the Corporation to fail to qualify as a REIT; and
(iv) no Person may Transfer or Acquire Shares of Common Stock if such
Transfer or Acquisition would result in the Corporation being owned by
fewer than 100 Persons. Any Person who Beneficially or Constructively
Owns or attempts to Beneficially or Constructively Own shares of Common
Stock which causes or will cause a Person to Beneficially or
Constructively Own shares of Common Stock in excess of the above
limitations must immediately notify the Corporation. If any of the
restrictions on transfer or ownership are violated, the shares of
Common Stock represented hereby will be automatically transferred to a
Trustee of a Trust for the benefit of one or more Charitable
Beneficiaries, or in certain circumstances such shares will
automatically repurchased by the Corporation. In addition, the
Corporation may redeem shares upon the terms and conditions specified
by the Board of Directors in its sole discretion if the Board of
Directors determines that ownership or a Transfer or other event may
violate the restrictions described above. Furthermore, upon the
occurrence of certain events, attempted Transfers in violation of the
restrictions described above may be void ab initio. All capitalized
terms in this legend have the meanings defined in the charter of the
Corporation, as the same may be amended from time to time, a copy of
which, including the restrictions on transfer and ownership, will be
furnished to each holder of Common Stock on request and without
charge."
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4.6 TRANSFERS OF COMMON STOCK IN TRUST
Section 4.6.1 Ownership in Trust. Upon any purported Transfer,
Acquisition, or other event described in Section 4.5.5(b), (c), or (d) that is
to result in a transfer of shares of Common Stock to a Trust, such shares of
Common Stock shall be deemed to have been transferred to the Trustee in his
capacity as trustee of a Trust for the exclusive benefit of one or more
Charitable Beneficiaries. Such transfer to the Trustee shall be deemed to be
effective as of the close of business on the Business Day prior to the purported
Transfer, Acquisition, or other event that results in a transfer to the Trust
pursuant to Section 4.5.5. The Trustee shall be appointed by the Corporation and
shall be a Person unaffiliated with the Corporation, any Purported Beneficial
Transferee, or any Purported Record Transferee. Each Charitable Beneficiary
shall be designated by the Corporation as provided in Section 4.6.6.
Section 4.6.2 Status of Shares Held by the Trustee. Shares of
Common Stock held by the Trustee shall be issued and outstanding shares of
Capital Stock of the Corporation. The Purported Beneficial Transferee or
Purported Record Transferee shall have no rights in the shares held by the
Trustee. The Purported Beneficial Transferee or Purported Record Transferee
shall not benefit economically from ownership of any shares held in trust by the
Trustee, shall have no rights to dividends and shall not possess any rights to
vote or other rights attributable to the shares held in the Trust.
Section 4.6.3 Dividend and Voting Rights. The Trustee shall
have all voting rights and rights to dividends with respect to shares of Common
Stock held in the Trust, which rights shall be exercised for the exclusive
benefit of the Charitable Beneficiary. Any dividend or distribution paid prior
to the discovery by the Corporation that the shares of Common Stock have been
transferred to the Trustee shall be paid to the Trustee upon demand, and any
dividend or distribution declared but unpaid shall be paid when due to the
Trustee with respect to such shares of Common Stock. Any dividends or
distributions so paid over to the Trustee shall be held in trust for the
Charitable Beneficiary. The Purported Record Transferee shall have no voting
rights with respect to shares held in the Trust and any vote cast by a Purported
Record Transferee prior to the discovery by the Corporation that the shares of
Common Stock have been transferred to the Trustee will be rescinded as void and
shall be recast in accordance with the desires of the Trustee acting for the
benefit of the Charitable Beneficiary.
Section 4.6.4 Sale of Shares by Trustee. Within 20 days of
receiving notice from the Corporation that shares of Common Stock have been
transferred to the Trust, the Trustee of the Trust shall sell the shares held in
the Trust to a person, designated by the Trustee, whose ownership of the shares
will not violate the ownership limitations set forth in Section 4.5.5(a). Upon
such sale, the interest of the Charitable Beneficiary in the shares sold shall
terminate and the Trustee shall distribute the net proceeds of the sale to the
Purported Record Transferee and to the Charitable Beneficiary as provided in
this Section 4.6.4. The Purported Record Transferee shall receive the lesser of
(1) the price paid by the Purported
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Record Transferee for the shares or, if the Purported Record Transferee did not
give value for the shares (through a gift, devise or other transaction), the
Market Price of the shares on the day of the event causing the shares to be held
in the Trust and (2) the price per share received by the Trustee from the sale
or other disposition of the shares held in the Trust. Any net sales proceeds in
excess of the amount payable to the Purported Record Transferee shall be
immediately paid to the Charitable Beneficiary. If, prior to the discovery by
the Corporation that shares of Common Stock have been transferred to the
Trustee, such shares are sold by a Purported Record Transferee then (i) such
shares shall be deemed to have been sold on behalf of the Trust and (ii) to the
extent that the Purported Record Transferee received an amount for such shares
that exceeds the amount that such Purported Record Transferee was entitled to
receive pursuant to this Section 4.6.4, such excess shall be paid to the Trustee
upon demand.
Section 4.6.5 Purchase Right in Stock Transferred to the
Trustee. Shares of Common Stock transferred to the Trustee shall be deemed to
have been offered for sale to the Corporation, or its designee, at a price per
share equal to the lesser of (i) the price per share in the transaction that
resulted in such transfer to the Trust (or, in the case of a devise or gift, the
Market Price at the time of such devise or gift) and (ii) the Market Price on
the date the Corporation, or its designee, accepts such offer. The Corporation
shall have the right to accept such offer until the Trustee has sold the shares
held in the Trust pursuant to Section 4.6.4. Upon such a sale to the
Corporation, the interest of the Charitable Beneficiary in the shares sold shall
terminate and the Trustee shall distribute the net proceeds of the sale to the
Purported Record Transferee.
Section 4.6.6 Designation of Charitable Beneficiaries. By
written notice to the Trustee, the Corporation shall designate one or more
nonprofit organizations to be the Charitable Beneficiary of the interest in the
Trust such that (i) the shares of Common Stock held in the Trust would not
violate the restrictions set forth in Section 4.5.5(a) in the hands of such
Charitable Beneficiary and (ii) each Charitable Beneficiary is an organization
described in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code.
ARTICLE V
General REIT Provisions
Section 5.1 Termination of REIT Status. The Board of Directors
of the Corporation shall take no action to terminate the Corporation's status as
a REIT until such time as (i) the Board of Directors adopts a resolution
recommending that the Corporation terminate its status as a REIT, (ii) the Board
of Directors presents the resolution for consideration at an annual or special
meeting of the stockholders and (iii) such resolution is approved by the vote of
holders of a majority of the shares entitled to be cast on the matter.
Section 5.2 Exchange or Market Transactions. Nothing in
Article IV or this Article V shall preclude the settlement of any transaction
entered into through the facilities of
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any national securities exchange or automated inter-dealer quotation system. The
fact that the settlement of any transaction is permitted shall not negate the
effect of any other provision of Article IV or this Article V and any transferee
in such a transaction shall be subject to all of the provisions and limitations
set forth in Article IV and this Article V.
Section 5.3 Severability. If any provision of Article IV or
this Article V or any application of any such provision is determined to be
invalid by any federal or state court having jurisdiction over the issues, the
validity of the remaining provisions shall not be affected and other
applications of such provision shall be affected only to the extent necessary to
comply with the determination of such court.
ARTICLE VI
Board of Directors
Section 6.1 Management. The business and affairs of the
Corporation shall be managed under the direction of its Board of Directors.
Section 6.2 Number. The number of directors which will
constitute the entire Board of Directors shall be fixed by, or in the manner
provided in, the Bylaws but shall in no event be less than three. Any increase
or decrease in the size of the board shall be apportioned as nearly equally as
possible among the classes of directors. There are currently three directors in
office whose names are as follows:
William J. Wolfe
Stuart D. Halpert
Lester Zimmerman
Section 6.3 Classification. The directors shall be classified,
with respect to the time for which they severally hold office, into three
classes, as nearly equal in number as possible. As shall be provided in the
Bylaws of the Corporation, one class shall originally be elected for a term
expiring at the annual meeting of stockholders to be held in 1995, another class
shall originally be elected for a term expiring at the annual meeting of
stockholders to be held in 1996, and another class shall originally be elected
for a term expiring at the annual meeting of stockholders to be held in 1997,
with each class to hold office until its successors are elected and qualify.
Except as otherwise provided in this Charter, at each annual meeting of the
stockholders of the Corporation, the date of which shall be fixed by or pursuant
to the Bylaws of the Corporation, the successors of the class of directors whose
terms expire at that meeting shall be elected to hold office for a term expiring
at the annual meeting of stockholders held in the third year following the year
of their election. No election of directors need be by written ballot. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
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Section 6.4 Vacancies. Except as otherwise provided in this
Charter, newly created directorships resulting from any increase in the number
of directors may be filled by the majority vote of the Board of Directors, and
any vacancies on the Board of Directors resulting from death, resignation,
removal or other cause shall be filled by the affirmative vote of a majority of
the remaining directors then in office, even if less than a quorum of the Board
of Directors, or, if applicable, by a sole remaining director. Any director
elected in accordance with the preceding sentence shall hold office until the
next annual meeting of the Corporation, at which time a successor shall be
elected to fill the remaining term of the position filled by such director.
Section 6.5 Removal. Except as otherwise provided in this
Charter, any director may be removed from office only for cause and only by the
affirmative vote of two-thirds of the aggregate number of votes then entitled to
be cast generally in the election of directors. For purposes of this Section
6.5, "cause" shall mean the willful and continuous failure of a director to
substantially perform the duties to the Corporation of such director (other than
any such failure resulting from temporary incapacity due to physical or mental
illness) or the willful engaging by a director in gross misconduct materially
and demonstrably injurious to the Corporation.
Section 6.6 Bylaws. The Board of Directors shall have the
exclusive power to adopt, amend, alter, change and repeal any Bylaws of the
Corporation.
Section 6.7 Powers. The enumeration and definition of
particular powers of the Board of Directors included elsewhere in this Charter
shall in no way be limited or restricted by reference to or inference from the
terms of any other clause of this or any other Article of this Charter, or
construed as excluding or limiting, or deemed by inference or otherwise in any
manner to exclude or limit, the powers conferred upon the Board of Directors
under the MGCL as now or hereafter in force.
ARTICLE VII
Liability
To the fullest extent permitted by Maryland law, in effect
from time to time, no person who at any time was or is a director or officer of
the Corporation shall be personally liable to the Corporation or its
stockholders for money damages. No amendment of this Charter or repeal of any of
its provisions shall limit or eliminate any of the benefits provided to
directors and officers under this Article VII in respect of any act or omission
that occurred prior to such amendment or repeal.
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ARTICLE VIII
Indemnification
The Corporation shall have the power to obligate itself to
indemnify, to the fullest extent permitted by Maryland law in effect from time
to time, all persons who at any time were or are directors or officers of the
Corporation for any threatened, pending or completed action, suit or proceeding
(whether civil, criminal, administrative or investigative) relating to any
action alleged to have been taken or omitted in such capacity as a director or
an officer and to pay or reimburse all reasonable expenses incurred by a present
or former director or officer of the Corporation in connection with any
threatened, pending or completed action, suit or proceeding (whether civil,
criminal, administrative or investigative) in which the present or former
director or officer is a party, in advance of the final disposition of the
proceeding. The Corporation may indemnify any other persons permitted but not
required to be indemnified by Maryland law, as applicable from time to time, if
and to the extent indemnification is authorized and determined to be
appropriate, in each case in accordance with applicable law, by the Board of
Directors of the Corporation, the majority of the stockholders of the
Corporation entitled to vote thereon or special legal counsel appointed by the
Board of Directors. No amendment of this Charter or repeal of any of its
provisions shall limit or eliminate any of the benefits provided to directors
and officers under this Article VIII in respect of any act or omission that
occurred prior to such amendment or repeal.
ARTICLE IX
Written Consent or Stockholders
Any corporate action upon which a vote of stockholders is
required or permitted may be taken without a meeting with the unanimous written
consent of each stockholder entitled to vote on the matter.
ARTICLE X
Miscellaneous
The Corporation reserves the right to amend, alter or repeal
any provision contained in this Charter, including any amendment altering the
terms or contract rights, as expressly set forth in this Charter, of any
outstanding shares of stock. Notwithstanding any provision of law permitting or
requiring any action to be taken or approved by the affirmative vote of the
holders of shares entitled to cast a greater number of votes, any such action
shall be effective and valid if taken or approved by the affirmative vote of
holders of shares entitled to cast a majority of all the votes entitled to be
cast on the matter; provided, however, subject to the voting rights of the
Series A Preferred Stock, the affirmative vote of the holders of two-thirds of
all the votes then entitled to be cast generally in the election of directors
shall be required to amend Sections 4.5.3, 6.3 and 6.5 and this Article X
hereof. All rights conferred upon stockholders herein are subject to this
reservation.
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ARTICLE XI
Existence
The Corporation is to have a perpetual existence.
THIRD: The foregoing restatement of the charter has been
approved by the entire Board of Directors.
FOURTH: The charter is not amended by these Articles of
Restatement.
FIFTH: The current address of the principal office of the
Corporation is set forth in Article II of the foregoing restatement of the
charter.
SIXTH: The name and address of the Corporation's current
resident agent is set forth in Article II of the foregoing restatement of the
charter.
SEVENTH: The number of directors of the Corporation and the
names of those currently in office are set forth in Article VI of the foregoing
restatement of the charter.
EIGHTH: The undersigned President acknowledges these Articles
of Restatement to be the corporate act of the Corporation and as to all matters
or facts required to be verified under oath, the undersigned President
acknowledges that to the best of his knowledge, information and belief, these
matters and facts are true in all material respects and that this statement is
made under the penalties for perjury.
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IN WITNESS WHEREOF, the Corporation has caused these Articles
to be signed in its name and on its behalf by its President and attested to by
its Secretary on this 12th day of September, 1994.
ATTEST: FIRST WASHINGTON REALTY
TRUST, INC.
/s/ By: /s/ (SEAL)
Jeffrey S. Distenfeld William J. Wolfe
Secretary President
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FIRST WASHINGTON REALTY TRUST, INC.
ARTICLES OF RESTATEMENT
THIS IS TO CERTIFY THAT:
FIRST: First Washington Realty Trust, Inc., a Maryland
corporation (the "Corporation"), desires to restate its charter as currently
in effect.
SECOND: The following provisions are all the provisions of
the charter currently in effect:
ARTICLE I
Name
The name of the Corporation (the "Corporation") is First
Washington Realty Trust, Inc.
ARTICLE II
Principal Office, Registered Office, and Agent
The address of the Corporation's principal office in the State
of Maryland is c/o The Prentice Hall Corporation System, Maryland, 11 East Chase
Street, Baltimore, Maryland 21202. The name and address of the Corporation's
resident agent in the State of Maryland are The Prentice Hall Corporation
System, Maryland, 11 East Chase Street, Baltimore, Maryland 21202. The
registered agent is a corporation located in the State of Maryland.
ARTICLE III
Purpose
The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the Maryland General
Corporation Law as now or hereafter in force (the "MGCL").
ARTICLE IV
Capitalization
4.1 STOCK
Section 4.1.1 Authority to Issue Stock. The Board of
Directors of the Corporation may authorize the issuance from time to time of
shares of its stock, whether now or hereafter
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authorized, for such consideration as the Board of Directors may deem advisable,
subject to such limitations as may be set forth in the Charter or the Bylaws of
the Corporation.
Section 4.1.2 Shares and Par Value. The total number of shares
of all classes of stock that the Corporation has authority to issue is one
hundred million (100,000,000), consisting of (i) ninety million (90,000,000)
shares of common stock having a par value of one cent ($.01) per share (the
"Common Stock") and (ii) ten million (10,000,000) shares of preferred stock
having a par value of one cent ($.01) per share (the "Preferred Stock"), of
which three million seven hundred fifty thousand (3,750,000) shares shall be
designated as 9.75% Series A Cumulative Participating Convertible Preferred
Stock (the "Series A Preferred Stock"). The aggregate par value of all
authorized shares of stock having par value is one million dollars ($1,000,000).
Subject to the express terms of any other classes of Common Stock or of any
other series of Preferred Stock outstanding at the time and notwithstanding any
other provision of the Charter, the Board of Directors of the Corporation may
increase or decrease the number of shares of, or alter the designation of, or
classify or reclassify into one or more classes or series, any unissued shares
of Common Stock or Preferred Stock by setting or changing, in any one or more
respects, from time to time before issuing the shares, the terms, preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends or other distributions, qualifications or terms or conditions of
redemption of shares of Common Stock or of Preferred Stock.
Section 4.1.3 Declaration of Dividends. To the extent declared
by the Board of Directors of the Corporation out of assets legally available
therefor, dividends payable in respect of the Series A Preferred Stock and the
Common Stock will have identical record and payment dates.
Section 4.1.4 Determination of Funds Legally Available for
Distribution. In determining whether a distribution (other than upon voluntary
or involuntary liquidation) by dividend, redemption or other acquisition of
shares or otherwise of Capital Stock is permitted under the MGCL, no effect
shall be given to amounts that would be needed, if the Corporation were to be
dissolved at the time of the distribution, to satisfy the preferential rights
upon dissolution of holders of shares of Capital Stock whose preferential rights
upon dissolution are superior to those receiving the distribution.
Section 4.1.5 Preemptive Rights. No holder of shares of stock
of the Corporation shall, as such holder, have any preemptive or other right to
purchase or subscribe for any shares of Series A Preferred Stock, Common Stock
or any other class of Capital Stock which the Corporation may issue or sell.
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4.2 CERTAIN DEFINITIONS
Unless the context otherwise requires, the terms defined in
this Section 4.2 shall have, for all purposes of this Charter, the meanings
herein specified (with terms defined in the singular having comparable meanings
when used in the plural).
Acquire. The term "Acquire" shall mean the acquisition of
Beneficial Ownership or Constructive Ownership of shares of Capital Stock by any
means including, without limitation, a Transfer, the exercise of or right to
exercise any rights under any option, warrant, convertible security, pledge or
other security interest or similar right to acquire shares, but shall not
include the acquisition of any such rights unless, as a result, the acquiror
would be considered a Beneficial Owner or Constructive Owner, as defined below.
The term "Acquisition" shall have the correlative meaning.
Aggregate Stock Ownership Limit. The term "Aggregate Stock
Ownership Limit" shall mean not more than 9.8% (in value) of the aggregate of
the outstanding shares of Capital Stock. The number and value of shares of the
outstanding shares of Capital Stock shall be determined by the Board of
Directors of the Corporation in good faith, which determination shall be
conclusive for all purposes hereof.
Beneficial Ownership. The term "Beneficial Ownership" shall
mean ownership of Capital Stock by a Person who is or would be an actual owner
of such shares of Capital Stock or who is or would be treated as a constructive
owner of such shares through the application of Section 544 of the Code, as
modified by Section 856(h)(1)(B) of the Code (except where expressly provided
otherwise). The terms "Beneficial Owner," "Beneficially Owns" and "Beneficially
Owned" shall have the correlative meanings.
Business Day. The term "Business Day" shall mean any day,
other than a Saturday or Sunday, that is neither a legal holiday nor a day on
which banking institutions in New York City are authorized or required by law,
regulation or executive order to close.
Capital Stock. The term "Capital Stock" shall mean all classes
or series of stock of the Corporation, including, without limitation, Common
Stock, Preferred Stock and Series A Preferred Stock.
Capital Gains Amount. The term "Capital Gains Amount" shall
have the meaning set forth in Section 4.3.1(g) hereof.
Charitable Beneficiary. The term "Charitable Beneficiary"
shall mean one or more beneficiaries of the Trust as determined pursuant to
Section 4.4.6 or Section 4.6.6 each of which shall be an organization described
in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code.
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Code. The term "Code" shall mean the Internal Revenue Code
of 1986, as amended from time to time.
Common Stock. The term "Common Stock" shall have the meaning
set forth in Section 4.1.2.
Common Stock Affected Persons. The term "Common Stock
Affected Persons" shall have the meaning set forth in Section 4.5.5(c) herein.
Common Stock Ownership Limit. The term "Common Stock Ownership
Limit" shall mean not more than 9.8% (in value or in number of shares, whichever
is more restrictive) of the aggregate of the outstanding shares of Common Stock
of the Corporation. The number and value of outstanding shares of Common Stock
of the Corporation shall be determined by the Board of Directors of the
Corporation in good faith, which determination shall be conclusive for all
purposes hereof.
Common Stock Constructive Ownership Event. The term "Common
Stock Constructive Ownership Event" shall have the meaning set forth in Section
4.5.5(c).
Constructive Ownership. The term "Constructive Ownership"
shall mean ownership of Capital Stock by a Person who is or would be an actual
owner of Capital Stock or who is or would be treated as a constructive owner of
such shares through the application of Section 318(a) of the Code, as modified
by Section 856(d)(5) of the Code. The terms "Constructive Owner,"
"Constructively Owns" and "Constructively Owned" shall have the correlative
meanings.
Conversion. The term "Conversion" shall mean a conversion of
shares of Series A Preferred Stock into shares of Common Stock, as provided in
Section 4.3.6 hereof.
Conversion Commencement Date. The term "Conversion
Commencement Date" shall mean May 31, 1999.
Conversion Holder. The term "Conversion Holder" shall mean any
Person who is the Beneficial or Constructive Owner of shares of Common Stock in
excess of the Common Stock Ownership Limit by reason of the Conversion of (or
the right to convert) shares of Series A Preferred Stock into shares of Common
Stock.
Conversion Price. The term "Conversion Price" shall have the
meaning set forth in Section 4.3.6(a) hereof.
Dividend Payment Date. The term "Dividend Payment Date" shall
have the meaning set forth in Section 4.3.1(b) hereof.
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Dividend Period. The term "Dividend Period" shall mean the
period from, and including, the Initial Issuance Date to, but not including, the
first Dividend Payment Date and thereafter each quarterly period from, and
including, the Dividend Payment Date to, but not including, the next Dividend
Payment Date (or earlier date on which dividends are paid), as the case may be.
Funds from Operations of the Operating Partnership. The term
"Funds from Operations of the Operating Partnership" shall have the meaning set
forth in Section 4.3.6(e)(ix) hereof.
Initial Issuance Date. The term "Initial Issuance Date" shall
mean the date that shares of Series A Preferred Stock and Common Stock are
issued by the Corporation pursuant to the Private Placement.
Market Price. The term "Market Price" on any date shall mean,
with respect to any class or series of outstanding shares of Capital Stock, the
Closing Price for such Capital Stock on such date. The "Closing Price" on any
date shall mean the last sale price for such Capital Stock, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, for such Capital Stock in either case as reported in
the principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the NYSE or, if such Capital Stock
is not listed or admitted to trading on the NYSE, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which such Capital Stock is listed
or admitted to trading or, if such Capital Stock is not listed or admitted to
trading on any national securities exchange, the last quoted price, or, if not
so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System or, if such system is no longer in use,
the principal other automated quotation system that may then be in use or, if
such Capital Stock is not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in such Capital Stock selected by the Board of Directors of the
Corporation.
MGCL. The term "MGCL" shall have the meaning set forth in
Article III.
NYSE. The term "NYSE" shall mean the New York Stock Exchange.
Operating Partnership. The term "Operating Partnership" shall
mean First Washington Realty Limited Partnership, a Maryland limited
partnership.
Partnership Agreement. The term "Partnership Agreement" shall
mean the Agreement of Limited Partnership of First Washington Realty Limited
Partnership, of which the Corporation is the sole general partner, dated as of
April 28, 1994, as such agreement may be amended from time to time.
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Person. The term "Person" shall mean an individual,
corporation, partnership, estate, trust (including a trust qualified under
Sections 401(a) or 501(c)(17) of the Code), a portion of a trust permanently set
aside for or to be used exclusively for the purposes described in Section 642(c)
of the Code, association, private foundation within the meaning of Section
509(a) of the Code, joint stock company or other entity and also includes a
group as that term is used for purposes of Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended.
Preferred Stock Affected Persons. The term "Preferred Stock
Affected Persons" shall have the meaning set forth in Section 4.3.7(c) herein.
Preferred Stock Constructive Ownership Event. The term
"Preferred Stock Constructive Ownership Event" shall have the meaning set forth
in Section 4.3.7(c).
Private Placement. The term "Private Placement" means the
closing of the sale of shares of Series A Preferred Stock and Common Stock on or
about June 27, 1994.
Purported Beneficial Transferee. The term "Purported
Beneficial Transferee" shall mean, with respect to any purported Transfer or
Acquisition which results in a transfer to a Trust, as provided in Section 4.4
or Section 4.6, the purported beneficial transferee for whom the Purported
Record Transferee would have acquired shares of Capital Stock if such Transfer
or Acquisition had not violated the provisions of Sections 4.3.7 or 4.5.5. The
Purported Beneficial Transferee and the Purported Record Transferee may be the
same Person.
Purported Record Transferee. The term "Purported Record
Transferee" shall mean, with respect to any purported Transfer or Acquisition
which results in a transfer to a Trust, as provided in Section 4.4 or Section
4.6, the Person who would have been the record holder of the Capital Stock if
such Transfer or Acquisition had not violated the provisions of Sections 4.3.7
or 4.5.5. The Purported Beneficial Transferee and the Purported Record
Transferee may be the same Person.
Record Date. The term "Record Date" shall mean, for any class
or series of Capital Stock, the date designated by the Board of Directors of the
Corporation at the time a dividend is declared as the date for determining
holders of record entitled to such dividend; provided, however, that, to the
extent permitted by the MGCL, such Record Date shall be the first day of the
calendar month in which the applicable Dividend Payment Date falls or such other
date designated by the Board of Directors for the payment of dividends that is
not more than thirty (30) days nor less than ten (10) days prior to such
Dividend Payment Date.
Registration Rights Agreement. The term "Registration Rights
Agreement" shall have the meaning set forth in Section 4.3.1(h) hereof.
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REIT. The term "REIT" shall mean a real estate investment
trust within the meaning of Section 856 of the Code.
Restriction Termination Date. The term "Restriction
Termination Date" shall mean the first day after the date of the Private
Placement on which the Corporation determines pursuant to Section 5.1 hereof
that it is no longer in the best interests of the Corporation to attempt to, or
continue to, qualify as a REIT or that compliance with the restrictions and
limitations on Beneficial Ownership, Constructive Ownership and Transfers and
Acquisitions of shares of Capital Stock set forth herein is no longer required
in order for the Corporation to qualify as a REIT.
Series A Preferred Liquidation Preference. The term "Series A
Preferred Liquidation Preference" shall have the meaning set forth in Section
4.3.2(a) hereof.
Series A Preferred Stock Limitation Price. The term "Series A
Preferred Stock Limitation Price" shall have the meaning set forth in Section
4.4.5(a) hereof.
Series A Preferred Stock Ownership Limit. The term "Series A
Preferred Stock Ownership Limit" shall mean not more than 9.8% (in value or in
number of shares, whichever is more restrictive) of the aggregate of the
outstanding Series A Preferred Stock of the Corporation. The number and value of
outstanding shares of Series A Preferred Stock of the Corporation shall be
determined by the Board of Directors of the Corporation in good faith, which
determination shall be conclusive for all purposes hereof.
Series A Redemption Date. The term "Series A Redemption Date"
shall have the meaning set forth in Section 4.3.3(b) hereof.
Series A Redemption Price. The term "Series A Redemption
Price" shall have the meaning set forth in Section 4.3.3(a) hereof.
Special Triggering Event. The term "Special Triggering Event"
shall mean either (i) the election by one or more holders of shares of Series A
Preferred Stock to convert all or a portion of such Series A Preferred Stock
into shares of Common Stock, (ii) the redemption or purchase by the Corporation
of all or a portion of the outstanding shares of Capital Stock, or (iii) a
change in the relative values of classes of Capital Stock.
Total Dividends. The term "Total Dividends" shall have the
meaning set forth in Section 4.3.1(g) hereof.
Transfer. The term "Transfer" shall mean any sale, transfer,
gift, assignment, devise or other disposition of Capital Stock or the right to
vote or receive dividends on Capital Stock including (i) the granting of any
option or entering into any agreement for the sale, transfer or other
disposition of Capital Stock or the right to vote or receive dividends on
Capital Stock or (ii) the sale,
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transfer, assignment or other disposition of any securities or rights
convertible into or exchangeable for Capital Stock, in each case whether
voluntary or involuntary, whether of record or Beneficially or Constructively
Owned (including without limitation Transfers of interests in other entities
which result in changes in Beneficial or Constructive Ownership of Capital
Stock), and whether by operation of law or otherwise. The terms "Transferring"
and "Transferred" shall have the correlative meanings.
Trust. The term "Trust" shall mean each of the trusts
provided for in Sections 4.4.1 and 4.6.1.
Trustee. The term "Trustee" shall mean the Person unaffiliated
with the Corporation, or the Purported Beneficial Transferee, or the Purported
Record Transferee, that is appointed by the Corporation to serve as trustee of
the Trust.
Units. The term "Units" shall mean units of convertible
preferred partnership interests and common partnership interests in the
Operating Partnership.
4.3 SERIES A PREFERRED STOCK
Section 4.3.1 Dividends.
(a) Subject to the preferential rights of any series of
Preferred Stock ranking senior as to dividends to the Series A Preferred Stock
and to Section 4.4.2, the record holders of shares of Series A Preferred Stock
shall be entitled to receive dividends, when and as declared by the Board of
Directors of the Corporation, out of assets legally available for the payment of
dividends. Subject to the provisions of Section 4.3.1(h), such dividends shall
be payable by the Corporation in an amount per share equal to (i) $0.6094 per
quarter ($2.4375 per annum) (or such higher number as is determined under
Section 4.3.1(h)) plus (ii) a participating dividend equal to the amount, if
any, of dividends in excess of $0.4875 payable on the applicable Dividend
Payment Date with respect to the number of shares of Common Stock (or fraction
thereof) into which a share of Series A Preferred Stock is then (or will be)
convertible. The amount of participating dividend referred to in clause (ii)
payable on any Dividend Payment Date shall equal the number of shares of Common
Stock, or fraction thereof, into which a share of Series A Preferred Stock is
then convertible, multiplied by the quarterly dividend in excess of $0.4875 per
share paid with respect to a share of Common Stock on such Dividend Payment
Date.
(b) Dividends on shares of Series A Preferred Stock shall
accrue and be cumulative from the Initial Issuance Date and will be payable
quarterly in arrears on the fifteenth day of each August, November, February,
and May (each, a "Dividend Payment Date"), beginning August 15, 1994. If any
Dividend Payment Date occurs on a day that is not a Business Day, any accrued
dividends otherwise payable on such Dividend Payment Date shall be paid on the
next succeeding Business Day. Dividends payable in respect of any Dividend
Period which is less than
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a full Dividend Period in length will be computed from the immediately preceding
Dividend Payment Date (or the Initial Issuance Date in the case of the first
Dividend Period) to, but not including the date on which dividends are paid, on
the basis of a 360-day year consisting of twelve 30-day months. Dividends shall
be paid to the holders of record of shares of Series A Preferred Stock as their
names shall appear on the stock transfer records of the Corporation at the close
of business on the Record Date for such dividend. Dividends in respect of any
past Dividend Period that is in arrears may be declared and paid at any time to
holders of record on the Record Date thereof. No interest, or sum of money in
lieu of interest, shall be payable in respect of any dividend payment or
payments on the Series A Preferred Stock that may be in arrears.
(c) Notwithstanding anything herein to the contrary, no
dividends on shares of Series A Preferred Stock shall be declared by the Board
of Directors of the Corporation or paid or set apart for payment by the
Corporation at such time as, and to the extent that, the terms and provisions of
any agreement of the Corporation, including any agreement relating to its
indebtedness, or any provisions of this Charter relating to any series of
Preferred Stock ranking senior to the Series A Preferred Stock as to dividends,
prohibit such declaration, payment or setting apart for payment or provide that
such declaration, payment or setting apart for payment would constitute a breach
thereof or a default thereunder, or if such declaration or payment shall be
restricted or prohibited by law.
(d) If any shares of Series A Preferred Stock are outstanding,
no full dividends shall be declared or paid or set apart for payment on any
series of Capital Stock ranking, as to dividends, junior to or on a parity with
the Series A Preferred Stock as to dividends for any period unless full
cumulative dividends have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for such payment
on the Series A Preferred Stock for all past Dividend Periods and the then
current Dividend Period. When dividends are not paid in full (or a sum
sufficient for such full payment is not so set apart) upon the shares of the
Series A Preferred Stock and the shares of any other series of Preferred Stock
ranking on a parity as to dividends with the Series A Preferred Stock, all
dividends declared upon shares of Series A Preferred Stock and any other series
of Preferred Stock ranking on a parity as to dividends with the Series A
Preferred Stock shall be declared pro rata so that the amount of dividends
declared per share on the Series A Preferred Stock and such other series of
Preferred Stock shall in all cases bear to each other the same ratio that
accrued and unpaid dividends per share on the shares of the Series A Preferred
Stock and such other series of Preferred Stock bear to each other.
(e) Except as provided in Section 4.3.1(d), unless full
cumulative dividends on the Series A Preferred Stock have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for all past Dividend Periods and the then
current Dividend Period, no dividends (other than dividends payable in Common
Stock or other Capital Stock ranking junior to the Series A Preferred Stock as
to dividends and upon liquidation, dissolution or winding up) shall be declared
or paid or set aside for payment, and no other distribution shall be declared or
made, upon any series or class of Capital Stock ranking junior to
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or on a parity with the Series A Preferred Stock as to dividends, nor, subject
to the Corporation's right to purchase shares of stock held in Trust for one or
more Charitable Beneficiaries as otherwise provided in this Charter and subject
to the automatic repurchase by the Corporation of shares of stock pursuant to
Section 4.3.7(d) or Section 4.5.5(d), shall shares of any series of Capital
Stock ranking junior to or on a parity with the Series A Preferred Stock as to
dividends or upon liquidation, dissolution or winding up be redeemed, purchased
or otherwise acquired for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any shares of any such
stock), by the Corporation (except by conversion into or exchange for other
Capital Stock ranking junior to the Series A Preferred Stock as to dividends and
upon liquidation, dissolution or winding up).
(f) Notwithstanding anything contained herein to the contrary,
dividends on the Series A Preferred Stock, if not paid on a Dividend Payment
Date, shall accrue whether or not dividends are declared for such Dividend
Payment Date, whether or not the Corporation has earnings and whether or not
there are assets legally available for the payment of such dividends. Any
dividend payment made on shares of Series A Preferred Stock shall first be
credited against the earliest accrued but unpaid dividend due with respect to
shares of such Series A Preferred Stock which remains payable.
(g) If, for any taxable year, the Corporation elects to
designate as "capital gain dividends" (as defined in Section 857 of the Code)
any portion (the "Capital Gains Amount") of the dividends (within the meaning of
the Code) paid or made available for the year to holders of all classes of stock
(the "Total Dividends"), then the portion of the Capital Gains Amount that shall
be allocable to the holders of Series A Preferred Stock shall be the Capital
Gains Amount multiplied by a fraction, the numerator of which shall be the total
dividends (within the meaning of the Code) paid or made available to the holders
of the Series A Preferred Stock for the year and the denominator of which shall
be the Total Dividends.
(h) In the event that the Corporation fails to file a
registration statement within the period of time required by the Registration
Rights Agreement dated as of the Initial Issuance Date (the "Registration Rights
Agreement"), or the required registration statement does not become effective
within the period of time required by the Registration Rights Agreement, or the
Corporation fails to maintain the effectiveness of the registration statement as
required by the Registration Rights Agreement, (i) the stated quarterly dividend
rate set forth in clause (i) of Section 4.3.1(a) will be increased by an
additional $0.0625 for each Dividend Period (or fraction thereof) during which
any such registration statement is not filed or declared effective, as
applicable (which number shall not increase if the registration statement delay
continues for more than one Dividend Period), and such increased stated dividend
rate shall remain in effect until such registration statement is filed or
declared effective, as applicable, and (ii) the amount per share of Common Stock
set forth in clause (ii) of Section 4.3.1(a) (in excess of which a participating
dividend is payable) will be increased by an additional $0.04875 for each
dividend period (or fraction thereof) during which any such registration
statement is not filed or declared effective, as applicable (which
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number shall not increase if the registration statement delay continues for more
than one Dividend Period), and such increased stated dividend rate shall remain
in effect until such registration statement is filed or declared effective, as
applicable.
Section 4.3.2 Liquidation Rights.
(a) In the event of any liquidation, dissolution or winding up
of the Corporation, subject to the prior preferences or other rights of any
series of Capital Stock ranking senior to the Series A Preferred Stock upon
liquidation, dissolution or winding up, the holders of shares of Series A
Preferred Stock shall be entitled to be paid out of the assets of the
Corporation legally available for distribution to its stockholders a liquidating
distribution in cash or property at its fair market value as determined by the
Board of Directors of the Corporation in an amount equal to the sum of $25.00
per share plus an amount equal to any accrued and unpaid dividends thereon
(whether or not earned or declared) to the date of payment (the "Series A
Preferred Liquidation Preference"), before any distribution or payment shall be
made to the holders of any shares of Capital Stock that rank junior to the
Series A Preferred Stock in the distribution of assets upon liquidation,
dissolution or winding up. After payment of the full amount of the liquidating
distributions to which they are entitled, the holders of shares of Series A
Preferred Stock shall have no right or claim to any of the remaining assets of
the Corporation and shall not be entitled to any other distribution in the event
of liquidation, dissolution or winding up of the affairs of the Corporation.
(b) In the event that, upon any such voluntary or involuntary
liquidation, dissolution or winding up, the legally available assets of the
Corporation are insufficient to pay the Series A Preferred Liquidation
Preference on all outstanding shares of Series A Preferred Stock and the
corresponding amounts payable on all shares of other classes or series of
Capital Stock ranking on a parity with the Series A Preferred Stock in the
distribution of assets upon liquidation, dissolution or winding up, then the
holders of the Series A Preferred Stock and all other such classes or series of
Capital Stock shall share ratably in any such distribution of assets in
proportion to the full liquidating distributions to which they would otherwise
be respectively entitled.
(c) Neither the consolidation or merger of the Corporation
with or into any other entity, nor the sale, lease, transfer or conveyance of
all or substantially all of the property or business of the Corporation to any
other entity, shall be deemed to constitute a liquidation, dissolution or
winding up of the Corporation within the meaning of this Section 4.3.2.
Section 4.3.3 Redemption by the Corporation.
(a) The Series A Preferred Stock may be redeemed, in whole or
from time to time in part, at any time on and after July 15, 1999 at the option
of the Corporation at the price per share set forth below (the "Series A
Redemption Price"):
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<TABLE>
<S> <C>
If the Redemption Date is: Price Per Share
- -------------------------- ---------------
On or after July 15, 1999 but prior to July 14, 2000............. $ 27.4375
On or after July 15, 2000 but prior to July 14, 2001............. $ 26.9500
On or after July 15, 2001 but prior to July 14, 2002............. $ 26.4625
On or after July 15, 2002 but prior to July 14, 2003............. $ 25.9750
On or after July 15, 2003 but prior to July 14, 2004............. $ 25.4875
On or after July 15, 2004.......................................... $ 25.00
</TABLE>
in each case in cash plus all accrued and unpaid dividends thereon to the Series
A Redemption Date, except as may be provided below, without interest.
(b) Each date fixed for redemption pursuant to Section
4.3.3(d) below is called a "Series A Redemption Date." If the Series A
Redemption Date is after a Record Date and before the related Dividend Payment
Date, the dividend payable on such Dividend Payment Date shall be paid to the
holder in whose name the Series A Preferred Stock to be redeemed is registered
at the close of business on such Record Date notwithstanding the redemption
thereof between such Record Date and the related Dividend Payment Date or the
Corporation's default in the payment of the dividend due.
(c) In case of redemption of less than all shares of Series A
Preferred Stock at the time outstanding, the shares to be redeemed shall be
selected pro rata from the holders of record of such shares in proportion to the
number of shares held by such holders (with adjustments to avoid redemption of
fractional shares) or, if a pro rata redemption would result in a violation of
the Series A Preferred Stock Ownership Limit, the Common Stock Ownership Limit,
or the Aggregate Stock Ownership Limit, by any other equitable method determined
by the Board of Directors of the Corporation, to the extent practicable, that
would not result in such a violation.
(d) Notice of any redemption will be given by publication in a
newspaper of general circulation in the City of New York, such publication to be
made once a week for two successive weeks commencing not less than 30 nor more
than 60 days prior to the Series A Redemption Date. A similar notice will be
mailed by the Corporation, postage prepaid, not less than 30 nor more than 60
days prior to the Series A Redemption Date, addressed to the respective holders
of record of the Series A Preferred Stock to be redeemed at their respective
addresses as they appear on the stock transfer records of the Corporation. No
failure to give such notice or any defect therein or in the mailing thereof
shall affect the validity of the proceedings for the redemption of any shares of
Series A Preferred Stock except as to the holder to whom the Corporation has
failed to give notice or except as to the holder to whom notice was defective.
In addition to any information required by law or by the applicable rules of any
exchange upon which Series A Preferred Stock may be listed or admitted to
trading, such notice shall state: (i) the Series A Redemption Date; (ii) the
Series A Redemption Price; (iii) the aggregate number of shares of Series A
Preferred Stock to be redeemed and, if less than all shares held by such holder
are to be redeemed, the number of such shares to be redeemed; (iv) the place or
places where certificates for such shares are to be surrendered for payment of
the Series A Redemption Price; (v) that dividends on the shares to be redeemed
will cease to accrue on the Series A Redemption Date; and (vi) that any
conversion rights with respect to such shares shall terminate at the close of
business on the third Business Day immediately preceding the Series A Redemption
Date.
(e) If notice has been mailed in accordance with Section
4.3.3(d) above and provided that on or before the Series A Redemption Date
specified in such notice all funds necessary for such
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redemption shall have been set aside by the Corporation, separate and apart from
its other funds in trust for the pro rata benefit of the holders of the shares
so called for redemption, so as to be and to continue to be available therefor,
then, from and after the Series A Redemption Date, dividends on the shares of
the Series A Preferred Stock so called for redemption shall cease to accrue, and
such shares shall no longer be deemed to be outstanding and shall not have the
status of shares of Series A Preferred Stock, and all rights of the holders
thereof as stockholders of the Corporation (except the right to receive from the
Corporation the Series A Redemption Price) shall cease. Notwithstanding the
foregoing, upon the Corporation's default in the payment of the dividend due,
the holders of shares of Series A Preferred Stock at the close of business on
any Record Date will be entitled to receive the dividend payable with respect to
such Series A Preferred Stock on the corresponding Dividend Payment Date,
although such Series A Preferred Stock shall have been redeemed between such
Record Date and such corresponding Dividend Payment Date. Upon surrender, in
accordance with the redemption notice, of the certificates for any shares of
Series A Preferred Stock so redeemed (properly endorsed or assigned for
transfer, if the Corporation shall so require and the notice shall so state),
such shares shall be redeemed by the Corporation at the Series A Redemption
Price. In case fewer than all the shares represented by any such certificate are
redeemed, a new certificate or certificates shall be issued representing the
unredeemed shares without cost to the holder thereof.
(f) Any deposit of funds with a bank or trust company for the
purpose of redeeming Series A Preferred Stock shall be irrevocable except that:
(i) the Corporation shall be entitled to receive from
such bank or trust company the interest or other earnings, if any,
earned on any money so deposited in trust, and the holders of any
shares redeemed shall have no claim to such interest or other earnings;
and
(ii) any balance of monies so deposited by the
Corporation and unclaimed by the holders of the Series A Preferred
Stock entitled thereto at the expiration of two (2) years after the
applicable Series A Redemption Date shall be repaid, together with any
interest or other earnings earned thereon, to the Corporation, and
after such repayment, the holders of the shares entitled to the funds
so repaid to the Corporation shall look only to the Corporation for
payment without interest or other earnings.
(g) No Series A Preferred Stock may be redeemed except with
funds legally available for the payment of the Series A Redemption Price.
(h) Unless full cumulative dividends on all outstanding shares
of Series A Preferred Stock shall have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment thereof set apart for
payment for all past Dividend Periods and the then current Dividend Period, no
shares of any Series A Preferred Stock shall be redeemed unless all outstanding
shares of Series A Preferred Stock are simultaneously redeemed, provided,
however, that the foregoing shall not prevent the purchase or acquisition of
shares of Series A Preferred Stock pursuant to a purchase or exchange offer made
on the same terms to holders of all outstanding shares of Series A Preferred
Stock; and, unless full cumulative dividends on all outstanding shares of Series
A Preferred Stock have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment for
all past Dividend Periods and the then current Dividend Period, the Corporation
shall not purchase or otherwise acquire directly or indirectly, through a
subsidiary or otherwise, any shares of Series A Preferred Stock (except by
conversion into or exchange for Capital Stock ranking junior to the Series A
Preferred Stock as to dividends and upon liquidation, dissolution or winding
up).
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(i) All shares of Series A Preferred Stock redeemed pursuant
to this Section 4.3.3 shall be retired and shall be restored to the status of
authorized and unissued shares of Preferred Stock, without designation as to
series, and may thereafter be reissued as shares of any series of Preferred
Stock.
(j) Notwithstanding any other provision of this Section 4.3.3,
the Corporation shall not , pursuant to this Section 4.3.3, redeem shares of
Series A Preferred Stock held by any holder of such shares if such holder (i)
has provided notice of conversion with respect to such shares pursuant to
Section 4.3.6(b) and (ii) such holder could not, at the time of such redemption,
convert such shares of Series A Preferred Stock into shares of Common Stock
pursuant to Section 4.3.6 due to the restriction set forth in Section 4.3.6(l).
Section 4.3.4 Voting Rights.
(a) The holders of record of shares of Series A Preferred
Stock shall not be entitled to any voting rights or to notice of any meeting of
stockholders except as hereinafter provided in this Section 4.3.4. The
Corporation shall not, without the affirmative vote or consent of the holders of
at least two-thirds of the shares of the Series A Preferred Stock outstanding at
the time, given in person or by proxy, either in writing or at a meeting (such
Series A Preferred Stock voting separately as a class), (i) authorize, create,
or increase the authorized or issued amount of, any class or series of Capital
Stock ranking senior to the Series A Preferred Stock as to dividends or upon
liquidation, dissolution or winding up, or reclassify any authorized shares of
Capital Stock into shares of any such senior Capital Stock, or create, authorize
or issue any obligation or security convertible into or evidencing the right to
purchase shares of any such senior Capital Stock; or (ii) amend, alter or repeal
the provisions of this Charter, whether by merger, consolidation or otherwise,
so as to materially and adversely affect any right, preference, privilege or
voting power of the Series A Preferred Stock or the holders thereof; provided,
however, that any increase in the amount of the authorized Preferred Stock or
the creation or issuance of any other series of Preferred Stock, or any increase
in the amount of authorized shares of the Series A Preferred Stock or any other
series of Preferred Stock, in each case ranking on a parity with or junior to
the Series A Preferred Stock with respect to payment of dividends and the
distribution of assets upon liquidation, dissolution or winding up, shall not be
deemed to materially and adversely affect such rights, preferences, privileges
or voting powers.
(b) If and whenever dividends payable on Series A Preferred
Stock shall be in arrears for six (6) or more quarterly periods, then the
holders of shares of Series A Preferred Stock, voting separately as a class
(together with any certain other series of preferred stock as provided in
Section 4.3.4(f) below), shall be entitled at the next annual meeting of the
stockholders or at any special meeting of stockholders to elect two (2)
additional directors. Upon election, such directors shall become additional
directors of the Corporation and the authorized number of directors of the
Corporation shall thereupon be automatically increased by such number of
directors.
(c) Whenever the voting right under Section 4.3.4(b) shall
have vested, such right may be exercised initially either at a special meeting
of the holders of Series A Preferred Stock, called as hereinafter provided, or
at any annual meeting of stockholders held for the purpose of electing
directors, and thereafter at such annual meetings or by the written consent of
holders of Series A Preferred Stock. Such right of the holders of Series A
Preferred Stock to elect directors may be exercised until all dividends to which
the holders of Series A Preferred Stock shall have been entitled for all
previous Dividend Periods and
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the current Dividend Period shall have been paid in full or declared and a sum
of money sufficient for the payment thereof set aside for payment, at which the
time the right of the holders of Series A Preferred Stock to elect such number
of directors shall cease, the term of such directors previously elected shall
thereupon terminate, and the authorized number of directors of the Corporation
shall thereupon return to the number of authorized directors otherwise in
effect, but subject always to the same provisions for the renewal and divestment
of such special voting rights in the case of any such future dividend default or
defaults and subject to the rights of any other series of preferred stock to
vote for the election of directors, together with the Series A Preferred Stock,
as described in Section 4.3.4(f), that shall not have then expired.
(d) At any time when the voting right described under Section
4.3.4(b) shall have vested in the holders of shares of Series A Preferred Stock
and if such right shall not already have been initially exercised, the Secretary
of the Corporation shall, upon the written request of holders of record of at
least ten percent (10%) of the shares of Series A Preferred Stock or any other
series of Preferred Stock entitled to vote on such matter as described in
Section 4.3.4(f) then outstanding, addressed to the Secretary of the
Corporation, call a special meeting of holders of Series A Preferred Stock. Such
meeting shall be held in accordance with Maryland law at the earliest
practicable date at a place designated by the Secretary of the Corporation. If
such meeting shall not be called by the Secretary of the Corporation within
thirty (30) days after the personal service of such written request upon the
Secretary of the Corporation, or within thirty (30) days after mailing the same
within the United States, by registered mail, addressed to the Secretary of the
Corporation at its principal office (such mailing to be evidenced by the
registry receipt issued by the postal authorities), then the holders of record
of at least ten percent (10%) of the shares of Series A Preferred Stock or of
other Preferred Stock entitled to vote on such matter as described in Section
4.3.4(f) then outstanding may designate in writing a holder of Series A
Preferred Stock or such other Preferred Stock to call such meeting at the
expense of the Corporation, and such meeting may be called by such person so
designated upon the notice required for annual meetings of stockholders and
shall be held in accordance with Maryland law at a place designated by such
holder. Any holder of shares of Series A Preferred Stock that would be entitled
to vote at such meeting shall have access to the stock books of the Corporation
for the purpose of causing a meeting of stockholders to be called pursuant to
the provisions of this Section 4.3.4(d). Notwithstanding the provisions of this
Section 4.3.4(d), however, no such special meeting shall be called if any such
request is received less than ninety (90) days before the date fixed for the
next ensuing annual or a special meeting of stockholders.
(e) If any director so elected by the holders of shares of
Series A Preferred Stock shall cease to serve as a director before such
director's term shall expire, the holders of shares of Series A Preferred Stock
(and any other series of Preferred Stock, if any, entitled to vote on such
matter, as described in Section 4.3.4(f)) then outstanding may, at a special
meeting of the holders called as provided above, elect a successor to hold
office for the unexpired term of the director whose place shall be vacant.
(f) If, at any time when the holders of shares of Series A
Preferred Stock are entitled to elect directors pursuant to the foregoing
provisions of this Section 4.3.4, the holders of shares of any one or more
additional series of Preferred Stock are entitled to elect directors by reason
of any default or event specified in this Charter, as in effect at the time
(including the articles supplementary for such series), and if the terms for
such other additional series so permit, then the voting rights of the two or
more series then entitled to vote shall be combined (with each series having a
number of votes proportional to the aggregate liquidation preference of its
outstanding shares). In such case, the holders of shares of Series A Preferred
Stock and of all such other series then entitled so to vote, voting as class,
shall elect such directors. If the holders of shares of any such other series
have elected such directors prior to the happening of the default
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or event permitting the holders of shares of Series A Preferred Stock to elect
directors, or prior to a written request for the holding of a special meeting
being received by the Secretary of the Corporation as required in Section
4.3.4(d) above, then a new election shall be held with holders of shares of all
such other series of Preferred Stock and the Series A Preferred Stock voting
together as a single class for such directors, resulting in the termination of
the term of such previously elected directors upon the election of such new
directors. If the holders of shares of any such other series are entitled to
elect in excess of two directors, the Series A Preferred Stock shall not
participate in the election of more than two such directors, and those directors
whose terms first expire shall be deemed to be the directors elected by the
holder of shares of Series A Preferred Stock; provided that, if at the
expiration of such terms, the holders of shares of Series A Preferred Stock are
entitled to vote in the election of directors pursuant to the provisions of this
Section 4.3.4, then the Secretary of Corporation shall call a meeting (which
meeting may be the annual meeting or special meeting of stockholders referred to
in Section 4.3.4(c) above) of holders of shares of Series A Preferred Stock for
the purpose of electing replacement directors (in accordance with the provisions
of this Section 4.3.4) to be held at or prior to the time of expiration of the
expiring terms referred to above.
(g) The holders of record of shares of Series A Preferred
Stock then outstanding shall be entitled to vote, together with any other class
or series of Capital Stock entitled to vote then outstanding, on any resolution
presented by the Board of Directors pursuant to Section 5.1.
(h) In any matter in which holders of shares of Series A
Preferred Stock may vote, including any action by written consent, each share of
Series A Preferred Stock shall be entitled to one (1) vote (except as expressly
provided herein or as may be required by law).
(i) Except as required by law, the foregoing voting provisions
shall not apply if, at or prior to the time when the act with respect to which
such vote would otherwise be required shall be effected, all outstanding shares
of the Series A Preferred Stock shall have been redeemed or shall have been
called for redemption upon proper notice and sufficient funds shall have been
deposited in trust to effect such redemption.
Section 4.3.5 Ranking.
The Series A Preferred Stock shall, with respect to dividend
rights and distributions upon liquidation, dissolution, and winding up, rank (i)
senior to the Common Stock, and shares of all other Capital Stock issued from
time to time by the Corporation the terms of which specifically provide that the
shares of such series rank junior to the Series A Preferred Stock with respect
to dividend rights and distributions upon liquidation, dissolution, or winding
up of the Corporation, (ii) on a parity with the shares of all other Capital
Stock issued by the Corporation the terms of which specifically provide that the
shares of such series rank on a parity with the Series A Preferred Stock with
respect to dividends and distributions upon liquidation, dissolution, or winding
up of the Corporation or make no specific provision as to their ranking; and
(iii) junior to all other Capital Stock issued by the Corporation the terms of
which specifically provide that the shares rank senior to the Series A Preferred
Stock with respect to dividends and distributions upon liquidation, dissolution
or winding up of the Corporation (the issuance of which must have been approved
by a vote of holders of at least a majority of the outstanding shares of Series
A Preferred Stock).
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Section 4.3.6 Conversion Rights.
Subject to any other provisions of this Article IV and Article
V hereof, the holders of shares of Series A Preferred Stock shall have the
right, at their option, to convert such shares into shares of Common Stock on
the following terms and conditions:
(a) Shares of Series A Preferred Stock shall be convertible at
any time and from time to time on or after the Conversion Commencement Date into
fully paid and nonassessable shares of Common Stock at a conversion price of
$19.50 per share of Common Stock (as such price may be adjusted from time to
time, the "Conversion Price"). For purposes of this Section 4.3.6, references to
shares of Series A Preferred Stock shall apply equally to fractional shares
thereof. The Conversion Price shall be subject to adjustment from time to time
as hereinafter provided. For purposes of such conversion, each share of Series A
Preferred Stock will be valued at $25.00 plus an amount equal to any accrued and
unpaid dividends on such share to the date of conversion. No payment or
adjustment shall be made on account of any accrued and unpaid dividends on
shares of Series A Preferred Stock surrendered for conversion prior to the
Record Date for the determination of stockholders entitled to such dividends or
on account of any dividends on the shares of Common Stock issued upon such
conversion subsequent to the Record Date for the determination of stockholders
entitled to such dividends. If any shares of Series A Preferred Stock shall be
called for redemption, the right to convert the shares designated for redemption
shall terminate at the close of business on the third Business Day immediately
preceding the date fixed for redemption unless default is made in the payment of
the Series A Redemption Price. In the event of default in the payment of the
Series A Redemption Price, the right to convert the shares designated for
redemption shall terminate at the close of business on the Business Day
immediately preceding the date that such default is cured.
(b) In order to convert shares of Series A Preferred Stock
into shares of Common Stock, the holder thereof shall, on or after the
Conversion Commencement Date, surrender the certificates therefor, duly endorsed
if the Corporation shall so require, or accompanied by appropriate instruments
of transfer satisfactory to the Corporation, at the office of the transfer agent
for the Series A Preferred Stock or at such other office as may be designated by
the Corporation, together with written notice that such holder irrevocably
elects to convert such shares. Such notice shall also state the name and address
in which such holder wishes the certificate for the shares of Common Stock
issuable upon conversion to be issued. As soon as practicable after receipt of
the certificates representing the shares of Series A Preferred Stock to be
converted and the notice of election to convert the same, the Corporation shall
issue and deliver at said office a certificate for the number of whole shares of
Common Stock issuable upon conversion of the shares of Series A Preferred Stock
surrendered for conversion, together with a cash payment in lieu of any fraction
of a share, as hereinafter provided, to the person entitled to receive the same.
If more than one stock certificate for Series A Preferred Stock shall be
surrendered for conversion at one time by the same holder, the number of full
shares of Common Stock issuable upon conversion thereof shall be computed on the
basis of the aggregate number of shares represented by all the certificates so
surrendered. Shares of Series A Preferred Stock shall be deemed to have been
converted immediately prior to the close of business on the date such shares are
surrendered for conversion and notice of election to convert the same is
received by the Corporation in accordance with the foregoing provision, and the
person entitled to receive the Common Stock issuable upon such conversion shall
be deemed for all purposes as the record holder of such shares of Common Stock
as of such date.
(c) In the case of any share of Series A Preferred Stock which
is converted after any Record Date with respect to the payment of a dividend on
the Series A Preferred Stock and on or prior to the
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corresponding Dividend Payment Date, the dividend due on such Dividend Payment
Date shall be payable on such Dividend Payment Date to the holder of record of
such shares on such preceding Record Date notwithstanding such conversion.
Shares of Series A Preferred Stock surrendered for conversion during the period
from the close of business on any Record Date with respect to the payment of a
dividend on the Series A Preferred Stock next preceding any Dividend Payment
Date to the opening of business on such Dividend Payment Date shall (except in
the case of shares of Series A Preferred Stock which have been called for
redemption on a Series A Redemption Date within such period) be accompanied by
payment in New York Clearing House funds or other funds acceptable to the
Corporation of an amount equal to the dividend payable on such Dividend Payment
Date on the shares of Series A Preferred Stock being surrendered for conversion.
The dividend with respect to a share of Series A Preferred Stock called for
redemption on a Series A Redemption Date during the period from the close of
business on any Record Date with respect to the payment of a dividend on the
Series A Preferred Stock next preceding any dividend payment to the opening of
business on such Dividend Payment Date shall be payable on such Dividend Payment
Date to the holder of record of such share on such Record Date, notwithstanding
the conversion of such share of Series A Preferred Stock after such Record Date
and prior to such Dividend Payment Date, and the holder converting such share of
Series A Preferred Stock called for redemption need not include a payment of
such dividend amount upon surrender of such share of Series A Preferred Stock
for conversion.
(d) No fractional shares of Common Stock shall be issued upon
conversion of any shares of Series A Preferred Stock. If more than one share of
Series A Preferred Stock is surrendered at one time by the same holder, the
number of full shares issuable upon conversion thereof shall be computed on the
basis of the aggregate number of shares so surrendered. If the conversion of any
shares of Series A Preferred Stock results in a fractional share of Common
Stock, the Corporation shall pay cash in lieu thereof in an amount equal to such
fraction multiplied by the closing price of the Common Stock, determined as
provided in Section 4.3.6(e)(vi) below, on the date on which the shares of
Series A Preferred Stock were duly surrendered for conversion, or if such date
is not a trading date, on the next succeeding trading date.
(e) The Conversion Price shall be adjusted from time to
time as follows:
(i) In case the Corporation shall pay or make a
dividend or other distribution on shares of Common Stock in Common
Stock, the Conversion Price in effect at the opening of business on the
date following the date fixed for the determination of stockholders
entitled to receive such dividend or other distribution shall be
reduced by multiplying such Conversion Price by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at
the close of business on the date fixed for such determination and the
denominator shall be the sum of such number of shares and the total
number of shares of Common Stock constituting such dividend or other
distribution, such reduction to become effective immediately after the
opening of business on the day following the date fixed for such
determination. For purposes of this subsection, the number of shares of
Common Stock at any time outstanding shall not include authorized but
unissued shares but shall include shares issuable in respect to scrip
certificates issued in lieu of fractions of shares of Common Stock. The
Corporation will not pay any dividend or make any distribution on
authorized but unissued shares of Common Stock.
(ii) In case the Corporation shall issue additional
rights or warrants to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per share
less than the then current market price per share (determined as
provided in Section 4.3.6(e)(vi) below) of the Common Stock on the date
fixed for the determination of
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stockholders entitled to receive such rights or warrants (other than
pursuant to a dividend reinvestment plan), the Conversion Price in
effect at the opening of business on the day following the date fixed
for such determination shall be reduced by multiplying such Conversion
Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the date
fixed for such determination plus the number of shares of Common Stock
which the aggregate of the offering price of the total number of shares
of Common Stock so offered for subscription or purchase would purchase
at such current market price (determined as provided in Section
4.3.6(e)(vi) below) and the denominator shall be the number of shares
of Common Stock outstanding at the close of business on the date fixed
for such determination plus the number of shares of Common Stock so
offered for subscription or purchase, such reduction to become
effective immediately after the opening of business on the day
following the date fixed for such determination. For the purposes of
this Section 4.3.6(e)(ii), the number of shares of Common Stock at any
time outstanding shall not include authorized but unissued shares but
shall include shares issuable in respect of scrip certificates issued
in lieu of fractions of shares of Common Stock. The Corporation will
not issue any rights or warrants in respect of shares of authorized but
unissued Common Stock.
(iii) In case outstanding shares of Common Stock
shall be subdivided into a greater number of shares of Common Stock,
the Conversion Price in effect at the opening of business on the date
following the day upon which such subdivision becomes effective shall
be proportionately reduced, and, conversely, in case outstanding shares
of Common Stock shall be combined into a smaller number of shares of
Common Stock, the Conversion Price in effect at the opening of business
on the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after the
opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(iv) In case the Corporation shall, by dividend or
otherwise, distribute to all holders of its Common Stock evidence of
its indebtedness or assets (including securities, but excluding (1) any
rights or warrants referred to in Section 4.3.6(e)(ii) above, (2) any
dividend described in Section 4.3.6(e)(ix) below, and (3) any dividend
or distribution referred to in Section 4.3.6(e)(i) above), the
Conversion Price shall be adjusted so that the same shall equal the
price determined by multiplying the Conversion Price in effect
immediately prior to the close of business on the date fixed for the
determination of stockholders entitled to receive such distributions by
a fraction of which the numerator shall be the current market price per
share (determined as provided in Section 4.3.6(e)(vi) below) of the
Common Stock on the date fixed for such determination less the fair
market value (as determined by the Board of Directors, whose
determination shall be conclusive and shall be described in a statement
filed with the transfer agent for the Series A Preferred Stock) of the
portion of the evidences of the indebtedness or assets so distributed
applicable to one share of Common Stock and the denominator shall be
such current market price per share of Common Stock, such adjustment to
become effective immediately prior to the opening of business on the
day following the date fixed for the determination of stockholders
entitled to receive such distribution.
(v) For the purposes of this Section 4.3.6, the
reclassification of Common Stock into securities including securities
other than Common Stock (other than any reclassification upon a
consolidation or merger to which Section 4.3.6(g) below applies) shall
be deemed to involve (A)
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a distribution of such securities other than Common Stock to all
holders of Common Stock (and the effective date of such
reclassification shall be deemed to be "the date fixed for the
determination of stockholders entitled to receive such distribution"
and the "date fixed for such determination" within the meaning of
Section 4.3.6(e)(vi) above), and (B) a subdivision or combination, as
the case may be, of the number of shares of Common Stock outstanding
immediately thereafter (and the effective date of such reclassification
shall be deemed to be "the day upon which such subdivision became
effective" and "the day upon which such subdivision or combination
becomes effective," as the case may be) within the meaning of Section
4.3.6(e)(iii) above.
(vi) For the purpose of any computation under Section
4.3.6 and (iv) above, the "current market price per share" of Common
Stock on any day shall be deemed to be the average of the daily closing
prices for the thirty (30) consecutive trading days commencing
forty-five (45) days before the day in question. The closing price for
each day shall be the reported last sale price or, in case no such
reported sale takes place on such day, the average of the reported
closing bid and asking prices, in either case on the NYSE, or, if the
Common Stock is not quoted on such exchange, on the principal national
securities exchange on which the Common Stock is then listed or
admitted to trading or, if the Common Stock is not quoted on any
national securities exchange, the average of the closing bid and asked
prices in the Nasdaq Stock Market, or in the over-the-counter market as
furnished by a NYSE member first selected from time to time by the
Board of Directors of the Corporation for that purpose.
(vii) Notwithstanding the foregoing, no adjustment in
the Conversion Price for the Series A Preferred Stock shall be required
unless such adjustment would require an increase or decrease of at
least 1% in such price; provided, however, that any adjustment which by
reason of this Section 4.3.6(e)(vii) is not required to be made shall
be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 4.3.6 shall be made to the nearest
cent or to the nearest one-hundredth of a share, as the case may be.
(viii) In the event of a distribution of evidences of
indebtedness or other assets (as described in Section 4.3.6(e)(iv)) or
a dividend to all holders of Common Stock of rights to subscribe for
additional shares of Capital Stock (other than those referred to in
Section 4.3.6(e)(ii) above), the Corporation may, instead of making an
adjustment of the Conversion Price, make proper provision so that each
holder who converts such shares will be entitled to receive upon such
conversion, in addition to shares of Common Stock, an appropriate
number of such rights, warrants, evidences of indebtedness or other
assets.
(ix) No adjustment will be made for Ordinary Cash
Dividends (defined as dividends or other distributions to holders of
Common Stock in an amount not exceeding the accumulated Funds from
Operations of the Operating Partnership including for this purpose
consolidated partnerships since the Initial Issuance Date, after
deducting cumulative dividends or other distributions (A) paid in
respect of all classes of Capital Stock and in respect of Units held by
persons other than the Corporation or (B) accrued in respect of Series
A Preferred Stock and any other shares of Preferred Stock of the
Corporation ranking on a parity with or senior to the Series A
Preferred Stock as to dividends, in each case since the Initial
Issuance Date). For this purpose, "Funds from Operations of the
Operating Partnership" shall mean net income (loss) (computed in
accordance with generally accepted accounting principles consistently
applied), excluding gains (or
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losses) from debt restructuring and sales of property, plus
depreciation and amortization of, and after adjustments for
unconsolidated partnerships and joint ventures of the Operating
Partnership.
(f) Whenever the Conversion Price shall be adjusted as herein
provided, (i) the Corporation shall forthwith make available at the office of
the transfer agent for the Series A Preferred Stock a statement describing in
reasonable detail the adjustment, the facts requiring such adjustment and the
method of calculation used; and (ii) the Corporation shall cause to be mailed by
first class mail, postage prepaid, as soon as practicable to each holder of
record of shares of Series A Preferred Stock a notice stating that the
Conversion Price has been adjusted and setting forth the adjusted Conversion
Price.
(g) In the event of any consolidation of the Corporation with
or merger of the Corporation into any other corporation (other than a merger in
which the Corporation is the surviving corporation) or a sale, lease (other than
in the ordinary course of business) or conveyance of the assets of the
Corporation as an entirety or substantially as an entirety, or any statutory
exchange of securities with another corporation, the holder of each share of
Series A Preferred Stock shall, notwithstanding anything in this Section 4.3.6
to the contrary, have the right, after such consolidation, merger, sale, lease,
conveyance or exchange, to convert such share into the number and kind of shares
of stock or other securities and the amount and kind of property which such
holder would have been entitled to receive immediately upon such consolidation,
merger, sale, lease, conveyance or exchange for the number of shares of Common
Stock that would have been issued to such holder had such shares of Series A
Preferred Stock been converted immediately prior to such consolidation, merger,
sale, lease, conveyance or exchange. The provisions of this Section 4.3.6(g)
shall similarly apply to successive consolidations, mergers, sales, leases,
conveyances or exchanges.
(h) The Corporation shall pay any taxes that may be payable in
respect of the issuance of shares of Common Stock upon conversion of shares of
Series A Preferred Stock, but the Corporation shall not be required to pay any
taxes which may be payable in respect of any transfer involved in the issuance
of shares of Common Stock in a name other than that in which the shares of
Series A Preferred Stock so converted are registered, and the Corporation shall
not be required to issue or deliver any such shares unless and until the person
requesting such issuance shall have paid to the Corporation the amount of any
such taxes or shall have established to the satisfaction of the Corporation that
such taxes have been paid.
(i) The Corporation may (but shall not be required to) make
such reductions in the Conversion Price, in addition to those required by
Sections 4.3.6(e)(i) through (iv) above, as it considers to be advisable in
order that any event treated for federal income tax purposes as a dividend of
stock or stock rights shall not be taxable to the recipients.
(j) The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock the full
number of shares of Common Stock issuable upon the conversion of all shares of
Series A Preferred Stock then outstanding.
(k) In the event that:
(i) the Corporation shall declare a dividend or
any other distribution on its Common Stock, other than an Ordinary Cash
Dividend; or
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(ii) the Corporation shall authorize the granting to
the holders of its Common Stock of rights to subscribe for or purchase
any shares of Capital Stock of any class or of any other rights; or
(iii) any capital reorganization of the Corporation,
reclassification of the Capital Stock, consolidation or merger of the
Corporation with or into another corporation (other than a merger in
which the Corporation is the surviving corporation), or sale, lease
(other than in the ordinary course of business) or conveyance of the
assets of the Corporation as an entirety or substantially as an
entirety to another corporation occurs; or
(iv) the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation shall occur;
the Corporation shall cause to be mailed to the holders of record of shares of
Series A Preferred Stock at least fifteen (15) days prior to the applicable date
hereinafter specified a notice stating (A) the date on which a record is to be
taken for the purpose of such dividend, distribution or grant of rights or, if a
record is not to be taken, the date as of which the holders of shares of Common
Stock of record to be entitled to such dividend, distribution. or grant of
rights are to be determined or (B) the date on which such reorganization,
reclassification, consolidation, merger, sale, lease (other than in the ordinary
course of business), conveyance, dissolution, liquidation or winding up is
expected to take place, and the date, if any is to be fixed, as of which holders
of shares of Common Stock of record shall be entitled to exchange their shares
of Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, lease,
conveyance, dissolution, liquidation or winding up. Failure to give such notice,
or any defect therein, shall not affect the legality of such dividend,
distribution, grant, reorganization, reclassification, consolidation, merger,
sale, lease, conveyance, dissolution, liquidation or winding up.
(l) No shares of Series A Preferred Stock may be converted
into shares of Common Stock if such conversion would result in any violation of
the applicable restrictions set forth in Section 4.5.5.
Section 4.3.7 Series A Preferred Stock Ownership Limitations.
(a) During the period commencing on the Initial Issuance
Date and prior to the Restriction Termination Date:
(i) except as provided in Section 4.3.13, no Person
shall Acquire any shares of Series A Preferred Stock if, as the result
of such Acquisition, such Person shall Beneficially or Constructively
Own shares of Series A Preferred Stock in excess of the Series A
Preferred Stock Ownership Limit;
(ii) except as provided in Sections 4.3.13 and
4.5.11, no Person shall Acquire or Beneficially Own or Constructively
Own shares of Series A Preferred Stock or Common Stock in excess of the
Aggregate Stock Ownership Limit; and
(iii) no Person shall Acquire or Beneficially or
Constructively Own shares of Capital Stock to the extent that such
Acquisition or Beneficial or Constructive Ownership of Capital Stock
would result in the Corporation being "closely held" within the meaning
of Section 856(h) of the Code, or otherwise failing to qualify as a
REIT (including, but not limited to, an Acquisition or
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Beneficial or Constructive Ownership that would result in the
Corporation owning (actually or Constructively) an interest in a tenant
that is described in Section 856(d)(2)(B) of the Code if the income
derived by the Corporation from such tenant would cause the Corporation
to fail to satisfy any of the gross income requirements of Section
856(c) of the Code).
(b) If, during the period commencing on the Initial Issuance
Date and prior to the Restriction Termination Date, any Transfer or Acquisition
of shares of Series A Preferred Stock (other than a Transfer or Acquisition to
which Section 4.3.7(c) applies) (whether or not such Transfer or Acquisition is
the result of a transaction entered into through the facilities of the NYSE or
any other national securities exchange or automated inter-dealer quotation
system) occurs which, if effective, would result in any Person Acquiring shares
of Series A Preferred Stock in violation of Section 4.3.7(a), (i) then that
number of shares of the Series A Preferred Stock being Transferred or Acquired
that otherwise would cause such Person to violate Section 4.3.7(a) (rounded up
to the nearest whole share) shall be automatically transferred to a Trust for
the benefit of a Charitable Beneficiary, as described in Section 4.4, effective
as of the close of business on the Business Day prior to the date of such
Transfer or Acquisition, and such Person shall acquire no rights in such shares;
or (ii) if the transfer to the Trust described in clause (i) of this sentence
would not be effective for any reason to prevent any Person from Acquiring or
Transferring Series A Preferred Stock in violation of Section 4.3.7(a), then the
Transfer or Acquisition of that number of shares of Series A Preferred Stock
that otherwise would cause any Person to violate Section 4.3.7(a) shall be void
ab initio, and the intended transferee shall acquire no rights in such shares of
Series A Preferred Stock.
(c) If, during the period commencing on the Initial Issuance
Date and prior to the Restriction Termination Date, a change in the relationship
between two or more Persons ("Preferred Stock Affected Persons") results in any
of such Preferred Stock Affected Persons Beneficially or Constructively Owning
shares of Series A Preferred Stock in violation of Section 4.3.7(a) because of
the application of Section 318(a) of the Code (as modified by Section 856(d)(5)
of the Code) or Section 544 of the Code (as modified by Section 856(h)(1)(B) of
the Code) (a "Preferred Stock Constructive Ownership Event"), then that number
of shares of Series A Preferred Stock Beneficially or Constructively Owned by
the Preferred Stock Affected Persons (rounded up to the nearest whole share)
that otherwise would violate Section 4.3.7(a) shall be automatically transferred
to a Trust for the benefit of a Charitable Beneficiary, as described in Section
4.4, effective as of the close of business on the Business Day prior to such
Preferred Stock Constructive Ownership Event, and such Preferred Stock Affected
Person or Persons shall acquire no rights in such shares.
(d) Notwithstanding anything to the contrary in Section 4.3.3,
if during the period commencing on the Initial Issuance Date and prior to the
Restriction Termination Date, a Special Triggering Event (if effective) or other
event or occurrence (if effective), other than a Transfer or Acquisition
described in Section 4.3.7(b) or a Preferred Stock Constructive Ownership Event
described in Section 4.3.7(c), would result in any violation of Section
4.3.7(a), then (i) the number of shares of Series A Preferred Stock (rounded up
to the nearest whole share) that would (but for this Section 4.3.7(d)) cause any
Person to Beneficially or Constructively Own Series A Preferred Stock in
violation of Section 4.3.7(a) shall be automatically repurchased by the
Corporation from the actual owner of such shares of Series A Preferred Stock,
effective as of the close of business on the Business Day prior to the date of
such Special Triggering Event or other event or occurrence; or (ii) if the
automatic repurchase described in clause (i) of this sentence would not be
effective for any reason to prevent any Person from Beneficially or
Constructively Owning Series A Preferred Stock in violation of Section 4.3.7(a),
then that number of shares of Series A Preferred Stock (rounded up to the
nearest whole share) that otherwise would cause any Person to violate Section
4.3.7(a)
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shall be automatically transferred to a Trust for the benefit of a Charitable
Beneficiary, as described in Section 4.4, effective as of the close of business
on the Business Day prior to the date of such Special Triggering Event or other
event or occurrence, and the actual owner shall retain no rights in such shares
of Series A Preferred Stock; or (iii) if the transfer to the Trust described in
clause (ii) of this sentence would not be effective for any reason to prevent
any Person from Beneficially or Constructively Owning Series A Preferred Stock
in violation of Section 4.3.7(a), then the Special Triggering Event or other
event or occurrence that would otherwise cause such Person to violate Section
4.3.7(a) shall be void ab initio. The repurchase price of each share of Series A
Preferred Stock automatically repurchased pursuant to this Section 4.3.7(d)
shall be a price per share equal to the Market Price on the date of the Special
Triggering Event or other event or occurrence that resulted in the repurchase.
Dividends which were accrued but unpaid with respect to the repurchased shares
as of the date of the Special Triggering Event or other event or occurrence that
resulted in the repurchase shall be paid. Any dividend or other distribution
paid after the Special Triggering Event or other event or occurrence that
resulted in the repurchase, but prior to the discovery by the Corporation that
shares of Series A Preferred Stock have been automatically repurchased by the
Corporation, shall be paid to the Corporation upon demand.
(e) Subject to Section 5.2 and notwithstanding any other
provisions contained herein, during the period commencing on the Initial
Issuance Date and prior to the Restriction Termination Date, any Transfer or
Acquisition of shares of Series A Preferred Stock (whether or not such Transfer
or Acquisition is the result of a transaction entered into through the
facilities of the NYSE or any other national securities exchange or automated
inter-dealer quotation system) that, if effective, would result in the Capital
Stock being beneficially owned by less than 100 Persons (determined without
reference to any rules of attribution) shall be void ab initio, and the intended
transferee shall acquire no rights in such shares of Series A Preferred Stock.
Section 4.3.8 Remedies for Breach. If the Board of Directors
of the Corporation or any duly authorized committee thereof shall at any time
determine in good faith that a Transfer or other event has taken place that
results in a violation of Section 4.3.7 or that a Person intends to Acquire or
has attempted to Acquire Beneficial or Constructive Ownership of any shares of
Series A Preferred Stock in violation of Section 4.3.7 (whether or not such
violation is intended), the Board of Directors or a committee thereof shall take
such action as it deems advisable, subject to Section 5.2 hereof, to refuse to
give effect to or to prevent such Transfer or other event, including, but not
limited to, causing the Corporation to redeem shares, refusing to give effect to
such Transfer on the books of the Corporation or instituting proceedings to
enjoin such Transfer; provided, however, that any Transfers or attempted
Transfers or, in the case of an event other than a Transfer, Beneficial or
Constructive Ownership, in violation of Section 4.3.7 shall automatically result
in the transfer to the Trust described above (or the automatic repurchase) and,
where applicable, such Transfer (or other event) shall be void ab initio as
provided above irrespective of any action (or non-action) by the Board of
Directors or a committee thereof.
Section 4.3.9 Notice of Restricted Transfer. Any Person who
Acquires or attempts or intends to Acquire shares of Series A Preferred Stock in
violation of Section 4.3.7 or any Person who is a transferee in a Transfer or is
otherwise affected by an event other than a Transfer that results in a violation
of Section 4.3.7 shall immediately give written notice to the Corporation of
such Acquisition, Transfer or other event and shall provide to the Corporation
such other information as the Corporation may request in order to determine the
effect, if any, of such Acquisition, Transfer or attempted, intended or
purported Acquisition, Transfer or other event on the Corporation's status as a
REIT.
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Section 4.3.10 Owners Required To Provide Information.
From the Initial Issuance Date and prior to the Restriction Termination Date:
(a) every owner of more than five percent (5%) (or such lower
percentage as required by the Code or the Treasury Regulations promulgated
thereunder) of the outstanding shares of Series A Preferred Stock, within 30
days after December 31 of each year, shall give written notice to the
Corporation stating the name and address of such owner, the number of shares of
Series A Preferred Stock and other shares of the Capital Stock Beneficially
Owned, and a description of the manner in which such shares are held. Each such
owner shall provide to the Corporation such additional information as the
Corporation may request in order to determine the effect, if any, of such
Beneficial Ownership on the Corporation's status as a REIT and to ensure
compliance with the Series A Preferred Stock Ownership Limit; and
(b) each Person who is a Beneficial or Constructive Owner of
Series A Preferred Stock and each Person (including the stockholder of record)
who is holding Series A Preferred Stock for a Beneficial or Constructive Owner
shall provide to the Corporation such information as the Corporation may
request, in good faith, in order to determine the Corporation's status as a REIT
and to comply with requirements of any taxing authority or governmental
authority or to determine such compliance.
Section 4.3.11 Remedies Not Limited. Subject to Section 5.1
and Section 5.2, nothing contained in this Section 4.3 shall limit the authority
of the Board of Directors of the Corporation to take such other action as it
deems necessary or advisable to protect the Corporation and the interests of its
stockholders in preserving the Corporation's status as a REIT.
Section 4.3.12 Ambiguity. In the case of an ambiguity in the
application of any of the provisions of this Section 4.3, Section 4.4, or any
definition contained in Section 4.2, the Board of Directors of the Corporation
shall have the power to determine the application of the provisions of this
Section 4.3 or Section 4.4 with respect to any situation based on the facts
known to it. In the event Section 4.3 or 4.4 requires an action by the Board of
Directors and this Charter fails to provide specific guidance with respect to
such action, the Board of Directors shall have the power to determine the action
to be taken so long as such action is not contrary to the provisions of Sections
4.2, 4.3 or 4.4. Absent a decision to the contrary by the Board of Directors
(which the Board may make in its sole and absolute discretion), the shares to be
affected by the remedies set forth in Section 4.3.7(b), (c), and (d) shall be as
follows: (1) if a Person would have (but for the remedies set forth in Section
4.3.7(b), (c), and (d) as applicable) Acquired shares of Series A Preferred
Stock in violation of Section 4.3.7(a), such remedies (as applicable) shall
apply first to the shares which, but for such remedies, would have been Acquired
and actually owned by such Person, second to shares which, but for such
remedies, would have been Acquired by such Person and which would have been
Beneficially Owned or Constructively Owned (but not actually owned) by such
Person, pro rata among the Persons who actually own such shares based upon the
relative value of the shares held by each such Person; and (2) if a Person is in
violation of Section 4.3.7(a) as a result of an event other than an Acquisition
of shares of Series A Preferred Stock by such Person, the remedies set forth in
Section 4.3.7(b), (c), or (d) (as applicable) shall apply first to shares which
are actually owned by such Person and second to shares which are Beneficially or
Constructively Owned (but not actually owned) by such Person, pro rata among the
Persons who actually own such shares based upon the relative value of the shares
held by each such Person.
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Section 4.3.13 Exceptions.
(a) Subject to Section 4.3.7(a)(iii), the Board of Directors
of the Corporation, in its sole discretion, may exempt a Person from the Series
A Preferred Stock Ownership Limit or the Aggregate Stock Ownership Limit, as the
case may be, if: (A) such Person is not (i) an individual for purposes of
Section 542(a)(2) of the Code as modified by Section 856(h) of the Code, or (ii)
treated as the owner of such stock for purposes of Section 542(a)(2) of the Code
as modified by Section 856(h) of the Code, and the Board of Directors obtains
such representations and undertakings from such Person as are reasonably
necessary to ascertain that no individual's Beneficial or Constructive Ownership
of such shares of Series A Preferred Stock will violate Section 4.3.7; (B) such
Person does not and represents that it will not own, actually or Constructively,
an interest in a tenant of the Corporation (or a tenant of any entity owned or
controlled by the Corporation) that would cause the Corporation to own, actually
or Constructively, more than a 9.9% interest (as set forth in Section
856(d)(2)(B) of the Code) in such tenant and the Board of Directors obtains such
representations and undertakings from such Person as are reasonably necessary to
ascertain this fact; and (C) such Person agrees that any violation or attempted
violation of such representations or undertakings (or other action which is
contrary to the restrictions contained in Sections 4.3.7 through 4.3.12) will
result in such shares of Series A Preferred Stock being automatically
transferred to a Trust or automatically repurchased in accordance with Section
4.3.7. Solely for purposes of clause (B) above, a tenant from whom the
Corporation (or an entity owned or controlled by the Corporation) derives (and
is expected to continue to derive) a sufficiently small amount of revenue such
that, in the opinion of the Board of Directors of the Corporation, rent from
such tenant would not adversely affect the Corporation's ability to qualify as a
REIT, shall not be treated as a tenant of the Corporation.
(b) Prior to granting any exception pursuant to Section
4.3.13(a), the Board of Directors of the Corporation may require a ruling from
the Internal Revenue Service, or an opinion of counsel, in either case in form
and substance satisfactory to the Board of Directors in it sole discretion, as
it may deem necessary or advisable in order to determine or ensure the
Corporation's status as a REIT. Notwithstanding the receipt of any ruling or
opinion, the Board of Directors may impose such conditions or restrictions as it
deems appropriate in connection with granting such exception.
(c) Subject to Section 4.3.7(a)(iii), an underwriter which
participates in a public offering or a private placement of Capital Stock (or
securities convertible into or exchangeable for Capital Stock) may Acquire or
Beneficially Own or Constructively Own shares of Capital Stock (or securities
convertible into or exchangeable for Capital Stock) in excess of the Series A
Preferred Stock Ownership Limit or the Aggregate Stock Ownership Limit, but only
to the extent necessary to facilitate such public offering or private placement.
Section 4.3.14 Legend. Each certificate for shares of Series
A Preferred Stock shall bear the following legend:
"The shares represented by this certificate are subject to restrictions
on Beneficial and Constructive Ownership and Transfer for the purpose
of the Corporation's maintenance of its status as a Real Estate
Investment Trust under the Internal Revenue Code of 1986, as amended
(the "Code"). Subject to certain further restrictions and except as
expressly provided in the Corporation's Charter, (i) no Person may
Beneficially or Constructively Acquire shares of the Corporation's
Series A Preferred Stock in excess of 9.8% of the outstanding shares of
Series A Preferred Stock of the Corporation; (ii) no Person (other than
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a Conversion Holder with respect to such holder's conversion rights)
may Beneficially or Constructively Own shares of the Corporation's
Common Stock in excess of 9.8% of the outstanding shares of Common
Stock of the Corporation; (iii) no Person may Beneficially or
Constructively Own shares of Capital Stock of the Corporation which has
an aggregate value in excess of 9.8% of the value of the total
outstanding shares of Capital Stock of the Corporation; (iv) no Person
may Beneficially or Constructively Own Series A Preferred Stock or
Common Stock that would result in the Corporation being "closely held"
under Section 856(h) of the Code or otherwise cause the Corporation to
fail to qualify as a REIT; and (v) no Person may Transfer or Acquire
shares of Series A Preferred Stock if such Transfer or Acquisition
would result in the Capital Stock of the Corporation being owned by
fewer than 100 Persons. Any Person who Beneficially or Constructively
Owns or attempts to Beneficially or Constructively Own shares of Series
A Preferred Stock or Common Stock which causes or will cause a Person
to Beneficially or Constructively Own shares of Series A Preferred
Stock or Common Stock in excess of the above limitations must
immediately notify the Corporation. If any of the restrictions on
transfer or ownership are violated, the shares of Series A Preferred
Stock represented hereby will be automatically transferred to a Trustee
of a Trust for the benefit of one or more Charitable Beneficiaries, or
in certain circumstances such shares will be automatically repurchased
by the Corporation. In addition, the Corporation may redeem shares upon
the terms and conditions specified by the Board of Directors in its
sole discretion if the Board of Directors determines that ownership or
a Transfer or other event may violate the restrictions described above.
Furthermore, upon the occurrence of certain events, attempted Transfers
in violation of the restrictions described above may be void ab initio.
All capitalized terms in this legend have the meanings defined in the
charter of the Corporation, as the same may be amended from time to
time, a copy of which, including the restrictions on transfer and
ownership, will be furnished to each holder of Series A Preferred Stock
on request and without charge."
4.4 TRANSFER OF SERIES A PREFERRED STOCK IN TRUST
Section 4.4.1 Ownership in Trust. Upon any purported Transfer,
Acquisition, or other event described in 4.3.7(b), (c) or (d) that is to result
in a transfer of shares of Series A Preferred Stock to a Trust, such shares of
Series A Preferred Stock shall be deemed to have been transferred to the Trustee
in his capacity as trustee of a Trust for the exclusive benefit of one or more
Charitable Beneficiaries. Such transfer to the Trustee shall be deemed to be
effective as of the close of business on the Business Day prior to the purported
Transfer, Acquisition, or other event that results in the transfer to the Trust
pursuant to Section 4.3.7. The Trustee shall be appointed by the Corporation and
shall be a Person unaffiliated with the Corporation, any Purported Beneficial
Transferee, or any Purported Record Transferee. Each Charitable Beneficiary
shall be designated by the Corporation as provided in Section 4.4.6.
Section 4.4.2 Status of Shares Held by the Trustee. Shares of
Series A Preferred Stock held by the Trustee shall be issued and outstanding
shares of Capital Stock. The Purported Beneficial Transferee or Purported Record
Transferee shall have no rights in the shares held by the Trustee. The Purported
Beneficial Transferee or Purported Record Transferee shall not benefit
economically from ownership of any shares held in trust by the Trustee, shall
have no rights to dividends and shall not possess any rights to vote or other
rights attributable to the shares held in the Trust.
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Section 4.4.3 Dividend and Voting Rights. The Trustee shall
have all voting rights and rights to dividends with respect to shares of Series
A Preferred Stock held in the Trust, which rights shall be exercised for the
exclusive benefit of the Charitable Beneficiary. Any dividend or distribution
paid prior to the discovery by the Corporation that the shares of Series A
Preferred Stock have been transferred to the Trustee shall be paid with respect
to such shares of Series A Preferred Stock to the Trustee upon demand, and any
dividend or distribution declared but unpaid shall be paid when due to the
Trustee. Any dividends or distributions so paid over to the Trustee shall be
held in trust for the Charitable Beneficiary. The Purported Record Transferee
shall have no voting rights with respect to shares held in the Trust and any
vote cast by a Purported Record Transferee prior to the discovery by the
Corporation that the shares of Series A Preferred Stock have been transferred to
the Trustee will be rescinded as void and shall be recast in accordance with the
desires of the Trustee acting for the benefit of the Charitable Beneficiary.
Section 4.4.4 Sale of Shares by Trustee. Within 20 days of
receiving notice from the Corporation that shares of Series A Preferred Stock
have been transferred to the Trust, the Trustee of the Trust shall sell the
shares held in the Trust to a person, designated by the Trustee, whose ownership
of the shares will not violate the ownership limitations set forth in Section
4.3.7(a). Upon such sale, the interest of the Charitable Beneficiary in the
shares sold shall terminate and the Trustee shall distribute the net proceeds of
the sale to the Purported Record Transferee and to the Charitable Beneficiary as
provided in this Section 4.4.4. The Purported Record Transferee shall receive
the lesser of (1) the price paid by the Purported Record Transferee for the
shares or, if the Purported Record Transferee did not give value for the shares
(through a gift, devise or other transaction), the Market Price of the shares on
the day of the event causing the shares to be held in the Trust and (2) the
price per share received by the Trustee from the sale or other disposition of
the shares held in the Trust. Any net sales proceeds in excess of the amount
payable to the Purported Record Transferee shall be immediately paid to the
Charitable Beneficiary. If, prior to the discovery by the Corporation that
shares of Series A Preferred Stock have been transferred to the Trustee, such
shares are sold by a Purported Record Transferee then (i) such shares shall be
deemed to have been sold on behalf of the Trust and (ii) to the extent that the
Purported Record Transferee received an amount for such shares that exceeds the
amount that such Purported Record Transferee was entitled to receive pursuant to
this Section 4.4.4, such excess shall be paid to the Trustee upon demand.
Section 4.4.5 Purchase Right in Stock Transferred to the
Trustee. Shares of Series A Preferred Stock transferred to the Trustee shall be
deemed to have been offered for sale to the Corporation, or its designee, at a
price per share equal to the lesser of (i) the price per share in the
transaction that resulted in such transfer to the Trust (or, in the case of a
devise or gift, the Market Price at the time of such devise or gift) and (ii)
the Market Price on the date the Corporation, or its designee, accepts such
offer. The Corporation shall have the right to accept such offer until the
Trustee has sold the shares held in the Trust pursuant to Section 4.4.4. Upon
such a sale to the Corporation, the interest of the Charitable Beneficiary in
the shares sold shall terminate and the Trustee shall distribute the net
proceeds of the sale to the Purported Record Transferee.
Section 4.4.6 Designation of Charitable Beneficiaries. By
written notice to the Trustee, the Corporation shall designate one or more
nonprofit organizations to be the Charitable Beneficiary of the interest in the
Trust such that (i) the shares of Series A Preferred Stock held in the Trust
would not violate the restrictions set forth in Section 4.3.7(a) in the hands of
such Charitable Beneficiary and (ii) each Charitable Beneficiary is an
organization described in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the
Code.
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4.5 COMMON STOCK
Section 4.5.1 Dividends. Subject to the preferential rights of
any class or series within any such class of Capital Stock ranking senior as to
dividends to the Common Stock, including the Series A Preferred Stock, and to
the provisions of Section 4.6 of this Charter, each record holder of shares of
Common Stock shall be entitled to receive, out of the assets of the Corporation
which are legally available therefor, such dividends as from time to time may be
declared by the Board of Directors of the Corporation. All such holders shall
share ratably, in accordance with the number of shares of Common Stock held by
each such holder, in all dividends paid on the Common Stock.
Section 4.5.2 Distribution Upon Liquidation, Dissolution or
Winding Up. In the event of any dissolution, liquidation or winding up of the
affairs of the Corporation, after payment or provision for payment of the debts
and other liabilities of the Corporation and subject to the preferential rights
of any class of Capital Stock ranking senior to the Common Stock as to
liquidation preferences and to the provisions of Articles IV and V of this
Charter (including Series A Preferred Stock and all classes or series of
Preferred Stock), the holders of shares of Common Stock shall be entitled to
receive, ratably with each other holder of shares of Common Stock, a portion of
the assets of the Corporation available for distribution to the holders of its
Common Stock calculated by dividing the number of shares of Common Stock held by
such holder by the total number of shares of Common Stock then outstanding.
Section 4.5.3 Voting Rights. Except as otherwise provided in
this Charter or required by applicable law, each holder of shares of Common
Stock shall be entitled to notice of, and the right to vote at, any meeting of
the stockholders of Common Stock and each outstanding share of Common Stock
shall be entitled to one vote on each matter submitted to a vote at a meeting of
stockholders. The holders of record of shares of Common Stock shall be entitled
to vote, together with any other class or series of Capital Stock entitled to
vote then outstanding, on any resolution presented by the Board of Directors of
the Corporation pursuant to Section 5.1.
Section 4.5.4 Exclusion of Other Rights. Except as may
otherwise be required by law, the shares of Common Stock shall not have any
preferences or relative, participating, optional or other special rights, other
than those specifically set forth in this Charter.
Section 4.5.5 Common Stock Ownership Limitations.
(a) During the period commencing on the Initial Issuance
Date and prior to the Restriction Termination Date:
(i) except as provided in Section 4.5.11, no Person,
other than a Conversion Holder, shall Acquire or Beneficially or
Constructively Own any shares of Common Stock if, as the result of such
Acquisition or Beneficial or Constructive Ownership, such Person shall
Beneficially or Constructively Own shares of Common Stock in excess of
the Common Stock Ownership Limit, provided, however, a Conversion
Holder shall only be permitted to Acquire or Beneficially Own or
Constructively Own shares of Common Stock in excess of the limitation
provided herein to the extent that such excess Beneficial or
Constructive Ownership was caused by a conversion of (or the right to
convert) Series A Preferred Stock into Common Stock and, provided
further, solely for purposes of facilitating the exercise of stock
options pursuant to the Stock Option Plan, and subject
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to Sections 4.5.5(a)(ii) and 4.5.5(a)(iii) below, the Operating
Partnership may Constructively Own Common Stock in excess of the Common
Stock Ownership Limit;
(ii) except as provided in Sections 4.5.11 and
4.3.13, no Person, including but not limited to a Conversion Holder,
shall Acquire or Beneficially or Constructively Own shares of Series A
Preferred Stock or Common Stock in excess of the Aggregate Stock
Ownership Limit; however, solely for purposes of facilitating the
exercise of stock options pursuant to the Stock Option Plan, the
Operating Partnership may Constructively Own Common Stock to the extent
that as a result of such Constructive Ownership, the value of the
shares of Capital Stock Constructively Owned by the Operating
Partnership, in the aggregate, does not exceed 9.9% of the aggregate
value of the outstanding shares of Capital Stock; and
(iii) no Person shall Acquire or Beneficially or
Constructively Own shares of Capital Stock to the extent that such
Acquisition or Beneficial or Constructive Ownership of Capital Stock
would result in the Corporation being "closely held" within the meaning
of Section 856(h) of the Code, or otherwise failing to qualify as a
REIT (including, but not limited to, an Acquisition or Beneficial or
Constructive Ownership that would result in the Corporation owning
(actually or Constructively) an interest in a tenant that is described
in Section 856(d)(2)(B) of the Code if the income derived by the
Corporation from such tenant would cause the Corporation to fail to
satisfy any of the gross income requirements of Section 856(c) of the
Code).
(b) If, during the period commencing on the Initial Issuance
Date and prior to the Restriction Termination Date, any Transfer or Acquisition
of shares of Common Stock (other than a Transfer or Acquisition to which Section
4.5.5(c) applies) (whether or not such Transfer or Acquisition is the result of
a transaction entered into through the facilities of the NYSE or any other
national securities exchange or automated inter-dealer quotation system) occurs
which, if effective, would result in any Person Acquiring shares of Common Stock
in violation of Section 4.5.5(a), (i) then that number of shares of the Common
Stock being Transferred or Acquired that otherwise would cause such Person to
violate Section 4.5.5(a) (rounded up to the nearest whole share) shall be
automatically transferred to a Trust for the benefit of a Charitable
Beneficiary, as described in Section 4.6, effective as of the close of business
on the Business Day prior to the date of such Transfer or Acquisition, and such
Person shall acquire no rights in such shares or (ii) if the transfer to the
Trust described in clause (i) of this sentence would not be effective for any
reason to prevent any Person from Acquiring or Transferring Common Stock in
violation of Section 4.5.5(a), then the Transfer or Acquisition of that number
of shares of Common Stock that otherwise would cause any Person to violate
Section 4.5.5(a) shall be void ab initio, and the intended transferee shall
acquire no rights in such shares of Common Stock.
(c) If, during the period commencing on the Initial Issuance
Date and prior to the Restriction Termination Date, a change in the relationship
between two or more Persons ("Common Stock Affected Persons") results in any of
such Common Stock Affected Persons Beneficially or Constructively Owning shares
of Common Stock in violation of Section 4.5.5(a) because of the application of
Section 318(a) of the Code (as modified by Section 856(d)(5) of the Code) or
Section 544 of the Code (as modified by Section 856(h)(1)(B) of the Code) (a
"Common Stock Constructive Ownership Event"), then that number of shares of
Common Stock Beneficially or Constructively Owned by the Common Stock Affected
Persons (rounded up to the nearest whole share) that otherwise would violate
Section 4.5.5(a) shall be automatically transferred to a Trust for the benefit
of a Charitable Beneficiary, as described in Section 4.6, effective as of
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the close of business on the Business Day prior to such Common Stock
Constructive Ownership Event, and such Common Stock Affected Person or Persons
shall acquire no rights in such shares.
(d) If during the period commencing on the Initial Issuance
Date and prior to the Restriction Termination Date, a Special Triggering Event
(if effective) or other event or occurrence (if effective), other than a
Transfer or Acquisition described in Section 4.5.5(b) or a Common Stock
Constructive Ownership Event described in Section 4.5.5(c), would result in any
violation of Section 4.5.5(a), then: (i) the number of shares of Common Stock
(rounded up to the nearest whole share) that would (but for this Section
4.5.5(d)) cause any Person to Beneficially or Constructively Own Common Stock in
violation of Section 4.5.5(a) shall be automatically repurchased by the
Corporation from the actual owner of such shares of Common Stock, effective as
of the close of business on the Business Day prior to the date of such Special
Triggering Event or other event or occurrence; or (ii) if the automatic
repurchase described in clause (i) of this sentence would not be effective for
any reason to prevent any Person from Beneficially or Constructively Owning
Common Stock in violation of Section 4.5.5(a), then that number of shares of
Common Stock (rounded up to the nearest whole share) that otherwise would cause
any Person to violate Section 4.5.5(a) shall be automatically transferred to a
Trust for the benefit of a Charitable Beneficiary, as described in Section 4.6,
effective as of the close of business on the Business Day prior to the date of
such Special Triggering Event or other event or occurrence, and the actual owner
shall retain no rights in such shares of Common Stock; or (iii) if the transfer
to the Trust described in clause (ii) of this sentence would not be effective
for any reason to prevent any Person from Beneficially or Constructively Owning
Common Stock in violation of Section 4.5.5(a), then the Special Triggering Event
or other event or occurrence that would otherwise cause such Person to violate
Section 4.5.5(a) shall be void ab initio. The repurchase price of each share of
Common Stock automatically repurchased pursuant to this Section 4.5.5(d) shall
be a price per share equal to the Market Price on the date of the Special
Triggering Event or other event or occurrence that resulted in the repurchase.
Dividends which were accrued but unpaid with respect to the repurchased shares
as of the date of the Special Triggering Event or other event or occurrence that
resulted in the repurchase shall be paid. Any dividend or other distribution
paid after the Special Triggering Event or other event or occurrence that
resulted in the repurchase, but prior to the discovery by the Corporation that
shares of Common Stock have been automatically repurchased by the Corporation,
shall be paid to the Corporation upon demand.
(e) Subject to Section 5.2 and notwithstanding any other
provisions contained herein, during the period commencing on the Initial
Issuance Date and prior to the Restriction Termination Date, any Transfer or
Acquisition of shares of Common Stock (whether or not such Transfer or
Acquisition is the result of a transaction entered into through the facilities
of the NYSE or any other national securities exchange or automated inter-dealer
quotation system) that, if effective, would result in the Capital Stock being
beneficially owned by less than 100 Persons (determined without reference to any
rules of attribution) shall be void ab initio, and the intended transferee shall
acquire no rights in such shares of Common Stock.
Section 4.5.6 Remedies for Breach. If the Board of Directors
of the Corporation or any duly authorized committee thereof shall at any time
determine in good faith that a Transfer or other event has taken place that
results in a violation of Section 4.5.5 or that a Person intends to Acquire or
has attempted to Acquire Beneficial or Constructive Ownership of any shares of
Common Stock in violation of Section 4.5.5 (whether or not such violation is
intended), the Board of Directors or a committee thereof shall take such action
as it deems advisable, subject to Section 5.2 hereof, to refuse to give effect
to or to prevent such Transfer or other event, including, but not limited to,
causing the Corporation to redeem shares, refusing to give effect to such
Transfer on the books of the Corporation or instituting proceedings to enjoin
such
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Transfer; provided, however, that any Transfers or attempted Transfers or, in
the case of an event other than a Transfer, Beneficial or Constructive Ownership
in violation of Section 4.5.5 shall automatically result in the transfer to the
Trust described above (or the automatic repurchase), and, where applicable, such
Transfer (or other event) shall be void ab initio as provided above irrespective
of any action (or non-action) by the Board of Directors or a committee thereof.
Section 4.5.7 Notice of Restricted Transfer. Any Person who
Acquires or attempts or intends to Acquire shares of Common Stock in violation
of Section 4.5.5 or any Person who is a transferee in a Transfer or is otherwise
affected by an event other than a Transfer that results in a violation of
Section 4.5.5 shall immediately give written notice to the Corporation of such
Acquisition, Transfer or other event and shall provide to the Corporation such
other information as the Corporation may request in order to determine the
effect, if any, of such Acquisition, Transfer or attempted, intended or
purported Acquisition, Transfer or other event on the Corporation's status as a
REIT.
Section 4.5.8 Owners Required To Provide Information. From
the Initial Issuance Date and prior to the Restriction Termination Date:
(a) every owner of more than five percent (5%) (or such lower
percentage as required by the Code or the Treasury Regulations promulgated
thereunder) of the outstanding shares of Common Stock shall, within 30 days
after December 31 of each year, give written notice to the Corporation stating
the name and address of such owner, the number of shares of Common Stock and
other shares of the Common Stock Beneficially or Constructively Owned, and a
description of the manner in which such shares are held. Each such owner shall
provide to the Corporation such additional information as the Corporation may
request in order to determine the effect, if any, of such Beneficial or
Constructive Ownership on the Corporation's status as a REIT and to ensure
compliance with the Common Stock Ownership Limit; and
(b) each Person who is a Beneficial or Constructive Owner of
Common Stock and each Person (including the stockholder of record) who is
holding Common Stock for a Beneficial or Constructive Owner shall provide to the
Corporation such information as the Corporation may request, in good faith, in
order to determine the Corporation's status as a REIT and to comply with
requirements of any taxing authority or governmental authority to determine such
compliance.
Section 4.5.9 Remedies Not Limited. Subject to Section 5.1 and
Section 5.2, nothing contained in this Section 4.5 shall limit the authority of
the Board of Directors of the Corporation to take such other action as it deems
necessary or advisable to protect the Corporation and the interests of its
stockholders in preserving the Corporation's status as a REIT.
Section 4.5.10 Ambiguity. In the case of an ambiguity in the
application of any of the provisions of this Section 4.5, Section 4.6, or any
definition contained in Section 4.2, the Board of Directors of the Corporation
shall have the power to determine the application of the provisions of this
Section 4.5 or Section 4.6 with respect to any situation based on the facts
known to it. In the event Section 4.5 or 4.6 requires an action by the Board of
Directors of the Corporation, and the Charter fails to provide specific guidance
with respect to such action, the Board of Directors of the Corporation shall
have the power to determine the action to be taken so long as such action is not
contrary to the provisions of Sections 4.2, 4.5 or 4.6. Absent a decision to the
contrary by the Board of Directors (which the Board may make in its sole and
absolute discretion), the shares to be affected by the remedies set forth in
Section 4.5.5(b), (c), and (d) shall be as follows: (1) if a Person would have
(but for the remedies set forth in Section 4.5.5(b), (c), and
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(d) as applicable) Acquired shares of Common Stock in violation of Section
4.5.5(a), such remedies (as applicable) shall apply first to the shares which,
but for such remedies, would have been Acquired and actually owned by such
Person, second to shares which, but for such remedies, would have been Acquired
by such Person and which would have been Beneficially Owned or Constructively
Owned (but not actually owned) by such Person, pro rata among the Persons who
actually own such shares based upon the relative value of the shares held by
each such Person; and (2) if a Person is in violation of Section 4.5.5(a) as a
result of an event other than an Acquisition of shares of Common Stock by such
Person, the remedies set forth in Section 4.5.5(b), (c), or (d) (as applicable)
shall apply first to shares which are actually owned by such Person and second
to shares which are Beneficially or Constructively Owned (but not actually
owned) by such Person, pro rata among the Persons who actually own such shares
based upon the relative value of the shares held by each such Person.
Section 4.5.11 Exceptions.
(a) Subject to Section 4.5.5(a)(iii), the Board of Directors
of the Corporation, in its sole discretion, may exempt a Person from the Common
Stock Ownership Limit or the Aggregate Stock Ownership Limit, as the case may
be, if: (A) such Person is not (i) an individual for purposes of Section
542(a)(2) of the Code as modified by Section 856(h) of the Code, or (ii) treated
as the owner of such stock for purposes of Section 542(a)(2) of the Code as
modified by Section 856(h) of the Code, and the Board of Directors obtains such
representations and undertakings from such Person as are reasonably necessary to
ascertain that no individual's Beneficial or Constructive Ownership of such
shares of Common Stock will violate Section 4.5.5; (B) such Person does not and
represents that it will not own, actually or Constructively, an interest in a
tenant of the Corporation (or a tenant of an entity owned or controlled by the
Corporation) that would cause the Corporation to own, actually or
Constructively, more than a 9.8% interest (as set forth in Section 856(d)(2)(B)
of the Code) in such tenant and the Board of Directors obtains such
representations and undertakings from such Person as are reasonably necessary to
ascertain this fact; and (C) such Person agrees that any violation or attempted
violation of such representations or undertakings (or other action which is
contrary to the restrictions contained in Sections 4.5.5 through 4.5.10) will
result in such Common Stock being automatically transferred to a Trust or
automatically repurchased in accordance with Section 4.5.5. Solely for purposes
of clause (B) above, a tenant from whom the Corporation (or an entity owned or
controlled by the Corporation) derives (and is expected to continue to derive) a
sufficiently small amount of revenue such that, in the opinion of the Board of
Directors of the Corporation, rent from such tenant would not adversely affect
the Corporation's ability to qualify as a REIT, shall not be treated as a tenant
of the Corporation.
(b) Prior to granting any exception pursuant to Section
4.5.11(a), the Board of Directors of the Corporation may require a ruling from
the Internal Revenue Service, or an opinion of counsel, in either case in form
and substance satisfactory to the Board of Directors in it sole discretion, as
it may deem necessary or advisable in order to determine or ensure the
Corporation's status as a REIT. Notwithstanding the receipt of any ruling or
opinion, the Board of Directors may impose such conditions or restrictions as it
deems appropriate in connection with granting such exception.
(c) Subject to Section 4.5.5(a)(iii), an underwriter which
participates in a public offering or a private placement of Capital Stock (or
securities convertible into or exchangeable for Capital Stock) may Acquire or
Beneficially Own or Constructively Own shares of Capital Stock (or securities
convertible into or exchangeable for Capital Stock) in excess of the Common
Stock Ownership Limit or the Aggregate Stock Ownership Limit, but only to the
extent necessary to facilitate such public offering or private placement.
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Section 4.5.12 Legend. Each certificate for shares of Common
Stock shall bear the following legend:
"The shares represented by this certificate are subject to restrictions
on Beneficial and Constructive Ownership and Transfer for the purpose
of the Corporation's maintenance of its status as a Real Estate
Investment Trust under the Internal Revenue Code of 1986, as amended
(the "Code"). Subject to certain further restrictions and except as
expressly provided in the Corporation's Charter, (i) no Person (other
than a Conversion Holder with respect to such holder's conversion
rights) may Beneficially or Constructively Acquire shares of the
Corporation's Common Stock in excess of 9.8% of the outstanding shares
of Common Stock of the Corporation; (ii) no Person may Beneficially or
Constructively Own shares of Capital Stock of the Company which has an
aggregate value in excess of 9.8% of the value of the total outstanding
shares of Capital Stock of the Corporation; (iii) no Person may
Beneficially or Constructively Own Common Stock that would result in
the Corporation being "closely held" under Section 856(h) of the Code
or otherwise cause the Corporation to fail to qualify as a REIT; and
(iv) no Person may Transfer or Acquire Shares of Common Stock if such
Transfer or Acquisition would result in the Corporation being owned by
fewer than 100 Persons. Any Person who Beneficially or Constructively
Owns or attempts to Beneficially or Constructively Own shares of Common
Stock which causes or will cause a Person to Beneficially or
Constructively Own shares of Common Stock in excess of the above
limitations must immediately notify the Corporation. If any of the
restrictions on transfer or ownership are violated, the shares of
Common Stock represented hereby will be automatically transferred to a
Trustee of a Trust for the benefit of one or more Charitable
Beneficiaries, or in certain circumstances such shares will
automatically repurchased by the Corporation. In addition, the
Corporation may redeem shares upon the terms and conditions specified
by the Board of Directors in its sole discretion if the Board of
Directors determines that ownership or a Transfer or other event may
violate the restrictions described above. Furthermore, upon the
occurrence of certain events, attempted Transfers in violation of the
restrictions described above may be void ab initio. All capitalized
terms in this legend have the meanings defined in the charter of the
Corporation, as the same may be amended from time to time, a copy of
which, including the restrictions on transfer and ownership, will be
furnished to each holder of Common Stock on request and without
charge."
4.6 TRANSFERS OF COMMON STOCK IN TRUST
Section 4.6.1 Ownership in Trust. Upon any purported Transfer,
Acquisition, or other event described in Section 4.5.5(b), (c), or (d) that is
to result in a transfer of shares of Common Stock to a Trust, such shares of
Common Stock shall be deemed to have been transferred to the Trustee in his
capacity as trustee of a Trust for the exclusive benefit of one or more
Charitable Beneficiaries. Such transfer to the Trustee shall be deemed to be
effective as of the close of business on the Business Day prior to the purported
Transfer, Acquisition, or other event that results in a transfer to the Trust
pursuant to Section 4.5.5. The Trustee shall be appointed by the Corporation and
shall be a Person unaffiliated with the Corporation, any Purported Beneficial
Transferee, or any Purported Record Transferee. Each Charitable Beneficiary
shall be designated by the Corporation as provided in Section 4.6.6.
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Section 4.6.2 Status of Shares Held by the Trustee. Shares of
Common Stock held by the Trustee shall be issued and outstanding shares of
Capital Stock of the Corporation. The Purported Beneficial Transferee or
Purported Record Transferee shall have no rights in the shares held by the
Trustee. The Purported Beneficial Transferee or Purported Record Transferee
shall not benefit economically from ownership of any shares held in trust by the
Trustee, shall have no rights to dividends and shall not possess any rights to
vote or other rights attributable to the shares held in the Trust.
Section 4.6.3 Dividend and Voting Rights. The Trustee shall
have all voting rights and rights to dividends with respect to shares of Common
Stock held in the Trust, which rights shall be exercised for the exclusive
benefit of the Charitable Beneficiary. Any dividend or distribution paid prior
to the discovery by the Corporation that the shares of Common Stock have been
transferred to the Trustee shall be paid to the Trustee upon demand, and any
dividend or distribution declared but unpaid shall be paid when due to the
Trustee with respect to such shares of Common Stock. Any dividends or
distributions so paid over to the Trustee shall be held in trust for the
Charitable Beneficiary. The Purported Record Transferee shall have no voting
rights with respect to shares held in the Trust and any vote cast by a Purported
Record Transferee prior to the discovery by the Corporation that the shares of
Common Stock have been transferred to the Trustee will be rescinded as void and
shall be recast in accordance with the desires of the Trustee acting for the
benefit of the Charitable Beneficiary.
Section 4.6.4 Sale of Shares by Trustee. Within 20 days of
receiving notice from the Corporation that shares of Common Stock have been
transferred to the Trust, the Trustee of the Trust shall sell the shares held in
the Trust to a person, designated by the Trustee, whose ownership of the shares
will not violate the ownership limitations set forth in Section 4.5.5(a). Upon
such sale, the interest of the Charitable Beneficiary in the shares sold shall
terminate and the Trustee shall distribute the net proceeds of the sale to the
Purported Record Transferee and to the Charitable Beneficiary as provided in
this Section 4.6.4. The Purported Record Transferee shall receive the lesser of
(1) the price paid by the Purported Record Transferee for the shares or, if the
Purported Record Transferee did not give value for the shares (through a gift,
devise or other transaction), the Market Price of the shares on the day of the
event causing the shares to be held in the Trust and (2) the price per share
received by the Trustee from the sale or other disposition of the shares held in
the Trust. Any net sales proceeds in excess of the amount payable to the
Purported Record Transferee shall be immediately paid to the Charitable
Beneficiary. If, prior to the discovery by the Corporation that shares of Common
Stock have been transferred to the Trustee, such shares are sold by a Purported
Record Transferee then (i) such shares shall be deemed to have been sold on
behalf of the Trust and (ii) to the extent that the Purported Record Transferee
received an amount for such shares that exceeds the amount that such Purported
Record Transferee was entitled to receive pursuant to this Section 4.6.4, such
excess shall be paid to the Trustee upon demand.
Section 4.6.5 Purchase Right in Stock Transferred to the
Trustee. Shares of Common Stock transferred to the Trustee shall be deemed to
have been offered for sale to the Corporation, or its designee, at a price per
share equal to the lesser of (i) the price per share in the transaction that
resulted in such transfer to the Trust (or, in the case of a devise or gift, the
Market Price at the time of such devise or gift) and (ii) the Market Price on
the date the Corporation, or its designee, accepts such offer. The Corporation
shall have the right to accept such offer until the Trustee has sold the shares
held in the Trust pursuant to Section 4.6.4. Upon such a sale to the
Corporation, the interest of the Charitable Beneficiary in the shares sold shall
terminate and the Trustee shall distribute the net proceeds of the sale to the
Purported Record Transferee.
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Section 4.6.6 Designation of Charitable Beneficiaries. By
written notice to the Trustee, the Corporation shall designate one or more
nonprofit organizations to be the Charitable Beneficiary of the interest in the
Trust such that (i) the shares of Common Stock held in the Trust would not
violate the restrictions set forth in Section 4.5.5(a) in the hands of such
Charitable Beneficiary and (ii) each Charitable Beneficiary is an organization
described in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code.
ARTICLE V
General REIT Provisions
Section 5.1 Termination of REIT Status. The Board of Directors
of the Corporation shall take no action to terminate the Corporation's status as
a REIT until such time as (i) the Board of Directors adopts a resolution
recommending that the Corporation terminate its status as a REIT, (ii) the Board
of Directors presents the resolution for consideration at an annual or special
meeting of the stockholders and (iii) such resolution is approved by the vote of
holders of a majority of the shares entitled to be cast on the matter.
Section 5.2 Exchange or Market Transactions. Nothing in
Article IV or this Article V shall preclude the settlement of any transaction
entered into through the facilities of any national securities exchange or
automated inter-dealer quotation system. The fact that the settlement of any
transaction has occurred shall not negate the effect of any other provision of
Article IV or this Article V and any transferee in such a transaction shall be
subject to all of the provisions and limitations set forth in Article IV and
this Article V.
Section 5.3 Severability. If any provision of Article IV or
this Article V or any application of any such provision is determined to be
invalid by any federal or state court having jurisdiction over the issues, the
validity of the remaining provisions shall not be affected and other
applications of such provision shall be affected only to the extent necessary to
comply with the determination of such court.
ARTICLE VI
Board of Directors
Section 6.1 Management. The business and affairs of the
Corporation shall be managed under the direction of its Board of Directors.
Section 6.2 Number. The number of directors which will
constitute the entire Board of Directors shall be fixed by, or in the manner
provided in, the Bylaws but shall in no event be less than three. Any increase
or decrease in the size of the board shall be apportioned as nearly equally as
possible among the classes of directors. There are currently three directors in
office whose names are as follows:
William J. Wolfe
Stuart D. Halpert
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Lester Zimmerman
Section 6.3 Classification. The directors shall be classified,
with respect to the time for which they severally hold office, into three
classes, as nearly equal in number as possible. As shall be provided in the
Bylaws of the Corporation, one class shall originally be elected for a term
expiring at the annual meeting of stockholders to be held in 1995, another class
shall originally be elected for a term expiring at the annual meeting of
stockholders to be held in 1996, and another class shall originally be elected
for a term expiring at the annual meeting of stockholders to be held in 1997,
with each class to hold office until its successors are elected and qualify.
Except as otherwise provided in this Charter, at each annual meeting of the
stockholders of the Corporation, the date of which shall be fixed by or pursuant
to the Bylaws of the Corporation, the successors of the class of directors whose
terms expire at that meeting shall be elected to hold office for a term expiring
at the annual meeting of stockholders held in the third year following the year
of their election. No election of directors need be by written ballot. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
Section 6.4 Vacancies. Except as otherwise provided in this
Charter, newly created directorships resulting from any increase in the number
of directors may be filled by the majority vote of the Board of Directors, and
any vacancies on the Board of Directors resulting from death, resignation,
removal or other cause shall be filled by the affirmative vote of a majority of
the remaining directors then in office, even if less than a quorum of the Board
of Directors, or, if applicable, by a sole remaining director. Any director
elected in accordance with the preceding sentence shall hold office until the
next annual meeting of the Corporation, at which time a successor shall be
elected to fill the remaining term of the position filled by such director.
Section 6.5 Removal. Except as otherwise provided in this
Charter, any director may be removed from office only for cause and only by the
affirmative vote of two-thirds of the aggregate number of votes then entitled to
be cast generally in the election of directors. For purposes of this Section
6.5, "cause" shall mean the willful and continuous failure of a director to
substantially perform the duties to the Corporation of such director (other than
any such failure resulting from temporary incapacity due to physical or mental
illness) or the willful engaging by a director in gross misconduct materially
and demonstrably injurious to the Corporation.
Section 6.6 Bylaws. The Board of Directors shall have the
exclusive power to adopt, amend, alter, change and repeal any Bylaws of the
Corporation.
Section 6.7 Powers. The enumeration and definition of
particular powers of the Board of Directors included elsewhere in this Charter
shall in no way be limited or restricted by reference to or inference from the
terms of any other clause of this or any other Article of this Charter, or
construed as excluding or limiting, or deemed by inference or otherwise in any
manner to exclude or limit, the powers conferred upon the Board of Directors
under the MGCL as now or hereafter in force.
ARTICLE VII
Liability
To the fullest extent permitted by Maryland law, in effect
from time to time, no person who at any time was or is a director or officer of
the Corporation shall be personally liable to the Corporation or its
stockholders for money damages. No amendment of this Charter or repeal of any of
its provisions shall
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limit or eliminate any of the benefits provided to directors and officers under
this Article VII in respect of any act or omission that occurred prior to such
amendment or repeal.
ARTICLE VIII
Indemnification
The Corporation shall have the power to obligate itself to
indemnify, to the fullest extent permitted by Maryland law in effect from time
to time, all persons who at any time were or are directors or officers of the
Corporation for any threatened, pending or completed action, suit or proceeding
(whether civil, criminal, administrative or investigative) relating to any
action alleged to have been taken or omitted in such capacity as a director or
an officer and to pay or reimburse all reasonable expenses incurred by a present
or former director or officer of the Corporation in connection with any
threatened, pending or completed action, suit or proceeding (whether civil,
criminal, administrative or investigative) in which the present or former
director or officer is a party, in advance of the final disposition of the
proceeding. The Corporation may indemnify any other persons permitted but not
required to be indemnified by Maryland law, as applicable from time to time, if
and to the extent indemnification is authorized and determined to be
appropriate, in each case in accordance with applicable law, by the Board of
Directors of the Corporation, the majority of the stockholders of the
Corporation entitled to vote thereon or special legal counsel appointed by the
Board of Directors. No amendment of this Charter or repeal of any of its
provisions shall limit or eliminate any of the benefits provided to directors
and officers under this Article VIII in respect of any act or omission that
occurred prior to such amendment or repeal.
ARTICLE IX
Written Consent or Stockholders
Any corporate action upon which a vote of stockholders is
required or permitted may be taken without a meeting with the unanimous written
consent of each stockholder entitled to vote on the matter.
ARTICLE X
Miscellaneous
The Corporation reserves the right to amend, alter or repeal
any provision contained in this Charter, including any amendment altering the
terms or contract rights, as expressly set forth in this Charter, of any
outstanding shares of stock. Notwithstanding any provision of law permitting or
requiring any action to be taken or approved by the affirmative vote of the
holders of shares entitled to cast a greater number of votes, any such action
shall be effective and valid if taken or approved by the affirmative vote of
holders of shares entitled to cast a majority of all the votes entitled to be
cast on the matter; provided, however, subject to the voting rights of the
Series A Preferred Stock, the affirmative vote of the holders of two-thirds of
all the votes then entitled to be cast generally in the election of directors
shall be required to amend Sections 4.5.3, 6.3 and 6.5 and this Article X
hereof. All rights conferred upon stockholders herein are subject to this
reservation.
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ARTICLE XI
Existence
The Corporation is to have a perpetual existence.
THIRD: The foregoing restatement of the charter has been
approved by the entire Board of Directors.
FOURTH: The charter is not amended by these Articles of
Restatement.
FIFTH: The current address of the principal office of the
Corporation is set forth in Article II of the foregoing restatement of the
charter.
SIXTH: The name and address of the Corporation's current
resident agent is set forth in Article II of the foregoing restatement of the
charter.
SEVENTH: The number of directors of the Corporation and the
names of those currently in office are set forth in Article VI of the foregoing
restatement of the charter.
EIGHTH: The undersigned President acknowledges these Articles
of Restatement to be the corporate act of the Corporation and as to all matters
or facts required to be verified under oath, the undersigned President
acknowledges that to the best of his knowledge, information and belief, these
matters and facts are true in all material respects and that this statement is
made under the penalties for perjury.
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IN WITNESS WHEREOF, the Corporation has caused these Articles
to be signed in its name and on its behalf by its President and attested to by
its Secretary on this 28th day of June, 1996.
ATTEST: FIRST WASHINGTON REALTY
TRUST, INC.
/s/ By: /s/ (SEAL)
Jeffrey S. Distenfeld William J. Wolfe
Secretary President
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CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT is made and entered on March 19, 1997, and
effective as of March 1, 1997, by and between ASHBURN FARMS VILLAGE CENTER,
L.L.C., a Virginia limited liability company (the "Contributor") and FIRST
WASHINGTON REALTY LIMITED PARTNERSHIP, a Maryland limited partnership
(hereinafter referred to as "FWRLP").
W I T N E S S E T H:
WHEREAS, the Contributor is the record and beneficial owner of all of
that certain real property containing approximately 10.2 acres and located in
Loudoun County, Virginia, as more particularly described on Exhibit A attached
hereto (the "Land"), together with a shopping center known as Ashburn Farms
Village Center and containing approximately 88,965 square feet of rentable area
and all other buildings and improvements situated thereon (collectively, the
"Building") and all personal property and fixtures located therein (the
"Personalty"), and all appurtenances, rights, easements, rights-of-way,
tenements and hereditaments incident thereto (the "Additional Property") (the
Land, Building, Personalty and Additional Property are hereinafter collectively
referred to as the "Property"); and
WHEREAS, Contributor and FWRLP desire to enter into this Agreement
relating to the contribution by Contributor to FWRLP and/or an affiliate
thereof, of the Property in exchange for certain interests in FWRLP.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Contribution. Subject to the terms and conditions set forth
in this Agreement, Contributor and FWRLP agree to the contribution by
Contributor to FWRLP (the "Contribution") of all of the Property.
2. Consideration.
(a) (i) Effective upon the Contribution of the Property to
FWRLP (i.e., at Closing), the Contributor (or its Members) shall be admitted to
FWRLP as additional limited partners in accordance with Section 12.2 of the
First Amended and Restated Agreement of Limited Partnership of FWRLP dated as of
June 27, 1994 (the "FWRLP Partnership Agreement"). In consideration of the
Contribution of the Property, FWRLP shall (i) issue 93,571 Common Units (as
defined in the FWRLP Partnership Agreement) to the Contributor, (ii) subject to
Section 2(b), below, take the Property subject to (A) the Contributor's
obligations with respect to the outstanding principal balance of the existing
$6,400,000 construction loan made by The First National Bank
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of Maryland ("FNBM") to the Contributor (the "FNBM Loan") (which balance, as of
February 1, 1997, was equal to $5,189,260.00) (the "Principal Balance"), and (B)
the obligation of the Contributor to repay those certain advances in the amount
of $983,334.00 and $491,667.00 made by Stuart Malone and Joe Thomson,
respectively, to the Contributor, plus all interest accrued thereon to the
Closing (collectively, the "Malone/Thomson Advance"). If the outstanding
principal balance of the FNBM Loan and the Malone/Thomson Advance, and any
accrued and unpaid interest thereon, at Closing is less than or greater than
$7,700,000, then the total Units to be issued to Contributor shall be increased
or decreased, respectively, by an amount equal to the difference divided by the
Unit Price.
(ii) The Common Units to be issued to the
Contributor shall be issued at the following times and the following amounts:
(A) 70,711 of the Common Units shall be
issued to the Contributor at the Closing.
(B) 22,860 of the Common Units shall be
issued to the Contributor upon the earlier to occur of the following
(the "Second Issuance Date"): (i) closing of the sale by FWRLP of that
certain parcel of land containing approximately 0.7 acres, as more
particularly described in Exhibit A-1 attached hereto (the "Pad Site"), or
(ii) FWRLP enters into a lease of the Pad Site and the tenant thereunder
actually commences paying rent under said lease, or (iii) the date which is
three (3) years after the Closing Date.
(iii) Contributor shall have the right to
distribute the Units received by it under this Agreement to its members
(the "Members"), as identified on Exhibit M attached hereto. Unless
otherwise directed by Contributor, the Units issuable under this Agreement
to Contributor will be issued directly to the Members of Contributor in the
proportions set forth on Exhibit M and the Members shall be admitted to FWRLP
as limited partners at the Closing.
(b) (i) At or immediately after Closing, FWRLP shall repay the
Malone/Thomson Advance to Malone and Thomson. In addition, nothing set forth
above shall be construed to prohibit FWRLP from closing, immediately after
Closing under this Agreement is fully effective, on a permanent loan which will
have the effect of refinancing the FNBM Loan.
(ii) The Property is presently encumbered by a
Deed of Trust and Security Agreement ("Mortgage") from the Contributor, as
debtor, for the benefit of FNBM, as secured party (the "Lender"), which
Mortgage secures an original principal indebtedness of $6,400,000.00 with
interest thereon payable over the term thereof (which initial term ends on
January 1, 1998, subject to three one (1) year extension options), as
evidenced by a Note from the Contributor to Lender ("Note"). The Mortgage
and Note and all documents and instruments executed in connection
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therewith are collectively referred to as the "FNBM Loan Documents." Copies of
the Mortgage and Note are attached hereto as Exhibits Q and R, respectively.
(iii) If FWRLP elects to take the Property
subject to the FNBM Loan, then at Closing, the Contributor shall execute an
estoppel certificate in favor of FWRLP certifying that, to the best knowledge
of the Contributor, there is no default, or event of default which with notice
or lapse of time, or both, would constitute a default under the FNBM Loan.
(c) The Contributor and FWRLP will settle any pro rations and
closing adjustments as provided in this Agreement as follows: (i) if Contributor
owes the same, on a net basis, to FWRLP, through a reduction in Units in an
amount equal to the net adjustment divided by $21.00 per Common Unit (the "Unit
Price"), rounded to the nearest one (1), to be delivered at the Closing, and
(ii) if FWRLP owes the same, on a net basis, to Contributor, through (A) an
increase in the agreed initial Gross Asset Value (as such term is defined in
FWRLP's Partnership Agreement) of the Property in an amount equal to the net
adjustment and (B) the issuance of additional Common Units in an amount equal to
the net adjustment divided by the Unit Price, rounded to the nearest one (1), to
be delivered at the Closing. Contributor acknowledges and agrees that the Units
will not be redeemable for cash or exchangeable for common stock of the REIT for
a period of thirteen (13) months after the Closing Date (with respect to the
Units issued pursuant to Section 2(a)(ii)(A)) and for a period of thirteen (13)
months after the Second Issuance Date (with respect to the Units issued pursuant
to Section 2(a)(ii)(B)), all as more fully discussed in the Confidential
Information Statement (as hereinafter defined), as supplemented through the date
hereof.
(d) Upon written notice to FWRLP prior to Closing, the
Contributor may elect to receive Series B Preferred Units (as defined in the
FWRLP Partnership Agreement) in place of some or all of the Common Units
otherwise issuable to the Contributor hereunder, based on an exchange rate of
0.78 Preferred Units for each Common Unit otherwise issuable hereunder (the
Common Units and the Preferred Units are hereinafter collectively referred to as
the "Units").
(e) In the event that (i) FWRLP sells the Pad Site or (ii)
enters into a lease of the Pad Site with a net effective base rent payable to
FWRLP (i.e., net of any leasing commissions in excess of $30,000 and tenant
improvements and/or allowances, etc.) of at least $50,000 per annum [or if the
lease of the Pad Site requires FWRLP to construct a building thereon at FWRLP's
expense, then the net effective annual base rent must be at least $50,000 plus
12.5% times the aggregate cost of constructing the building on the Pad Site
(hard and soft costs)], then Contributor shall have the right to participate in
the development of the possible second pad site, as more particularly described
in Exhibit A-2 attached hereto (the "Second Pad Site"), on a 50/50 basis (i.e.,
all costs of developing the Second Pad Site and all net cash flow generated by
the Second Pad Site will be shared equally). Contributor must exercise its right
to participate in the Second Pad Site by giving written notice thereof to FWRLP
within ten (10) days after delivery of written notice from FWRLP to the
Contributor that FWRLP
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intends to develop the Second Pad Site and the terms thereof. If Contributor
does not elect to participate or fails to so elect within the time period set
forth above, than all of the rights to participate granted to Contributor (and
its Members) herein shall terminate and be null and void and of no further force
or effect. If Contributor timely elects to participate in the development of the
Second Pad Site as set forth above, then FWRLP and Contributor will form a joint
venture (or other entity mutually agreeable to the parties) which will lease the
Second Pad Site from FWRLP for a period of ninety-nine (99) years at a rental of
One Dollar ($1.00) per year. The terms of the joint venture agreement between
FWRLP and the Contributor will provide that FWRLP shall be the managing partner
and all decisions with respect to the development, leasing, management and
operation of the Second Pad Site shall be made by FWRLP, in its sole discretion.
In addition, the decision of whether or not and when to lease and develop the
Second Pad Site will be made in FWRLP's sole discretion. Contributor hereby
assigns its rights to participate in the development of the Second Pad Site to
its Members. Notwithstanding the foregoing, if prior to the development of the
Second Pad Site FWRLP sells or otherwise disposes of the Property (which
includes the Second Pad Site) to a third party in a bona fide transaction, then
any and all rights granted to Contributor (and its Members) herein to
participate in the development of the Second Pad Site shall terminate upon the
closing of such sale or other disposition, and shall be null and void and of no
further force or effect.
(e) Intentionally Omitted.
(f) Attached hereto as Exhibit S is a description of unpaid
fees, expenses or other liabilities incurred by Contributor in connection with
the acquisition, development or leasing of the Property (the "Development
Expenses"). Provided that Contributor gives FWRLP at least five (5) days prior
notice of such Development Expenses and that such Development Expenses can be
quantified, FWRLP shall pay such Development Expenses at the Closing (or when
due and payable, if later) and the amount of Common Units otherwise issuable to
Contributor at Closing shall be reduced by dividing the aggregate amount of
Development Expenses by $21.00 (or, if Preferred Units are also being issued,
then there shall be a pro rata reduction of the Preferred Units using the
exchange rate set forth in Section 2(d) hereof). If mutually agreeable,
Contributor and FWRLP may treat the responsibility for all or a portion of the
Post- Closing Work described in Section 21 below as a Development Expense, in
which case FWRLP shall assume responsibility for the expense of such
Post-Closing Work and the Units otherwise issuable to Contributor at Closing
shall be further reduced as provided in the preceding sentence.
(g) Any amounts paid by the Contributor to FWRLP pursuant to
Sections 14, 18, or 21 or otherwise, shall be treated as a capital contribution
by the Contributor to FWRLP, and the agreed initial Gross Asset Value (as such
term is defined in FWRLP's Partnership Agreement) of the Property contributed to
FWRLP by the Contributor shall be reduced by the same amount.
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3. Deposit.
(a) Within three (3) business days after the date of delivery
to FWRLP of an original of this Agreement executed by Contributor together with
completed Exhibits hereto (the date of such delivery by Contributor being the
"Acceptance Date"), FWRLP shall deliver to the Title Company, as escrow agent, a
deposit (the "Deposit") of Fifty Thousand Dollars ($50,000.00) by check payable
to the Fidelity National Title Insurance Company of Pennsylvania (the "Title
Company").
(b) The Title Company will immediately provide Contributor
with written evidence of receipt of such Deposit. The Title Company shall place
the Deposit in an interest-bearing account within three (3) days after the date
of receipt thereof, and interest on the Deposit shall accrue to the benefit of
the party entitled to the Deposit pursuant to this Agreement. The Deposit shall
be held by the Title Company pursuant to the terms and conditions of this
Agreement.
(c) In the event that, at any time prior to Closing,
Contributor or FWRLP provides Title Company with a certification (a copy of
which shall be delivered contemporaneously to the other party) that the
Contributor or FWRLP, as the case may be, is entitled to the Deposit pursuant to
the terms of this Agreement, Title Company shall deliver the Deposit to such
party within seven (7) business days after receipt of said notice, unless the
other party disputes such certification by written notice to Title Company (a
copy of which shall be delivered contemporaneously to the other party) delivered
within five (5) business days of Title Company's receipt of the initial
certification. In such event, Title Company shall hold the Deposit pending
resolution of such dispute.
(d) The parties acknowledge that Title Company is acting
solely as a stakeholder at their request and for their convenience, that Title
Company shall not be deemed to be the agent of either of the parties, and Title
Company shall not be liable to either of the parties for any act or omission on
its part unless taken or suffered in bad faith, in willful disregard to this
Agreement or involving gross negligence. Contributor and FWRLP shall jointly and
severally indemnify and hold Title Company harmless from and against all costs,
claims and expenses, including reasonable attorneys' fees, incurred in
connection with the performance of Title Company's duties hereunder, except with
respect to actions or omissions taken or suffered by Title Company in bad faith,
in willful disregard of this Agreement or involving gross negligence on the part
of Title Company.
4. Closing. Except as otherwise provided in this Agreement, the
Contribution contemplated herein shall be consummated at the "Closing", which
shall take place on the date (the "Closing Date") specified by FWRLP on not less
than ten (10) days notice to Contributor, provided that the Closing Date shall
not be later than thirty (30) days after the end of the Feasibility Period. The
Closing shall take place at the offices of Tenenbaum & Saas, P.C., or at such
other place as may mutually agreed upon by Contributor and FWRLP. The parties
intend that the transfer of the Property
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be effective for all purposes as of 12:01 a.m. on March 1, 1997, irrespective of
the actual Closing Date, and all provisions of this Agreement which purport to
adjust items as of the Closing Date shall be interpreted so as to give effect to
such intention. The date upon which the Closing actually occurs (irrespective of
the intended effective date of the contribution of the Property) shall also be
referred to herein as of the "Date of Funding".
5. Representations and Warranties of Contributors. (i) In order to
induce FWRLP to enter into this Agreement and to issue the Units in
consideration for the Property, but subject to Section 5(ii), below, Contributor
hereby makes the following representations and warranties, each of which is
material and shall, together with all covenants, agreements and indemnities set
forth in or made pursuant to this Agreement, survive Closing, notwithstanding
any investigation at any time made by or on behalf of FWRLP:
(a) Authority of Contributor. Contributor has the right, power
and authority to enter into this Agreement and to contribute the Property in
accordance with the terms and conditions hereof. Other than FNBM's consent if
the FNBM Loan is not repaid in full, no consents of any persons other than those
executing this Agreement are required for such execution or to cause Contributor
to consummate the transactions contemplated hereby. This Agreement is the valid
and binding obligation of Contributor, enforceable against it in accordance with
its terms.
(b) [Intentionally Omitted]
(c) Compliance with Existing Laws. Contributor has not
received any written notice, and the Contributor is not aware of, any violation
of, any applicable building, zoning, environmental or other ordinances, statutes
or regulations of any governmental agency, in respect to the ownership, use,
maintenance, condition and operation of the Property or any part thereof which
remain(s) outstanding as of the date hereof, except as set forth in Exhibit G.
(d) Leases. True, correct and complete copies of all of the
leases of the Property and any amendments thereto (collectively, the "Leases")
have been delivered to FWRLP. Attached hereto as Exhibit B is a description of
all of the Leases and a current rent schedule ("Rent Schedule") covering the
Leases. There are no leases or tenancies of any space in the Property other than
those set forth in Exhibit B or, to the Contributor's knowledge, any subleases
or subtenancies unless otherwise noted therein. Except as otherwise set forth in
Exhibit B, the Leases, or elsewhere in this Agreement:
(i) The Leases are in full force and effect
and constitute a legal, valid and binding obligation of the
respective tenants;
(ii) no tenant has an option to purchase the
Property;
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(iii) no renewal or expansion options have been
granted to the tenants, except as provided in the Leases;
(iv) to the Contributor's knowledge, the
Contributor is not in default under the Leases;
(v) the rents set forth on the Rent Schedule are
being collected on a current basis and there are no arrearages
in excess of one month, except as indicated in Exhibit B
hereto, nor has any tenant paid any rent, additional rent or
other charge of any nature for a period of more than thirty
(30) days in advance;
(vi) other than tenant alterations and allowances as
described in Exhibit L (which shall be the responsibility of
Contributor unless otherwise agreed under Section 2(f) above),
all work for tenant alterations and allowances and other work
or materials contracted for by the Contributor and, to the
Contributor's knowledge, any tenant has been completed and/or
paid for by the Contributor (or such tenant), and all work and
materials have been fully paid for or will be paid for by
Closing;
(vii) the Contributor has not sent written notice to
any tenant claiming that such tenant is in default, which
default remains uncured, and to the best of Contributor`s
knowledge, no tenant is in default under its Lease, except as
indicated in Exhibit B hereto;
(ix) no action or proceeding instituted against
the Contributor by any tenant is presently pending in any
court; and
(x) there are no security deposits other than
those set forth in Exhibit B.
(e) Service Contracts. Attached hereto as Exhibit C is a
complete and correct list of all contracts or agreements relating to the
management, leasing, operation, maintenance or repair of the Property (the
"Service Contracts"). True and correct copies of all of the Service Contracts
have been delivered to FWRLP. No Service Contract which FWRLP agrees to assume
will be terminated, amended, modified or supplemented prior to the Closing Date
without FWRLP's prior written approval, which approval shall not be unreasonably
withheld, conditioned or delayed.
(f) Tax Bills. Attached hereto as Exhibit D are true and
correct copies of tax bills issued by any applicable federal, state or local
governmental authority to the Contributor with respect to the Property for the
most recent past and current tax years, and any new assessment received with
respect to a current or future tax year.
(g) Insurance. The Property is insured for its
replacement value against loss or damage sustained as a result of fire or
other casualty. Contributor shall
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maintain in full force and effect all hazard, liability, rent loss and other
insurance policies until the Closing Date. Copies of all such policies have been
delivered to FWRLP.
(h) Condition of Property. At Closing, the Property shall be
in its "as is, where is" condition as of the Acceptance Date. Contributor has
not knowingly withheld any information regarding the condition of the Property,
or its compliance with any laws, rules or regulations that would be material to
FWRLP's decision to enter into this transaction.
(i) Tenant Estoppels. Contributor represents and warrants that
it will use commercially reasonable efforts to obtain and deliver to FWRLP
within thirty (30) days after the Acceptance Date, a tenant estoppel letter in
the form attached hereto as Exhibit F (or such other form as required by FWRLP's
mortgage lender) from each of the tenants of the Property, except that in the
case of Super Fresh the form of estoppel letter will be governed by the tenant
Lease. Contributor hereby agrees that FWRLP shall have full participation in
connection with the procurement of said tenant estoppel letter(s).
(j) Condemnation Proceedings. No condemnation or eminent
domain proceedings are pending or, to the best of Contributor`s knowledge,
threatened against the Property or any part thereof, and Contributor has made no
commitments to and has received no notice, oral or written, of the desire of any
public authority or other entity to take or use the Property or any part thereof
whether temporarily or permanently, for easements, rights-of-way, or other
public or quasi-public purposes, other than as set forth in the Permitted
Exceptions and in other public records concerning the initial development of the
Property (e.g., the approved site plan).
(k) Litigation. No litigation is pending or, to the best of
Contributor`s knowledge, threatened, including administrative actions or orders
relating to governmental regulations, affecting the use, operation or ownership
of the Property or any part thereof or Contributor`s right to contribute the
Interests as contemplated herein.
(l) No Defaults. Subject to obtaining FNBM's consent, or the
full repayment of the Loan, neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby will: (i) conflict with, or
result in a breach of, the terms, conditions or provisions of, or constitute a
default under, any agreement or instrument to which Contributor is a party or by
which the Contributor or the Property is bound, (ii) to Contributor`s knowledge,
violate any restriction, requirement, covenant or condition to which the
Contributor is subject or by which the Contributor or the Property is bound, or
(iii) to Contributor`s knowledge, constitute a violation of any applicable code,
resolution, law, statute, regulation, ordinance, rule, judgment, decree or
order, or (iv) result in the cancellation of any contract or lease pertaining to
the Property.
(m) Hazardous Waste. Other than as set forth in the
Phase I environmental report prepared by Engineering Consulting Services, Ltd.
dated
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February 15, 1995, Contributor has no knowledge of any discharge, spillage,
uncontrolled loss, seepage or filtration (a "Spill") of oil, petroleum or
chemical liquids or solids, liquid or gaseous products or any hazardous waste or
hazardous substance (as those terms are used in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the Resource
Conservation and Recovery Act of 1976, as amended, or in any other applicable
federal, state or local laws, ordinances, rules or regulations relating to
protection of public health, safety or the environment, as such laws may be
amended from time to time) at, upon, under or within the Land or any contiguous
real estate. To the best of Contributor`s knowledge, there is no proceeding or
action pending or threatened by any person or governmental agency regarding the
environmental condition of the Property. To the Contributor`s knowledge, the
Building is totally free of asbestos.
(n) [Intentionally Omitted]
(o) Utilities. To the best of Contributor`s knowledge,
adequate, usable public sewers, public water facilities, gas and electrical
facilities necessary to the operation of the Property are installed in and are
duly connected to the Property and can be used without any charge, except the
normal deposits, if any, and usual metered utility charges and sewer charges.
(p) Personal Property. Attached hereto as Exhibit H is a true,
correct and complete inventory of all personal property ("Personal Property"),
if any, used in the management, maintenance and operation of the Property (other
than trade fixtures or personal property of tenants).
(q) Leasing Commissions. There are, and at Closing shall be,
no outstanding or contingent leasing commissions or fees payable with respect to
the Property (exclusive of any partial commissions payable for Leases where the
tenant is not yet in occupancy as set forth in Exhibit O hereto, which shall be
the responsibility of Contributor, unless otherwise agreed under Section 2(f)
above). The covenants contained in this subparagraph shall survive Closing
without limitation.
(r) Securities Law Matters.
(i) The Contributor and each of its Members is an
"accredited investor" as such term is defined under Rule 501
promulgated under the Securities Act of 1933, as amended (the
"Securities Act");
(ii) The Members have their primary residences or
principal place of business in the Commonwealth of
Pennsylvania and the Commonwealth of Virginia;
(iii) The recipients of the Units are acquiring the
Units for their own respective accounts for investment
purposes only and not with a present view to distribution;
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(iv) Taking into account the personnel and resources
Contributor can practically bring to bear on the acquisition
of the Units in the FWRLP contemplated hereby, the recipients
of the Units are knowledgeable, sophisticated and experienced
in making, and are qualified to make, decisions with respect
to investments in securities presenting an investment decision
like that involved in the acquisition of the Units, including
investments in securities issued by FWRLP, and have requested,
received, reviewed and considered all information it deems
relevant in making an informed decision to acquire the Units
(including the Confidential Information Statement attached
hereto as Exhibit I which Contains First Amended and Restated
Agreement of Limited Partnership of FWRLP and any Amendments
thereto (the "Partnership Agreement"));
(v) The recipients of the Units will not, directly
or indirectly, voluntarily offer, sell, pledge, transfer or
otherwise dispose of (or solicit any offers to buy, purchase
or otherwise acquire or take a pledge of) any of the Units
except in compliance with the Securities Act and the rules and
regulations promulgated thereunder and with the terms and
conditions of the Partnership Agreement;
(vi) The recipients of the Units acknowledge that the
Units to be issued must be held unless and until they are
subsequently registered under the Securities Act and under
applicable state securities or blue sky laws, unless
exemptions from such registrations are available at the time
of resale;
(vii) Prior to the issuance of the Units, the
recipients of the Units will execute all such other documents
and instruments as may be reasonably necessary to allow FWRLP
to comply with federal and state securities law requirements
with respect to the issuance of the Units and to comply with
the terms of the Partnership Agreement, including without
limitation executing an amendment to the Partnership Agreement
of FWRLP whereby the recipients of the Units agree to be bound
by all of the terms and conditions of the Partnership
Agreement;
(viii) As required by the Pennsylvania Securities Act
of 1972, recipients of Units who are residents of, or who have
their principal place of business in, the Commonwealth of
Pennsylvania, shall not resell his or its Units for a period
of twelve (12) months from and after the issuance thereof
unless pursuant to an exemption from the requirements of such
act or an order from the Pennsylvania Securities Commission;
(ix) The recipients of the Units acknowledge and
agree that, notwithstanding Section 8.6 of the FWRLP
Partnership Agreement, the Units to be issued hereunder shall
not be redeemable for cash or exchangeable for Common and
Preferred Stock, as applicable, of First
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Washington Realty Trust, Inc. ("REIT") for a period of
thirteen (13) months from and after the Closing Date (with
respect to the Units issued pursuant to Section 2(a)(ii)(A))
and for a period of thirteen (13) months after the Second
Issuance Date (with respect to the Units issued pursuant to
Section 2(a)(ii)(B)); and
(x) The foregoing representations and covenants
in this subsection (r) shall survive Closing without limitation.
FWRLP hereby agrees that, at Closing, Contributor may transfer the
Units to its Members in accordance with the percentages set forth in Exhibit M
to this Agreement, or may request FWRLP to issue the Units directly to such
Members, provided that the Members receiving such Units shall acknowledge and
agree to be bound (on a several basis with respect to matters pertaining to such
Members) by all of the provisions of this Section 5(r) and any other provision
of this Agreement relating to the Units (in lieu of Contributor), and by
accepting such Units hereby agree to be so bound.
(s) Bonding Requirements. The only payment or performance
bonds required of the Contributor by Loudoun County or other jurisdiction in
connection with the development of the Property which remain outstanding are (i)
a $2,472.02 one year maintenance cash bond to Loudoun County for off-site
sanitary sewer, (ii) a $2,700.10 one year maintenance cash bond to Loudoun
County for on-site and off-site water and sewer, (iii) a $12,500 bond to VDOT
for stormwater management, and (iv) a $43,667 bond to Loudoun County for erosion
control (items (i) and (ii) are referred to collectively as the "Cash Bonds" and
items (iii) and (iv) are referred to collectively as the "Non-cash Bonds"). If
and when any bond is released, any cash related thereto which is received by
FWRLP shall be retained by FWRLP. If less than the face amount of any cash bond
is returned to FWRLP when the bond is released or if any bond is drawn upon
prior to its release, then the amount of the shortfall or draw down, as
applicable shall be reimbursed to FWRLP by the Contributor and its Members
pursuant to Section 18(e) herein. If either of the bonds set forth as items
(iii) and (iv) above are not released within six (6) months after Closing, then
FWRLP shall have the right to hold back any distributions payable by FWRLP to
Contributor or its Members in an amount equal to twenty-five percent (25%) of
the face value of such bond(s) not released until such bond(s) are released. If
any of the bonds are drawn upon by the applicable authority holding such
bond(s), then FWRLP will promptly notify Contributor and its Members, and if the
bonds drawn upon are not reinstated in full (and the Members may participate
with FWRLP in seeking such reinstatement) within thirty (30) days after such
notice to Contributor (and its Members), then Contributor and its Members shall
reimburse to FWRLP such amount drawn pursuant to Section 18(e) herein.
Contributor and its Members hereby agree to cooperate with FWRLP to properly
transfer ownership rights to such bonds to FWRLP, at the lowest cost and fees
possible. With respect to the Non-cash bonds, but subject to the foregoing
reimbursement obligations from Contributor and its Members, FWRLP agrees to
either (i) replace the contractor as obligor to Commerce Bank to secure any
obligation of the contract or viz-a-viz the
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letters of credit supporting such Non-cash Bonds or (ii) replace the
contractor's letters of credit with those of FWLRP. This covenant shall survive
Closing without limitation.
(ii) Notwithstanding Section 5(i) or any other provision of this
Agreement to the contrary (other than the second sentence of Section 14(a)):
(a) With regard to the title to the Property, FWRLP is relying
solely upon the Policy of Title Insurance currently issued to FWRLP (the "Title
Policy"), plus any additional title insurance to be obtained by FWRLP pursuant
to this Agreement, and any endorsements to the Title Policy to be obtained by
FWRLP, and Contributor makes no representations or warranties whatsoever with
regard to matters of title affecting the Property.
(b) In the event FWRLP does not elect to terminate this
Agreement within the Feasibility Period pursuant to the terms of Section 13,
below, then the representations and warranties made by Contributor in this
Agreement (as well as the specific facts and/or conditions which were the
subject of such representations and/or warranties) shall be deemed modified to
account appropriately for every fact or other matter which came to the attention
of FWRLP, or FWRLP's employees, agents, or representatives, during the course of
the Feasibility Period (other than such fact or matter which was due to the
willful misconduct or bad faith of Contributor), which fact or matter was
inconsistent with the Contributor`s representation(s) or warranty(ies) set forth
herein, it being the intent and agreement of the parties that FWRLP shall not
have the right or ability to claim that the inaccuracy of any representation set
forth herein (provided that such inaccuracy was not due to the willful
misconduct or bad faith of Contributor or its employees agents and/or
representatives) which was actually known to FWRLP (or its employees, agents
and/or representatives) as of the end of the Feasibility Period constitutes
either a default by Contributor or a failure of a condition to Closing
hereunder.
(c) In the event FWRLP elects to consummate the Closing under
this Agreement despite the failure of any of the conditions set forth in Section
8, below which was actually known to FWRLP (or its employees, agents and/or
representatives), including without limitation the failure of any representation
or warranty of the Contributor herein contained to be true and correct as the
time of Closing, then unless Contributor expressly agrees in writing to the
contrary at the time of Closing, FWRLP shall be deemed to have waived any claims
against Contributor arising out of such failure (provided that such failure was
not due to the willful misconduct or bad faith of Contributor), and, in such
event, Contributor shall have no post-Closing liability to FWRLP with respect
thereto.
(d) FWRLP shall not be entitled to assert any claim against
Contributor with respect to the inaccuracy of any representation or warranty
made by Contributor (provided that such inaccuracy was not due to the willful
misconduct or bad faith of Contributor), to the extent such inaccuracy was
actually known to FWRLP, or FWRLP's employees, agents and/or representatives, as
of or prior to the time of Closing and
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FWRLP elects to consummate the Closing under this Agreement, it being the intent
and agreement of the parties that FWRLP shall not have the right or ability to
consummate the Closing and thereafter assert a claim for breach of a warranty or
representation by Contributor which was actually known to FWRLP or its
representatives as of or prior to Closing.
(e) In the event a matter represented by Contributor hereunder
was true as of the date of execution of this Agreement, but subsequently is
rendered inaccurate due to the occurrence of events or due to a cause other than
Contributor `s intentional misconduct or bad faith, or intentional breach of
this Agreement, then such inaccuracy shall not constitute a default by
Contributor under this Agreement, even though the same might constitute a
failure of a condition to the Closing (subject to subsections 5(ii)(b) - (d),
above).
(f) The representations and warranties of the Contributor
contained in this Agreement, or in any certificate, document, instrument or
agreement delivered pursuant to this Agreement, shall survive until one (1) year
after Closing, unless a representation or warranty survives Closing without
limitation as expressly stated elsewhere in this Agreement.
(g) FWRLP shall not have the right to assert any claim against
the Contributors for inaccuracies set forth in Exhibit B and Exhibit C hereto,
to the extent such inaccuracies derive from errors made by First Washington
Management, Inc. ("FWM") in the preparation of such Exhibits (as opposed to
erroneous information or documentation furnished by Contributor to FWM). In
addition, FWRLP shall be imputed any actual knowledge which FWM has with respect
to the matters set forth in this Section 5 of the Agreement.
6. Obligations of Contributor Pending Closing. From and after
the date of this Agreement through the Closing Date, Contributor covenants and
agrees as follows:
(a) Maintenance and Operation of Premises. Contributor will
cause the Property to be maintained in its present order and condition, normal
wear and tear excepted, and will cause the continuation of the normal operation
thereof, and the continuation of the normal practice with respect to maintenance
and repairs so that the Property will, except for normal wear and tear and fire,
casualty and/or condemnation (which are governed by other provisions of this
Agreement), be in substantially the same condition on the Closing Date as on the
Acceptance Date.
(b) Licenses. Contributor shall use all reasonable and
diligent efforts to preserve in force all licenses and permits (collectively,
"Licenses") necessary for the proper operation of the Property and to cause
those expiring to be renewed.
(c) Changes in Representations. Contributor shall notify
FWRLP promptly, and FWRLP shall notify Contributor promptly, if either becomes
aware of any
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occurrence prior to the Closing Date which would make any of its
representations, warranties or covenants contained herein not true in any
material respect.
(d) Obligations as to Leases. Contributor shall not after the
end of the Feasibility Period, without FWRLP's prior written consent which shall
not be unreasonably withheld, conditioned or delayed, amend, modify, renew or
extend any Lease in any respect unless required by law, or enter into new leases
or approve any assignment of leases or subletting of leased space, or terminate
any Lease. Contributor hereby further agrees that if any space is vacant on the
Closing Date, FWRLP shall accept the Property subject to such vacancy, provided
that the vacancy was not permitted or created by Contributor in violation of any
restrictions contained in this Agreement. Prior to Closing, Contributor shall
not apply all or any part of the security deposit of any tenant unless after a
default in accordance with the terms of such tenant's Lease.
7. Representations and Warranties of FWRLP. In order to induce
Contributor to enter into this Agreement and to contribute the Interests to
FWRLP, FWRLP hereby makes the following representations and warranties, each of
which is material and shall survive Closing, notwithstanding any investigation
at any time made by or on behalf of Contributor:
(a) Authority of FWRLP. FWRLP is a limited partnership duly
organized and existing and in good standing under the laws of the State of
Maryland. FWRLP has all necessary power and authority to execute, deliver and
perform this Agreement and consummate all of the transactions contemplated by
this Agreement. This Agreement is the valid and binding obligation of FWRLP,
enforceable against it in accordance with its terms.
(b) No Defaults. Neither the execution of this Agreement nor
the consummation of the transactions contemplated hereby will: (i) conflict
with, or result in a breach of, the terms, conditions or provisions of, or
constitute a default under, any agreement or instrument to which FWRLP or the
REIT is a party, (ii) violate any restriction, requirement, covenant or
condition to which the FWRLP or the REIT is subject, and (iii) constitute a
violation of any applicable code, resolution, law, statute, regulation,
ordinance, rule, judgment, decree or order.
(c) Disclosure Documents. Attached hereto as Exhibit I is a
true and correct copy of the Confidential Information Statement, as supplemented
through the date hereof. The FWRLP Partnership Agreement, as contained in the
Confidential Information Statement, as supplemented through the date hereof, has
not been amended or modified except as provided in Exhibit I.
(d) Disclosure. The Confidential Information Statement, as
supplemented through the date hereof, and including the Appendices thereto, on
the date hereof does not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein,
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in light of the circumstances under which they were made, not misleading. FWRLP
acknowledges that the Contributor is relying upon the confidential information
statement in acquiring the Common Units and Preferred Units.
(e) Financial Information. The financial statements of FWRLP
and the REIT (including the notes thereto) included in the Confidential
Information Statement, as supplemented through the date hereof, present fairly
the financial position of the respective entity or entities presented therein at
the respective dates indicated and the results of their operations for the
respective periods specified, and except as otherwise stated in any such
registration statement or periodic report, such financial statements have been
prepared in conformity with generally accepted accounting principles applied on
a consistent basis. Since the date of the aforementioned financial statements,
there has been no material and adverse change in the financial condition of
either FWRLP or the REIT.
(f) Issuance of Units. The FWRLP Partnership Agreement
provides, or prior to Closing will provide, for the issuance of the Units. The
Units to be issued in connection with the transactions herein contemplated have
been, or prior to the Closing Date will have been, duly authorized for issuance
by FWRLP to Contributor, and on the Closing Date will be validly issued, fully
paid and non-assessable. The Units conform to the description thereof contained
in the Confidential Information Statement, as supplemented through the date
hereof, and such description conforms to the rights set forth in the FWRLP
Partnership Agreement. All issued and outstanding Units were issued in
compliance with or in transactions exempt from the registration provisions of
applicable federal and state securities laws. All shares of stock of the REIT
exchangeable for Units issued in connection with the transactions herein
contemplated will at Closing and at all times thereafter until the time of such
exchange be duly authorized and available for such exchange and upon issuance
will be validly issued, fully paid and non-assessable, and, after the issuance
of such stock pursuant to the terms of an effective registration statement,
shall be unrestricted. All issued and outstanding shares of stock of the REIT
were issued in compliance with or in transactions exempt from the registration
provisions of applicable federal and state securities laws.
(g) Litigation. There is no legal or governmental action or
proceeding pending or, to the knowledge of FWRLP, threatened against FWRLP, the
REIT or any subsidiary before any court or administrative agency which would
result in any material adverse change in the business or financial condition of
FWRLP, the REIT and their subsidiaries, taken as a whole or which would
materially and adversely affect the consummation of any of the transactions
contemplated within this Agreement.
(h) Disposition of Property. Except in connection with a sale
of all or substantially all of FWRLP's assets or a merger or consolidation of
FWRLP, in no event shall FWRLP voluntarily sell or otherwise dispose of the
Property (other than the Pad Site and the Second Pad Site) for a period of five
(5) years following the Closing Date.
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8. Conditions Precedent to Closing.
(a) It shall be a condition precedent of FWRLP's obligation to
make a full settlement hereunder that each and every one of the following
conditions shall exist on the Closing Date:
(i) Representations and Warranties. Subject to the
qualifications set forth in Section 5(ii), above,
Contributor`s representations and warranties hereunder shall
be true and correct in the same manner and with the same
effect as though such representations and warranties had been
made on and as of the Closing.
(ii) Zoning. No proceedings shall have occurred or be
pending to change, redesignate or redefine the zoning
classification of the Property to a more restrictive
classification than presently exists.
(iii) Title. Title to the Property shall be
marketable, good of record, and insurable by the Title Company
at standard rates or less, pursuant to a full coverage ALTA
Form-B (Rev. 1970 and 1984) owner's title insurance policy (or
an unconditional commitment therefor) without any exceptions
("Printed form" or otherwise) other than the Permitted
Exceptions, and in addition, providing affirmative coverage
satisfactory to FWRLP insuring against any mechanic's or
materialmen's lien arising from goods, labor or materials
provided to the Property prior to the Closing Date. The
"Permitted Exceptions" are:
(A) the lien of current real estate taxes and
special assessments not yet due and payable; and
(B) such matters as would be shown by a current
and accurate survey of the Property as of the
Acceptance Date;
(C) all existing zoning, building, land use and
other restrictions upon the Property existing as of
the Acceptance Date;
(D) the Leases;
(E) such other matters which are listed on
Exhibit J hereto, and
(F) such other matters as FWRLP shall approve in
writing.
(iv) Existing Mortgages. Contributor shall have
delivered to the Title Company such releases or other
instruments necessary to release of record and beneficially
any and all existing mortgages, deeds of trust, financing
statements or other security documents affecting the Property
(collectively, the "Existing Mortgages"), other than the FNBM
Loan which may be satisfied at Closing pursuant to Section 2
herein.
(v) Leasing Brokerage/Property Management
Agreements. Contributor shall have terminated any and all
leasing brokerage agreements and property management
agreements with respect to the Property effective as of the
Closing. All responsibility for dealings with any such brokers
and agents, including the payment of any claims (if deemed
warranted by Contributor), shall be the sole responsibility of
Contributor, except if and to the extent such claims are
expressly assumed by FWRLP in writing or pursuant to Section
2(f) herein. Contributor agrees that they will indemnify and
hold FWRLP, its successors, assigns, partners, agents and
employees, harmless against any such claims and/or losses
which might be incurred by such indemnitees in connection with
any additional and/or contingent leasing commissions or fees
or management fees. The provisions of this subparagraph (v)
shall survive Closing without limitation.
(vi) Performance by Contributor. Contributor shall
have complied with and not be in breach of any of its
covenants or obligations under this Agreement, which breach
remains continuing for a period of thirty (30) days after
FWRLP provides Contributor with written notice specifying such
breach (provided that the Closing Date shall be extended by
the lesser of (i) such 30-day period or (ii) the actual number
of days which it takes for the Contributor to cure any such
breach, if any such breach is in existence as of the date the
parties otherwise intend to consummate the Closing).
(vii) Tenant Estoppels. FWRLP shall have received a
tenant estoppel letter in the form attached hereto as Exhibit
F (except that in the case of Super Fresh the form of estoppel
letter will be governed by the Tenant's Lease) from, at a
minimum, tenants satisfying the requirements described on
Exhibit F-1 (or from such tenants and in such form as required
by FWRLP's mortgage lender), confirming the information set
forth in the Rent Schedule attached as Exhibit B hereto for
such tenants and containing no material changes from the Rent
Schedule, and any subordination and attornment agreements
required by the mortgage lender of FWRLP.
If FWRLP elects to consummate Closing notwithstanding a failure of any of the
foregoing conditions, then the provisions of Section 5(ii)(c), above, shall be
applicable.
(b) Failure of Condition. In the event of the failure by the
Closing Date of any condition precedent set forth above, then FWRLP, at its sole
election, may (a) terminate this Agreement, in which event the Deposit and any
interest thereon shall be returned to FWRLP and, except as otherwise provided in
Section 16 hereof, neither party shall have any further obligations or
liabilities to the other; or (b) proceed to
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Closing, in which event FWRLP will be deemed to have waived any claim it
otherwise might have against Contributor by virtue of such failure of condition,
unless such failure of condition was due to the willful misconduct or bad faith
of Contributor; or (c) extend the Closing Date for such reasonable time period
as may be determined by FWRLP (but in no event for more than three (3) months
from the Closing Date then in effect) in order to permit the satisfaction of any
condition precedent not so fulfilled.
(c) It shall be a condition precedent of the Contributor`s
obligation to make a full settlement hereunder that each and every one of the
following conditions shall exist on the Closing Date, or shall occur
simultaneously with the deliveries to be made by Contributor pursuant to Section
9, below:
(i) Representations and Warranties. FWRLP's
representations and warranties hereunder shall be true and
correct in all material respects as though such
representations and warranties had been made on and as of the
Closing (except that FWRLP may amend its Partnership Agreement
prior to Closing provided it does not materially adversely
affect Contributor).
(ii) Release of Guarantors. Unless the FNBM Loan is
repaid in full as of the Closing Date, FWRLP shall have caused
FNBM to execute and deliver to Brian McElwee, Jay Donegan and
Richard Ireland (collectively, the "Loan Guarantors") a
complete and unconditional release of the Contributor and all
existing Guaranties of the FNBM Loan to which the Loan
Guarantors are bound, including without limitation the
"Guaranty of Payment" and the "Guaranty of Completion" dated
December 28, 1995 which was executed and delivered by the Loan
Guarantors in favor of FNBM.
(iii) [Intentionally Omitted]
(iv) [Intentionally Omitted]
(v) Issuance of Units. FWRLP shall have issued to
the Contributor (or its Members) the Common Units and/or
Preferred Units required to be issued pursuant to Section
2(a)(i) and, if applicable, Section 2(d) of this Agreement,
and the Contributor (or its Members) shall have been admitted
to FWRLP as a limited partner pursuant to Section 12.2 of the
FWRLP Partnership Agreement.
(vi) [Intentionally Omitted]
(vii) Tax Opinion of Saul, Ewing, Remick & Saul.
The Contributor shall have received an opinion from Saul,
Ewing, Remick & Saul, regarding the tax treatment of the
transaction evidenced by this
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Agreement, which is in form and substance satisfactory to the
Contributor in its sole discretion.
(viii) Performance by FWRLP. FWRLP shall have
complied with, and not be in breach of, any of its covenants
or obligations under this Agreement, which breach remains
continuing for a period of thirty (30) days after Contributor
provides FWRLP with written notice specifying such breach
(provided that the Closing Date shall be extended by the
lesser of (i) such 30-day period or (ii) the actual number of
days which it takes for FWRLP to cure any such breach, if any
such breach is in existence as of the date the parties
otherwise intend to consummate the Closing).
(d) Each of the parties hereto shall use all reasonable and
diligent efforts to cause the satisfaction of each condition to closing which is
within the control of such party.
9. Contributor`s Deliveries. Contributor shall execute,
acknowledge and deliver to FWRLP at the Closing the following documents, each
dated on the Closing Date:
(a) a special warranty deed, in form and substance
satisfactory to FWRLP, and Title Company, conveying good and marketable fee
simple title to the Property;
(b) a bill of sale which shall convey to FWRLP good
title to all the Property, free and clear of all liens and encumbrances;
(c) [Intentionally Omitted]
(d) an assignment and assumption of the Leases, together
with all originally executed Leases, and the security deposits shall be paid to
FWRLP;
(e) an assignment of Licenses and Service Contracts, if any,
which are to be assumed by FWRLP at FWRLP's request, together with the
originally executed Service Contracts which are to be assumed, and any
warranties;
(f) a schedule updating the Rent Schedule for the
Property and setting forth all arrearages in rents and all prepayments of
rents;
(g) copies of books, records, operating reports, files and
other materials related to the ownership, use and operation of the Property, to
the extent that any exist and are in the possession of Contributor, which
obligation shall survive Closing;
(h) such documents as are reasonably required by FNBM to
permit FWRLP to assume the FNBM Loan;
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(i) an original letter executed by Contributor advising the
tenants of the Property of the contribution of the Property to FWRLP and
directing that rents and other payments thereafter be sent to FWRLP or as FWRLP
may direct;
(j) possession of the Property in the condition required
by this Agreement, and the keys therefore;
(k) the Certification of Non-foreign Status from
Contributor and as provided in Treas. Reg. 1.1445-2T(b)(2)(iii)(B) or in any
other form as may be required by the Internal Revenue Code or the regulations
issued thereunder;
(l) such other items and instruments as shall be required by
the Title Company in connection with the issuance of its title insurance policy
and/or endorsements to FWRLP pursuant to Section 8(a)(iii) (including customary
owner's affidavit, if required) or as shall be reasonably requested by counsel
to FWRLP and consistent with the terms of this Agreement;
(m) any and all documents necessary to release the cash
constituting the Deposit from escrow with the Title Company and to have said
cash returned to FWRLP;
(n) an amendment to the Partnership Agreement of FWRLP, in a
form acceptable to FWRLP, admitting the Contributor (or the Members receiving
Units, if applicable) as a limited partner(s) of FWRLP and issuing such Common
Units and/or Preferred Units as set forth on Exhibit M hereto;
(o) an assignment of the hedge cap on the one month
LIBOR, with a notional amount of $6,200,000.00 and a strike of nine percent
(9%); and
(p) any other documents required by this Agreement to
be delivered by Contributor.
10. FWRLP's Performance. At Closing, simultaneously with the deliveries
of Contributor pursuant to the provisions of Section 9 above, FWRLP shall
satisfy each of the conditions stated in Section 8(c), above, including
subsections 8(c)(ii) and (vi), above, and issue to Contributor (or its Members)
certificates evidencing the Units in the manner specified in Section 2 and any
cash required under Section 2, whereupon the Deposit, and any interest accrued
thereon, shall be returned to FWRLP by the Title Company.
11. Settlement Charges; Prorations and Adjustments.
(a) At or before Closing, FWRLP shall (i) pay all charges for
the title examination, the title insurance premium, notary fees and other such
charges incident to Closing, (ii) pay all transfer and recording fees and taxes
and documentary stamps associated with the financing of this transaction by
FWRLP, (iii) pay all of FWRLP's
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legal fees related to the preparation of this Agreement and the preparation of
all documents required to settle the transaction contemplated hereby, or
otherwise incurred by FWRLP in connection herewith, (iv) pay all Development
Expenses assumed by FWRLP under Section 2(f) above, to the extent then due and
payable, and (v) pay all transfer and recording fees and taxes and documentary
stamps associated with the transfer of the Property other than those described
in clause (ii) above (the amount described in clause 11(a)(v), above being
referred to in this Agreement as the "Closing Costs").
(b) Return on Malone/Thomson Advance. FWRLP shall pay
interest at a rate of 9% per annum to Malone/Thomson on the Malone/Thomson
Advance due Malone/Thomson from March 1, 1997 to the Date of Funding.
(c) At the Closing, the following adjustments and prorations
shall be computed as of March 1, 1997 (it being agreed that March 1, 1997 shall
be the effective date of the Closing irrespective of the actual date upon which
Closing occurs).
(i) Taxes. Real estate and personal property
taxes shall be apportioned as of March 1, 1997.
(ii) Assessments. All special assessments and other
similar charges which have become or may become a lien upon
the Property or any part thereof as of March 1, 1997, whether
or not the same are then past due or are payable thereafter
(in installments or otherwise), or which have been confirmed
by a public authority as of Closing, shall be paid by
Contributor in full at Closing (or apportioned in favor of
FWRLP pursuant to this Section 11(c).
(iii) Rent. Rent shall be apportioned as of March 1,
1997, and Rent for the month of Closing and thereafter which
was collected by the Contributor prior to the actual Closing
Date shall be apportioned in favor of FWRLP. If any tenant is
in arrears in the payment of rent on the Closing Date, rents
received from such tenant after the Closing shall be applied
in the following order of priority: (a) first, to the payment
of current rent then due; (b) second, to delinquent rent for
any period after the Closing Date; and (c) third, to
delinquent rent for any period prior to the Closing Date.
FWRLP shall either use reasonable and diligent efforts to
collect (at no cost to FWRLP), or shall assign the right to
collect arrearages in rents due from tenants as of the Closing
Date to the Contributor. If rents or any portion thereof
received by Contributor or FWRLP after the Closing Date are
payable to the other party by reason of this allocation, the
appropriate sum, less a proportionate share of any reasonable
attorneys' fee, costs and expenses of collection thereof, (if
any) shall be promptly paid to the other party, which
obligation shall survive the Closing.
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If any tenants are required to pay
percentage rents, escalation charges for real estate taxes,
operating expenses, cost-of-living adjustments or other
charges of a similar nature ("Additional Rents") and any
Additional Rents are collected by FWRLP after the Closing
which are attributable in whole or in part to any period prior
to March 1, 1997, then FWRLP shall promptly pay to Contributor
its proportionate share thereof, less a proportionate share of
any reasonable attorneys' fees, costs and expenses of
collection thereof, (if any) if and when the tenant paying the
same has made all payments of rents and Additional Rents then
due to FWRLP pursuant to the tenant's Lease, which obligation
shall survive the Closing.
Notwithstanding the foregoing:
(A) Prepaid rent shall be pro rated as of March 1,
1997.
(B) Contributor shall receive a credit at Closing
for accounts receivable from Tenants through February 28, 1997
in the total amount of $32,323.76. If any of such accounts
receivable are not collected from such tenants, then
Contributor (and its Members) shall reimburse FWRLP for such
uncollected amounts pursuant to Section 18(e) herein.
(C) Except as set forth in clause (B) above,
Contributors shall not receive any credit at Closing for
uncollected rents for the for months prior to the month of
March 1, 1997.
(D) [Intentionally Omitted]
(E) [Intentionally Omitted]
(F) With respect to any pass-throughs of operating
expenses, real estate taxes or insurance premiums due from any
tenant (except for those tenants in clause (B) above) at the
Property under its lease, but not payable by such tenant until
an accounting is rendered to such tenant after year end, and
any such amounts are payable on account of a period of time
prior to March 1, 1997 (other than those from any tenant who
is more than 60 days delinquent in payment of rent at the
Closing or from any tenant listed in clause (B) above), FWRLP
shall pay over to Contributor Contributor`s pro rata share
thereof (less a pro rata share of any cost of collection or
bad debts) within fifteen (15) days of receipt by FWRLP, but
only if and to the extent received by FWRLP.
(iv) Debt Service on FNBM Loan. If the FNBM Loan is
not repaid at Closing, the amount of interest payable under
the FNBM Loan from and after March 1, 1997 shall be paid by
FWRLP or shall otherwise be apportioned in favor of the
Contributor at Closing.
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(v) Cash Bonds. FWRLP will credit to
Contributor the amount of $5,172.12 at Closing, as replacement
for the Cash Bonds.
(vi) Miscellaneous. All other charges and fees
customarily prorated and adjusted in sales transactions of
operating properties, including utilities, insurance premiums
and charges for Service Contracts, shall be prorated as of
March 1, 1997. In the event that accurate prorations and other
adjustments cannot be made at Closing because current bills
are not obtainable or the amount to be adjusted is not yet
ascertainable (as, for example, in the case of utility bills)
the parties shall prorate on the best available information,
subject to further adjustment promptly upon receipt of the
final bill or upon completion of final computations. Any
adjustment which requires a payment by Contributor to FWRLP
shall be paid in accordance with Section 18(e). Contributor
agrees that an appropriate amount in respect of water
consumption charges may be held in escrow by the Title Company
in connection with its issuance of a title insurance policy to
FWRLP as of March 1, 1997. Contributor shall use its best
efforts to have all utility meters read on March 1, 1997 so as
to accurately determine its share of current utility bills.
12. Risk of Loss. The risk of loss or damage to the Property by fire or
other casualty shall be borne by Contributor until Closing, provided that
Closing under this Agreement in fact occurs. If prior to Closing (i)
condemnation proceedings are commenced against all or any material portion of
the Property, or (ii) if the Property is damaged by fire or other casualty to
the extent that the cost of repairing such damage shall be Two Hundred Thousand
Dollars ($200,000.00) or more, or (iii) if the Property is damaged by an
uninsured risk; or (iv) if the Property becomes subject to litigation which may
deprive FWRLP of any material benefit to which it would become entitled pursuant
to this Agreement, then FWRLP shall have the right, upon notice in writing to
the Contributor delivered within thirty (30) days after actual notice of such
condemnation or fire or other casualty or litigation, and in all events prior to
the Closing Date to terminate this Agreement, and thereupon the parties shall be
released and discharged from any further obligations to each other and the
Deposit shall be refunded to FWRLP. If FWRLP fails to send such notice within
such 30-day period (time being of the essence) FWRLP shall be deemed to have
elected not to terminate this Agreement. If FWRLP does not elect to terminate
this Agreement or in the event of fire or other casualty not giving rise to a
right to terminate this Agreement by FWRLP, FWRLP shall be entitled to an
assignment of all of Contributor`s share of the proceeds of fire or other
casualty insurance and rent insurance proceeds payable with respect to the
period after Closing or of the condemnation award, as the case may be, and
Contributor shall have no obligation to repair or restore the Property;
provided, however, that the Unit portion of the Consideration shall be reduced
by an amount equal to the sum of (a) the "deductible" applied by the
Contributor's insurance policy, or (b) if the Contributor is self-insured, the
cost of repairing such damage. If FWRLP does not elect to terminate
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this Agreement as aforesaid, FWRLP shall have the right to participate in the
negotiation and settlement of any casualty or condemnation-related claim.
13. Inspection of Property.
(a) FWRLP's Right of Inspection. FWRLP shall have the right,
at its own risk, cost and expense, at any time or times prior to Closing, to
enter, or cause its agents or representatives to enter, upon the Property for
the purpose of making surveys, or any tests, investigations and/or studies
relating to the Property which FWRLP deems appropriate, in its sole discretion,
during reasonable hours and upon reasonable notice to Contributor. FWRLP shall
further have complete access to all documentation, agreements and other
information in the possession of Contributor related to the ownership, use and
operation of the Property, to the extent it is readily available to Contributor,
and shall have the right to make copies of same. FWRLP agrees to repair any
damage to the Property that may be caused by its inspections and to indemnify
and defend Contributor and hold Contributor harmless against any injury, loss or
damage suffered upon the Property as a result of such inspections.
(b) Feasibility Period. Any other provisions of this Agreement
to the contrary notwithstanding, FWRLP may cause at FWRLP's sole cost and
expense, such boring, engineering, economic, water, sanitary and storm sewer,
utilities, topographic, structural, environmental and other tests,
investigations, market studies and other studies as FWRLP shall elect. In the
event that any of such tests, investigations and/or studies indicate, in FWRLP's
sole discretion, that FWRLP's plans for the Property would not be feasible, then
FWRLP shall have the right, at its sole election on or before the date which is
thirty (30) days after the Acceptance Date (such period herein referred to as
the "Feasibility Period"), to terminate this Agreement by giving written notice
thereof to Contributor, in which event this Agreement shall terminate, the
Deposit shall be returned to FWRLP and neither party shall have any further
liabilities or obligations to each other.
FWRLP agrees to use all reasonable and diligent efforts to
minimize disruption to business operations within the Property during the course
of any entries thereupon. In addition, in making any entries onto the Property,
or otherwise conducting its due diligence activities pursuant to this Agreement:
(i) FWRLP agrees to notify Contributor prior to making any entry onto the
Property which is not within the scope of the ordinary property management
functions of its affiliate property management company; (ii) FWRLP shall obtain
and maintain commercial general liability insurance, covering FWRLP with respect
to any third party claims for injury or damage to property, and injury or death
to persons, occurring during the course of any entry by FWRLP or its employees,
agents, contractors and/or representatives upon the Property; (iii) all entries
by FWRLP shall be conducted, to the extent possible, at times calculated to
minimize disruption to shopping center operations; (iv) all such entries shall
be made at FWRLP 's sole risk and expense; (v) any intrusive testing by FWRLP
(such as soil borings, and the like) shall be subject to the Contributor's
reasonable consent; (vi) in the event FWRLP elects to terminate this Agreement
prior to the expiration of the
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Feasibility Period, or does not consummate Closing thereafter, FWRLP agrees to
return to the Contributor, upon the termination of this Agreement, all written
reports, studies, title materials, surveys, environmental reports, as well as
all copies of documents theretofore delivered to FWRLP in connection with its
due diligence activities, with no charge to the Contributor; and (vii) FWRLP
agrees that the election by FWRLP not to terminate this Agreement pursuant to
this Section 13, whether deemed or otherwise, shall constitute FWRLP 's
acceptance, as exceptions to title, of all matters of record as of the
Acceptance Date.
(c) Audit. Contributor hereby agrees to allow books and
records related to the Property to be audited (at FWRLP's sole expense) by an
independent, certified public accounting firm selected by FWRLP, and Contributor
will cooperate and cause its employees and other agents to cooperate in such
auditing process. FWRLP shall provide Contributor with prior notice of such
audit.
(d) FWRLP acknowledges that all records and information
received by it pursuant to this Agreement relating to the Property constitutes
proprietary and sensitive business information of the Contributor, and FWRLP
accordingly agrees to keep all such information confidential, and not to
disclose any such information to any third parties except (A) to its affiliates
and their employees, attorneys, financial advisors, lenders accountants and
auditors and other consultants, (B) pursuant to compulsion by due process of
law, (C) in connection with the resolution of any dispute between FWRLP and the
Contributor, or (D) if such information was obtained, or is otherwise available,
in the public domain or from other sources.
14. Indemnifications.
(a) Indemnification by Contributor. Subject to Section 5(ii),
the Contributor hereby indemnifies and agree to defend and hold harmless FWRLP
and its partners and subsidiaries and any officer, director, employee, agent of
any of them, and their respective successors and assigns from and against any
and all claims, expenses, costs, damages, losses and liabilities (including
reasonable attorneys' fees) which may at any time be asserted against or
suffered by any indemnitee, the Property, or any part thereof, whether before or
after Closing, as a result of, on account of or arising from (a) any breach of
any covenant, representation, warranty or agreement on the part of the
Contributor made herein or in any instrument or document delivered pursuant to
this Agreement, and/or (b) any claim relating to or arising out of any contract,
agreement or other obligation to which the Company was a party or any claim
relating to any encumbrance or other occurrence prior to Closing, (exclusive of
the documents evidencing the FNBM Loan) provided (and solely to the extent) such
claim is derived from an occurrence or breach which took place prior to Closing,
and solely to the extent such claim is not within the scope of any insurance
and/or indemnity agreement in favor of FWRLP (and FWRLP will look to any such
insurance and /or indemnity agreement(s) in connection with any such insured or
indemnified claims to the extent actually covered by such insurance and/or
indemnity agreement). Notwithstanding any other provision of this Agreement to
the contrary, the liability of the Contributor, or its Members, to
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FWRLP and its successors and assigns with respect to or arising out of this
Agreement, any indemnities set forth herein, any documents delivered pursuant
hereto, and/or any of the transactions contemplated herein, shall be limited to
the right, title and interest of Contributor or the Members in the Units issued
to the Contributor (or its Members) pursuant to Section 2 of this Agreement, and
such liability shall be satisfied solely out of the sale or redemption of such
Units by FWRLP in levy upon or set off against the right, title and interest of
the Contributor (or its Members) therein, and in any distributions payable
pursuant thereto, except and solely to the extent the Units so issued have been
exchanged by the Contributor (or its Members) for REIT Shares or sold or
otherwise transferred by the Contributor (or its Members), in which event such
liability may be satisfied out of any assets of the Contributor or the Members,
subject to a maximum limitation of liability equal to the market value of the
Units (i.e., the number of Units multiplied by the closing price on the NYSE of
the respective Common Stock or Preferred Stock into which the Units are
exchangeable) issued to such Contributor (or its Members) as of Closing. Any
indemnification of FWRLP by the Contributor or its Members shall survive Closing
for a period of three (3) years (other than indemnification for breach of the
securities representations set forth in Section 5(i)(r) hereof which shall
survive Closing without limitation and other than indemnification for breach of
other representations or warranties pursuant to clause (a) of the first sentence
of this Section 14(a) which are subject to a limited survival period under this
Agreement (Section 5 (ii) (f)), in which case the survival of such
indemnification shall be limited to the survival period, if any, of such
representation or warranty).
(b) Indemnification by FWRLP and the Company. FWRLP hereby
indemnifies and agrees to defend and hold harmless Contributor and its Members
and their successors and assigns from and against any and all claims, expenses,
costs, damages, losses and liabilities (including reasonable attorneys' fees)
which may at any time be asserted against or suffered by Contributor or its
Members as a result of, on account of or arising from (a) any breach of any
covenant, representation, warranty or agreement on the part of FWRLP made herein
or in any instrument or document delivered pursuant to this Agreement, and/or
(b) any obligation, claims, suit, liability, contract, agreement, debt or
encumbrance or other occurrence created, arising or accruing on and after the
Closing and relating to the Property or its operations.
15. Brokerage Commission. Contributor and FWRLP represent and warrant
to each other that no brokerage fee or real estate commission is or shall be due
or owing in connection with this transaction, and Contributor and FWRLP hereby
indemnify and hold the other harmless from any and all claims of any other
broker or agent so claiming based on action or alleged action of the other.
16. Default Provisions; Remedies.
(a) FWRLP's Default. If FWRLP fails to consummate the
Contribution contemplated herein when required to do so pursuant to the
provisions hereof, then the Title Company shall deliver the Deposit to
Contributor as full and complete liquidated damages, and as the exclusive and
sole right and remedy of Contributor, whereupon
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this Agreement shall terminate and neither party shall have any further
obligations or liabilities to any other party. The foregoing notwithstanding,
(i) if FWRLP disputes any certification by the Contributor to the Title Company
that the Contributor is entitled to delivery of the Deposit due a default by
FWRLP hereunder and if Contributor is the prevailing party in any such dispute,
then in addition to recovery of the Deposit due to such default by FWRLP, the
Contributor shall also be entitled to recover from FWRLP all reasonable
attorneys fees and court costs incurred by the Contributor to enforce its rights
and remedies under this Agreement; and (ii) any indemnification of the
Contributor by FWRLP pursuant to this Agreement (such as, but not limited to,
FWRLP's indemnity under Section 13(a) hereof), shall survive any such
termination of this Agreement and shall not be affected thereby. The foregoing
exclusive remedy applies solely to FWRLP's failure to consummate the
Contribution contemplated herein, and shall not apply to limit any right or
remedy available to the Contributor in the event of FWRLP's violation of its
post-closing obligations hereunder, including but not limited to FWRLP's
post-closing obligations under Section 14(b) and Section 18 hereof.
(b) Contributor`s Default. Except for any breaches waived in
writing by FWRLP, if Contributor has breached any of its covenants or
obligations under this Agreement or have failed, refused or are unable to
consummate the Contribution contemplated herein by the Closing Date or if any of
the representations and warranties made by Contributor under this Agreement
shall be inaccurate or incorrect, then FWRLP shall be entitled as its sole and
exclusive remedy to (i) (A) waive such breach, default or failure and proceed to
Closing, (B) terminate this Agreement and obtain the return of the Deposit, or
(C) pursue an action for specific performance, or (ii) extend the Closing for
such reasonable time or times (not to exceed 3 months) as may be necessary in
order to enable Contributor to remedy such breach, default or failure, and if
not so remedied by the end of such extension period (if FWRLP elects such
extension), FWRLP shall have the choice of remedies set forth in clause (i)
above. In the event that FWRLP elects to pursue an action for specific
performance and FWRLP prevails in such action, in addition to any relief awarded
to FWRLP, Contributor shall be obligated to pay all reasonable legal fees, costs
and expenses incurred by FWRLP. The foregoing exclusive remedy applies solely to
Contributor`s failure to consummate the Contribution contemplated herein, and
shall not apply to limit any right or remedy available to FWRLP in the event of
Contributor`s violation of its post-closing obligations hereunder, including but
not limited to Contributor`s post-closing obligations under Section 14(a) and
Section 18 hereof.
17. Registration Rights.
Contributor, the Members and the REIT hereby agree to execute
at Closing the Registration Rights Agreement attached hereto as Exhibit N.
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18. Guaranty.
(a) Rent Guaranty.
(i) Term of Guaranty. The period from Closing
through February 28, 2000 is defined as the "Rent Guaranty
Period." Subject to the limitation specified in Section
18(a)(iv) below, Contributor and its Members hereby
(severally, as described in Section 18(c), below) guarantee to
FWRLP (the "Rent Guaranty") during the Rent Guaranty Period
the payment of the amount of any monthly deficiency or
difference (the "Rent Deficiency") between (A) the aggregate
Rent (as defined below) due and payable for each month (or
portion thereof) with respect to the Tenant Space (defined as
those spaces described in Exhibit K hereto) less $34,000 as an
overall annual vacancy factor, and (B) the aggregate amount of
such Rent actually received by FWRLP with respect to such
Tenant Space.
(ii) Computation of Rent. "Rent", as used
herein, shall be computed on a triple-net basis and as to
the Tenant Space described in Exhibit K shall consist of the
sum of:
(A) a monthly base rent for the Tenant
Space, derived from the annual base rents specified
in Exhibit K; plus,
(B) a pro rata share for the Tenant Spaces
which are vacant as of Closing of all estimated
taxes, insurance and common area maintenance expenses
of the Property, including but not limited to
management fees calculated at a rate of 5% of gross
rents, and other incidental costs of managing the
Property. Such operating expenses are currently
estimated to be approximately Three and 00/100
Dollars ($3.00) per square foot of rentable area per
year; plus,
(C) a pro rata share for the Tenant Spaces
which were leased as of Closing of all estimated
taxes, insurance and common area maintenance expenses
of the Property, including but not limited to
management fees and other incidental costs of
managing the Property, but only to the extent such
amounts are recoverable under the terms of the leases
executed with respect to such spaces as of Closing.
(iii) Records Regarding Rent Guaranty. FWRLP
shall provide Contributor with quarterly accounting of rent
collection on the Tenant Space.
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(iv) Limitation of Liability. Anything in this
Section 18(a) to the contrary notwithstanding, (A) the Rent
Guaranty obligation for the first year of the Rent Guaranty
Period shall be limited to a maximum aggregate amount equal to
the product of $1.95 times the total number of Common Units to
be issued to Contributor (or its Members) hereunder (prior to
any election to receive Preferred Units in place of Common
Units), (B) the Rent Guaranty obligation for the second year
of the Rent Guaranty Period shall be limited to a maximum
aggregate amount equal to 75% of the product of $1.95 times
the total number of Common Units to be issued to Contributor
(or its Members) hereunder (prior to any election to receive
Preferred Units in place of Common Units), and (C) the Rent
Guaranty obligation for the third year of the Rent Guaranty
Period shall be limited to a maximum aggregate amount equal to
50% of the product of $1.95 times the total number of Common
Units to be issued to Contributor (or its Members) hereunder
(prior to any election to receive Preferred Units in place of
Common Units).
(v) Leasing and Collection Efforts. FWRLP shall use
reasonable and diligent efforts to lease the Tenant Space on
terms and conditions acceptable to FWRLP, and to collect Rent
from all tenants within the Tenant Space on a timely basis. In
the event that Contributor or any of its Members procures a
bona fide, creditworthy tenant for any Tenant Space whose
proposed use of the Tenant Space is compatible with the other
tenants at the Property in FWRLP's sole but reasonable
judgement and such tenant has entered into a bona fide letter
of intent for such Tenant Space with a base rent (on a triple
net basis) equal to or greater than the base rent set forth
for such Tenant Space in Exhibit K hereto, but FWRLP rejects
such tenant, then the Rent Guaranty with respect to such
Tenant Space shall terminate until such time that any
subsequent tenant of such Tenant Space ceases paying rent
therefor during the Rent Guaranty Period; provided, however,
that if the proposed base rent payable by such bona fide
tenant is not more than five percent (5%) less than the base
rent set forth for such Tenant Space in Exhibit K hereto, then
the Rent Guaranty with respect to such Tenant Space shall not
terminate, but rather Contributor shall be deemed to receive a
credit against the Rent Guaranty with respect to the rent
otherwise due and payable for such Tenant Space as set forth
in Exhibit K until a subsequent tenant of such Tenant Space
ceases to pay rent therefor.
(vi) In the event that FWRLP leases the Pad Site, the
Rent Guaranty set forth in this Section 18, shall include a
guarantee of net rent (i.e., net of leasing commissions in
excess of $30,000, tenant improvements and/or allowances,
etc.) for the Pad Site of $50,000 per annum (or $4,166.67 per
month) commencing on the issuance of the Units to Contributor
pursuant to Section 2(a)(ii)(B) herein and ending on February
28, 2000. In the event that Contributor or any of its Members
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procures a bona fide, creditworthy tenant for the Pad Site
whose proposed use of the Pad Site is compatible with the
other tenants at the Property in FWRLP's sole but reasonable
judgment and such proposed tenant enters into a bona fide
letter of intent to lease such Pad Site and either (i) such
Tenant enters into a Ground Lease on terms acceptable to FWRLP
which produces a net effective annual base rent of at least
$50,000 per annum, or (ii) such Tenant enters into a Lease of
the Pad Site which requires FWRLP to construct the building
thereon at FWRLP's expense and the net effective annual base
rent is at least the sum of $50,000 plus 12.5% times the
aggregate cost of constructing the building on the Pad Site
(hard and soft costs), but FWRLP rejects such tenant, then the
Rent Guaranty with respect to the Pad Site only shall
terminate. In addition, upon any bona fide sale of the Pad
Site by FWRLP to a third party, then the Rent Guaranty with
respect to the Pad Site only shall terminate upon the closing
of such sale.
(b) Fit-Up/Leasing Guaranty.
(i) Reimbursement. Contributor and its Members shall
(severally, as described in Section 18(c), below) reimburse
FWRLP (A) up to $5.00 per square foot [on a rolling average
basis, (e.g., if a lease for 2,000 square feet provides for a
$3.00 per square foot tenant improvement allowance, then
another lease for 2,000 square feet may provide for up to
$7.00 per square foot tenant improvement allowance, etc.)] for
any costs, expenses or allowances incurred by FWRLP in
connection with tenant improvements or tenant allowances
funded by FWRLP pursuant to any leases for the Tenant Space
executed during the Rent Guaranty Period, and (B) leasing
commissions and fees in an amount of up to 3% of the aggregate
value of the base rent (up to FWRLP's pro forma base rent for
such Tenant Space) payable under new leases (up to a maximum
term of 5 years) payable by FWRLP pursuant to any leases for
the Tenant Space executed during the Rent Guaranty Period.
(ii) Certain Statements from Operating Partnership.
When FWRLP is due to pay any such costs, expenses or
allowances or leasing commissions or fees described in Section
18(b)(i) above, FWRLP shall present the Contributors and its
Members with a statement setting forth the costs, expenses or
allowances incurred by FWRLP in connection with such tenant
improvements or tenant allowances funded by FWRLP and/or
leasing commissions.
(iii) Final Payments. If any Tenant Space was
occupied as of Closing, or at any point during the Rental
Guaranty Period and such space is vacant at the expiration of
the Rent Guaranty Period, then Contributor and its Members
shall pay to FWRLP, pursuant to Section 18(e), an amount equal
to: (i) $5.00 per square foot for such vacant
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Tenant Space, plus (ii) 3% of the aggregate value of a 5-year
lease on such vacant Tenant Space assuming an annual rental
rate for each such space set forth under Year 3 on Exhibit K
hereto.
(iv) Quarterly Accounting. FWRLP shall provide
Contributor with a quarterly accounting of all amounts payable
to FWRLP pursuant to this Agreement with respect to the Tenant
Space (space by space), and such amounts shall be reimbursed
to FWRLP pursuant to Section 18(e) herein.
(c) Collection of Guarantied Amounts.
(i) [Intentionally Omitted]
(ii) Units. In connection with the obligations of the
Contributor (and its Members) pursuant to Sections 18 (a) and
(b) above, Contributor and its Members hereby absolutely
assign to FWRLP the distributions/dividends payable to
Contributor and its Members by FWRLP with respect to
Contributor`s and its Members' Units. Recourse for
Contributor`s and its Members' liability pursuant to this
Agreement may be taken against such distributions/dividends,
provided, however, if the Units are reduced pursuant to the
exercise of the exchange rights contemplated hereby or
otherwise, then Contributor and its Members shall deliver to
FWRLP cash or an irrevocable and unconditional letter of
credit (in form and from a financial institution reasonably
acceptable to FWRLP) in an amount of (i) $5.86 per Common Unit
reduced and $7.32 per Preferred Unit reduced, if such
reduction occurs during the first year after Closing, (ii)
$3.90 per Common Unit reduced and $4.88 per Preferred Unit
reduced, if such reduction occurs during the second year after
Closing, and (iii) $1.95 per Common Unit reduced and $2.44 per
Preferred Unit reduced, if such reduction occurs during the
third year after Closing, to be held in escrow by FWRLP to
secure the Rent Guaranty and Fit- Up/Leasing Guaranty of
Contributor and its Members hereunder. FWRLP shall place any
escrow in an interest-bearing account at a federally-insured
institution reasonably acceptable to Contributor within three
(3) days after receipt thereof, and interest thereon shall
become part of the escrow for all purposes herein. Contributor
and its Members authorize FWRLP and its agents to pay directly
to FWRLP from such distributions/dividends or escrow all
amounts payable by Contributor and its Members to FWRLP
pursuant to this Section 18 or as otherwise provided for in
this Agreement. If the amount in any cash escrow established
under Section 18(b)(i) with respect to fit-up and commissions
for Tenant Space which was vacant as of the Closing Date
exceeds the maximum unfunded liability of the Contributor and
its Members with respect to such vacant space under Section
18(b)(i), FWRLP shall distribute the excess amount to the
Contributor (the calculation for which shall be made when the
last such vacant space is leased or at the expiration of the
Guaranty Period). If current distributions from FWRLP
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exceed the amounts then payable by Contributor and its Members
to FWRLP, then the excess will be paid to Contributor and its
Members. If current distributions from FWRLP are less than the
amounts then payable by Contributor and its Members to FWRLP,
then such current distributions shall be paid in their
entirety to FWRLP and payment of the remainder of the amounts
payable by Contributor and its Members to FWRLP shall be
deferred until the subsequent distribution(s). All guaranty
payments due from the Contributor and its Members under
Sections 18(a) and 18(b), above, shall be collected solely by
impounding or setting off against distributions/dividends
payable with respect to the Units to be issued to the
Contributor (or its Members) under this Agreement (or from the
cash escrow established under this Section 18(c) with respect
to such Contributor or its Members who exercised the exchange
rights contemplated hereby and by the Partnership Agreement of
FWRLP), and such collection shall be effected solely on a pro
rata basis against the Contributor's or its Member's
distributions or escrow (so that the foregoing guaranties
will, in effect, be "several" (and not joint) guaranties by
each Member of the Contributor for his, her or its pro rata
share of the total guaranty obligation of the Contributor and
its Members' under this Section 18). The Contributor and each
of its Members authorizes FWRLP to exercise such pro rata
right of collection against such Contributor's and its
Members' distributions/dividends and/or cash escrows under
circumstances where FWRLP is entitled to payment of sums from
the Contributor under the Guaranties set forth in Sections
18(a) and 18(b), above or as otherwise provided for in this
Agreement. To the extent that a tenant of a Tenant Space
forfeits a security deposit, the same shall be applied by
FWRLP to rent in arrears before impounding or collecting
against the Contributor's (or its Members) Unit distributions
or escrow on account of such rent in arrears. If an amount is
paid to FWRLP because a tenant(s) occupying a Tenant Space
does not pay its Rent when due, and FWRLP subsequently
collects such unpaid Rent from the tenant, then such Rent
collected from such tenant shall be paid to Contributor on a
quarterly basis to the extent of such amount previously paid
to FWRLP. Contributor and its Members shall not be precluded
from making a claim against FWRLP with respect to any
incorrect amount paid to FWRLP pursuant to this Agreement.
Notwithstanding the foregoing, if the Units are issued to the
Members, then the obligations under this Section 18 of
"Contributors and (or) its Members" shall mean the Members.
(d) Suspension. In the event that the Shelf Registration
Statement to be filed with the SEC pursuant to the Registration Rights Agreement
attached hereto as Exhibit N is not declared effective by the SEC within
nineteen (19) months after the Closing Date (with respect to the Units issued
pursuant to Section 2(a)(ii)(A)) and the Second Issuance Date (with respect to
the Units issued pursuant to Section 2(a)(ii)(B)), then the Rent Guaranty and
the Fit-Up/Leasing Guaranty set forth in Sections 18(a) and 18(b), above,
respectively, shall be suspended for the period commencing on the first day of
the twentieth (20th) month after the Closing Date and terminating on the date
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that the Shelf Registration Statement is declared effective by the SEC. Upon the
date the SEC declares the Shelf Registration Statement to be effective, the
Rental Guaranty and the Fit-Up Leasing Guaranty shall be reinstated, but FWRLP
shall not have any retroactive claim for recapture of amounts which otherwise
would have been due thereunder with respect to the suspension period.
(e) Notwithstanding anything to the contrary contained herein,
any amounts that are payable by Contributor and/or its Members to FWRLP under
this Agreement after Closing under Sections 5(i)(s), 11, 18(a) and (b) or 21
shall be reimbursed to FWRLP solely by impounding or setting off against
distributions/ dividends next payable with respect to the Units issued to the
Contributor or its Members under this Agreement (and/or from the cash escrow
established under Section 18(c)). Any amounts which are not paid from a
distribution/dividend shall be carried forward and shall be paid from the next
following distributions/dividends (and/or from the cash escrow), and any such
amount carried forward shall bear interest at the rate of nine percent (9%) per
annum, which interest shall be paid from the next following
distributions/dividends (and/or from the cash escrow). Any payment obligations
which remain outstanding at the time of reduction of the Units pursuant to the
exercise by Contributor or its Members of their exchange rights contemplated
hereby or otherwise, shall be paid to FWRLP by Contributor and its Members in
cash at such time.
19. Miscellaneous Provisions.
(a) Completeness and Modification. This Agreement (together
with Exhibits A to S attached hereto) with respect to the transactions
contemplated herein, and it supersedes all prior discussions, understandings or
agreements between the parties. This Agreement shall not be modified or amended
except by an instrument in writing signed by all of the parties hereto.
(b) Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties hereto, and their respective successors
and assigns.
(c) Assignment. This Agreement shall not be assignable by
FWRLP without the consent of Contributor, provided that this Agreement may be
assigned without Contributor's consent to an entity controlled by, controlling
or under common control with FWRLP. This Agreement shall not be assignable by
Contributor provided nothing herein shall preclude transfer of any membership
interests in the Company prior to Closing, as long as all transferees are bound
hereby.
(d) Waiver; Modification. Failure by FWRLP or
Contributor to insist upon or enforce any of its rights hereto shall not
constitute a waiver or modification thereof.
(e) Governing Law. This Agreement shall be governed by
and construed under the laws of the State of Virginia.
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(f) Headings. The headings are herein used for convenience or
reference only and shall not be deemed to vary the content of this Agreement or
the covenants, agreements, representations and warranties herein set forth, or
the scope of any provision hereof.
(g) Continuing Documentation and Access. From and after
Closing, Contributor shall afford FWRLP reasonable access to any and all
information in its possession concerning the ownership, use and operation of the
Property (including the right to copy same at the expense of FWRLP) for purposes
of any tax examination or audit or other similar purpose, subject to the
agreements of FWRLP concerning confidentiality set forth herein.
(h) Counterparts. To facilitate execution, this Agreement may
be executed in as many counterparts as may be required; it shall be sufficient
that the signature of, or on behalf of, each party, or that the signatures of
the persons required to bind any party, appear on one or more such counterparts.
All counterparts shall collectively constitute a single agreement.
(i) Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be delivered by hand or
mailed by first-class registered or certified mail, return receipt requested,
postage prepaid or delivered by commercial courier, telecopy or overnight
courier (e.g., Federal Express) against receipt, to the addresses indicated
below:
(i) if to FWRLP:
First Washington Realty Limited Partnership
4350 East-West Highway, Suite 400
Bethesda, MD 20814
Attn: William J. Wolfe
Jeffrey S. Distenfeld, Esq.
Telecopy: (301) 907-4911
(ii) if to Contributors or its Members:
Mr. Brian G. McElwee
c/o Valley Forge Investment Corp.
120 S. Warner Road, Suite 200
King of Prussia, PA 19406
Telecopy: (610) 254-0666
and
Jay Donegan
8500 Leesburg Pike, Suite 403
Vienna, VA 22182
Telecopy: (703) 506-1721
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Such notice shall be deemed given on the date of receipt by the addressee or the
date receipt would have been effectuated if delivery were not refused. Each
party may designate a new address by written notice to the other in accordance
with this Paragraph 19(i).
(j) Further Assurances. Contributor and FWRLP agree to
execute, acknowledge and deliver any further agreements, documents or
instruments that are reasonably necessary or desirable to carry out the
transactions contemplated by this Agreement.
(k) Business Days. A "business day" shall be Mondays through
Fridays, less and expecting all legal holidays observed by the United States
Government or the Government of the State of Maryland. Any date specified in
this Agreement which does not fall on a business day shall be automatically
extended until the first business day after such date.
20. Additional Provisions.
(a) Approvals and Consents. In the event that any provision of
this Agreement subjects the action or inaction of any party hereto to the
consent or approval of the other party, the parties agree that such consent or
approval shall not be unreasonably withheld, conditioned or delayed (unless
specifically provided to the contrary in the applicable provision).
(b) Time of the Essence. Time is of the essence of all
provisions of this Agreement.
(c) Effect of Termination. Upon any termination of this
Agreement, and irrespective of the cause thereof, all rights of entry provided
for hereunder, and all provisions limiting the actions of the Contributor to the
consent of FWRLP shall immediately cease and terminate.
(d) Severability. All provisions of this Agreement shall be
valid and enforceable to the fullest extent permissible by law; and in the event
any provision (or part) of this Agreement shall be held to be void, invalid or
unenforceable for any reason, then the same shall not affect the validity or
enforceability of the remaining provisions of this Agreement, which shall
continue in full force and effect as if the void, invalid or unenforceable
provision (or part) were deleted herefrom.
(e) Attorney's Fees for Breach of Post-Closing Obligations. In
the event any legal action is brought by a party hereto due to any breach of the
post-closing obligations of the parties hereto, the non-breaching party shall be
entitled to recover from the breaching party, in addition to any damages
recoverable by virtue of such
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breach, the non-breaching party's reasonable attorneys fees and court costs, if
the non- breaching party is the prevailing party in such legal action.
21. Post Closing Work.
(a) Contributor hereby agrees that, unless otherwise agreed
pursuant to Section 2(f) below, the Property work set forth on Exhibit P hereto
(the "Post-Closing Work") shall be completed by Contributor, at Contributor`s
sole cost and expense, after Closing and in a diligent and good and workmanlike
manner, lien free, and in accordance with all Loudoun County approved plans and
specifications and other applicable laws, rules and regulations. Notwithstanding
the foregoing, all of the Post- Closing Work shall be completed with all due
diligence, but in no event later than six (6) months after Closing, unless
required to be completed sooner under the requirements of any governmental
agency or body. If the Post-Closing Work is not completed within the time period
set forth above, then FWRLP shall have the right, but not the obligation, to
complete the Post-Closing Work and Contributor shall reimburse FWRLP for all
reasonable costs paid by FWRLP in accordance with Section 18(e) herein. In
addition, if the cost of the monument sign for the Property exceeds $25,000,
then Contributor (or its Members) shall reimburse FWRLP for one-half (1/2) of
the cost of such monument sign in excess of $25,000.00, and such payment shall
be made to FWRLP in accordance with Section 18(e) herein. The obligations set
forth in this Section 21 shall survive Closing without limitation.
(b) To the extent any of the items listed on Exhibit P are
covered or indemnified against under the terms of any applicable warranty and/or
contractual rights in favor of the Contributor which have been properly assigned
to FWRLP, FWRLP agrees to enforce such warranty and/or contractual rights upon
the request of the Contributor (and the Contributor agrees to coordinate with
FWRLP's property manager, at no out-of-pocket expense to FWRLP, the actions
necessary to bring about the enforcement of such warranty rights and the
completion of all such items).
(c) Except as otherwise agreed pursuant to Section 2(f) above,
all costs expended by FWRLP pursuant to this Section 21 shall be paid by the
Contributor to FWRLP pursuant to Section 18(e) herein.
(d) The obligations and covenants set forth in this
Section 21 shall survive Closing without limitation.
-35-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Contribution
Agreement as of the day and year first written above.
FWRLP:
FIRST WASHINGTON REALTY
LIMITED PARTNERSHIP
By: First Washington Realty Trust, Inc.,
WITNESS: Its general partner
By: /s/
William J. Wolfe
President
Date of execution: March 19, 1997
WITNESSES: CONTRIBUTOR:
ASHBURN FARMS VILLAGE
CENTER, L.L.C.
By: /s/
Brian G. McElwee
Managing Member
The undersigned Members join herein solely for the purpose of making
the representations, warranties and covenants contained in Sections 2(e),
5(i)(r), 5(i)(s), 11(c)(B), 14(a), 18 and 21 hereof.
MEMBERS:
/s/
BRIAN G. McELWEE
/s/
RICHARD W. IRELAND
/s/
STUART H. MALONE
/s/
JOHN H. DONEGAN
/s/
JOE M. THOMSON
-36-
<PAGE>
First Washington Realty Trust, Inc. joins herein solely for the purpos
of making the covenants contained in Sections 17 hereof.
WITNESS: FIRST WASHINGTON REALTY TRUST, INC.
By: /s/
William J. Wolfe
President
Date of execution: March 19, 1997
F:\DATA\WPDOC\DUKE\JBLUM\FORMS\ASHBURN.AGT
-37-
<PAGE>
ACKNOWLEDGE BY TITLE COMPANY
The undersigned Title Company executes this Contribution Agreement
solely to acknowledge receipt of the Deposit pursuant to Paragraph 3 hereof and
to evidence its agreement to serve as escrow agent pursuant to the terms of the
foregoing Agreement.
FIDELITY NATIONAL TITLE
INSURANCE COMPANY OF
PENNSYLVANIA
By: /s/
Dennis Ryan
Date: March 19, 1997
-38-
<PAGE>
LIST OF EXHIBITS
EXHIBIT A. Legal Description of Land Recitals
EXHIBIT A-1. Legal Description of Pad Site Section 2(a)(ii)(C)
EXHIBIT A-2. Description of Second Pad Site Section 2(e)
EXHIBIT B. Leases and Rent Schedule Section 5(i)(d)
EXHIBIT C. Service Contracts Section 5(i)(e)
EXHIBIT D. Tax Bills Section 5(i)(f)
EXHIBIT E. Intentionally Omitted
EXHIBIT F. Form of Tenant Estoppel Section 5(i)(i)
EXHIBIT F-1. Minimum Tenant Estoppels Section 8(a)(vii)
EXHIBIT G. Violations Section 5(i)(c)
EXHIBIT H. Personal Property Section 5(i)(p)
EXHIBIT I. Confidential Information Statement Section 5(i)(t)(iv)
EXHIBIT J. Permitted Exceptions Section 8(a)(iii)(B)
EXHIBIT K. Tenant Space Section 18(a)
EXHIBIT L. Schedule of Incomplete Work and
Allowances Due Under Leases Section 5(i)(d)(vi)
EXHIBIT M. Percentage of Units to Members of Contributor Section 2(a)(iii)
EXHIBIT N. Registration Rights Agreement Section 17(a)
EXHIBIT O. Contingent Leasing Commissions Section 5(i)(q)
EXHIBIT P. Post Closing Work Section 21
EXHIBIT Q. FNBM Mortgage Section 2(c)
EXHIBIT R. FNBM Note Section 2(c)
EXHIBIT S. Development Expenses Section 2(f)
[Contributors to Attach Foregoing at Acceptance of this Agreement]
-39-
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement on
Form S-3 of First Washington Realty Trust, Inc. (the "Company"), of: (1) our
report dated January 31, 1997, except for Note 16, as to which date is March
26, 1997, on our audits of the consolidated balance sheets of the Company as
of December 31, 1996 and 1995 and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1996, which report is included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996,
and (2) our report, dated January 31, 1997, on our audits of the financial
statements schedules of the Company, which report is included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996.
COOPERS & LYBRAND L.L.P.
Washington, D.C.
March 27, 1997
<PAGE>
Exhibit 21
<TABLE>
<S> <C>
Subsidiary State of
Incorporation
or Formation
First Washington Realty Limited Partnership Maryland
First Washington Management, Inc. District of Columbia
First Capital Realty, Inc. District of Columbia
JFD, Inc. Maryland
Bryans QRS, Inc. Maryland
Valley Centre, Inc. Maryland
Southside Marketplace Limited Partnership Maryland
Clopper's Mill Village Center, L.L.C. Maryland
Allenbeth Associates Limited Partnership Maryland
Branchwood, Inc. Maryland
Branchwood Apartments Limited Partnership Maryland
Woodholme Properties Limited Partnership Maryland
SP Associates Limited Partnership Maryland
JFD Limited Partnership Maryland
FW-Bryans Road Limited Partnership Maryland
Greenspring Associates Limited Partnership Maryland
Northway Limited Partnership Maryland
City Line Shopping Center Associates Maryland
</TABLE>
REVOLVING CREDIT LOAN AGREEMENT
-----------------------
FIRST WASHINGTON REALTY LIMITED PARTNERSHIP
a Maryland limited partnership,
Borrower
-----------------------
CORESTATES BANK, N.A.,
Lender
-----------------------
$25,000,000
Secured Revolving Line of Credit
-----------------------
<PAGE>
January 31, 1997
<PAGE>
REVOLVING CREDIT LOAN AGREEMENT
THIS AGREEMENT made as of the 31st day of January, 1997, by
and between FIRST WASHINGTON REALTY LIMITED PARTNERSHIP, a Maryland limited
partnership ("Borrower"), and CORESTATES BANK, N.A., a national banking
association ("Lender").
BACKGROUND
Borrower is a limited partnership formed primarily to
acquire, improve, develop, lease, finance, operate, hold for investment, and
sell existing retail shopping centers and other income producing real estate
(the "Business"). Borrower desires to establish a secured credit facility with
Lender to provide working capital and to finance the acquisition and renovation
of retail shopping centers. Lender has agreed to extend such credit facility to
Borrower, subject to the terms and conditions hereinafter more particularly set
forth.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants set forth herein, the parties hereto, intending to be legally
bound, agree as follows:
ARTICLE 1.
DEFINITIONS, CERTAIN RULES OF CONSTRUCTION
(a) Defined Terms. Each of the terms listed below
shall have the meaning herein ascribed to it for the purposes
hereof and for each of the Loan Documents:
"Advance" means the cash which Lender advances to
Borrower under the Revolving Credit including draws under Letters of Credit, all
subject to and in accordance with the provisions of Article 2 hereof.
"Affiliate" means and refers to, as applied to any
Person, any other Person directly or indirectly controlling, or through one or
more Persons is controlled by, controlling or in common control with that
Person. "Control" (including with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as applied to any Person,
means the
<PAGE>
possession, directly or indirectly, of the power to direct or cause the
direction of the management and/or policies of that Person, whether through the
ownership of voting securities, by contract, or otherwise.
"Agreement" means this Revolving Credit Loan
Agreement, and any schedules, exhibits, riders, extensions, supplements,
amendments, or modifications to this Revolving Credit Loan Agreement.
"Applicable Spread" means one and one-half percent
(1.5%) per annum (that is, 150 "basis points"); provided that if, on the basis
of Consolidated Financial Statements for the Last Reported Calendar Quarter, (i)
the then current Commitment Amount is less than fifty five percent (55%) of the
Gross Asset Value of the Collateral and (ii) Borrower's Total Liabilities are
less then fifty percent (50%) of Borrower's Gross Asset Value, the Applicable
Spread shall be reduced to one and thirty-five one-hundredths of one percent
(1.35%) per annum (that is, 135 "basis points") during the period commencing on
the last day of the month by which the Consolidated Financial Statements for
such Last Reported Calendar Quarter were due and continuing until the last day
of the month in
<PAGE>
which the next Consolidated Financial Statements are due (e.g., if the
Consolidated Financial Statements for the third Calendar Quarter, which are due
by December 31st, result in the Applicable Spread being 1.35%, such Applicable
Spread shall be in effect from December 31st until the following April 30th,
when the Consolidated Financial Statements for the fourth Calendar Quarter are
due, and the Applicable Spread as determined by such fourth Calendar Quarter
statements would be in effect from such April 30th until the following June
30th).
"Appraisal" means an M.A.I. appraisal indicating
the "market value" of a Property. The appraiser shall be independent of Borrower
and must be acceptable to Lender in good faith; the Appraisal shall be prepared
in accordance with the Uniform Standards of Professional Appraisal Practice and,
if any Event of Default or Unmatured Event of Default exists at the time an
Appraisal is to be delivered to Lender, the Appraisal shall be certified to
Lender.
"Assignment of Leases" means an assignment of
rents, leases, and profits encumbering a Property and made by Borrower in favor
of Lender as security for the Indebtedness.
<PAGE>
"Authorized Signer" means any of the Persons listed
on the certificate to be delivered to Lender at Closing in accordance with
Section 3.1.21 hereof or any replacement certificate with respect thereto
subsequently delivered to Lender at any time.
"Bankruptcy Code" means Title 11 of the United
States Code as now or hereafter in effect, or any successor statute.
"Borrower" means First Washington Realty Limited
Partnership, a Maryland limited partnership.
"Business Day" means any week day except those on
which commercial banks in Philadelphia, Pennsylvania are authorized
by law to close.
"Calendar Quarter" means each of the three month
periods ending on the last day of March, June, September and December of each
Calendar Year.
<PAGE>
"Calendar Year" means the twelve month period
ending on December 31st of each year.
"Capital Lease" means any lease of any property
(real, personal or mixed) which, in conformity with GAAP, is or should be
accounted for as a capital lease on the balance sheet of the lessee.
"Cash" means money, currency or a credit balance in
a Deposit Account.
"Closing" and "Closing Date" mean the day on which
all of the conditions set forth in Article III hereof have been
satisfied.
"Collateral" means the collateral provided by
Borrower for the Indebtedness as described in Article 3 hereof.
"Collateral Assignment" means an assignment of
various contracts, Governmental Approvals, and other rights, privileges, and
interests of Borrower relating to a Property and made by Borrower in favor of
Lender as security for the Indebtedness.
"Commitment Amount" means the amount of Lender's
commitment to lend under the Revolving Credit, which amount is $25,000,000 on
the Closing Date, or such lesser amount as Borrower shall have determined
pursuant to Section 2.2.8.3 hereof.
"Consolidated Financial Statements" means the Forms
10-Q and 10-K required to be filed by Guarantor with the United States
Securities and Exchange Commission, with respect to the operations and financial
condition of Guarantor, which include financial statements that consolidate
Guarantor, Borrower, and each of Guarantor's subsidiaries during and as of the
last day of each Calendar Quarter, prepared and certified by Guarantor's chief
financial officer.
"Debt" means for any Person at any date, without
duplication, (i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments with an original maturity in excess of one year, (iii) all
obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable and accrued liabilities, in each case
arising in the ordinary course of business, (iv) all debt of others secured by a
lien on any asset of such Person, which debt is not assumed by such Person, but
only to the extent of the value of such asset, and (v) all debt of others
guaranteed by such Person.
"Deposit Account" means a demand, time, savings,
passbook or like account with a federally insured bank or savings and loan
association, other than an account evidenced by a negotiable certificate of
deposit.
"Designated Officer" means Greg A. Hartin or any
other person designated in writing by Lender as its representative for the
purpose of receiving notice hereunder.
"Dollars" and the symbol "$" mean the lawful money
of the United States of America.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time.
"Event of Default" means each of the events set
forth in Section 7.1 hereof.
"Funding Date" means the Business Day on which an
Advance is made.
"GAAP" means generally accepted accounting principles
as set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board as in effect on
the date hereof or in such other statements by such other Person as may be
approved by a sig nificant segment of the accounting profession, which are
applicable to the circumstances as of the date of determination and which are
applied on a consistent basis.
"Governmental Approvals" means all authorizations,
consents, approvals, licenses and exemptions of, registrations and filings with,
and reports to all governmental bodies.
"Gross Asset Value" means, at any time, the quotient
of (i) the aggregate NOI during the period of twelve (12) calendar months ended
on the last day of the Last Reported Calendar Quarter derived from the operation
of Borrower's income producing real estate divided by (ii) 0.1.
"Gross Asset Value of Collateral" means, at any time,
the Gross Asset Value of the Properties that are then encumbered by
a Mortgage.
"Guarantor" means First Washington Realty Trust,
Inc., a Maryland corporation.
"Guaranty" means a guaranty and suretyship agreement
executed by Guarantor in favor of Lender with respect to the
Indebtedness.
"Indebtedness" means all amounts due from Borrower to
Lender pursuant to Article 2 and otherwise arising out of or in connection with
this Agreement or any other Loan Document.
"Interest Expense" means all payments by Borrower
with respect to interest on the Indebtedness or any other obligation of Borrower
on which interest is paid, including the interest portion of Capital Leases.
"Interest Period" means that period of time applica
ble to a LIBOR Borrowing as determined pursuant Section 2.2.5 hereof.
"Interest Rate Determination Date" means each date
for determining the interest rate for an Interest Period in respect of an
Advance based on the LIBOR. The Interest Rate Determination Date shall be the
second London Business Day prior to the first day of the related Interest Period
for an LIBOR Loan.
"Interest Rate Option" means the Prime Rate or the
LIBOR selected by Borrower for all or any part of the Loans as permitted by this
Agreement.
"Investment Entity" means any partnership or joint
venture (i) formed for the purpose of owning, and whose assets consist primarily
of, income producing real estate that is wholly owned by such partnership or
joint venture and (ii) in which Borrower has, directly or indirectly, an
ownership interest.
"LIBOR" means (i) the rate per annum at which
deposits of Dollars are offered to Lender by prime banks in the London
Eurodollar interbank market at or about 11:00 A.M. local time in such interbank
market, two London Business Days prior to the first day of the applicable
Interest Period for a period equal to the period of such Interest Period in an
amount substantially equal to the principal amount requested to be lent as,
maintained as or converted to an LIBOR Loan, rounded upwards if necessary, to
the next higher 1/16 of 1%, divided by (ii) one minus the Reserve Percentage.
"LIBOR Borrowings" and "LIBOR Loans" mean Advances
bearing interest at a rate determined with reference to the LIBOR.
"Last Reported Calendar Quarter" means, at any time,
the most recently concluded Calendar Quarter for which Consolidated Financial
Statements have been delivered to Lender.
"Lender" means CoreStates Bank, N.A.
"Lender's Costs" means all costs and expenses of any
kind paid or incurred by Lender in connection with the preparation, execution,
delivery, amendment, modification, administration or termination of this
Agreement or any other Loan Document, any amendments thereto, any transaction
contemplated herein or any existing or future related agreements and the
preservation, enforce ment, defense and protection of Lender's rights, remedies,
obliga tions and liabilities in any manner concerning this Agreement or any
other Loan Document, any transaction contemplated herein or any existing or
future related agreements, including, but not limited to: (a) reasonable
attorneys' fees and other expenses paid or incurred by Lender in enforcing,
obtaining legal advice in preparing, reviewing, consummating, amending,
restructuring, extending, terminating, defending, or preserving or protecting
Lender's rights, remedies, obligations or liabilities in any manner concerning,
this Agreement, any Loan Document or any amendments thereto, any transaction
contemplated herein or any existing or future related agreements; and (b) wire
transfer charges in such amounts as Lender may from time to time establish for
such service.
"Letter of Credit" means a letter of credit issued
pursuant to Section 2.1.7 hereof.
"Loan Documents" means this Agreement, the Note, the
Mortgages, the Assignments of Leases, the Collateral Assignments, the Guaranty,
and every other document delivered pursuant to this Agreement.
"Loan(s)" means the aggregate of all monies advanced
by Lender under the Revolving Credit.
"London Business Day" means any Business Day on which
commercial banks are open for international business (including dealings in
Dollar deposits) in London and Philadelphia.
"Materially Adverse Effect" means, with respect to
Borrower, a materially adverse effect upon Borrower's ability to perform
Borrower's obligations under the Loan Documents in accordance with their
respective terms, as determined by Lender.
"Maximum Available Credit" means (i) prior to the
first anniversary of the Closing Date, the Commitment Amount and (ii) on and
after the first anniversary of the Closing Date, sixty five percent (65%) of the
Gross Asset Value of Collateral, determined as of the end of the Last Reported
Calendar Quarter.
"Mortgage" means a mortgage or deed of trust (as
appropriate to the jurisdiction in which a Property is located) encumbering a
Property and granted by Borrower as security for the Indebtedness.
"NOI" means with respect to Borrower, at any time,
its net operating income, which shall be equal to the gross revenues of real
estate assets that, directly or indirectly, are wholly owned at such time by (a)
Borrower or (b) any Investment Entity in which Borrower's Pro-Rata Share exceeds
fifty percent (50%), minus operating and servicing expenses incurred in
connection with the operation of such real estate assets during, and as shown on
the financial statements for, the Last Reported Calendar Quarter, before
Interest Expense, depreciation and amortization; provided that (i) there shall
be deducted from gross revenues as an expense (regardless of whether the same
has been incurred or reserved) a property management fee equal to two and
one-half percent (2.5%) of gross revenues and a replacement reserve equal to
$.10 per square foot of space within such income producing real estate assets,
(ii) if at any time Borrower or any such Investment Entity has owned a real
estate asset for less than four (4) consecutive Calendar Quarters, the gross
revenues and expenses of such asset shall be appropriately adjusted and
calculated on a proforma basis, (iii) gross revenues shall not include the
proceeds of insurance (other than loss of rents insurance) or condemnation
awards and (iv) expenses shall not include the costs of repairs or replacements
paid with the proceeds of insurance or condemnation awards that are not included
in gross revenues. Borrower's "NOI" shall also include Borrower's Pro-Rata Share
of the amount by which (x) the gross revenues of each Investment Entity in which
Borrower's Pro-Rata Share does not exceed fifty percent (50%) exceeds (y) such
Investment Entity's operating costs and expenses, calculated as aforesaid. "NOI"
with respect to a Property shall be determined as aforesaid on the basis of the
gross revenues and the operating expenses of such Property alone.
"Note" means the promissory note, dated the date
hereof, of Borrower in favor of Lender to evidence Borrower's repayment
obligations under this Agreement with respect to the Revolving Credit.
"Notice of Borrowing" means a notice substantially in
the form of Schedule 2.2.2 attached hereto and made a part hereof.
"Notice of Rate Election" means a notice substan
tially in the form of Schedule 2.2.3 attached hereto and made a part
hereof.
"Partnership Agreement" means the First Amended and
Restated Agreement of Limited Partnership of First Washington Realty Limited
Partnership, dated as of June 27, 1994, pursuant to which Borrower was created
and presently operates, as the same may from time to time be amended.
"PBGC" means the Pension Benefit Guaranty
Corporation.
"Permitted Liens" means (i) liens for taxes, assess
ments or governmental charges or claims which are not overdue or which are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted, if a reserve or other appropriate provision, if any, as
shall be required by GAAP, shall have been made therefor; (ii) statutory liens
of landlords and liens of carriers, warehousemen, mechanics, materialmen,
repairmen, suppliers and other like liens incurred in the ordinary course of
business for sums not yet delinquent or being contested in good faith by
appropriate proceedings promptly instituted and diligently con ducted, if a
reserve or other appropriate provision, if any, as shall be required by GAAP,
shall have been made therefor; (iii) liens (other than any lien imposed by
ERISA) incurred or deposits made in the ordinary course of business in
connection with workers' compensation or unemployment insurance and other types
of social security; (iv) liens incurred or deposits made to secure the
performance of tenders, statutory obligations, surety and appeal bonds, bids,
leases, government contracts, performance and return-of- money bonds and other
similar obligations incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money); (v) any judgment lien; provided
that, within 60 days after the entry of the judgment secured thereby, such
judgment shall be discharged or execution thereof shall be stayed pending
appeal; and further provided that such judgment shall be discharged within 60
days after the expiration of any such stay; (vi) the rights of tenants under
leases or subleases not interfering with the ordinary conduct of the Business of
Borrower; (vii) easements, rights-of-way, encroachments, zoning provisions,
covenants, conditions, restrictions and other similar charges, encumbrances and
governmental restrictions not interfering with the ordinary conduct of the
business of Borrower and that have been approved by Lender to the extent
required under this Agreement.
"Person" means an individual, corporation, partner
ship, joint venture, trust or unincorporated organization, or a government or
any agency or political subdivision thereof.
"Prime Rate" means that rate of interest per annum
established by Lender from time to time as its "prime rate", which may not
represent the lowest rate charged by Lender to other borrowers, or to any class
of borrowers, at any time, or from time to time.
"Prime Rate Borrowing" and "Prime Rate Loans" mean
Advances bearing interest at a rate with reference to the Prime Rate.
"Pro Forma Debt Service" means, with respect to any
period of time at any time, the aggregate amount of principal
payments and interest during such period on an amount equal to the
Commitment Amount, calculated using the amount of interest and principal
payable, based on a 25 year amortization schedule, on such principal amount with
interest at a per annum rate equal to (i) the then-current yield to maturity of
United States Treasury obligations having a seven (7) year maturity plus (ii)
two percent per annum, as determined by Lender in good faith.
"Pro-Rata Share" means, with respect to each
Investment Entity, the percentage of the profits, losses and distributions to
which Borrower, directly or indirectly, is entitled.
"Project Specific Information" means an income and
expense statement with respect to the gross rental revenues, operating expenses,
mortgage interest, and net operating income of an individual income producing
real estate asset, including the Properties.
"Property" means each of, and "Properties" means all
of, (i) the Newtown Square Shopping Center, Newtown Square, Delaware County,
Pennsylvania, (ii) The Shoppes of Graylyn, Wilmington, New Castle County,
Delaware, (iii) Four Mile Fork Shopping Center, Fredericksburg, Spotsylvania
County, Virginia, and (iv) Centre Ridge Marketplace, Centreville, Fairfax
County, Virginia.
"Reserve Percentage" means for any day that maximum
percentage (expressed as a decimal), whether or not incurred, which is in effect
on such day, as prescribed by the Board of Governors of the Federal Reserve
System, for determining the reserve requirement for a member bank of the Federal
Reserve System in Philadelphia with respect to the LIBOR "Eurocurrency
liabilities" (as such term is defined in Regulation D) (or in respect of any
other category of liabilities which includes deposits by reference to which the
interest rate on LIBOR Loans is determined or any category of extensions of
credit or other assets which includes loans by a nonUnited States office of any
Lender to United States residents).
"Revolving Credit" means the facility under which
Advances may be borrowed, repaid and reborrowed and Letters of Credit may be
issued and paid, in the maximum amount of $25,000,000, all as more fully
described in Article 2 hereof.
"RICO" means the Racketeer Influenced and Corrupt
Organization Act, as amended by the Comprehensive Crime Control Act of 1984, 18
USC ss.ss.1961-68.
"Rules" means any law, regulation, or rule of
practice promulgated by Persons other than Lender, whether or not having the
force of law, by which any Lender is bound or to which it adheres.
"Termination Date" means January 31, 2000, or such
extension thereof agreed to in writing by Lender.
"Total Liabilities" means, at any time, the sum of
(i) all liabilities of Borrower, determined in accordance with GAAP, (ii) all
Debt of Investment Entities in which Borrower's Pro-Rata Share exceeds fifty
percent (50%), and (iii) Borrower's Pro-Rata Share of the Debt of all Investment
Entities in which Borrower's Pro- Rata Share does not exceed fifty percent (50%)
(provided that in calculating Total Liabilities, the Debt of Borrower or an
Investment Entity that is guaranteed by, or secured by a lien on an asset of,
another Investment Entity or Borrower, the amount of such Debt shall be included
only once in "Total Liabilities").
"Unmatured Event of Default" means and refers to any
event, act or occurrence which with the passage of time or giving of notice or
both becomes an Event of Default.
1.2 Construction of Definitions. All terms defined herein
shall be construed to include the plural or the singular, and references to
persons in the masculine or neuter gender shall refer to all persons or
entities, as the context requires.
1.3 Accounting Reports and Principles. The character or
amount of any asset, liability, account or reserve and of any item of income or
expense to be determined, and any consolidation or other accounting computation
to be made, and the construction of any definition containing a financial term,
pursuant to this Agreement or any other Loan Document, shall be construed,
determined or made, as the case may be, in accordance with GAAP, consistently
applied, unless such principles are inconsistent with any express provision of
this Agreement.
1.4 Business Day. Whenever any payment or other obliga tion
hereunder, whether under the Note or under another Loan Docu ment, is due on a
day other than a Business Day, such shall be paid or performed on the Business
Day next following the prescribed due date, except as otherwise specifically
provided for herein to the contrary, and such extension of time shall be
included in the compu tation of interest and charges. Any reference made herein
or in any other Loan Document to an hour of day shall refer to the then pre
vailing Philadelphia, Pennsylvania time, unless specifically provided herein to
the contrary.
1.5 Charging Accounts. Whenever Borrower is obligated,
pursuant to Article 2 hereof, or pursuant to the Note or any other Loan
Document, to make payments of any nature to Lender, Lender shall be entitled,
and Borrower hereby authorizes Lender to draw against any Deposit Account owned
by Borrower at Lender on account of such
fees and expenses or payments due. Upon such drawing, Lender shall deliver to
Borrower a notice setting forth, in reasonable detail, the amount of the fees,
expenses and/or payments to be satisfied by such draw, and the name or number of
the account or accounts from which the draw was made.
1.6 Lender's Costs. Borrower shall, upon the request of
Lender, pay Lender the amount of all unpaid Lender's Costs within thirty (30)
days after such notice. Until paid, all past due Lender's Costs shall be deemed
to be part of the principal balance of the appropriate Loan, bear interest at
the Prime Rate, and be secured by the Collateral.
1.7 Other Terms. The words "herein", "hereof", "here under"
and other words of similar import refer to this Agreement as a whole, including
the exhibits hereto, as the same may from time to time be amended, modified or
supplemented, and not to any particular section, subsection or clause contained
in this Agreement. Any reference to an "Article", a "Section", an "Exhibit" or a
"Schedule" shall refer to the relevant Article of, Section of, Exhibit to or
Schedule to this Agreement, unless otherwise specifically indicated.
ARTICLE 2
THE LOAN
2.1 Revolving Credit.
2.1.1 Extension of Revolving Credit. Provided
that no Event of Default or Unmatured Event of Default has occurred and is
continuing and subject to the terms and conditions set forth herein, commencing
on the date hereof and expiring on the Termination Date, Lender shall extend to
Borrower the Revolving Credit, pursuant to which Lender shall make Loans to
Borrower up to an aggregate, at any time, of the Maximum Available Credit, which
Borrower may from time to time, borrow, repay and reborrow, on and subject to
the terms and conditions of this Agreement.
2.1.2 Payment of Principal. The entire
outstanding principal balance of the Revolving Credit shall be paid in full on
the Termination Date. In the event the principal amount of all outstanding
Advances and the face amount of Letters of Credit issued and outstanding under
Section 2.1.7 hereof at any time exceeds, in the aggregate, the Maximum
Available Credit, Borrower shall immediately pay such excess to Lender, without
demand or notice.
2.1.3 Payment of Interest. Interest on the
Revolving Credit shall be payable monthly, subject to Section 2.2.9 hereof in
arrears to the last day of each month, with the first
payment to be made on the first Business Day of the calendar month next
following the Closing Date, and continuing thereafter on the first Business Day
of each month.
2.1.4 Revolving Credit Interest Rate Option and
Notice of Rate Election. Advances shall bear interest on the unpaid principal
balance thereof from the Funding Date to maturity (whether by acceleration or
otherwise): with respect to Prime Rate Loans at the Prime Rate per annum
(calculated on the basis of a 360-day year and charged for the actual number of
days elapsed); and with respect to LIBOR Loans at the LIBOR on the relevant
Interest Rate Determination Date plus the Applicable Spread (calculated on the
basis of a 360-day year and charged for the actual number of days elapsed). The
applicable basis for determining the Interest Rate Option with respect to each
Advance shall be selected by Borrower at the time a Notice of Borrowing or
Notice of Rate Election is given pursuant to Sections 2.2.2, and 2.2.3 hereof.
2.1.5 Loan Fees. Borrower agrees to pay to
Lender the following fees:
2.1.5.1 Borrower shall pay to Lender, upon the
execution of this Agreement, a loan commitment fee of $75,000.
2.1.5.2 Borrower shall pay to Lender, after
Closing and until the Termination Date, an unused loan fee, payable in arrears,
at an annual rate equal to two tenths of one percent (0.2%) per annum of the
amount by which (i) the Commitment Amount exceeds (ii) the sum of (a) the daily
average outstanding principal balance of all Loans plus (b) the daily average
obligations of Lender under Letters of Credit that are issued and outstanding,
such payments to be made first on the last day of the Calendar Quarter in which
Closing occurs and thereafter on the last day of each Calendar Quarter and on
the Termination Date. The unused loan fee shall be calculated on the basis of
the number of days actually elapsed in a 360 day year.
2.1.6 Note. To evidence Borrower's obligations
under the Revolving Credit, Borrower shall execute and deliver the
Note to Lender.
2.1.7 Letters of Credit. Upon receipt of a
properly executed Notice of Borrowing submitted by Borrower to Lender at least
five (5) Business Days before the date of issuance, Lender shall issue a Letter
or Letters of Credit to a beneficiary designated by Borrower, for the purpose of
collateralizing such of Borrower's obligations as are requested to be secured by
a Letter of Credit. The aggregate face amount of issued Letters of Credit under
this subsection 2.1.7 shall not exceed $10,000,000 at any time. Letters of
Credit may provide for automatic renewal absent termination by
Lender, provided, however, no Letter of Credit hereunder shall be issued with an
expiration date exceeding one year and no Letter of Credit shall be issued with
an expiration date later than one (1) year after the Termination Date. Each
Letter of Credit shall be subject to the terms and conditions of Lender's
standard unsecured application and agreement in effect at the time of the
issuance of the Letter of Credit, the current form of which is attached hereto
as Schedule 2.1.7.
2.1.7.1 Letter of Credit Fee. Borrower agrees
to pay to Lender a letter of credit fee at an annual rate of one percent (1.0%)
per annum of the principal face amount of each issued Letter of Credit, payable
upon the issuance of such Letter of Credit and on each anniversary thereof.
2.1.7.2 Reduction of Available Revolving
Credit. Letters of Credit shall reduce, dollar-for-dollar, the available
borrowings under the Revolving Credit and, upon the termination thereof, shall
increase the available borrowings, up to the Maximum Available Credit.
2.1.7.3 Draws under Letter of Credit. All
draws under Letters of Credit shall be deemed to be Advances to be repaid in
accordance with the provisions of subsection 2.1.2 hereof. All Advances
resulting from draws made under Letters of Credit after the Termination Date
shall be payable by Borrower upon written demand.
2.1.7.4 Other Documents. Borrower agrees to
execute and deliver such documents and instruments as Lender may reasonably
require in connection with each Letter of Credit.
2.1.7.5 Security. If on the Termination Date
any Letters of Credit are outstanding, Borrower shall establish with Lender a
Deposit Account in the amount of the aggregate face amounts of all such Letters
of Credit, which Deposit Account shall be pledged to Lender as security for
Borrower's obligation to repay Advances resulting from draws made under such
Letters of Credit. No withdrawal may be made by Borrower from such Deposit
Account if, as a result thereof, the balance in such Deposit Account would be
less than the aggregate face amounts of all Letters of Credit then-outstanding.
2.2 General Provisions.
2.2.1 Maximum Available Credit. Notwithstanding
anything herein to the contrary, the maximum amount of the Loans to Borrower
that may be outstanding at any one time shall not exceed the Maximum Available
Credit, less the face amount of all outstanding Letters of Credit.
2.2.2 Notice of Borrowing. Subject to the provi
sions of this Article 2, whenever Borrower desires to borrow under this
Agreement, Borrower shall deliver by telecopy to Lender a properly completed and
executed Notice of Borrowing with respect to (i) LIBOR Loans no later than 11:00
A.M. at least two (2) London Business Days in advance of the proposed Funding
Date, or (ii) Prime Rate Loans no later than 11:00 A.M. at least one Business
Day in advance of the proposed Funding Date. The Notice of Borrowing shall
specify (i) the proposed Funding Date (which shall be a Business Day), (ii) the
amount of the proposed Advance, (iii) whether such Advance is initially to
consist of a Prime Rate Loan, LIBOR Loans or a combination thereof, and (iv) if
such Advance, or any portion thereof, is initially to be one or more LIBOR
Loans, the amounts thereof and the initial Interest Periods therefor; provided
that the minimum amount of Advances shall be $100,000 for Prime Rate Loans and
$500,000 for LIBOR Loans. Advances may be continued as or converted into LIBOR
Loans in the manner provided in Section 2.2.3 hereof upon the submission to
Lender of a properly completed and executed Notice of Rate Election.
A Notice of Borrowing or a Notice of Rate Election for a
LIBOR Loan shall be irrevocable on and after the related Interest Rate
Determination Date, and Borrower and Lender shall be bound to make, continue or
convert an Advance in accordance therewith.
2.2.3 Notice of Rate Election; Failure to Give
Notice. Whenever Borrower desires to change or continue the Interest Rate Option
on an Advance, Borrower shall deliver to Lender a Notice of Rate Election with
respect to LIBOR Loans no later than 11:00 A.M. at least two (2) London Business
Days in advance of the proposed change or continuation. The Notice of Rate
Election shall specify: (i) the proposed date of change or continuation (which
shall be a Business Day); (ii) the type of Advance and amount thereof affected;
(iii) whether such interest rate change or continuation is to consist of a Prime
Rate Loan, LIBOR Loans or a combination thereof; and (iv) the Interest Periods
therefor, if applicable. If at the termination of any Interest Period, Borrower
has failed to submit a Notice of Rate Election, as aforesaid, to convert or to
continue LIBOR Loans, then such portions of the Revolving Credit shall
automatically be and become Prime Rate Loans as of the termination of the
relevant Interest Period.
Upon the expiration of any Interest Period applicable to
portions of the Revolving Credit bearing interest based on the LIBOR, such
portions of the Revolving Credit shall be deemed repaid and reborrowed upon the
submission to Lender of a properly completed and executed Notice of Rate
Election pertaining thereto within the requi site time periods for a change or
continuation of an Interest Rate Option, and the succeeding Interest Period(s)
of such continued
portions of the Revolving Credit shall commence on the first day of the Interest
Period of the portions of the Revolving Credit deemed to be reborrowed and
continued.
LIBOR Loans may be converted into Prime Rate Loans only on
the expiration date of an Interest Period applicable thereto. In addition, no
outstanding portions of the Revolving Credit may be continued as, or be
converted into LIBOR Loans when any Event of Default or Unmatured Event of
Default has occurred and is continuing.
If on any day portions of the Revolving Credit are out
standing with respect to which a Notice of Rate Election has not been delivered
to Lender in accordance with the terms of this Agreement specifying the basis
for determining the Interest Rate Option, then such portions of the Revolving
Credit shall automatically be and become Prime Rate Loans as of such date.
2.2.4 Funding. Upon satisfaction of the
conditions precedent specified in Sections 3.1 (in the case of the initial
Advances) and 3.2 (in the case of all subsequent Advances), not later than 11:00
A.M. on the Funding Date specified in the Notice of Borrowing relating thereto,
Lender shall cause such Advances to be made available to Borrower on the Funding
Date pertaining thereto by depositing the amount thereof in the designated
account of Borrower with Lender or by wire transfer to such other Deposit
Account as Borrower may from time to time designate in writing.
2.2.5 Interest Periods. In connection with each
LIBOR Loan, Borrower shall elect an Interest Period to be applicable to such
Loan, which Interest Period shall be either a one, two or three month period;
provided that:
2.2.5.1 the first Interest Period for any
Advance shall commence on the Funding Date of such Advance;
2.2.5.2 except as provided in subsection
2.2.5.3 hereof, if an Interest Period would otherwise expire on a day which is
not a Business Day, such Interest Period shall expire on the next succeeding
Business Day;
2.2.5.3 any Interest Period in respect of a
LIBOR Loan which: (i) begins on the last Business Day of a calendar month (or a
day for which there is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last Business Day of the
relevant calendar month, or (ii) would expire on a day which is not a Business
Day but is a day of the month after which no further Business Day occurs in that
month, such Interest Period shall end on the last Business Day of the month;
2.2.5.4 no Interest Period shall extend beyond
the Termination Date; and
2.2.5.5 there shall be no more than five (5)
LIBOR Loans outstanding at any time.
2.2.6 Post-Maturity Interest. Any principal pay
ments on the Loans not paid when due and, to the extent permitted by applicable
law, any interest payment on the Loans not paid when due, and any other amount
due to Lender under this Agreement or any other Loan Document not paid when due,
in any case whether at stated maturity, by notice of prepayment, by acceleration
or otherwise, shall thereafter bear interest, until such overdue payment is
made, payable upon demand at a rate which is 2% per annum in excess of the
applicable interest rate then being charged until the expiration of the then
applicable Interest Period and after the expiration of the then applicable
Interest Period, at a rate which is 2% per annum in excess of the Prime Rate.
2.2.7 LIBOR and Prime Rate.
2.2.7.1 Lender shall give Borrower prompt
notice of the LIBOR determined for an Interest Period, and absent manifest
error, each determination of such rates by Lender shall be conclusive and
binding on Lender and Borrower for all purposes hereof.
2.2.7.2 If Borrower requests that all or any
portion of the outstanding Revolving Credit bear interest at the LIBOR and
Lender determines that, by reason of circumstances affecting the interbank
Eurodollar market generally, deposits in U.S. Dollars (in the applicable
amounts) are not being offered to banks in the interbank Eurodollar market for
the selected Interest Period, or that the relevant rates of interest referred to
in the definition of LIBOR do not accurately reflect the cost to Lender of
making or maintaining LIBOR Loans for the Interest Periods therefor, then Lender
shall forthwith give notice thereof to Borrower, whereupon until Lender notifies
Borrower that the circumstances giving rise to such suspension no longer exist,
(a) the obligation of Lender to permit applicable portions of the Revolving
Credit to bear interest at the LIBOR shall be suspended so long as such
circumstances exist, and (b) Borrower shall convert the interest rates on the
applicable portions of the outstanding Revolving Credit to Prime Rate Loans or
the available LIBOR on the last day of the then current Interest Period, as
Borrower may elect.
2.2.7.3 If, after the date of this Agreement,
the adoption of or any change in Rules, or change in the interpreta tion or
administration thereof, by a governmental authority, central bank or comparable
agency charged with the interpretation or adminis tration thereof, or compliance
by Lender with any request or directive (whether or not having the force of law)
of any such
authority, central bank or comparable agency shall make it unlawful or
impossible for Lender to make or maintain or fund loans at the LIBOR, Lender
shall promptly notify Borrower and the interest rates on the applicable portions
of the outstanding Revolving Credit shall be deemed to have been converted to
the Prime Rate, or the LIBOR, whichever is available, on either (i) the last day
of the then current Interest Period if Lender may lawfully continue to maintain
loans at the LIBOR to such day, or (ii) immediately if Lender may not lawfully
continue to maintain loans at the LIBOR to such day. Lender will use its best
efforts to designate a different lending office if such office may lawfully
continue to maintain loans at the LIBOR through the end of the then current
Interest Period. After Borrower's receipt of notice of the illegality or
impossibility for Lender to make, maintain or fund loans at the LIBOR, Borrower
shall not request future LIBOR Loans until Lender shall have notified Borrower
of the absence or removal of such illegality or impossibility.
2.2.7.4 If, after the date of this Agreement,
any governmental authority, central bank or other comparable authority shall at
any time impose, modify or deem applicable any reserve (including, without
limitation, any imposed by the Board of Governors of the Federal Reserve System
that is not reflected in the Reserve Percentage), any tax (including without
limitation, any United States interest equalization tax or similar tax however
named applicable to the acquisition or holding of debt obligations and any
interest or penalties with respect thereto), duty, charge, fee, deduction,
withholding, special deposit or similar requirement against assets of, deposits
with, or for the account of, or credit extended by, Lender, or shall impose on
Lender or the interbank Eurodollar market any other condition affecting loans at
the LIBOR, and the result of any of the foregoing is to increase the cost to
Lender of making or maintaining the interest rate at the LIBOR or to reduce the
amount of any sum received or receivable by Lender under this Agreement or the
Note by an amount deemed by Lender in good faith to be material, then within
five days after demand by Lender, Borrower shall pay to Lender such additional
amount or amounts as will compensate such Lender for such increased cost or
reduction. Lender will promptly notify Borrower of any event of which it has
knowledge occurring after the date hereof, which will entitle Lender to
compensation pursuant to this subsection 2.2.7.4. A certificate of Lender
claiming compensation under this subsection 2.2.7.4 and setting forth the
additional amount or amounts to be paid to Lender hereunder shall be conclusive
in the absence of manifest error.
2.2.7.5 The LIBOR shall be adjusted
automatically on and as of the effective day of any change in the
relevant Reserve Percentage.
2.2.7.6 Promptly upon notice from Lender to
Borrower, Borrower will pay, prior to the date on which penalties attach
thereto, all present and future stamp, documentary and other similar taxes,
levies, or costs and charges whatsoever imposed, assessed, levied or collected
on or in respect of the Loans solely as a result of the interest rate being
determined by reference to the LIBOR and/or the provisions of this Agreement
relating to the LIBOR and/or the recording, registration, notarization or other
formalization of any thereof and/or payments of principal, interest or other
amounts made on or in respect of a Loan when the interest rate is determined by
reference to the LIBOR (all such taxes, levies, costs and charges being herein
collectively called "Eurodollar Rate Tax"). Promptly after the date on which
payment of any such Eurodollar Rate Tax is due pursuant to applicable law,
Borrower will, at the request of Lender, furnish to Lender evidence, in form and
substance satisfactory to Lender, that Borrower has met its obligation under
this subsection 2.2.7.6. Borrower will indemnify Lender against, and reimburse
Lender on demand for, any Eurodollar Rate Tax, as determined by Lender in its
good faith discretion. Lender shall provide Borrower with appropriate receipts
for any payments or reimbursements made by Borrower pursuant to this subsection
2.2.7.6. A certificate of Lender as to any amount payable pursuant to this
Section shall, absent manifest error, be final, conclusive and binding on all
parties hereto.
2.2.7.7 If Lender shall reasonably determine
that (i) any current Rule, law, regulation, or guideline, the adop tion or
imposition of any Rules, law, regulation, or guideline any change in any Rules,
law, regulation or guideline, or the adoption, imposition or change in the
interpretation or administration thereof by a governmental authority, central
bank or comparable agency charged with the interpretation and administration
thereof, or (ii) compliance by Lender (or any lending office or any holding
company of Lender) with any request, guideline or directive by a governmental
authority, central bank or comparable agency whether or not having the force of
law regarding special deposit, capital adequacy, risk based capital, capital or
reserve maintenance, capital ratio, or similar requirements against loans or
loan commitments or any commitments to extend credit or other assets of or any
deposits or other liabilities taken or entered into by Lender (including the
capital adequacy guidelines promulgated by the Board of Governors of the Federal
Reserve System) and the result of any event referred to in clauses (i) or (ii)
above (x) shall be to increase the cost to Lender of making or maintaining, or
to impose upon Lender or increase any capital requirement applicable as a result
of the making or maintenance of, the Loan or the obligation of Borrower
hereunder or (y) has or would have the effect of reducing the rate of return or
amounts receivable hereunder on any Loan as a consequence of its obligations
pursuant to this Agreement or Loan made by Lender pursuant hereto to a level
below that which Lender (or Lender's hold ing company) could have achieved but
for such adoption, imposition,
change or compliance (taking into consideration Lender's policies and the
policies of Lender's holding company with respect to capital adequacy) by an
amount deemed by such holder in good faith to be material (which adoption,
imposition, change, or increase in capital requirements or reduction in amounts
receivable may be determined by Lender's reasonable allocation of the aggregate
of such cost increase, capital increase or imposition or reductions in amounts
receivable resulting from such events), then, from time to time, Borrower shall
pay to Lender, on demand by Lender as set forth below, such additional amount or
amounts as will be necessary to restore the rate of return to Lender from the
date of such change, together with interest on such amount from the date
demanded until payment thereof in full at the rate provided in this Agreement.
Lender (or Lender's holding company) shall be entitled to compensation pursuant
to this subsection 2.2.7.7. A certificate of Lender claiming compensation under
this subsection 2.2.7.7 and setting forth the increased cost, reduction in
amounts receivable, additional amount or amounts necessary to compensate Lender
(or Lender's holding company) hereunder shall be delivered to Borrower and shall
be conclusive in the absence of manifest error. Borrower shall pay Lender the
amount shown as due on any such certificate delivered by Lender within 20 days
after Borrower's receipt of same. If Lender demands compensation under this
Section, Borrower may, upon 20 Business Days' prior notice to Lender, prepay in
full, in accordance with subsection 2.2.8 hereof, the then outstanding: (1)
Prime Rate Loans together with accrued interest thereon to the date of
prepayment without penalty; and (ii) LIBOR Loans together with accrued interest
thereon to the date of prepayment along with the respective prepayment premium
as provided in subsection 2.2.8.1 hereof, in each case payable to Lender.
2.2.7.8 Failure on the part of Lender to
demand compensation for any increased costs or reduction in amounts received or
receivable or reduction in return on capital with respect to any period shall
not constitute a waiver of Lender's right to demand compensation with respect to
such period or any other period. The protection of this Section 2.2.7 shall be
available to Lender for a period of one (1) year after the Indebtedness has been
paid in full regardless of any possible contention of the invalidity or
inapplicability of the law, rule, regulation, guideline or other change or
condition which shall have occurred or been imposed.
2.2.7.9 The Prime Rate shall be determined and
adjusted daily.
2.2.8 Prepayment; Repayments; Prepayment Premium.
2.2.8.1 Voluntary Prepayments. In connection
with each voluntary prepayment of Loans:
(a) Borrower shall provide Lender
with at least one (1) Business Day prior notice of its intention to prepay,
specifying the amount and date of such payment.
(b) Each prepayment of principal
shall be in an amount equal to at least Five Hundred Thousand Dollars
($500,000).
In the event Borrower makes a prepayment (whether voluntary or mandatory) of any
portion of the Loans bearing interest at a rate based on the LIBOR during a
specified Interest Period on a day other than the last day of such Interest
Period, Borrower will pay to Lender, upon demand any cost or expense incurred by
Lender as a result of such prepayment. Lender shall certify the amount of such
cost or expense to Borrower and provide Borrower with a written statement
setting forth the cost or expense claimed and the calculations used in
determining such loss and expense, which certification and statement shall be
conclusive in the absence of manifest error.
Prepayments shall be applied first to principal with respect to the portions of
the Loans accruing interest at a rate based upon the Prime Rate, and then to
principal with respect to those portions of the Loans accruing interest at a
rate based upon the LIBOR, and among such portions of the Loans accruing
interest at rates based upon the LIBOR to such portions with the earliest
expiring Interest Periods.
2.2.8.2 Funding Losses. If the Borrower fails
to borrow any LIBOR Loan after a Notice of Borrowing or Notice of Rate
Election has been given to Lender as provided in this Article 2, Borrower shall
reimburse Lender on demand for any resulting loss or expense incurred by it
(or by any existing or prospective participant in the related Loan),
including (without limitation) any loss incurred in obtaining, liquidating
or employing deposits from third parties, provided that Lender shall have
delivered to the Borrower a certificate as to the amount of such loss or
expense and specifying the calculation thereof, which certificate
shall be conclusive in the absence of manifest error.
2.2.8.3 Termination or Reduction in
Commitment. Borrower shall have the right without premium or penalty
except as provided in subsection 2.2.8.1 hereof, upon not less than
three (3) Business Days' prior written notice to Lender, to reduce or
terminate any or all of the commitments of Lender regarding the
Revolving Credit on and as of the last day of any Calendar Quarter.
Any voluntary termination or reduction in the Commitment Amount shall
permanently reduce the Commitment Amount. No such reduction in
Commitment Amount shall be in an amount less than $1,000,000. If
Borrower desires to terminate or reduce the Commitment Amount as aforesaid,
Borrower shall execute and deliver to Lender such documents and instruments as
Lender shall reasonably require.
2.2.9 Manner and Time of Payment. All payments
of principal, interest and fees hereunder and under the Note shall be made by
Borrower without notice, set off or counterclaim and in immediately available
same day funds and delivered to Lender not later than 12:00 noon on the date due
at its office located at Broad and Chestnut Streets, Philadelphia, Pennsylvania,
19101; funds received by Lender after that time shall be deemed to have been
paid by Borrower on the next succeeding Business Day.
2.2.10 Use of Proceeds. The Revolving Credit
shall be used solely by Borrower for its working capital purposes and to acquire
and rehabilitate retail shopping centers.
2.2.11 Conditional Payment. Borrower agrees that
checks and other instruments received by Lender in payment or on account of the
Indebtedness constitute only conditional payment until such items are actually
paid to Lender.
2.2.12 Postponement of Termination Date. If
Borrower desires to postpone the Termination Date, Borrower shall deliver to
Lender a written request therefor not earlier than January 1 and not later than
June 30th of any year after 1997. Any request shall be to postpone the
Termination Date by 12 months. If such a request is made, Lender shall advise
Borrower in writing whether Lender has approved such request within eight (8)
weeks after the later of (i) Lender's receipt of such request or (ii) the date
Lender receives Guarantor's 10-K report with respect to the immediately
preceding Calendar Year as required by Section 5.1.3 hereof. The approval of
Borrower's requests shall be in Lender's sole and absolute discretion. If Lender
approves such request, the Termination Date shall be postponed for 12 months,
Borrower and Lender shall promptly execute and deliver such documentation as
Lender may reasonably require to evidence such postponement and Borrower shall
pay to Lender a loan extension fee equal to one-eighth of one percent (.125%) of
the amount that Lender specifies in writing to be the Commitment Amount during
the 12 months period of the approved postponement. If Lender does not give
Borrower written notice of Lender's approval of the requested postponement, the
then-current Termination Date shall remain unchanged.
ARTICLE 3
CONDITIONS PRECEDENT
The performance by Lender of any of its obligations
hereunder is subject to the following conditions precedent:
3.1 Execution of this Agreement. Borrower shall deliver or
cause to be delivered to Lender on the Closing Date (except as otherwise
indicated herein), in form and substance satisfactory to Lender and its counsel,
in addition to this Agreement, the following documents and instruments and the
following transactions shall have been consummated:
3.1.1 The Note;
3.1.2 A Mortgage encumbering each Property;
3.1.3 An Assignment of Leases with respect to
each Property;
3.1.4 A Collateral Assignment with respect to
each Property;
3.1.5 UCC-1 Financing Statements with respect to
each Property;
3.1.6 An Environmental Indemnity Agreement with
respect to the Properties;
3.1.7 The Guaranty;
3.1.8 A policy of title insurance, issued by
Commonwealth Land Title Insurance Company insuring each Mortgage as a first lien
against the Property that it encumbers, subject only to Permitted Liens;
3.1.9 A current rent-roll of each Property and
copies of such leases as Lender may request;
3.1.10 An "as-built" survey of each Property,
certified to Lender and Commonwealth Land Title Insurance Company;
3.1.11 An Appraisal of each Property;
3.1.12 A "Phase I" environmental audit of each
Property prepared in accordance with Lender's environmental study protocol by
EMG, Inc., which audit is acceptable to Lender in all respects;
3.1.13 Evidence, in form acceptable to Lender,
that all Governmental Approvals required for the lawful operation of the
Property as it is presently being used have been obtained and are in full force
and effect;
3.1.14 Evidence, in form acceptable to Lender,
that each Property complies, in all material respects, with all
applicable statutes, ordinances, laws, rules, and regulations;
3.1.15 Evidence, in form acceptable to Lender,
that Borrower maintains policies of insurance with respect to
Borrower and the Properties as required by Section 5.1.11 hereof;
3.1.16 A copy of the Partnership Agreement and of
all amendments and modifications thereto and thereof, certified as
true, correct and complete by an Authorized Signer;
3.1.17 A copy of the filed Certificate of Limited
Partnership of Borrower;
3.1.18 A good standing certificate, issued by the
Maryland Secretary of State with respect to Borrower as of a date no earlier
than thirty (30) days prior to the Closing Date;
3.1.19 A partnership borrowing authorization with
respect to the Revolving Credit, executed by the general partner of
Borrower;
3.1.20 A copy of resolutions adopted by the Board
of Directors of Guarantor, (i) authorizing the execution, delivery and
performance of this Agreement by Guarantor as general partner of Borrower and
(ii) authorizing the execution, delivery and performance of the Guaranty,
certified by an officer of Guarantor to be true and correct copies of the
originals and to be in full force and effect as of the date hereof;
3.1.21 An incumbency and signature certificate
with respect to the officers of Guarantor authorized to execute and deliver this
Agreement as general partner of Borrower and to execute and deliver the
Guaranty;
3.1.22 A copy of Guarantor's articles of
incorporation certified by an officer of Guarantor to be a true and
correct copy of the original and to be in full force and effect as of
the Closing Date;
3.1.23 A certification by the Maryland Secretary
of State, evidencing that Guarantor is in good standing under the laws of such
state, as of a date no earlier than thirty (30) days prior to the Closing Date;
3.1.24 The opinion of Borrower's and Guarantor's
counsel, in form and substance acceptable to Lender;
3.1.25 A Notice of Borrowing with respect to any
Advances requested as of the Closing Date;
3.1.26 Such additional documents or instruments as
may be required by this Agreement or as Lender may reasonably
require.
3.2 All Loan Fundings. On the Funding Date of any Advance or
issuance date of any Letter of Credit: (a) Lender shall have received a Notice
of Borrowing as required by Section 2.2.2; (b) the representations and
warranties set forth in Article 4 hereof shall be true and correct on and as of
such date, with the same effect as though made on and as of such date, except to
the extent such representations and warranties relate to an earlier date or
changes have been disclosed to Lender and not objected to by Lender; (c) no
Event of Default or Unmatured Event of Default shall have occurred and be
continuing; and (d) Borrower shall be in compliance with all of the terms and
conditions hereof, of the Note, and of all other Loan Documents, in each case on
and as of the date of the performance of such obligations by Lender.
Each Advance and issuance of a Letter of Credit shall be
deemed to constitute a representation and warranty by Borrower on the respective
Funding Date or issuance date as to the matters specified in paragraphs (b), (c)
and (d) of this Section. Continuations and conversions of outstanding portions
of the Revolving Credit shall not be deemed to be new borrowings for purposes of
this Section.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES.
4.1 Borrower represents and warrants to Lender as
follows:
4.1.1 Good Standing. Borrower is a limited
partnership duly organized and in good standing under the laws of the State of
Maryland; has the power and authority to own and operate the Properties and its
other real estate assets and to carry on its respective business where and as
contemplated; is duly qualified to do business in, and is in good standing in,
every jurisdiction where the nature of Borrower's business requires such
qualification.
4.1.2 Power and Authority. The making,
execution, issuance and performance by Borrower of this Agreement, the Note, the
Mortgages, and the other Loan Documents executed by Borrower have been duly
authorized by all necessary official action and will not violate any provision
of law or regulation or of the Partnership Agreement; will not violate any
agreement, trust or other
indenture or instrument to which Borrower is a party or by which Borrower or any
of its assets is bound, so that this Agreement, the Note, the Mortgages, and the
other Loan Documents when executed and delivered by Borrower will be valid and
binding obligations of Borrower enforceable in accordance with their respective
terms.
4.1.3 Financial Condition. The balance sheet of
Borrower and Guarantor, together with income and surplus statements, contained
in Guarantor's 10-Q report filed for the periods ending September 30, 1996
heretofore furnished to Lender are complete and correct in all respects, have
been prepared in accordance with GAAP, consistently applied, and fairly present
the financial condition of Borrower and Guarantor as of said dates and the
results of Borrower's and Guarantor's operations for the period then ended.
Except as set forth on such financial statements, neither Borrower nor Guarantor
has any fixed, accrued or contingent obligation or liability for taxes or
otherwise that is not disclosed or reserved against on its balance sheets.
Borrower and Guarantor have filed all federal, state and local tax returns
required to be filed by them with any taxing authority. Since September 30,
1996, there has been no material adverse change in the condition of Borrower's
or Guarantor's financial position or otherwise from that set forth in the
balance sheet as of said date. Borrower does not believe, and has no reason to
believe, that there has been or will be a change relating to the Business of
Borrower that would cause a Materially Adverse Effect on Borrower.
4.1.4 No Litigation. Except as set forth on
Schedule 4.1.4 hereto, there are no suits or proceedings pending, or, to the
knowledge of Borrower, threatened against or affecting Borrower, Guarantor, or
any Property, and Borrower is not in default in the performance of any agreement
to which Borrower may be a party or by which Borrower is bound, or with respect
to any order, writ, injunction, or any decree of any court, or any federal,
state, municipal or other government agency or instrumentality, domestic or
foreign, which could have a Materially Adverse Effect on Borrower.
4.1.5 Compliance. Borrower has all Governmental
Approvals necessary for the conduct of Borrower's business and the operation of
each Property, and the conduct of Borrower's Business is not and has not been in
violation of any such Governmental Approvals or any applicable federal or state
law, rule or regulation, the failure of which to obtain or to comply with would,
in any such case, have a Materially Adverse Effect on Borrower. Borrower does
not require any Governmental Approvals to enter into, or perform under, this
Agreement, the Note, the Mortgages or any other Loan Document.
4.1.6 Compliance with Regulations T, U and X.
Borrower is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meanings of Regulations T, U and
X of the Board of Governors of the Federal Reserve System).
4.1.7 ERISA. With respect to each employee
pension benefit plan (within the meaning of Section 3(2) of ERISA other than any
"multiemployer plan" within the meaning of Section 3(37) of ERISA) (hereinafter,
a "Plan"), maintained for employees of Borrower or of any trade or business
(whether or not incorporated) which is under common control with Borrower
(within the meaning of Section 4001(b)(1) of ERISA), (i) there is no accumulated
funding deficiency (within the meaning of Section 302 of ERISA or Section 412 of
the Code), as of the last day of the most recent plan year of such Plan
heretofore ended, taking into account contributions made or to be made within
the time prescribed by Section 412(c)(10) of the Code; (ii) each such Plan has
been maintained in accordance with its terms and ERISA; and (iii) there has been
no "reportable event" within the meaning of Section 4043 of ERISA and the
regulations thereunder for which the 30-day notice requirement has not been
waived. Borrower has not incurred any liability to the PBGC other than required
insurance premiums, all of which, that have become due as of the date hereof,
have been paid. Borrower is not a party to any multi-employer plan.
4.1.8 Environmental.
Except as set forth in Schedule 4.1.8 or where failure to
comply would not have or result in a Materially Adverse Effect on Borrower or
the conduct of Borrower's Business:
4.1.8.1 Borrower has, to the best of
Borrower's knowledge, in the conduct of Borrower's Business and the ownership
and use of the Properties, complied, in all material re spects, with all
federal, state and local, laws, rules, regulations, judicial decisions and
decrees pertaining to the use, storage or disposal of hazardous waste or toxic
materials.
4.1.8.2 Except as reflected in the reports
delivered to Lender pursuant to Section 3.1.12 hereof, to the best of Borrower's
knowledge: (i) no Hazardous Substance is present on any of the Properties in any
quantity in excess of those allowed by applicable law; (ii) Borrower has not
been identified in any litiga tion, administrative proceedings or investigation
as a responsible party for any liability under any Environmental Law; (iii) all
mate rials that are located on any of the Properties in lawful amounts are
properly stored and maintained in containers appropriate for such purposes. For
purposes of this Agreement, the term "Environmental Law" means any and all
applicable Federal, State and local environ mental statutes, laws, ordinances,
rules and regulations, whether now existing or hereafter enacted, together with
all amendments, modifications, and supplements thereto, including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act (CERCLA), 42 U.S.C. ss.9601, as amended by the Superfund
Amendments and Re-authorization Act of 1986 (Pub. L. No. 99-499, 100 Stat. 1613
(1986) (SARA) or 40 CFR Part 261, whichever is applicable) and the
term "Hazardous Substance" means all contaminants, hazardous sub
stances, pollutants, hazardous waste, residual waste, solid waste, or
similar substances or wastes which are the subject of any
Environmental Law.
4.1.9 Other Contractual Obligations. The
execution and delivery of this Agreement do not, and the performance by Borrower
of its obligations and covenants under this Agreement and the other Loan
Documents to which Borrower is bound will not, violate any other contractual
obligation of Borrower.
4.1.10 Investment Company Act.
Borrower is not an Investment Company within the meaning of the Investment
Company Act of 1940.
4.1.11 Public Utility Holding Company Act.
Borrower is not a Public Utility Holding Company within the meaning of the
Public Utility Holding Company Act.
4.1.12 RICO. Borrower has not engaged in any
conduct or taken or omitted to take any action which violates RICO.
4.1.13 Lease Information. All rent-rolls
heretofore delivered to Lender with respect to the Properties are true, correct
and complete as of the respective dates thereof and the copies of all leases
delivered to Lender with respect to any Property are complete copies of such
leases and of all amendments, modifications, addenda, riders and supplements
thereto.
4.2 Accuracy of Representations; No Default. The
---------------------------------------
information set forth herein and on each of the Schedules hereto, in
the Note, the Mortgages, the other Loan Documents and each document
heretofore or concurrently delivered to Lender in connection herewith
is complete and accurate and contains full and true disclosure of
pertinent financial and other information in connection with the
Loans. To the best of Borrower's knowledge, none of the foregoing
contains any untrue statement of a material fact or omits to state a
material fact necessary to make the information contained herein or
therein not misleading or incomplete. To the best of Borrower's
knowledge, no Event of Default or Unmatured Event of Default
hereunder, under the Note, any Mortgage, or any of the other Loan
Documents, has occurred.
ARTICLE 5
AFFIRMATIVE COVENANTS
5.1 Borrower's Covenants. As long as this Agreement
continues in effect or any portion of the Indebtedness remains outstanding and
unpaid, Borrower covenants and agrees that, in the absence of prior written
consent of Lender, Borrower shall:
5.1.1 Maintain the ratio of the aggregate NOI of
all Properties then encumbered by a Mortgage to Pro Forma Debt
Service at no less than 1.5 to 1 at all times;
5.1.2 Deliver to Lender, within 10 days after the
same is filed, but not later than 55 days after the end of each of the first
three (3) Calendar Quarters of each Calendar Year, (i) Guarantor's 10-Q report
for such Calendar Quarter, (ii) an income and expense statement and rent-roll
for each Property, and (iii) such other Project Specific Information as Lender
may reasonably request, the information required by (ii) and (iii) to be
certified by Guarantor's chief financial officer;
5.1.3 Deliver to Lender, within 10 days after the
same is filed, but not later than 100 days after each Calendar Year, (i)
Guarantors 10-K report for such Calendar Year, (ii) an income and expense
statement and rent-roll for each Property, and (iii) such other Property
Specific Information as Lender may reasonably request, the information required
by (ii) and (iii) to be certified by Guarantor's chief financial officer;
5.1.4 Deliver to Lender at the time each request
for a postponement of the Termination Date is requested, such Project Specific
Information with respect to Borrower's income producing real estate assets as
Lender may reasonably request, certified by Guarantor's chief financial officer;
5.1.5 Deliver to Lender, at the time each
financial statement is required to be delivered pursuant to Sections 5.1.2 and
5.1.3 hereof, a certification of Borrower, signed by a senior executive officer
of Guarantor, in the form of Schedule 5.1.5 attached hereto, certifying to
Lender that there exists no breach of any of the covenants contained in this
Article 5 or in Article 6 hereof;
5.1.6 With reasonable promptness furnish to
Lender such additional information and data concerning the business and
financial condition of Borrower as may be reasonably requested by Lender; afford
Lender or its agents reasonable access to the financial books and records,
computer records and Properties of Borrower at all reasonable times, and permit
Lender or its agents to
make copies and abstracts of same and to remove such copies; and abstracts from
Borrower's premises and permit Lender or its agents the right to converse
directly with the independent accounting firm then engaged by Borrower to
prepare its audited financial statements; Lender agrees that it shall not
disclose any non-public information obtained by Lender pursuant to this Section
5.1.6 to any Person in violation of applicable law;
5.1.7 Cause the prompt payment and discharge of
all taxes, governmental charges and assessments levied and assessed or imposed
upon Borrower's assets and pay all other claims which, if unpaid, might become
liens or charges upon Borrower's assets, provided, however, that nothing in this
Section shall require Borrower to pay any such taxes, claims or assessments
which are not overdue or which are being contested in good faith and by
appropriate proceedings, with adequate reserves therefor being available or
having been set aside;
5.1.8 Maintain in good standing the existence as
a limited partnership of Borrower and all necessary foreign
qualifications;
5.1.9 Promptly defend all actions, proceedings or
claims which would have a Materially Adverse Effect on Borrower and promptly
notify Lender of the institution of, or any change in, any such action,
proceeding or claim if the same is in excess of $500,000 for any single action,
proceeding or claim and $1,000,000 in the aggregate (other than claims covered
by insurance in the ordinary course of business and booked on Borrower's balance
sheet), or would have a Materially Adverse Effect on the financial condition of
Borrower or any of the Properties if adversely determined;
5.1.10 Promptly give written notice to Lender of
the occurrence or imminent occurrence of any event which causes or would
imminently cause any representation or warranty made in Article 4 hereof to be
untrue in any material respect at any time or which would cause Borrower to be
in default hereunder, under the Note, any Mortgage, or any other Loan Document
for any other reason, or the occurrence of an Event of Default or Unmatured
Event of Default;
5.1.11 Maintain and keep in force, throughout the
term of this Agreement, policies of insurance on the following terms:
5.1.11.1 Policies of insurance insuring each
Property against such perils and hazards, and in such amounts and with such
limits, as Lender may from time to time in good faith require, and, in any
event, including:
(a) Insurance against loss to each Property on
an "all risk" policy form, covering insurance risks no less broad
than those covered under a Standard Multi Peril (SMP) policy form, which
contains the most recent Commercial ISO "Causes of Loss-Special Form," and such
other risks as Lender may reasonably require, including, but not limited to,
insurance covering the cost of demolition of undamaged portions of any portion
of a Property when required by code or ordinance and the increased cost of
reconstruction to conform with current code or ordinance requirements, in
amounts equal to the full replacement cost of the Property (other than land,
foundations and other uninsurable improvements), including fixtures and
equipment, and the cost of debris removal, with an agreed amount endorsement and
deductibles of not more than $10,000.
(b) Rent and rental value/extra expense
insurance in amounts sufficient to pay, during any period in which a Property
may be damaged or destroyed, all rents for a period of twelve (12) months or
such greater time as Lender may in good faith deem appropriate.
Broad form boiler and machinery insurance
including rent and rental value insurance, on all equipment and objects
customarily covered by such insurance and/or involved in the heating, cooling,
electrical and mechanical systems of each Property (if any are located at the
Property), providing for full repair and replacement cost coverage, and other
insurance of the types and in amounts as Lender may reasonably require.
(d) During the making of any alterations or
improvements to a Property, (i) insurance covering claims based on the owner's
or employer's contingent liability not covered by the insurance provided in
clause (f) of this Section 5.1.11.1 and (ii) workers' compensation insurance
covering all persons engaged in such alterations or improvements.
(e) Insurance against loss or damage by flood
or mud slide in compliance with the Flood Disaster Protection Act of 1973, as
amended from time to time, if a Property is on the relevant Closing Date, or at
any time during the term of this Agreement shall be, situated in any area which
an appropriate governmental authority designates as a special flood hazard area,
in amounts equal to the full replacement value of all above grade structures on
such Property.
(f) Commercial general public liability
insurance, with the location of each Property designated thereon, against death,
bodily injury and property damage arising on, about or in connection with the
Properties, with Borrower listed as the named insured, with such limits as
Lender may reasonably require (but in no event less than $1,000,000) and written
on the most recent Standard "ISO" occurrence basis form or equivalent form,
excess umbrella
liability coverage with such limits as the Lender may reasonably require but in
no event less than $2,000,000, and, if any construction of new improvements
occurs after the date hereof, completed operations coverage for a period of one
year after construction of the improvements has been completed.
(g) Such other insurance relating to the
Properties and the uses and operation thereof as Lender may, from time to time
require in the exercise of good faith, including, but not limited to, workers'
compensation insurance.
5.1.11.2 All insurance shall: (a) be carried
in companies with a Rating of A or better and a Financial Size Category of Class
VII or higher, as set forth in the most recently published Best's Key Rating
Guide, or otherwise acceptable to Lender; (b) be in form and content that
conform to industry standards or are acceptable to Lender; (c) provide thirty
(30) days' advance written notice to Lender before any cancellation, material
modification or notice of non-renewal; and (d) provide that no claims shall be
paid thereunder without ten (10) days' advance written notice to Lender. All
physical damage policies and renewals shall contain a mortgage clause acceptable
to Lender naming Lender as mortgagee, which clause shall expressly state that
any breach of any condition or warranty by Borrower shall not prejudice the
rights of Lender under such insurance. No additional parties shall appear in the
mortgagee or loss payable clause without Lender's prior written consent. All
deductibles shall be in amounts acceptable to Lender. In the event of the
foreclosure of the applicable Mortgage or any other transfer of title to a
Property in full or partial satisfaction of the indebtedness secured hereby, all
right, title and interest of Borrower in and to all insurance policies and
renewals thereof then in force shall pass to such purchaser or grantee. If the
insurance, or any part thereof, shall expire, or be withdrawn, or become void or
unsafe by reason of Borrower's breach of any condition thereof, or become void
or unsafe by reason of the value or impairment of the capital of any company in
which the insurance may then be carried, Borrower shall place new insurance that
satisfies the requirements of this Section 5.1.11.
5.1.11.3 The insurance required by this Section
5.1.11 shall be evidenced by the original policy or a true and certified copy of
the original policy or an Evidence of Property Insurance, or in the case of
liability insurance, a Certificate of Insurance. Borrower shall deliver
originals of such policies or certificates to Lender at least ten (10) days
before the expiration of existing policies. If Lender has not received
satisfactory evidence of such renewal or substitute insurance in the time frame
specified herein, Lender shall have the right, but not the obligation, to
purchase such insurance for Lender's interest as mortgagee only. Any amounts so
disbursed by Lender pursuant to this
Section 5.1.11 shall be a part of the Indebtedness and shall be immediately
payable by the Borrower to Lender and shall bear interest at the rate that is 2%
per annum in excess of the Prime Rate.
Nothing contained in this Section 5.1.11.3 shall require Lender to incur any
expense or take any action hereunder, and inaction by Lender shall never be
considered a waiver of any right accruing to Lender on account of this Section
5.1.11.
5.1.12 Comply in all material respects with the
requirements of ERISA applicable to any employee pension benefit plan (within
the meaning of Section 3(2) of ERISA), sponsored by Borrower. With respect to
any such plan, other than any "multiemployer plan" (within the meaning of
Section 3(37) of ERISA), in the case of a "reportable event" within the meaning
of Section 4043 of ERISA and the regulations thereunder for which the 30-day
notice requirement has not been waived, or in the case of any other event or
condition which presents a material risk of the termination of any such plan by
action of the PBGC or Borrower, Borrower shall furnish to Lender a certificate
of the chief financial officer of Guarantor identifying such reportable event or
such other event or condition and setting forth the action, if any, that
Borrower intends to take or has taken with respect thereto, together with a copy
of any notice of such reportable event or such other event or condition filed
with the PBGC or any notice received by Borrower from the PBGC evidencing the
intent of the PBGC to institute proceedings to terminate any such plan. Such
certificate of the chief financial officer or such other notice to be furnished
to Lender in accordance with the preceding sentence shall be given in the manner
provided for in Section 8.4 hereof: (i) within 30 days after the Borrower knows
of such reportable event or such other event or condition; (ii) as soon as
possible upon receipt of any such notice from the PBGC; or (iii) concurrently
with the filing of any such notice with the PBGC, as the case may be. For
purposes of this Section, Borrower shall be deemed to have all knowledge
attributable to the administrator of any such plan;
5.1.13 Immediately notify Lender of: (i) the
occurrence or imminent occurrence of any event which causes or would imminently
cause (A) any material adverse change in the financial condition of Borrower,
(B) any representation or warranty made by Borrower hereunder to be untrue,
incomplete or misleading, or (C) the occurrence of any other Event of Default or
Unmatured Event of Default hereunder; and (ii) the institution of, or the
issuance of any order, judgment, decree or other process in, any litigation,
investigation, prosecution, proceeding or other action by any governmental
authority or other Person against Borrower and that does, or could, materially
affect Borrower;
5.1.14 Cause Guarantor to maintain its corporate
existence and all necessary foreign qualifications in good standing;
and
5.1.15 Continue to comply with all applicable
statutes, rules and regulations with respect to the conduct of Borrower's
Business to the extent the same are material to the financial condition of
Borrower or the conduct of Borrower's Business; maintain such necessary licenses
and permits required for the conduct of Borrower's Business, in each case if the
failure to maintain or comply would have a Materially Adverse Effect on
Borrower.
5.2 Indemnification. Borrower hereby indemnifies and agrees
to protect, defend, and hold harmless Lender and Lender's directors, officers,
employees, agents, attorneys and shareholders from and against any and all
losses, damages, expenses or liabilities of any kind or nature and from any
suits, claims, or demands, including all reasonable counsel fees incurred in
investigating, evaluating or defending such claim, suffered by any of them and
caused by, relating to, arising out of, resulting from, or in any way connected
with this Agreement, the Note, the Mortgages, the other Loan Documents and any
transaction contemplated herein or therein including, but not limited to, claims
based upon any act or failure to act by Lender in connection with this
Agreement, the Note, the Mortgages, the other Loan Documents and any transaction
contemplated herein or therein; provided, that Borrower shall not be liable for
any portion of such losses, damages, expenses or liabilities arising out of (i)
Lender's breach of its obligations to Borrower under this Agreement, the Note,
the Mortgage or any other Loan Document or (ii) gross negligence or willful
misconduct or that of Lender's officers, directors, employees or agents. If
Borrower shall have knowledge of any claim or liability hereby indemnified
against, it shall promptly give written notice thereof to Lender. THIS COVENANT
SHALL SURVIVE PAYMENT OF THE INDEBTEDNESS.
5.2.1 Lender shall promptly give Borrower written
notice of all suits or actions instituted against Lender with respect to which
Borrower has indemnified Lender, and Borrower shall timely proceed to defend any
such suit or action. Lender shall also have the right, at the reasonable expense
of Borrower, to participate in or, at Lender's election, assume the defense or
prosecution of such suit, action, or proceeding, and in the latter event
Borrower may employ counsel and participate therein. Lender shall have the right
to adjust, settle, or compromise any claim, suit, or judgment after notice to
Borrower, unless Borrower desires to litigate such claim, defend such suit, or
appeal such judgment and simultaneously therewith deposits with Lender such
amount of collateral sufficient to secure the payment of any judgment rendered,
with interest, costs, reasonable legal fees and expenses, as Lender may in good
faith require, giving consideration to Borrower's then-current net worth and
available insurance proceeds; and the right of Lender to indem
nification under this Agreement shall extend to any money paid by Lender in
settlement or compromise of any such claims, suits, and judgments in good faith,
after notice to Borrower.
5.2.2 If any suit, action, or other proceeding is
brought by Lender against Borrower for breach of Borrower's covenant of
indemnity herein contained, separate suits may be brought as causes of action
accrue, without prejudice or bar to the bringing of subsequent suits on any
other cause or causes of action, whether theretofore or thereafter accruing.
ARTICLE 6
NEGATIVE COVENANTS
6.1 Borrower's Negative Covenants. As long as this Agreement
continues in effect or any portion of the Indebtedness shall remain outstanding
and unpaid, Borrower shall not:
6.1.1 Change the general character of Borrower's
Business from that in which it is currently engaged; enter into proceedings in
total or partial dissolution; merge or consolidate with or into any entity, or
acquire all or substantially all of the assets or securities of any other Person
(excluding transactions, the primary purpose of which is to obtain direct or
indirect ownership and control of income producing real estate); or otherwise
take any action or omit to take any action which would have a Materially Adverse
Effect on Borrower;
6.1.2 Use any part of the proceeds of any Loan to
purchase or carry, or to reduce, retire or refinance any credit incurred to
purchase or carry, any margin stock (within the meaning of Regulations T, U and
X of the Board of Governors of the Federal Reserve System) or to extend credit
to others for the purpose of purchasing or carrying any margin stock. If
requested by Lender, Borrower shall furnish Lender statements in conformity with
the requirements of Federal Reserve Form U-1 referred to in said Regulation;
6.1.3 Use, generate, treat, store, dispose of, or
otherwise introduce any hazardous substances, pollutants, contaminants,
hazardous waste, residual waste or solid waste (as defined above) into or on any
of the Properties and will not intentionally or knowingly cause, suffer, or
permit any other Person to do so in violation of any applicable Environmental
Law;
6.1.4 Engage in any conduct or take or fail to
take any action which will, or would, if the facts and circumstances
relative thereto were discovered, violate RICO;
6.1.5 Terminate the Partnership Agreement.
ARTICLE 7
DEFAULT
7.1 Events of Default. The occurrence of any one or more of
the following events, conditions or states of affairs, shall constitute an
"Event of Default" hereunder, under the Note, the Mortgages, and under each of
the other Loan Documents, provided however, that nothing contained in this
Article 7 shall be deemed to enlarge or extend any grace period provided for in
the Note, any Mortgage, or any other Loan Document:
7.1.1 Failure of Borrower to pay the Indebtedness
or any portion thereof within ten (10) days after written notice from Lender of
the amount that is due (except that no such notice shall be required with
respect to the payment due on the Termination Date);
7.1.2 Failure by Borrower to observe or perform
any agreement, condition, undertaking or covenant in this Agreement, the Note,
or the other Loan Documents, which failure, if it does not consist of the
failure to pay money to such Lender and is susceptible to being cured, is not
cured within thirty (30) days after written notice from such Lender (but if such
failure cannot reasonably be cured within such thirty (30) day period, such
shall not be an Event of Default if Borrower has commenced such cure within such
thirty (30) day period and thereafter diligently pursues such cure to its
completion, but in no event shall the period to cure exceed one hundred twenty
(120) days); provided that the notice and grace period provided in this Section
7.1.2 shall not apply to the breach by Borrower of any covenants contained in
Sections 5.1.1, 5.1.8 (with respect to which Borrower's available cure period
shall be ten (10) days after Borrower receives written notice of such breach
from any governmental authority), 5.1.14 (with respect to which Borrower's
available cure period shall be ten (10) days after Borrower receives written
notice of such breach from any governmental authority), or 6.1.1 hereof, and
provided further that the grace period with respect to a breach of the covenants
contained in Section 5.1 hereof that pertain to the delivery to Lender of
financial information shall be limited to thirty(30) days after delivery of any
Lender's written notice of such breach;
7.1.3 Any representation or warranty of the
Borrower, or to the extent specifically provided in this Agreement is deemed
made, in this Agreement, the Note, any Mortgage, or any of the other Loan
Documents, or any statement or information in any report, certificate, financial
statement or other instrument furnished by Borrower in connection with making of
this Agreement or the making of the Loans hereunder or in compliance with the
provisions hereof or any other Loan Document shall have been false or misleading
in any material respect when so made or so deemed made or furnished;
7.1.4 Borrower or Guarantor shall become
insolvent or unable to pay its debts as they mature, or file a voluntary
petition or proceeding seeking liquidation, reorganization or other relief with
respect to itself under any provision of the Bankruptcy Code or any state
bankruptcy or insolvency statute, or make an assignment or any other transfer of
assets for the benefit of its creditors, or apply for or consent to the
appointment of a receiver for its assets, or suffer the filing against its
property of any attachment or garnishment or take any action to authorize any of
the foregoing; or an involuntary case or other proceeding shall be commenced
against Borrower or Guarantor seeking liquidation, reorganization or other
relief with respect to its debts under the Bankruptcy Code or any other
bankruptcy, insolvency or similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, and such involuntary
case or other proceeding shall remain undismissed and unstayed for a period of
sixty (60) days (it being understood that no delay period applies with respect
to any default arising under this Section by reason of the filing of a voluntary
petition by Borrower or Guarantor under the Bankruptcy Code or any state
bankruptcy or insolvency statute or the making of an assignment or other
transfer of assets for the benefit of Borrower's Guarantor's creditors or by
reason of Borrower or Guarantor applying for or consenting to the appointment of
a receiver for Borrower's or Guarantor's assets); or an order for relief shall
be entered against the Borrower or Guarantor under any provision of the
Bankruptcy Code or any state bankruptcy or insolvency statute as now or
hereafter in effect;
7.1.5 The occurrence of any "Event of Default" as
defined in the Note, Mortgage, or other Loan Document;
7.1.6 The occurrence of any default by Borrower
or Guarantor (after expiration of any applicable grace period therein contained)
under any note or instrument evidencing indebtedness for borrowed money in
excess of $1,000,000, the liability for which is not limited to real estate that
was mortgaged to the creditor as security for such indebtedness;
7.1.7 Borrower shall cease to conduct its
Business substantially in the manner described in the Background portion of this
Agreement or Borrower shall change the nature of its Business;
7.1.8 Entry of a final judgment or judgments
against Borrower or Guarantor by a court of law in an amount
exceeding an aggregate of $1,000,000 outstanding at any one time: (i)
which is not fully or unconditionally covered by insurance; or (ii)
for which Borrower or Guarantor has not established a cash or cash
equivalent reserve in the amount of such judgment or judgments that were entered
by a court of record against Borrower or Guarantor; or (iii) enforcement of such
judgment or judgments has not been stayed or such judgment or judgments shall
continue in effect for a period of 30 consecutive days without being vacated,
discharged, satisfied or bonded pending appeal;
7.1.9 Regardless of the intent or knowledge of
Borrower, if the validity, binding nature or enforceability of any material
term, provision, condition, covenant or agreement contained in this Agreement,
any other Loan Document or in any other existing or future agreement between
Borrower and Lender shall be wrongfully disputed by, on behalf of, or in the
right or name of Borrower or if any such material term, provision, condition,
covenant or agreement shall be found or declared to be invalid, non-binding,
unenforceable or avoidable by any governmental authority or court and the
parties cannot agree upon substitutions therefor within 30 days; or
then, and in every such event, Lender may (i) by notice to Borrower, terminate
Lender's obligations under this Agreement, and they shall thereupon terminate,
and (ii) declare the Note (together with accrued interest thereupon) to be, and
the Note shall thereupon become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by Borrower.
7.2 Remedies on Default.
7.2.1 Upon the occurrence and continuation of any
Event of Default, Lender may forthwith declare all Indebtedness to be
immediately due and payable, without protest, demand or other notice (which are
hereby expressly waived by Borrower) and, in addition to the rights specifically
granted hereunder or now or hereafter existing in equity, at law, by virtue of
statute or otherwise (each of which rights may be exercised at any time and from
time to time), Lender may exercise the rights and remedies available to Lender
at law or in equity or under this Agreement, the Note, the Mortgages, and any of
the other Loan Documents or any other agreement by or between Borrower and
Lender in accordance with the respective provisions thereof.
7.2.2 In addition to the remedies described in
Section 7.2.1 hereof, Lender may exercise all of Lender's rights under the
Guaranty.
7.3 Set-Off Rights Upon Default. Upon and during the
continuance of any Event of Default, Lender, in addition to any remedies set
forth above, shall have the right at any time and from time to time without
notice to Borrower, to the extent permitted by law (any such notice being
expressly waived by Borrower and to the fullest extent permitted by applicable
Rules) to set off, to exercise
any banker's lien or any right of attachment or garnishment and apply any and
all balances, credits, deposits (general or special, time or demand, provisional
or final), accounts or monies at any time held by Lender and other indebtedness
at any time owing by Lender to or for the account of Borrower against any and
all Indebtedness for which Borrower is liable or other obligations of Borrower
now or hereafter existing under this Agreement, the Note, any Mortgage, or any
other Loan Document, whether or not any Lender shall have made any demand
hereunder or thereunder.
7.4 Singular or Multiple Exercise; Non-Waiver. The
-----------------------------------------
remedies provided herein, in the Note, the Mortgages, and in the
other Loan Documents or otherwise available to Lender at law or in
equity and any warrants of attorney therein contained, shall be
cumulative and concurrent, and may be pursued singly, successively or
together at the sole discretion of Lender, and may be exercised as
often as occasion therefor shall occur; and the failure to exercise
any such right or remedy shall in no event be construed as a waiver
or release of the same.
ARTICLE 8
MISCELLANEOUS
8.1 Integration. This Agreement, the Note, the Mortgages,
and the other Loan Documents shall be construed as one agreement, and in the
event of any inconsistency, the provisions of the Note shall control over the
provision of this Agreement or any other Loan Document, and the provisions of
this Agreement shall control over the provisions of any other Loan Document.
This Agreement, the Note, the Mortgages, and the other Loan Documents contain
all the agreements of the parties hereto with respect to the subject matter of
each thereof and supersede all prior or contemporaneous discussions and
agreements with respect to such subject matter.
8.2 Modification. Modifications or amendments of or to
the provisions of this Agreement shall be effective only if set forth
in a written instrument signed by Lender and Borrower.
8.3 Amendments and Waivers. Any provision of this
Agreement may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by Borrower and Lender.
8.4 Notices. Any notice or other communication by one party
hereto to the other shall be in writing and shall be deemed to have been validly
given upon receipt if by hand delivery, or by overnight delivery service or by
telecopier, or two days after mailing if mailed, first class mail, postage
prepaid, return receipt requested, addressed as follows:
If to Borrower:
4350 East West Highway
Suite 400
Bethesda, MD 20814
Attn: James G. Blumenthal
Telecopier: (301) 907-4911
All with a copy to:
Jeffrey S. Distenfeld, Esq.
4350 East West Highway
Suite 400
Bethesda, MD 20814
Telecopier: (301) 907-4911
If to the Lender:
CoreStates Bank, N.A.
10th Floor, Widener Building
FC1-8-10-67
1339 Chestnut Street
P.O. Box 7618
Philadelphia, PA 19101-7618
Attn: Greg A. Hartin, Vice President
Telecopier: 215-786-6381
With a copy to:
Kenneth I. Rosenberg, Esquire
Mesirov Gelman Jaffe Cramer & Jamieson
1735 Market Street, 38th Floor
Philadelphia, PA 19103-7598
Telecopier: 215-994-1111
8.5 Survival. The terms of this Agreement and all
agreements, representations, warranties and covenants made by Borrower in any
other Loan Document shall survive the issuance and payment of the Note and shall
continue as long as any portion of the Indebtedness shall remain outstanding and
unpaid; provided, however, that the covenants set forth in Sections 5.2, 8.8,
and 8.9 hereof and all other covenants of Borrower to indemnify Lender and the
Lender shall survive the payment of the Indebtedness. Borrower hereby
acknowledges that Lender has relied upon the foregoing in making the Loans.
8.6 Closing. Closing hereunder shall occur at the offices of
Mesirov Gelman Jaffe Cramer & Jamieson, 1735 Market Street, 38th Floor,
Philadelphia, Pennsylvania 19103-7598 or at such other time and place as the
parties hereto may determine.
8.7 Successors and Assigns; Governing Law. This Agree ment
shall be binding upon and inure to the benefit of the respective successors and
assigns of the parties hereto; provided, however that Borrower shall not assign
this Agreement, or any rights or duties arising hereunder, without the express
prior written consent of Lender and that subject to the right to enter into
participation arrangements under Section 8.10 hereof, Lender may not assign its
rights or duties arising hereunder without the express prior written consent of
Borrower. This Agreement shall be construed and enforced in accordance with the
internal laws of the Commonwealth of Pennsylvania for contracts made and to be
performed in Pennsylvania.
8.8 Consent to Jurisdiction and Venue. In any legal
proceeding involving, directly or indirectly, any matter arising out of or
related to this Agreement or any relationship evidenced hereby, Borrower hereby
irrevocably submits to the nonexclusive jurisdiction of any state or federal
court located in any county in the Commonwealth of Pennsylvania where Lender
maintains an office and agrees not to raise any objection to such jurisdiction
or to the laying or maintaining of the venue of any such proceeding in such
county. Borrower agrees that service of process in any such proceeding may be
duly effected upon it by mailing a copy thereof, by registered mail, postage
prepaid, to Borrower.
8.9 Waiver of Jury Trial. BORROWER AND LENDER EXPRESSLY
WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTIONS BROUGHT BY ANY PARTY
WITH RESPECT TO THIS AGREEMENT OR THE INDEBTEDNESS.
8.10Participation. Lender may in its sole discretion enter
into one or more participation arrangement(s) with respect to the Revolving
Credit and may provide all information in its possession relating to Borrower to
any current or prospective participating lender.
8.11Excess Payments. If Borrower shall pay any interest
under the terms of the Note at a rate higher than the maximum rate allowed by
applicable law, then such excess payment shall be credited against the
Indebtedness unless Borrower notifies Lender in writing to return the excess
payment to Borrower.
8.12Partial Invalidity. If any provision of this Agreement
shall for any reason be held to be invalid or unenforce able, such invalidity or
unenforceability shall not affect any other provision hereof, but this Agreement
shall be construed as if such invalid or unenforceable provision had never been
contained herein.
8.13Compliance with Rules. Lender shall not be required by
operation or effect of any provision of this Agreement to violate any statute or
regulation under state or federal law, including all Rules.
8.14Headings. The heading of any Article or Section
contained in this Agreement is for convenience of reference only and shall not
be deemed to amplify, limit, modify or give full notice of the provisions
thereof.
8.15Counterparts. This Agreement may be signed in
counterparts each of which shall be deemed to be an original and all of which
together shall constitute one and the same agreement.
8.16Retention of Documents. Unless otherwise provided
herein, any documents, schedules, invoices or other papers delivered to Lender
may be destroyed or otherwise disposed of by Lender six (6) months after they
are delivered to or received by Lender, unless Borrower requests the return of
such documents, schedules, invoices or other papers and makes arrangements, at
Borrower's expense, for their return.
IN WITNESS WHEREOF, Borrower and Lender have executed this
Agreement under seal, intending to be legally bound hereby, as of the day and
year first above written.
BORROWER:
FIRST WASHINGTON REALTY LIMITED
PARTNERSHIP, a Maryland limited
partnership, by its sole general
partner:
FIRST WASHINGTON REALTY TRUST, INC.
By:__________________________________
William J. Wolfe, President
Attest: _____________________________
(Corporate Seal) , Secretary
LENDER:
CORESTATES BANK, N.A.
By:__________________________________
Greg A. Hartin, Vice President
<PAGE>
Schedule 2.2.2
Notice of Borrowing
By
First Washington Realty Limited Partnership
CoreStates Bank, N.A.
F.C. 1-8-12-1
1345 Chestnut Street
P.O. Box 7618
Philadelphia, PA 19101-7618
Attention: _________________
__________, 19__
This Notice of Borrowing ("Notice") is provided to
CoreStates Bank, N.A. ("Lender") to evidence the desire of First Washington
Realty Limited Partnership ("Borrower") to borrow funds in the form of Advances
pursuant to Section 2.2 of the Revolving Credit Loan Agreement, dated as of
___________ __, 1997, by and between Borrower and the Lender (the "Loan
Agreement"). All capitalized terms not defined herein shall have the same
meaning as provided in the Loan Agreement unless the context clearly requires to
the contrary.
Borrower desires to borrow $___________ to be funded on
_____________, 19__ (the "Funding Date"). This Loan shall initially
consist of:
$__________ Prime Rate Loans; this Notice is provided to Lender
by 11:00 a.m. at least one Business Day prior to the
Funding Date;
$__________ LIBOR Loans with an initial Interest Period of
_____________ months; this Notice is provided to
Lender by 11:00 a.m. least three London Business
Days prior to the Funding Date.
Borrower hereby requests Lender to open a Letter of Credit
in the face amount of $_________________________ in favor of
_____________________ with an expiration date of ____________ to be paid in
accordance with the notation attached hereto.
This Notice, if for LIBOR Loans, shall be irrevocable on and after the Interest
Rate Determination Date applicable to the Funding Date specified herein.
The undersigned hereby certifies that: (i) the representa
tions and warranties contained in Article 4 of the Loan Agreement are true and
correct as of the date hereof, except to the extent such representations and
warranties relate to an earlier date or such changes have been disclosed to and
agreed to by Lender; and (ii) to the best knowledge of Borrower no Event of
Default or Unmatured Event of Default under the Loan Agreement has occurred and
is continuing.
FIRST WASHINGTON REALTY LIMITED
PARTNERSHIP, a Maryland limited
partnership
By:________________________________
Authorized Signer
<PAGE>
Schedule 2.2.3
Notice of Rate Election
By
First Washington Realty Limited Partnership
CoreStates Bank, N.A.
F.C. 1-8-12-1
1345 Chestnut Street
P.O. Box 7618
Philadelphia, PA 19101-7618
Attention: _________________
_________, 19__
This Notice of Rate Election ("Notice") is provided to
CoreStates Bank, N.A. ("Lender") to evidence the desire of First Washington
Realty Limited Partnership ("Borrower") to continue or change the basis for
determining the interest rate on Loans pursuant to the Revolving Credit Loan
Agreement, dated as of _______ __, 1997, by and between Borrower and Lender (the
"Loan Agreement"). All capitalized terms not defined herein shall have the same
meaning as provided in the Loan Agreement unless the context clearly requires to
the contrary.
Borrower desires to (change) (continue) $___________ of
outstanding Advances for which (there is no present Interest Period) (the
Interest Period expires on _________) (to) (as) LIBOR Loans as follows:
$__________ LIBOR Loans with an Interest Period of
_____________ months; this Notice is provided to
Lender by 11:00 a.m. at least three London Business
Days prior to the first day of such Interest
Period, which day is hereby requested to be
________.
This Notice shall be irrevocable on and after the Interest
Rate Determination Date applicable to the Interest Period requested herein.
The undersigned hereby certifies that, to the best of
Borrower's knowledge, no Event of Default or Unmatured Event of Default under
the Loan Agreement has occurred and is continuing.
FIRST WASHINGTON REALTY LIMITED
PARTNERSHIP, a Maryland limited
partnership
By:_____________________________
Authorized Signer
<PAGE>
Schedule 5.1.5
Form of Covenant Compliance Certificate
For the Calendar Quarter ended
_________________, 19__
I, ____________________________, Chief Financial Officer of
First Washington Realty Trust, Inc., certify that the following is true and
correct as of ____________________________:
[Financial Covenant calculations]
The undersigned hereby certifies that to be best of the
undersigned's knowledge, no Event of Default or Unmatured Event of Default under
the Loan Agreement dated ___________________, 199_ has occurred and is
continuing.
--------------------------------
<PAGE>
LOAN AGREEMENT
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS, CERTAIN RULES OF CONSTRUCTION
<TABLE>
<S> <C> <C> <C>
1.1 Defined Terms..................................... 1
1.2 Construction of Definitions....................... 10
1.3 Accounting Reports and Principles................. 10
1.4 Business Day...................................... 10
1.5 Charging Accounts................................. 11
1.6 Lender's Costs.................................... 11
1.7 Other Terms.......................................
</TABLE>
ARTICLE 2 THE LOAN
<TABLE>
<S> <C> <C> <C>
2.1 Revolving Credit................................. 11
2.1.1 Extension of Revolving Credit.................... 11
2.1.2 Payment of Principal............................. 11
2.1.3 Payment of Interest.............................. 12
2.1.4 Revolving Credit Interest Rate Option and
Notice of Rate Election............... 12
2.1.5 Loan Fees........................................ 12
2.1.6 Note..... 12
2.1.7 Letters of Credit................................ 12
2.2 General Provisions...................... 14
2.2.1 Maximum Available Credit......................... 14
2.2.2 Notice of Borrowing.............................. 14
2.2.3 Notice of Rate Election; Failure to
Give Notice........................... 14
2.2.4 Funding.......................................... 15
2.2.5 Interest Periods................................. 15
2.2.6 Post-Maturity Interest........................... 16
2.2.7 LIBOR and Prime Rate............................. 16
2.2.8 Prepayment....................................... 20
2.2.9 Manner and Time of Payment....................... 21
2.2.10 Use of Proceeds.................................. 21
2.2.11 Conditional Payment.............................. 21
2.2.12 Postponement of Termination Date................. 21
</TABLE>
ARTICLE 3 CONDITIONS PRECEDENT
<TABLE>
<S> <C> <C> <C>
3.1 Execution of this Agreement...................... 22
3.2 All Loan Fundings................................ 24
</TABLE>
<PAGE>
ARTICLE 4 REPRESENTATIONS AND WARRANTIES
<TABLE>
<S> <C> <C> <C>
4.1.1 Good Standing.................................... 24
4.1.2 Power and Authority.............................. 24
4.1.3 Financial Condition.............................. 25
4.1.4 No Litigation.................................... 25
4.1.5 Compliance....................................... 25
4.1.6 Compliance with Regulations T, U and X........... 26
4.1.7 ERISA............................................ 26
4.1.8 Environmental.................................... 26
4.1.9 Other Contractual Obligations.................... 27
4.1.10 Investment Company Act........................... 27
4.1.11 Public Utility Holding Company Act............... 27
4.1.12 RICO............................................. 27
4.1.13 Lease Information................................ 27
4.2 Accuracy of Representations; No Default.......... 27
</TABLE>
ARTICLE 5 AFFIRMATIVE COVENANTS
<TABLE>
<S> <C> <C> <C>
5.1 Borrower's Covenants............................. 28
5.2 Indemnification.................................. 33
</TABLE>
ARTICLE 6 NEGATIVE COVENANTS
<TABLE>
<S> <C> <C> <C>
6.1 Borrower's Negative Covenants.................... 34
</TABLE>
ARTICLE 7 DEFAULT
<TABLE>
<S> <C> <C> <C>
7.1 Events of Default................................ 35
7.2 Remedies on Default.............................. 37
7.3 Set-Off Rights Upon Default...................... 38
7.4 Singular or Multiple Exercise; Non-Waiver........ 38
</TABLE>
ARTICLE 8 MISCELLANEOUS
<TABLE>
<S> <C> <C> <C>
8.1 Integration...................................... 38
8.2 Modification..................................... 38
8.3 Amendments and Waivers........................... 38
8.4 Notices.......................................... 39
8.5 Survival......................................... 39
8.6 Closing.......................................... 40
8.7 Successors and Assigns; Governing Law............ 40
8.8 Jurisdiction..................................... 40
8.9 Waiver of Jury Trial............................. 40
8.10 Participation.................................... 40
8.11 Excess Payments.................................. 40
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
8.12 Partial Invalidity................................ 41
8.13 Compliance with Rules............................. 41
8.14 Headings.......................................... 41
8.15 Counterparts...................................... 41
8.16 Retention of Documents............................ 41
</TABLE>
Schedules
<TABLE>
<S> <C> <C> <C>
2.1.7 Form of Application and Agreement for
Irrevocable Standby Letter of Credit
2.2.2 Notice of Borrowing
2.2.3 Notice of Rate Election
5.1.5 Form of Compliance Certificate
</TABLE>
<PAGE>
