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, 1997
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 $195 million based on the closing price of such
shares on the New York Stock Exchange as of March 27, 1998.
The number of shares of the Registrant's Common Stock outstanding was 7,388,718
on March 30, 1998.
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 8, 1998, to be filed pursuant
to Regulation 14A.
This report including Exhibits, contains 57 pages.
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC.
1997 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.............................. 22
7. Management's Discussion and Analysis
of Financial Condition and
Results of Operations....................................... 23
8. Consolidated Financial Statements and
Supplementary Data.............................................. 29
9. Changes in and Disagreements with
Accountants on Accounting
and Financial Disclosure.................................... 29
PART III
10. Directors and Executive Officers
of the Registrant............................................... 30
11. Executive Compensation.......................................... 30
12. Security Ownership of Certain
Beneficial Owners and Management................................ 30
13. Certain Relationships and
Related Transactions............................................ 30
PART IV
14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K.............................. 30
<PAGE>
PART I
Item 1. Business
General (dollars in thousands)
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 currently owns a portfolio of 49
retail properties (the "Retail Properties") containing a total of approximately
5.2 million square feet of gross leasable area ("GLA") located in the
Mid-Atlantic region and the Chicago, Illinois metropolitan area.
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, Dominick's Supermarket, 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 106,000
square feet of GLA. The anchor tenants typically offer daily necessity items
rather than specialty goods. Nine 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").
The Company's assets are held by, and all its operations conducted
through, First Washington Realty Limited Partnership (the "Operating
Partnership") and First Washington Management, Inc. ("FWM"). The Company is the
sole general partner of the Operating Partnership. The limited partners are
individuals, partnerships and others who have contributed their properties in
exchange for partnership interests ("Units"). The limited partners may exchange
their Units for cash, or at the option of the Company, for stock of the Company
on a 1 for 1 basis. As of December 31, 1997 and 1996, the Company owned
approximately 79% and 86% of the Operating Partnership, respectively. This
arrangement is commonly referred to as an Umbrella Partnership or "UPREIT"
structure. The Operating Partnership owns 100% of the non-voting preferred stock
of FWM which entitles it to 99% of the cash flow. Certain officers of the
Company own 100% of the voting common stock of FWM which entitles them to 1% of
the cash flow. In addition, the Operating Partnership holds an FWM promissory
note in the amount of $4,000 with interest payable quarterly in the amount of
$120. FWM provides management, leasing and related services to the Operating
Partnership and also provides such services to 15 third-party clients consisting
of 25 properties and 2.9 million square feet of GLA. As of December 31, 1997,
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. Allocation of net income and equity 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.
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.
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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 and the
Chicago metropolitan area, where the Company has extensive knowledge of local
market growth patterns and economic conditions. The Company would also consider
acquisitions in other metropolitan markets which management determines to be
both attractive and conveniently accessible.
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 and the Chicago metropolitan area,
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:
Additional
Name Description Cost Square Feet
1997 Completed Projects:
Centre Ridge Expansion - In-line retail $455 9,900
Firstfield Facade & common area renovation 122 -
First State Expansion - Shop Rite supermarket (1) 2,075
Laburnum Square Expansion - Hannaford Bros. (1) 14,000
Takoma Park Facade & common area renovation 1,082 -
Valley Centre Expansion - TJ Maxx 585 8,000
Brafferton Facade & common area renovation 227 -
Kenhorst Plaza Expansion - Redner's supermarket (1) 8,000
Southside Marketplace Facade & common area renovation 208 -
Valley Centre Expansion - Weis supermarket (1) 8,000
------- ------
$2,679 49,975
======= ======
(1) Paid by tenant
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Estimated
Completion Estimated Additional
Name Description Date Cost Square Feet
1998 Projects:
City Avenue Expansion - Sears
Paint & Hardware First Quarter 1998 $370 (1) 4,327
City Avenue Facade & common
area renovation Second Quarter 1998 1,020 -
Four Mile Fork Facade & common
area renovation Second Quarter 1998 151 -
Kings Park Facade & common
area renovation Third Quarter 1998 200 -
Laburnum Park Expansion -
Ukrops Supermarket Second Quarter 1998 (2) 10,000
Mallard Creek Facade & common
area renovation Third Quarter 1998 605 -
McHenry Commons Facade & common
area renovation Third Quarter 1998 339 -
Newtown Square Expansion -
Acme supermarket Third Quarter 1998 (2) 10,000
Newtown Square Facade & common
area renovation Third Quarter 1998 650 -
The Oaks Facade & common
area renovation Third Quarter 1998 529 -
Pheasant Hill Facade & common
area renovation Third Quarter 1998 413 -
Riverside Square/
River's Edge Facade & common
area renovation Third Quarter 1998 458 -
Spring Valley Facade & common
area renovation Third Quarter 1998 125 -
Stonebrook Facade & common
area renovation Third Quarter 1998 323 -
Valley Centre Development of
pad site First Quarter 1998 380 6,800
------- -----
$5,563 31,127
======= ======
(1) Represents amount due to seller of the property as an earn out payment,
payable in Operating Partnership Units.
(2) To be 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 other real estate
professionals 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 and Chicago, Illinois. 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. The Company would also
consider acquisitions in other metropolitan markets which management determines
to be both attractive and conveniently accessible.
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, FWM provided property management and
leasing services for four properties acquired from third-party clients. 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
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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; and, (ix) competition from comparable retail properties in
the market area. The Company successfully completed the acquisition of 36
properties since its organization in April 1994.
Recent Developments
In January 1998, the Company acquired Bowie Plaza Shopping Center located
in Bowie, Maryland. The total acquisition cost of $12,100 was financed through
the issuance of 130,626 Common Units to the seller of the property with a value
of approximately $3,600, assumed mortgage indebtedness of $5,400, a draw on the
Company's Line of Credit of $3,000 and cash of $100. The mortgage loan carries
an all-in effective interest rate of 7.2% and matures in December 2009. The
Center contains 104,036 square feet of GLA and is anchored by Giant Food and
CVS/Pharmacy.
In March 1998, the Company sold its two multi-family properties (Branchwood
and Park Place Apartments) for a combined sales price of approximately $8,050.
The estimated gain on sale is approximately $1,400 and net proceeds after the
payment of the existing mortgage debt was approximately $3,900. In March 1998,
the Company sold one of the Georgetown retail shops consisting of 5,000 square
feet for $750. The estimated gain on sale is approximately $200 and net proceeds
after the payment of existing mortgage debt was approximately $300. The proceeds
of these sales were used to purchase Watkins Park Plaza (described below) in a
like-kind exchange as defined in Internal Revenue Code Section 1031.
In March 1998, the Company acquired Watkins Park Plaza located in
Mitchellville, Maryland. The total acquisition cost of $14,295 was financed with
proceeds from the sale of the Company's two multi-family properties and a retail
property of $4,200, a draw on the Company's Lines of Credit of $10,000, and cash
of $95.
In January 1998, the Company closed on a $35,500 collateralized revolving
Line of Credit with Union Bank of Switzerland. This line is collateralized by
six properties (Kenhorst Plaza, Shoppes of Graylyn, Four Mile Fork, Takoma Park,
Centre Ridge Marketplace and Newtown Square). The line which matures on January
31, 2001 replaces the Lines of Credit the Company had with Mellon Bank and
Corestates Bank. Loans under this line will bear interest at LIBOR plus one
percent (1%).
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.
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, 1997
was approximately 40.0% and 35.0% assuming conversion of the Exchangeable
Debentures to equity. 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 $120.3 million
(including the Exchangeable Debentures) maturing in 1999 and 2000, 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.
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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 seven 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
groundwater 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 groundwater 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.
A dry cleaning solvent has been detected in the soil below Bowie Plaza
Shopping Center. Testing done 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 property has provided an indemnification for all costs and
expenses to obtain closure from the responsible regulatory authority. Also,
petroleum has been detected in the soil and groundwater beneath the property
arising from a release from an adjoining Shell service station not owned by the
Company. Shell is liable for the clean up and is currently performing clean up
activities. Also, the contamination is unlikely to have an affect on human
health. In light of the above, management believes that there is minimal
exposure at this time and, therefore, has not recorded an accrued environmental
clean-up liability for either of these items.
Petroleum has been detected in the soil and groundwater beneath Newtown
Square Shopping Center arising from a release from an adjoining Mobil service
station not owned by the Company. Mobil is liable for the clean up and is
currently performing clean up activities. Also, the contamination is unlikely to
have an affect on human health. In light of the above, management believes that
there is minimal exposure at this time and, therefore, has not recorded an
accrued environmental clean-up liability for either of these items.
Dry cleaning solvent and hydraulic fuel has been detected in the soil below
Riverside Square. Testing done at the site indicates that the contamination is
limited and is unlikely to have any effect on human health. 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 and groundwater beneath an Exxon
service station not owned by the Company which is adjacent to Spring Valley
Shopping Center. Exxon is liable for the clean up and is currently performing
clean up activities. Also, the contamination is unlikely to have an affect on
human health. In light of the above, management believes that there is minimal
exposure at this time and, therefore, has not recorded an accrued environmental
clean-up liability.
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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, Chicago,
Illinois or other metropolitan markets which management determines to be both
attractive and conveniently accessible. 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, 1997, the ratio of the Company's debt (including the
Exchangeable Debentures) to total market capitalization was approximately 40.0%
and the ratio of the Company's debt (assuming conversion of the Exchangeable
Debentures to equity) to total market capitalization was approximately 35.0%.
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 accordingly the Company may modify its
borrowing policy and may increase or decrease its ratio of debt-to-total market
capitalization. The
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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 has on file with the Securities and Exchange Commission a $175
million shelf registration statement, which allows for the issuance of debt or
equity.
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 or
limited liability company. 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 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.
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.
7
<PAGE>
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, 1997.
FIRST WASHINGTON REALTY TRUST, INC.
PROPERTY SUMMARY TABLE
Land
Year Area Leasable
Property Location Constructed (acres) Area (Sf) % Leased
Maryland
Bryans Road
Shopping Center Bryans Road, MD 1972 11.8 118,676 86.7
Capital Corner
Shopping Center Landover, MD 1987 4.1 42,625 91.6
Clinton Square
Shopping Center Clinton, MD 1979 2.0 18,961 68.7
Clopper's Mill
Shopping Center Germantown, MD 1995 14.2 137,952 98.2
Festival At
Woodholme Baltimore, MD 1986 7.1 81,027 100.0
Firstfield
Shopping Center Gaithersburg, MD 1978 2.4 22,327 100.0
Mitchellville
Plaza Shopping
Center Mitchellville, MD 1991 14.5 154,160 98.6
Northway
Shopping Center Millersville, MD 1987 9.6 91,116 100.0
P.G. County
Commercial Park Beltsville, MD 1988 9.7 146,422 98.0
Penn Station
Shopping Center(1) District Heights, MD 1989 22.5 334,970 98.4
Rosecroft
Shopping Center Temple Hills, MD 1963 8.3 119,010 87.4
Southside
Marketplace Baltimore, MD 1990 9.1 126,646 88.2
Takoma Park
Shopping Center Takoma Park, MD 1960 9.8 105,156 88.8
Valley Centre Owings Mills, MD 1987 33.0 237,449 99.0
Virginia
Ashburn Farm
Village Center Ashburn, VA 1996 10.2 88,942 100.0
Brafferton Center Garrisonville, VA 1974 9.4 94,731 94.2
Centre Ridge
Marketplace Centreville, VA 1996 10.9 104,154 100.0
Chesapeake Bagel
Building Alexandria, VA Late 1800's 0.1 11,288 100.0
Davis Ford
Crossing Manassas, VA 1988 20.8 147,622 95.2
Four Mile Fork
Shopping Center Fredericksburg, VA 1975 10.3 101,262 84.6
Fox Mill
Shopping Center Reston, VA 1977 14.0 103,269 96.1
Glen Lea
Shopping Center Richmond, VA 1969 9.2 78,823 100.0
Property Significant Tenants (Lease Expiration Date)
Maryland
Bryans Road
Shopping Center Safeway (2014), CVS/Pharmacy (2001)
Capital Corner
Shopping Center Burger King (2007), Dollar Bills (2001), Gallo
Clothing (2001)
Clinton Square
Shopping Center
Clopper's Mill
Shopping Center Shoppers Food Warehouse (2015), CVS/Pharmacy (2006)
Festival At
Woodholme Sutton Place Gourmet (2006), Pier One Imports (1999)
Firstfield
Shopping Center
Mitchellville
Plaza Shopping
Center Food Lion (2016)
Northway
Shopping Center Metro Foods (2007), Rite Aid (1997)
P.G. County
Commercial Park
Penn Station
Shopping Center(1) Safeway (N/A), Service Merchandise (2006), Kid City
Clothing (2003)
Rosecroft
Shopping Center Food Lion (2015), Rite Aid (1998)
Southside
Marketplace Metro Foods (2016), Rite Aid (2001)
Takoma Park
Shopping Center Shoppers Food Warehouse (2011)
Valley Centre Weis Markets (2002), TJ Maxx (2007), Ross (2003),
Sony Theatres (2005)
Virginia
Ashburn Farm
Village Center A&P Superfresh (2016)
Brafferton Center Giant Food (2009)
Centre Ridge
Marketplace A&P Superfresh (2016), Sears Paint & Hardware (2007)
Chesapeake Bagel
Building
Davis Ford
Crossing Weis Markets (2010), CVS/Pharmacy (2000)
Four Mile Fork
Shopping Center Safeway (2000), CVS/Pharmacy (2001)
Fox Mill
Shopping Center Giant Food (2018), Blockbuster (2001)
Glen Lea
Shopping Center Winn Dixie (2005), Eckerd Drug (2000)
9
<PAGE>
Item 2 Properties
FIRST WASHINGTON REALTY TRUST, INC.
PROPERTY SUMMARY TABLE
(Continued)
Land
Year Area Leasable
Property Location Constructed (acres) Area (Sf) % Leased
Hanover Village
Shopping Center Mechanicsville, VA 1971 9.5 95,331 98.3
Kings Park Burke, VA 1966 8.6 76,212 100.0
Laburnum Park (2) Richmond, VA 1988 9.3 113,992 100.0
Laburnum Square Richmond, VA 1975 11.4 109,405 95.4
Potomac Plaza Woodbridge, VA 1963 5.4 85,400 88.3
North Carolina
Shoppes Of Kildaire Cary, NC 1986 14.0 148,205 100.0
Pennsylvania
Allen Street
Shopping Center Allentown, PA 1958 4.1 46,503 95.5
City Avenue
Shopping Center Philadelphia, PA 1950's-60's 12.2 161,454 95.0
Colonial Square
Shopping Center York, PA 1955 2.9 27,488 89.0
Kenhorst Plaza
Shopping Center Reading, PA 1990 19.2 164,434 98.0
Mayfair
Shopping Center Philadelphia, PA 1988 5.7 112,267 100.0
Newtown Square Newtown Square, PA 1960's-70's 14.4 137,569 98.0
Stefko Boulevard Bethlehem, PA 1958-60-75 10.3 135,864 98.8
Illinois
Mallard Creek Round Lake Beach, IL 1987 14.9 143,759 98.9
McHenry Commons McHenry, IL 1988 11.5 100,526 98.6
The Oaks Des Plaines, IL 1983 16.7 138,274 92.2
Pheasant Hill Plaza Bolingbrook, IL 1983 14.4 111,190 100.0
Riverside Square/
River's Edge Chicago, IL 1986 17.7 169,434 90.0
Property Significant Tenants (Lease Expiration Date)
Hanover Village
Shopping Center Rack `N Sack (2008), Rite Aid (1998)
Kings Park Giant (2013), CVS/Pharmacy (1998)
Laburnum Park (2) Ukrops Supermarket (N/A), Rite Aid (2007)
Laburnum Square Hannaford Brothers (2013), CVS/Pharmacy (1999)
Potomac Plaza
North Carolina
Shoppes Of Kildaire Winn Dixie (2006)
Pennsylvania
Allen Street
Shopping Center Laneco (2003), Eckerd Drug (2004)
City Avenue
Shopping Center Acme Market (1999), Eckerd Drug (1999), T.J. Maxx (2001),
Sears Paint & Hardware (2007)
Colonial Square
Shopping Center Minich Pharmacy (1999)
Kenhorst Plaza
Shopping Center Redners (2009), Rite Aid (2000), Sears Paint &
Hardware (2007)
Mayfair
Shopping Center Shop 'N Bag Supermarket (2013), Eckerd Drug (2006)
Newtown Square Acme Market (1999), Eckerd Drug (1999)
Stefko Boulevard Laneco (2003)
Illinois
Mallard Creek Dominick's Finer Foods (2008)
McHenry Commons Dominick's Finer Foods (2018)
The Oaks Dominick's Finer Foods (2017)
Pheasant Hill Plaza Dominick's Finer Foods (2005)
Riverside Square/
River's Edge Dominick's Finer Foods (2017)
10
<PAGE>
Land
Year Area Leasable
Property Location Constructed (acres) Area (Sf) % Leased
Stonebrook Plaza Merrionette Park, IL 1984 8.1 95,825 95.3
Delaware
First State Plaza New Castle County, DE 1988 21.0 162,404 100.0
Shoppes of Graylyn Wilmington, DE 1971 5.0 65,476 97.7
South Carolina
James Island
Shopping Center Charleston, SC 1967 6.5 88,557 98.9
Washington, D.C.
The Georgetown
Shops (3) Washington, DC Late 1800's 0.3 17,052 100.0
Connecticut
Avenue Shops Washington, DC 1954 0.1 3,000 100.0
Spring Valley
Shopping Center Washington, DC 1930 0.9 16,834 100.0
----- --------- -----
Subtotal/Average 487.1 4,993,043 96.2
Post December 31, 1997
Acquisitions:
Bowie Plaza Bowie, MD 1966 10.8 104,036 100.0
Watkins Park Plaza Mitchellville, MD 1985 12.8 113,643 98.7
----- --------- -----
Subtotal/Average 23.6 217,679 99.3
----- ---------
Total/Average 510.7 5,210,722
===== =========
Property Significant Tenants (Lease Expiration Date)
Stonebrook Plaza Dominick's Finer Foods (2005)
Delaware
First State Plaza Shop Rite Supermarket (2009), Cinemark USA (2011)
Shoppes of Graylyn Rite Aid (2016)
South Carolina
James Island
Shopping Center Piggly Wiggly (2010), Kerr Drug (2002)
Washington, D.C.
The Georgetown
Shops (3)
Connecticut
Avenue Shops
Spring Valley
Shopping Center CVS (1999)
Post December 31, 1997
Acquisitions:
Bowie Plaza Giant (2002), CVS (1998)
Watkins Park Plaza Safeway (2007), CVS/Pharmacy (2001)
(1) Includes Safeway (50,000 sq.ft) and Bowling Alley (40,000 sq.ft) pad sites
owned by others. (2) Includes Ukrops Supermarket (49,000 sq ft) pad site owned
by the tenant.
(3) Represents four (4) historic retail shops all clustered in close proximity
in the central shopping district in Georgetown, Washington, D.C.
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 the Chicago
metropolitan area which compete with the Company in seeking acquisition
opportunities and tenants for its properties. In addition, retailers at the
shopping centers face competition from malls, factory outlet centers, discount
shopping clubs, direct mail, telemarketing and the Internet.
Retail Properties. The Properties consist of 49 Retail Properties located
in Maryland, Virginia, North Carolina, Pennsylvania, Delaware, South Carolina,
Illinois and the District of Columbia. The Retail Properties are primarily
neighborhood shopping centers containing a total of approximately 5.2 million
square feet of GLA occupied by approximately 1,000 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 106,000
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 8.0% of the Company's annualized minimum rent. All of the
Retail Properties are managed by the Company. As of December 31, 1997, the
Retail Properties were 96.2% 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 1998 through 2007
and thereafter:
Percent
of Total Percent Average
Approx GLA of Total Annual
Number GLA in Represented Annualized Annualized Minimum
of Square by Expiring Minimum Minimum Rent per
Year Leases Feet Leases Rent Rent Square Foot
(in 000's) (in 000's)
1998 167 421 9.0% 4,348 8.3% $10.33
1999 148 459 9.8% 5,159 9.9% 11.24
2000 152 439 9.4% 5,084 9.7% 11.58
2001 151 466 10.0% 6,023 11.5% 12.92
2002 123 352 7.5% 4,933 9.4% 14.01
2003 71 339 7.3% 3,646 7.0% 10.76
2004 22 81 1.7% 1,144 2.2% 14.12
2005 29 306 6.5% 3,444 6.6% 11.25
2006 35 245 5.2% 3,100 5.9% 12.65
2007 25 271 5.8% 2,966 5.7% 10.44
Thereafter 55 1,294 27.8% 12,454 23.8% 9.62
-- ----- ----- ------ ----- ----
978 4,673 100.0% $52,301 100.0% $11.19
=== ===== ====== ======= ====== ======
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: Percent of
Aggregate
Annualized Annualized
Number Minimum Minimum
Tenant GLA (Sq. Ft.) of Properties Rents Rents
- ------ -------------- ------------- ------------ ----------
(in 000's)
Dominick's Finer Foods 416,542 6 $4,162 8.0%
Shoppers Food Warehouse 133,700 2 1,082 2.1%
A&P Superfresh 112,168 2 1,080 2.1%
Metro Foods 93,292 2 872 1.7%
Weis Markets 94,960 2 786 1.5%
Blockbuster Video 41,669 7 716 1.4%
Food Lion 78,100 2 678 1.3%
Sears Paint & Hardware 65,816 3 670 1.3%
Rite Aid 83,018 7 650 1.3%
Giant Food 121,518 3 607 1.2%
CVS/Pharmacy 90,538 8 596 1.1%
T.J. Maxx 54,686 2 500 1.0%
Safeway 124,851 3 485 0.9%
Winn Dixie 79,000 2 482 0.9%
Shop Rite Supermarket 57,319 1 459 0.9%
Eckerd Drug 45,752 5 431 0.8%
Hollywood Video 22,366 3 425 0.8%
Redner's Supermarket 52,070 1 417 0.8%
Sony Theatres 32,058 1 385 0.7%
Payless Shoes 26,442 9 387 0.7%
---------- -------- ------
Total 1,825,865 $15,870 30.5%
========== ======== ======
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 45 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 98.4% leased as of December 31,
1997.
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:
13
<PAGE>
Percent of Percent
Total GLA of Total
Represented Annualized Annualized Average Annual
Number of GLA by Expiring Minimum Minimum Minimum Rent
Year Leases in Sq Ft Leases Rent Rent per Square Foot
(in 000's) (in 000's)
1998 6 12 5.2% $198 7.1% $16.50
1999 11 31 13.4% 540 19.3% 17.42
2000 6 31 13.4% 342 12.2% 11.03
2001 6 17 7.3% 270 9.7% 15.88
2002 6 21 9.1% 342 12.3% 16.29
2003 5 29 12.4% 331 11.9% 11.41
2004 2 21 9.1% 186 6.7% 8.86
2005 1 13 5.6% 135 4.8% 10.38
2006 1 50 21.5% 325 11.7% 6.50
2007 0 0 0.0% 0 0.0% 0.00
Thereafter 1 7 3.0% 119 4.3% 17.00
-- -- ------- ------ -------- --------
45 232 100.0% $2,788 100.0% $12.02
== === ====== ====== ====== ======
The following table sets forth the average annual rents per square foot
of GLA and the percentage of GLA leased at Penn Station:
Average Annual
Minimum Rent Percentage
per Square Foot Leased
1993 $11.68 94.7%
1994 $11.64 97.8%
1995 $11.94 98.3%
1996 $11.70 99.1%
1997 $11.87 98.4%
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, 1997, the federal tax basis of the Penn
Station Shopping Center was approximately $21.5 million. The realty tax rate on
the property is $3.45 per $100 of assessed value, resulting in a 1997 realty tax
of approximately $269,000.
Valley Centre. Valley Centre is a 237,449 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 99.0% leased as of December 31, 1997.
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 49,420 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 April 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 2003 and has one renewal option of five years. The annual minimum rent
of the Ross Stores
14
<PAGE>
lease is $243,240, plus percentage rent equal to 2% of gross sales over
approximately $11 million. The rental amounts for the renewal option is set at a
fixed amount reflecting an 8.6% increase. 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.
Percent of Percent Average
Total GLA of Total Annual
Represented by Annualized Annualized Minimum
Number of GLA in Expiring Minimum Minimum Rent per
Year Leases Sq Ft Leases Rent Rent Square Foot
(in 000's) (in 000's)
1998 1 5 2.1% $ 75 2.6% $15.00
1999 2 7 2.9% 123 4.2% 17.57
2000 5 19 7.9% 354 12.0% 18.63
2001 3 19 7.9% 252 8.6% 13.26
2002 7 27 11.3% 458 15.6% 16.96
2003 3 35 14.6% 363 12.3% 10.37
2004 0 0 0.0% 0 0.0% 0.00
2005 1 32 13.3% 417 14.2% 13.03
2006 0 0 0.0% 0 0.0% 0.00
2007 4 91 37.9% 805 27.3% 8.85
Thereafter 1 5 2.1% 93 3.2% 18.60
-- ---- ---- ------- ------- -----
27 240 100.0% $2,940 100.0% $12.25
== === ====== ====== ====== ======
The following table sets forth the average rents per square foot of GLA
and the percentage of GLA leased at Valley Centre:
Average Rent Percentage
per Square Foot leased
1993 $10.86 100.0%
1994 $11.10 99.4%
1995 $11.42 100.0%
1996 $11.40 95.9%
1997 $11.66 99.0%
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, 1997, the federal tax basis of Valley Centre was
approximately $25.1 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 1997 realty tax
of approximately $310,000.
Mortgages, Notes and Loans Payable
Information relating to future maturities of mortgages, notes and loans
payable at December 31, 1997 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.
15
<PAGE>
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
1997.
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
1996 and 1997 are as follows:
Distributions
High Low Per Share
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
1997
First Quarter $ 24.13 $ 22.25 $ .4875
Second Quarter 25.38 22.38 .4875
Third Quarter 25.25 22.88 .4875
Fourth Quarter 27.75 23.98 .4875
(b) Holders of Record
As of March 30, the approximate number of holders of record of the
Common Stock was 19.
(c) Dividends
The Company intends to make quarterly distributions to its common and
preferred stockholders. Quarterly distributions made during 1997 are as follows:
Record Date Payment Date Amount Per Share
Common Stock
February 1, 1997 February 15, 1997 $0.4875
May 1, 1997 May 15, 1997 $0.4875
August 1, 1997 August 15, 1997 $0.4875
November 1, 1997 November 15, 1997 $0.4875
Preferred Stock
February 1, 1997 February 15, 1997 $0.6094
May 1, 1997 May 15, 1997 $0.6094
August 1, 1997 August 15, 1997 $0.6094
November 1, 1997 November 15, 1997 $0.6094
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
17
<PAGE>
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, 1997, 44.9% of the distributions
made on the Common Stock represented a return of capital and 2.6% represented
capital gain distributions for federal income tax purposes.
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:
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
09/01/97 Common Units 858,244 units
10/01/97 Common Units 184,865 units
12/01/97 Common Units 142,578 units
01/01/98 Common Units 130,626 units
(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.
18
<PAGE>
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 Allen Street 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".
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".
xii.September 1, 1997 Sales. Underwriters were not retained in
connection with the sale of these securities. These shares were issued to
the sellers of McHenry Commons, Mallard Creek, The Oaks, Pheasant Hill,
Riverside Square/River's Edge and Stonebrook Plaza Shopping Centers, an
"accredited investor".
xiii. October 1, 1997 Sales. Underwriters were not retained in
connection with the sale of these securities. These units were sold to the
seller of Mitchellville Plaza, an "accredited investor".
xiv.December 1, 1997 Sales. Underwriters were not retained in
connection with the sale of these securities. These units were sold to the
seller of Spring Valley Shopping Center, an "accredited investor".
xv. January 1, 1998 Sales. Underwriters were not retained in
connection with the sale of these securities. These units were sold to the
seller of Bowie Plaza, 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
19
<PAGE>
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 a
property. These units were valued, at such time, at approximately $3.3
million (Common Units) and $1.6 million (Preferred Units).
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.
20
<PAGE>
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.
xii.September 1, 1997 Sales. These units were issued in exchange
for properties having a value of approximately $22.9 million, net of
assumed indebtedness. There were no underwriting discounts or commissions
with respect to such securities.
xiii. October 1, 1997 Sales. These units were issued in exchange
for properties having a value of approximately $5.6 million, net of
assumed indebtedness. There were no underwriting discounts or commissions
with respect to such securities.
xiv.December 1, 1997 Sales. These units were issued in exchange
for properties having a value of approximately $5.9 million, net of
assumed indebtedness. There were no underwriting discounts or commissions
with respect to such securities.
xv. January 1, 1998 Sales. These units were issued in exchange for
properties having a value of approximately $6.7 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.
21
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION (1)
Year Ended December 31,
1997 1996 1995 1994 1993
(dollars in thousands, except per share data)
OPERATING DATA
Revenues:
Minimum Rent $43,857 $31,398 $22,793 $14,701 $10,594
Tenant reimbursements 9,506 6,704 4,362 2,823 1,889
Percentage rent 1,060 664 495 255 68
Third-party fees - - - 1,912 4,396
Other income 1,211 1,672 1,447 508 245
------ ------ ------ ------ ------
Total revenues 55,634 40,438 29,097 20,199 17,192
------ ------ ------ ------ ------
Expenses:
Operating and maintenance 13,522 9,743 6,746 6,299 5,137
General and administrative 3,363 3,137 2,831 1,356 2,665
Interest 18,416 14,986 11,230 9,301 7,909
Depreciation and amortization 11,172 8,019 5,808 4,579 2,721
------ ------ ------ ------ ------
Total expenses 46,473 35,885 26,615 21,535 18,432
------ ------ ------ ------ ------
Income (Loss) before gain on
sale of properties, income
from Management Company,
extraordinary item, minority
interest and distributions to
Preferred Stockholders 9,161 4,553 2,482 (1,336) (1,240)
Gain on Sale of Properties 549 - - - -
Income from Management Company 433 221 449 500 -
------ ------ ------ ------ ------
Income (Loss) before
extraordinary item, minority
interest and distribution
to Preferred Stockholders 10,143 4,774 2,931 (836) (1,240)
Extraordinary item (954) - - 2,251 2,665
------ ------ ------ ------ ------
Net income $ 1,425
======
Income before minority
interest and distributions
to Preferred Stockholders 9,189 4,774 2,931 1,415
Income allocated to
minority interest (1,579) (694) (602) (1,101)
------ ------ ------ ------
Income before distributions
to Preferred Stockholders 7,610 4,080 2,329 314
Distributions to Preferred
Stockholders (5,641) (5,641) (5,117) (1,811)
------ ------ ------ ------
Income (loss) allocated to
Common Stockholders $1,969 $(1,561) $(2,788) $(1,497)
====== ======== ======== ========
Net income (loss) per
Common Share - Basic (2) $0.35 ($0.46) ($1.19) ($0.95)
====== ======== ======== ========
Net income (loss) per
Common Share - Diluted $0.34 ($0.46) ($1.19) ($0.95)
====== ======== ======== ========
Shares of Common Stock
(in thousands) - Basic 5,663 3,367 2,351 1,574
====== ======== ======== ========
Shares of Common Stock
(in thousands) - Diluted 5,730 3,367 2,351 1,574
====== ======== ======== ========
BALANCE SHEET DATA:
Rental properties, gross $456,798 $314,235 $228,092 $175,213 $87,749
Total assets $439,141 $313,613 $227,405 $172,487 $81,056
Mortgage and other
notes payable $212,030 $167,047 $116,182 $ 89,858 $92,382
Debentures $25,000 $25,000 $25,000 $ 25,000 -
Total Liabilities $247,944 $198,375 $145,241 $117,925 $96,216
Minority Interest $38,255 $16,661 $11,088 $8,580 -
Stockholders equity (deficit) $152,942 $98,577 $71,076 $45,982 $(15,160)
PORTFOLIO PROPERTY DATA
(end of period):
Retail Occupancy 96.2% 96.4% 96.0% 96.4% 95.4%
Number of retail properties 47 36 27 20 14
Number of multi-family
properties 2 2 2 2 2
Retail Properties GLA
(thousands of square feet) 4,931 3,652 2,668 2,014 1,186
Multi-family properties
(number of units) 401 401 401 401 401
OTHER DATA:
Funds From Operations
Diluted (3) (4) $23,947 $16,352 $12,601
Cash flow from operating
activities $23,441 $11,616 $10,003 $3,164 $831
Cash flow (used in)
investing activities (25,689) (56,994) (29,884) (56,236) (450)
Cash flow provided by
(used in) financing activities (6,390) 49,352 26,574 53,615 (529)
(1) See Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operation.
(2) Net income (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 income (loss)
per share would be unchanged for the periods presented even if the Common Units
were exchanged for Common Stock of the Company. (3) 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. (4) Before minority interest
and distributions to Preferred Stockholders.
22
<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
Financial Statements and notes thereto of the Company appearing elsewhere in
this Annual Report. Dollars are in thousands except share data.
Certain information included in the following section of this report,
other than historical information may contain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. The
forward-looking statements are identified by terminology such as "may", "will",
"believe", "expect", "estimate", "anticipate", "continue", or similar terms.
Although the Corporation believes that the expectations reflected in such
forward-looking statements are reasonable, actual results may differ materially
from those projected in the forward-looking statements.
Comparison of the year ended December 31, 1997 to the year ended December 31,
1996
For the year ended December 31, 1997, the net income allocated to
common stockholders increased by $3,530 from a net loss of $1,561 to a net
income of $1,969, when compared to the year ended December 31, 1996, primarily
due to an increase in revenues and a gain on sale of property offset by an
increase in expenses, an item of extraordinary loss, and an increase in the
amount of income allocated to minority interests.
Total revenues increased by $15,196 or 37.6%, from $40,438 to $55,634,
due primarily to an increase in minimum rents of $12,459 and tenant
reimbursements of $2,802. The increases were primarily due to the purchase of
Centre Ridge Marketplace in March 1996, Takoma Park Shopping Center in April
1996, Southside Marketplace in June 1996, Kings Park Shopping Center in December
1996, Newtown Square Shopping Center in December 1996 and Northway Shopping
Center in December 1996 (the "1996 Acquisitions") (resulting in partial year
revenues being included in the year ended December 31, 1996), City Avenue
Shopping Center in January 1997, Four Mile Fork Shopping Center in January 1997,
Shoppes of Graylyn in January 1997, Ashburn Farm Village Shopping Center in
March 1997, the six properties in Chicago in September 1997, Mitchellville Plaza
in October 1997 and Spring Valley Shopping Center in December 1997 (the "1997
Acquisitions").
Property operating and maintenance expense increased by $3,779, or
38.8%, from $9,743 to $13,522, due primarily to the 1996 and 1997 Acquisitions.
General and administrative expenses increased by $226 or 7.2%, from $3,137 to
$3,363, due primarily to an increase in the amount of compensation paid or
payable in Company stock of $310 offset by a decrease in NYSE fees of $95.
Interest expense increased by $3,430, or 22.9%, from $14,986 to
$18,416, due primarily to the increase in mortgage indebtedness of $74,657
associated with the 1996 and 1997 Acquisitions, offset by a decrease in mortgage
and line of credit indebtedness of $46,375 retired with the proceeds of the
September 1997 offering discussed below.
Depreciation and amortization expenses increased by $3,153, or 39.3%,
from $8,019 to $11,172, primarily due to the 1996 and 1997 Acquisitions.
During 1997, a gain on sale of properties of $549 was realized and
there was a $954 extraordinary loss due to the early extinguishment of debt.
Debt in the amount of $46,375 was retired with proceeds of the September 1997
common stock offering. There were no such items in 1996.
Income allocated to minority interests increased by $885 from $694 to
$1,579 due to an increase in net income and an increase in the minority
interests ownership of the Operating Partnership from 14.3% to 20.7%.
Net cash flow provided by operating activities increased from $11,616
in 1996 to $23,441 in 1997 primarily due to the acquisition of new properties
during 1997 and realizing the full years operations from properties purchased in
1996 and improved property performance. Net cash flows used in investing
activities decreased from $56,994 in 1996 to $25,869 in 1997 primarily due to an
increase in the amount of property acquisitions financed through the use of
assumed mortgage indebtedness during 1997. Net cash flow provided by financing
activities changed from net cash provided by financing activities of $49,352 to
net cash used in financing activities of $6,390 primarily due to an increase in
the amount of mortgage loans retired with proceeds of the September 1997
offering and cash from operations. In 1996, the proceeds of the December 1996
offering were primarily used for acquisitions of rental properties. In 1997, the
acquisition of rental properties were more heavily financed through assumed
mortgage indebtedness.
23
<PAGE>
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 from a net loss of $2,788 to a net loss of
$1,561, 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 $11,341 or 39.0%, from $29,097 to $40,438,
due primarily to an increase in minimum rents of $8,605 and tenant
reimbursements of $2,342. The increases were primarily due to the acquisition of
Festival at Woodholme on June 1, 1995, Glen Lea, Hanover Village, Laburnum Park
and Laburnum Square on July 1, 1995, Kenhorst Plaza on October 12, 1995, and
Firstfield Shopping Center on November 15, 1995 (resulting in partial year
revenues being included in the year ended December 31, 1995) (together the "1995
Acquisitions"), Stefko Boulevard and Allen Street Shopping Centers in January
1996 and the 1996 Acquisitions.
Property operating and maintenance expense increased by $2,997, or
44.4%, from $6,746 to $9,743, due primarily to the purchase of the 1995, 1996
Acquisitions, Stefko Boulevard and Allen Street Shopping Centers.
General and administrative expenses increased by $306, or 10.8%, from
$2,831 to $3,137, due primarily to the accrual of performance bonuses of $155
and an initial NYSE listing fee of $115.
Interest expense increased by $3,756, or 33.4%, from $11,230 to
$14,986, due primarily to the financing of the 1995, 1996 Acquisitions, Stefko
Boulevard and Allen Street Shopping Centers.
Depreciation and amortization expenses increased by $2,211, or 38.1%,
from $5,808 to $8,019, primarily due to an increase in depreciable basis due to
the purchase of the 1995, 1996 Acquisitions, Stefko Boulevard and Allen Street
Shopping Centers.
During 1996, distributions payable to owners of the Convertible
Preferred Stock increased by $524 from $5,117 to $5,641 primarily due to the
issuance of an additional 358,000 shares in June 1995 and the issuance of 36,189
shares of Convertible Preferred Stock in November 1995.
Net cash flow provided by operating activities increased from $10,103
in 1995 to $11,616 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 $29,984 in 1995 to $56,994 in 1996 primarily due to an
increase in the amount of property acquisitions during 1996. Net cash flow
provided by financing activities increased from $26,574 to $49,352 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 from a net loss of $1,497 to a net loss of
$2,788, 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.
Total revenues increased by $8,898 or 44.1%, from $20,199 to $29,097,
due primarily to an increase in minimum rents of $8,092 and tenant
reimbursements of $1,539, partially offset by a decrease in third-party fees of
$1,912 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 ("the 1994 Acquisitions") on June 27, 1994
resulting in only six months revenues being included in the year ended December
31, 1994 and the purchase of the 1995 Acquisitions.
Property operating and maintenance expense increased by $447, or 7.1%,
from $6,299 to $6,746, 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 23% 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.
24
<PAGE>
General and administrative expenses increased by $1,475, or 108.8%,
from $1,356 to $2,831, due primarily to compensation paid or payable in company
stock in the amount of $1,800 to key employees.
Interest expense increased by $1,929, or 20.7%, from $9,301 to $11,230,
due primarily to the financing of the 1995 Acquisitions.
Depreciation and amortization expenses increased by $1,229, or 26.8%,
from $4,579 to $5,808, 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 Stock increased by $3,306 from $1,811 to $5,117 primarily due to the
Convertible 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 from $1,101 to $602 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. There was no such item
during 1995.
Net cash flow provided by operating activities increased from $3,164 in
1994 to $10,103 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 $56,236 in 1994 to $29,984 in 1995 primarily due to a
decrease in the amount of property acquisitions during 1995. Net cash flow
provided by financing activities decreased from $53,615 to $26,574 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.
Liquidity and Capital Resources
In 1997, the Company continued to expand its portfolio of neighborhood
shopping centers. During the year, the Company acquired twelve shopping centers
for an aggregate acquisition cost of $134,553. The acquisitions were primarily
located in the metropolitan areas of Washington, D.C. and Chicago, Illinois. The
acquisitions increased the Company's portfolio by 1.3 million square feet. The
Company financed the acquisitions through the issuance of both Common and
Preferred Units with a value of $33,851, assumed mortgage indebtedness of
$78,747, deferred consideration of $2,223 and cash of $19,732. The cash was
provided by both draws on the Company's lines of credit and from proceeds
remaining from the December 1996 offering.
In September 1997, the Company completed an offering of 2,070,000
shares of Common Stock priced at $24.00 per share. Net proceeds (after deducting
the underwriters discount and other offering expenses) of $46,900 were primarily
used to retire existing mortgage debt ($25,875) and outstanding amounts on the
Company's Line of Credit ($20,500).
The Company also closed two sales during the year resulting in net
proceeds of $900 after the repayment of associated debt. Thieves Market was sold
for $1,200 and .357 acres and 5,500 square feet of building of Laburnum Park
Shopping Center was sold to Ukrops Supermarket for expansion space for $900.
Subsequent to 1997, the Company acquired two additional properties for
an aggregate acquisition cost of $26,395. The acquisitions were financed through
the issuance of 130,626 Common Units with a value of approximately $3,600,
assumed mortgage indebtedness of $5,400, draws on the Company's lines of credit
of 13,000 and cash of $4,395.
In March 1998, the Company sold its two multi-family properties for a
combined sales price of $8,050. The net proceeds after payment of the existing
mortgage debt and closing costs amounted to $3,900. In addition, in March 1998,
the Company sold one of its Georgetown retail shops for $750. The net proceeds
after payment of the existing mortgage debt and closing costs amounted to $300.
The proceeds of these sales were used to finance the acquisition of one of the
rental properties discussed above.
During 1997, the Company renovated four of its properties (Brafferton,
Southside, Takoma and Firstfield) for an aggregate cost of approximately $1,650
and expanded five properties (50,000 square feet) for an aggregate cost of
$1,050.
During 1998, the Company expects to renovate a minimum of eleven
properties for an aggregate cost of $4,900. The Company also plans to expend, at
a minimum, approximately $750 for the expansion of four of its properties. These
expansions will add approximately 31,000 square feet to the properties. These
expansions and renovations are expected to be financed primarily through draws
on the Company's Lines of Credit.
25
<PAGE>
The Company expects to continue its renovation and acquisition program
for the remainder of 1998. However, the level of future acquisitions is
dependent on the Company's ability to raise additional capital through debt
proceeds and equity offerings.
On April 17, 1997, the Company filed a $175 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, 1997:
Balance Maturity
Mortgage Loans Interest Rate (1) (in thousands) (2 Date (3)
Ashburn Farm Village (4) 7.41% 6,730 01/01/01
Broadmoor Apartments 9.90% 3,826 07/01/99
Chesapeake Bagel Building 6.59% 735 07/01/01
City Avenue Shopping Center 8.12% 9,909 10/18/05
Clopper's Mill 7.22% 14,132 03/21/06
Davis Ford, First State Plaza,
James Island,
Valley Centre and Bryans Road (5) 8.93% 38,500 07/01/99
Festival at Woodholme 9.82% 11,489 04/30/00
Allen Street and Stefko Boulevard (6) 7.86% 5,913 01/11/06
Firstfield 7.50% 2,472 12/01/05
Glen Lea, Hanover Village,
Laburnum Park
and Laburnum Square (7) 8.76% 13,283 10/31/05
Kings Park Shopping Center 7.89% 4,783 11/01/14
McHenry Commons 7.16% 6,643 03/01/99
Mallard Creek 7.16% 11,824 02/10/99
Mayfair Shopping Center (8)(9) 6.33% 7,075 06/24/10
Mitchellville Plaza Shopping Center 7.10% 15,764 06/24/05
Northway Shopping Center 8.01% 6,282 01/01/07
Northway Shopping Center (10) 8.62% 1,827 08/01/99
Pheasant Hill Shopping Center 7.28% 8,128 07/15/00
Potomac Plaza Shopping Center 7.15% 3,656 07/01/99
Riverside Square/River's Edge 7.16% 2,505 07/10/99
Shoppes of Kildaire 7.89% 7,774 05/31/06
Southside Marketplace 8.75% 7,999 08/01/05
Stonebrook Plaza 7.28% 6,226 07/15/00
The Georgetown Shops 6.65% 411 07/01/01
The Oaks 7.42% 10,144 05/01/03
Valley Centre 7.75% 700 06/30/07
Lines of Credit (11) 7.66% 3,300 01/31/00
------ --------
TOTALS 7.90% $212,030
====== ========
(1) The effective interest rate includes the amortization of deferred financing
costs and premiums over the term of the respective loan. (2) Includes premiums
on the assumption of mortgage debt in the amount of $5,330. (3) Many of the
outstanding mortgages contain prepayment penalties, typically calculated using a
yield maintenance formula.
(4) The interest rate is adjusted monthly based on 30-day LIBOR plus 1.50%.
(5) 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.
(6) 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.
(7) This debt is collateralized by these four properties.
(8) The debt service on this mortgage loan is determined based upon a
variable rate of interest, plus a letter of 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.
(9) This debt matures in the year 2010. However, the letter of credit enhancer
expires in June 1998. (10) This loan is a second trust which is also secured by
a letter of credit. (11) Loan was subsequently refinanced with the proceeds of a
new 3 year Line of Credit in January 1998.
As of December 31, 1997, the Company had total mortgage notes of
approximately $212,030, which consisted of approximately $204,955 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 $7,075 collateralized by
one of the properties. Of the Company's indebtedness, $17,105 (8.1%) is variable
rate indebtedness and $194,925 (91.9%) is at a fixed rate. The fixed rate
indebtedness has interest rates ranging from 6.33% to 9.90%, with a
26
<PAGE>
weighted average interest rate (excluding the Bond Obligations) of 8.10%, and
will mature between 1999 and 2014, with a weighted average remaining term to
maturity of 4.6 years. A large portion of the Company's indebtedness will become
due by 2000, requiring balloon payments of $67,762 in 1999 and $27,522 in 2000.
From 1997 through 2014, the Company will have to refinance an aggregate of
approximately $183,459. 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.
In June 1994, the Company borrowed $38,500 under new mortgage loans
(collectively, the "Nomura Mortgage Loan") collateralized by five of the
Properties. These loans, which bear interest at 30-day LIBOR (5.97% at December
31, 1997) 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 $38,500 that is effective through the loans maturity, and caps the
interest rate at 7.70% through the maturity date. The cost of the interest rate
protection agreement of approximately $3,200, 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 8.93% per
annum. The fair market value of the interest rate swap is determined by the
amounts at which they could be settled. The estimated fair market value of the
interest rate protection agreement was approximately $100 at December 31, 1997.
In December 1995, the Company entered into an interest rate swap
contract with a notional amount of $38,500. The Company intends to hold such
contract until the expiration date. The purpose of the swap is to fix the
interest rate on the $38,500 Nomura loan through its expiration date of June
1999 at 7.09%. 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. The Company will be receiving variable payments from
the Counter Party based on 30-day LIBOR through June 1999. The Counter Party has
as collateral a $3,500 restriction on the $5,800 Line of Credit it provided the
Company (see below). The fair market value of the interest rate swap 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, 1997, the
Company would have received approximately $300.
In anticipation of the large amounts of mortgage debt maturing in 1999
and 2000, the Company has entered into forward interest rate swap contracts. The
Company intends to hold such contracts until their expiration dates. The purpose
of the swaps is to mitigate any exposure to fluctuations in interest rates until
the maturity dates of the mortgages when the Company expects to refinance these
loans. Under the terms of the swap contract, the Company pays a fixed rate to
the other party to the contract ("Counter Party") while receiving variable
payments from the Counter Party based on 30-day LIBOR. This effectively fixes
the LIBOR rate for the Company during the period of the swap contracts. The
following is a summary of the Company's swap contracts as of December 31, 1997:
Notional Date of Period of Fixed Rate Fair Market
Amount Agreement Contract Payable Value
(In 000's) (In 000's)
$38,500 12/95 07/01/99 - 12/01/03 6.37% $(534)
20,000 08/97 03/01/99 - 03/01/04 6.44% $(366)
15,000 11/97 06/01/99 - 06/01/04 6.18% $(111)
24,000 01/98 05/01/00 - 05/02/05 5.85% N/A
------ -----
$97,500 6.23%
======= =====
Debentures
In June 1994, the Operating Partnership effected a private placement of
$25,000 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 quarterly,
in arrears. The Debentures mature
27
<PAGE>
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.
Lines of Credit
The Company currently has two collateralized revolving lines of credit (the
"Lines of Credit"). The Company has a collateralized revolving Line of Credit of
$35,500 with Union Bank of Switzerland. This line is collateralized by six
properties (Kenhorst Plaza, Shoppes of Graylyn, Four Mile Fork, Takoma Park,
Centre Ridge Marketplace and Newtown Square). The line which closed on January
22, 1998 and matures on January 31, 2001 replaces the Lines of Credit the
Company had with Mellon Bank and Corestates Bank. Loans under this line will
bear interest at LIBOR plus one percent (1%). The Company has an additional
collateralized revolving Line of Credit of up to $5,775 from First Union Bank.
Loans under this line will bear interest at LIBOR plus two percent (2%) per
annum, and will mature on June 30, 1998. Loans under this line will be
collateralized by a first mortgage lien on Brafferton Shopping Center. As of
December 31, 1997, there was $3,300 outstanding under the Lines of Credit.
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.
Liquidity
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 for the foreseeable future.
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 and debt 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, $92,762 of the Company's indebtedness becomes due, including
the $25,000 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 hedged its exposure to
interest rate fluctuations through the use of forward swaps.
Other
The Company has considered the effects that the year 2000 may have on its
computer hardware and software applications. The Company does not believe that
there will be a material effect on the Company's operations or future financial
results.
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 escalation
clauses with fixed increases or increased related to changes in the Consumer
Price Index or similar inflation indices. The leases may also contain clauses
enabling the Company to receive percentage rents based on tenant's gross sales
above predetermined levels, which generally increase as prices rise. Most of the
Company's leases require the tenant to pay its pro rata share of the property
operating expenses, including common area maintenance, real
28
<PAGE>
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.
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 Company's 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
Statements of Financial Accounting Standards No.128, "Earnings per Share"
became effective for fiscal periods ending after December 31, 1997. The Company
has made all appropriate disclosures required under FAS 128 and has restated all
periods presented.
Statements No. 130 "Reporting Comprehensive Income" and No. 131
"Disclosures about Segments of an Enterprise and Related Information" are
required for fiscal years beginning January 1, 1998 and will be adopted by the
Company in 1998. There will not be a material impact on the Company's financial
position as a result of the new standards.
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.
29
<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 8, 1998.
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
Not applicable.
C. Exhibits - pursuant to Item 601 of Regulation S-K
3.1 Articles of Incorporation of the Company (1) (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 $38,500 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 Contribution Agreement dated May 22, 1997, by and between Dodi
Developments L.L.C. and First Washington Realty Limited Partnership (The Oaks).
(3)
30
<PAGE>
10.6 Letter Agreement dated July 11, 1997, by and between Dodi Developments
L.L.C. and First Washington Realty Limited Partnership (The Oaks). (3)
10.7 Contribution Agreement dated May 22, 1997, by and between McHenry
Limited Partnership and First Washington Realty Limited Partnership (McHenry
Commons). (3)
10.8 Letter Agreement dated July 11, 1997, by and between McHenry Limited
Partnership and First Washington Realty Limited Partnership (McHenry Commons).
(3)
10.9 Contribution Agreement dated May 22, 1997, by and between Dodi
Developments L.L.C. and First Washington Realty Limited Partnership (Riverside
Square). (3)
10.10 Letter Agreement dated July 11, 1997, by and between Dodi
Developments L.L.C. and First Washington Realty Limited Partnership (Riverside
Square). (3)
10.11 Contribution Agreement dated May 22, 1997, by and between
Dominick Dimatteo, Jr. Irrevocable Family Trust f/b/o Mary
Ellen DiMatteo, Dominick DiMatteo, Jr. Irrevocable Family
Trust f/b/o Donna DiMatteo Owen, Dominick DiMatteo, Jr.
Irrevocable Family Trust f/b/o James S. DiMatteo, Dominick
DiMatteo, Jr. Irrevocable Family Trust f/b/o Margaret
DiMatteo Bedford, and Dominick DiMatteo, Jr. Irrevocable
Family Trust f/b/o Katherine DiMatteo Crane and First
Washington Realty Limited Partnership (River's Edge). (3)
10.12 Letter Agreement dated July 11, 1997, by and between
Dominick DiMatteo, Jr. Irrevocable Family Trust f/b/o Mary
Ellen DiMatteo, Dominick DiMatteo, Jr. Irrevocable Family
Trust f/b/o Donna DiMatteo Owen, Dominick DiMatteo, Jr.
Irrevocable Family Trust f/b/o James S. DiMatteo, Dominick
DiMatteo, Jr. Irrevocable Family Trust f/b/o Margaret
DiMatteo Bedford, and Dominick DiMatteo, Jr. Irrevocable
Family Trust f/b/o Katherine DiMatteo Crane and First
Washington Realty Limited Partnership (River's Edge). (3)
10.13 Contribution Agreement dated May 22, 1997, by and between Round Lake
Beach Development Limited Partnership and First Washington Realty Limited
Partnership (Mallard Creek). (3)
10.14 Letter Agreement dated July 11, 1997, by and between Round Lake Beach
Development Limited Partnership and First Washington Realty Limited Partnership
(Mallard Creek). (3)
10.15 Contribution Agreement dated May 22, 1997, by and between Dodi
Developments L.L.C. and First Washington Realty Limited Partnership (Pheasant
Hill). (3)
10.16 Letter Agreement dated July 11, 1997, by and between Dodi
Developments L.L.C. and First Washington Realty Limited Partnership (Pheasant
Hill). (3)
10.17 Contribution Agreement dated May 22, 1997, by and between Dodi
Developments L.L.C. and First Washington Realty Limited Partnership (Stonebrook
Plaza). (3)
10.18 Letter Agreement dated July 11, 1997, by and between Dodi
Developments L.L.C. and First Washington Realty Limited Partnership (Stonebrook
Plaza). (3)
10.19 Contribution Agreement dated August 6, 1997, by and between Edward A.
St. John, Philip E. Ratcliffe, Ronald E. Harman, James A. Clauson, Robert C.
Becker, Gene E. McClain, Charles R. Phillips, Lawrence F. Maykrantz, Edward B.
Okonski and Rodger R. Reiswig and First Washington Realty Limited Partnership
(Mitchellville). (3)
31
<PAGE>
10.21 Contribution Agreement dated October 8, 1997, by and between Spring
Valley Joint Venture and First Washington Realty Limited Partnership (Spring
Valley). (4)
10.22 Revolving Credit Loan Agreement dated January 31, 1997 between
Corestates Bank, N.A. and First Washington Realty Limited Partnership. (1)
10.23 Contribution Agreement dated March 19, 1997, by and between Ashburn
Farms Village Center, L.L.C. and First Washington Limited Partnership. (1)
10.24 Revolving Credit Agreement dated January 22, 1998 between Union Bank
of Switzerland 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)
(1) Incorporated herein by reference from the Company's Form 10-K filed on March
28, 1997.
(3) Incorporated herein by reference from the Company's current report on
Form 8-K filed on September 17, 1997.
(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 30 , 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 Date
/s/ Stuart D. Halpert
Chairman of the Board of Directors March 30 , 1997
/s/ William J. Wolfe
President, Chief Executive Officer, March 30 , 1997
Director
/s/ Lester Zimmerman
Executive Vice President, Director March 30 , 1997
/s/ James G. Blumenthal
Chief Financial Officer March 30 , 1997
/s/ Stanley T. Burns
Director March 30 , 1997
/s/ Matthew J. Hart
Director March 30 , 1997
/s/ William M. Russell
Director March 30 , 1997
/s/ Heywood Wilansky
Director March 30 , 1997
33
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
- -- Report of Independent Accountants................................... F- 2
- -- Consolidated Balance Sheets as of
December 31, 1997 and 1996.......................................... F- 3
- -- Consolidated Statements of Operations for the years
ended December 31, 1997, 1996 and 1995.............................. F- 4
- -- Consolidated Statements of Stockholders' Equity for
the years ended December 31, 1997,
1996 and 1995...................................................... F- 5
- -- Consolidated Statements of Cash Flows for the
years ended December 31, 1997, 1996 and 1995........................ F- 6
- -- Notes to the Consolidated Financial Statements...................... F- 7
- -- Schedule II -- Valuation and Qualifying Accounts.................... F-23
- -- Schedule III -- Real Estate and Accumulated Depreciation............ F-24
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, 1997 and 1996
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1997 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, 1998 except for Note 16,
as to which the date is March 26, 1998
F-2
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
as of December 31, 1997 and 1996
(dollars in thousands except share data)
-----------
1997 1996
-------- ------
ASSETS
Rental properties:
Land $89,042 $61,959
Buildings and improvements 367,756 252,276
------- -------
456,798 314,235
Accumulated depreciation (40,839) (30,450)
-------- --------
Rental properties, net 415,959 283,785
Cash and equivalents 3,142 11,780
Tenant receivables, net 7,274 4,639
Deferred financing costs, net 2,734 4,403
Other assets 10,032 9,006
------ --------
Total assets $439,141 $313,613
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $212,030 $167,047
Debentures 25,000 25,000
Accounts payable and accrued expenses 10,914 6,328
------ ----------
Total liabilities 247,944 198,375
Minority interest 38,255 16,661
Stockholders' equity:
Convertible preferred stock $.01
par value; 3,800,000 shares
designated; 2,314,189 shares
issued and outstanding
(aggregate liquidation preference
of $57,855) 23 23
Common stock $.01 par value;
90,000,000 shares
authorized; 7,291,732 and
4,946,245 shares issued and
outstanding, respectively 72 49
Additional paid-in capital 179,356 116,068
Accumulated distributions in
excess of earnings (26,509) (17,563)
-------- --------
Total stockholders'
equity 152,942 98,577
--------- --------
Total liabilities and
stockholders' equity $439,141 $313,613
========= =========
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, 1997, 1996 and 1995
(dollars in thousands, except share data)
-----------
1997 1996 1995
Revenues:
Minimum rents $43,857 $31,398 $22,793
Tenant reimbursements 9,506 6,704 4,362
Percentage rents 1,060 664 495
Other income 1,211 1,672 1,447
------- ------- -------
Total revenues 55,634 40,438 29,097
------- ------- -------
Expenses:
Property operating and
maintenance 13,522 9,743 6,746
General and administrative 3,363 3,137 2,831
Interest 18,416 14,986 11,230
Depreciation and amortization 11,172 8,019 5,808
------- ------- -------
Total expenses 46,473 35,885 26,615
------- ------- -------
Income before gain on sale of
properties, income from
Management Company,
extraordinary item, minority
interest and distributions to
Preferred Stockholders 9,161 4,553 2,482
Gain on sale of properties 549 - -
Income from Management Company 433 221 449
------- ------- -------
Income before extraordinary
item, minority interest
and distributions to
Preferred Stockholders 10,143 4,774 2,931
Extraordinary item - Loss on
early extinguishment of debt (954) - -
------- ------- -------
Income before minority interest
and distributions
to Preferred Stockholders 9,189 4,774 2,931
Income allocated to minority
interest (1,579) (694) (602)
------- ------- -------
Income before distributions to
Preferred Stockholders 7,610 4,080 2,329
Distributions to Preferred
Stockholders (5,641) (5,641) (5,117)
------- ------- -------
Income (loss) allocated to
Common Stockholders $1,969 $(1,561) $(2,788)
======= ======= =======
Earnings (loss) per Common
Share - Basic
Income (loss) before
extraordinary item $0.52 $(0.46) $(1.19)
Extraordinary item (0.17) - -
------- ------- -------
Net income (loss) $0.35 $(0.46) $(1.19)
======= ======= =======
Earnings (loss) per Common
Share - Diluted
Income (loss) before
extraordinary item $0.51 $(0.46) $(1.19)
Extraordinary item (0.17) - -
------- ------- -------
Net income (loss) $0.34 $(0.46) $(1.19)
======= ======= =======
Weighted average Common
Shares - Basic 5,663 3,367 2,351
Dilutive effect of employee
stock options 67 - -
------- ------- -------
Weighted average Common
Shares - Diluted 5,730 3,367 2,351
======= ======= =======
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, 1997, 1996 and 1995
(dollars in thousands)
---------
Accumulated
Convertible Additional Distributions
Preferred Common Paid in Excess of
Stock Stock in Capital Earnings Total
Balance, December 31, 1994 $19 $16 $48,245 $(2,298) $45,982
Net income 2,329 2,329
Issuance of Common Stock
(1,528,393 shares) 15 24,306 24,321
Issuance of Preferred Stock
(394,189 shares) 4 8,838 8,842
Issuance of Common Stock
for compensation
(66,666 shares) 1 1,182 1,183
Cash distributions (9,709) (9,709)
Exchange of common units for
common shares (20,131 shares) 119 119
Adjustment for minority interests'
ownership of the Operating
Partnership (1,991) (1,991)
---- ---- ------ ------ ------
Balance, December 31, 1995 23 32 80,699 (9,678) 71,076
Net income 4,080 4,080
Issuance of Common Stock
(1,655,000 shares) 17 33,418 33,435
Cash distributions (11,965) (11,965)
Exchange of common units for
common shares (17,416 shares) 83 83
Adjustment for minority interests'
ownership of the Operating
Partnership 1,868 1,868
---- ---- ------ ------ ------
Balance, December 31, 1996 23 49 116,068 (17,563) 98,577
Net income 7,610 7,610
Issuance of Common Stock
(2,155,562 shares) 22 48,850 48,872
Issuance of Common Stock for
compensation
(144,084 shares) 1 3,447 3,448
Exercise of Stock Options
(2,956 shares) 58 58
Cash distributions (16,556) (16,556)
Exchange of common units for
common shares (38,251) 320 320
Adjustment for minority interests'
ownership of the Operating
Partnership 10,613 10,613
---- ---- ------ ------ ------
Balance, December 31, 1997 $23 $72 $179,356 $(26,509) $152,942
==== ==== ======== ======== ========
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, 1997, 1996 and 1995
(Dollars in thousands)
--------
1997 1996 1995
----------- ------------ ----------
Operating activities:
Income before distributions
to Preferred Stockholders $7,610 $4,080 $2,329
Adjustment to reconcile to net
cash provided by operating activities:
Income allocated to minority interest 1,579 694 602
Depreciation and amortization 11,172 8,019 5,808
Gain on sale of rental properties (549) - -
Loss on early extinguishment of debt 954 - -
Amortization of deferred financing
costs and loan premiums 979 2,167 2,260
Equity in earnings of Management Company 47 259 131
Compensation paid or payable in
Company stock 1,866 1,649 1,800
Provision for uncollectible accounts 1,285 527 483
Recognition of deferred rent (1,337) (921) (855)
Net changes in
Tenant receivables (2,582) (1,032) (292)
Other assets (1,525) (4,230) (2,160)
Accounts payable and accrued
expenses 3,942 404 (3)
------- ------ -------
Net cash provided by operating
activities 23,441 11,616 10,103
------- ------ -------
Investing activities:
Additions to rental properties (7,891) (4,476) (2,067)
Acquisition of rental properties (19,864) (52,518) (27,917)
Proceeds from sale of rental properties 2,066 - -
------- ------ -------
Net cash used in investing
activities (25,689) (56,994) (29,984)
------- ------ -------
Financing activities:
Proceeds from Line of Credit draws 23,800 9,867 -
Proceeds from mortgage notes 398 31,376 16,720
Proceeds from issuance of Common
Stock 48,930 33,651 24,449
Repayment of Line of Credit (20,500) (9,867) -
Repayment on mortgage notes (38,704) (823) (2,260)
Additions to deferred financing
costs (686) (739) (581)
Prepayment Penalties (169) - -
Repayment in Advances due Principals - (447)
Distributions paid to Preferred
Stockholders (5,641) (5,641) (5,117)
Distributions paid to Common
Stockholders (10,915) (6,324) (4,593)
Distributions paid to minority interest (2,903) (2,148) (1,597)
------- ------ -------
Net cash provided by (used in)
financing activities (6,390) 49,352 26,574
------- ------ -------
Net increase (decrease) in cash and
equivalents (8,638) 3,974 6,693
Cash and equivalents, beginning of year 11,780 7,806 1,113
------- ------ -------
Cash and equivalents, end of year $3,142 $11,780 $ 7,806
======= ====== =======
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. (the "Company") is a
fully integrated real estate organization that acquires, manages,
leases, renovates and develops principally supermarket-anchored
neighborhood shopping centers. The Company currently owns a portfolio of
50 properties (the "Properties") consisting of 48 retail properties (the
"Retail Properties") containing a total of approximately 5.1 million
square feet of gross leasable area ("GLA") and two multifamily
properties (the "Multifamily Properties") located in the Mid-Atlantic
region and the Chicago, Illinois metropolitan area.
The Retail Properties are strategically located
neighborhood shopping centers principally anchored by tenants such as
Giant Food, Safeway, Shoppers Food Warehouse, Food Lion, A&P Superfresh,
Winn Dixie, Weis Markets, Acme Market, Dominick's Supermarket,
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
106,000 square feet of GLA.
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").
The Company's assets are held by, and all its operations
conducted through, First Washington Realty Limited Partnership (the
"Operating Partnership") and First Washington Management, Inc. ("FWM").
The Company is the sole general partner of the Operating Partnership.
The limited partners are individuals, partnerships and others who have
contributed their properties in exchange for partnership interests
("Units"). The limited partners may exchange their Units for cash, or at
the option of the Company, for stock of the Company on a 1 for 1 basis.
As of December 31, 1997 and 1996, the Company owned approximately 79%
and 86% of the Operating Partnership, respectively. This arrangement is
commonly referred to as an Umbrella Partnership or "UPREIT" structure.
The Operating Partnership owns 100% of the non-voting preferred stock of
FWM which entitles it to 99% of the cash flow. Certain officers of the
Company own 100% of the voting common stock of FWM which entitles them
to 1% of the cash flow. In addition, the Operating Partnership holds an
FWM promissory note in the amount of $4,000 with interest payable
quarterly in the amount of $120. FWM provides management, leasing and
related services to the Operating Partnership and also provides such
services to 15 third-party clients consisting of 25 properties and 2.9
million square feet of GLA. As of December 31, 1997, 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. Allocation of net income and equity 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.
In June 1995, the Company completed a public offering of
1,528,393 shares of common stock (the "June 1995 Offering"). The shares
were priced at $17.75 per share, resulting in net proceeds of $24,300.
F-7
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
In December 1996, the Company completed a public offering
of 1,655,000 shares of Common Stock (the "December 1996 Offering"). The
shares of stock were priced at $21.75 per share, resulting in net
proceeds of $30,200.
In September 1997, the Company completed a public offering
of 2,070,000 shares of Common Stock (the "September 1997 Offering"). The
shares were priced at $24.00 per share resulting in net offering
proceeds of $46,900.
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.
2. Acquisition of Rental Properties
During 1997, the Company acquired twelve shopping centers
for an aggregate acquisition cost of approximately $134,553. All the
acquisitions were accounted for using the purchase method of accounting
and the operations of each property is included in the Company's
Statement of Operations from their respective dates of acquisition. The
following is a summary of the acquisitions:
Total
Date Acquisition
Acquired Property Name Location GLA Cost
1/97(a) Four Mile Fork Fredericksburg, VA 101,262 $5,979
1/97(a) Shoppes of Graylyn Wilmington, VA 65,476 7,390
1/97(a) City Avenue Philadelphia, PA 161,454 15,675
3/97 Ashburn Farm Ashburn, VA 88,942 9,867
9/97 McHenry Commons McHenry, IL 100,526 8,345
9/97 Mallard Creek Round Lake Beach, IL 143,759 13,369
9/97 The Oaks Des Plaines, IL 138,274 14,462
9/97 Pheasant Hill Bolingbrook, IL 111,190 10,059
9/97 Riverside/
River's Edge Chicago, IL 169,434 13,858
9/97 Stonebrook Plaza Merrionette Park, IL 95,825 8,283
10/97 Mitchellville Plaza Mitchellville, MD 154,160 21,393
12/97 Spring Valley Washington, DC 16,834 5,873
---------- ----------
1,347,136 $134,553
========= ========
Anchor Anchor
Tenant (GLA)
1/97(a) Four Mile Fork Safeway 31,238
1/97(a) Shoppes of Graylyn Rite Aid 23,500
1/97(a) City Avenue Acme Supermarket 30,000
3/97 Ashburn Farm A&P Superfresh 57,030
9/97 McHenry Commons Dominick's Finer Foods 76,170
9/97 Mallard Creek Dominick's Finer Foods 76,258
9/97 The Oaks Dominick's Finer Foods 63,863
9/97 Pheasant Hill Dominick's Finer Foods 62,756
9/97 Riverside/
River's Edge Dominick's Finer Foods 74,494
9/97 Stonebrook Plaza Dominick's Finer Foods 63,000
10/97 Mitchellville Plaza Food Lion 45,100
12/97 Spring Valley CVS/Pharmacy 6,838
-------
610,247
=========
(a) This represents the closing dates of the acquisition, however the
contracts were executed and a substantial amount of due diligence
was performed during 1996.
F-8
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
The acquisitions were funded as follows:
Assumed Mortgage Debt (including premiums) $78,747
Market Value of 1,384,407 common and 9,538
preferred Operating Partnership Units 33,851
Deferred consideration 2,223
Cash 19,732
-----------
Total $134,553
==========
The deferred consideration will be paid upon the earlier of
the completion of certain events or a specific period of time. A
substantial amount of the deferred consideration is to be paid in the
form of common Operating Partnership Units. The number of units issued
will be based on the fair market value of the units at the time of
issuance.
The following unaudited pro forma condensed combined results
of operations for the years ended December 31, 1997 and 1996 are
presented as if the acquisitions of the rental properties that
occurred during 1996 and 1997 had occurred on January 1 of the period
presented. In preparing the pro forma data, adjustments have been made
to assume that the September 1997 and December 1996 Offerings 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.
1997 1996
-------- ------
(unaudited)
Total revenues $65,918 $63,381
======= =======
Income before minority interest and
distributions to Preferred Stockholders $13,821 $11,863
======= ========
Net income per common share - Basic $0.74 $0.57
======== =========
Net income per common share - Diluted $0.74 $0.57
======== =========
3. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of the
Company, the Operating Partnership and other limited partnerships and limited
liability companies which are majority owned by the Operating Partnership.
All significant intercompany balances and transactions have been eliminated.
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, leases
and provides other related services to all the properties owned by the Operating
Partnership and its affiliates in exchange for a fee.
Reclassification
Certain items of income and expense for the years ended December 31,
1996 and 1995 were reclassified to conform to the presentation for the year
ended December 31, 1997.
F-9
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
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.
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
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
Costs of interest rate caps, interest rate buydowns and fees incurred to
obtain long-term financing 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, 1997 and
1996 was $7,683 and $5,518, respectively. Deferred
F-10
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
financing cost amortization expense is included in interest expense and amounted
to $1,546, $2,167 and $2,260 during 1997, 1996, and 1995 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, 1997 and 1996, the
amounts of these straight-line receivables were $4,689 and $3,317, respectively.
The amount of rental income from the straight- lining of rents amounted to
$1,337, $921 and $855 for the years ended 1997, 1996 and 1995, 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 $1,453 and $683 as of December 31,
1997, and 1996, respectively.
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. The following per share distributions (and
their tax classifications) were paid during 1997:
Ordinary Return Capital Total
Income of Capital Gain Paid
Preferred $2.38 $0.00 $0.06 $2.44
Common $1.02 $0.88 $0.05 $1.95
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.
Income (Loss) per Share
Basic income (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. Diluted income
(loss) per share reflects the dilutive effect of outstanding employee stock
options using the treasury stock method. The assumed conversion of the
partnership units held by the limited partners of the Operating Partnership,
which would result in the elimination of earnings and losses allocated to
minority interests would have no effect for the periods presented. The
conversion of Preferred Stock and the Exchangeable Debentures would be
anti-dilutive for the periods presented.
F-11
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
Statements of Financial Accounting Standards No.128, "Earnings per
Share" became effective for fiscal periods ending after December 31, 1997. The
Company has made all appropriate disclosures required under FAS 128 and has
restated all periods presented.
Minority Interest
Minority interest represents the limited partners' interest of 2,121,089
and 782,360 common units in the Operating Partnership as of December 31, 1997
and 1996, respectively, and 429,147 and 419,609 Exchangeable Preferred Units in
the Operating Partnership as of December 31, 1997 and 1996, respectively. The
Exchangeable Preferred Units have an aggregate liquidation preference of
$10,729. 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 the issuance of units of the Operating
Partnership are reflected in additional paid in capital.
New Accounting Pronouncements
Statements No. 130 "Reporting Comprehensive Income", No. 131 "Disclosures
about Segments of an Enterprise and Related Information" are required for fiscal
years beginning January 1, 1998 and will be adapted by the Company in 1998.
There will not be a material impact on the Company's financial position as a
result of the new standards.
4. Rental Properties
Depreciation expense for each of the years ended December
31, 1997, 1996 and 1995 was $10,719, $7,675, and $5,534, respectively.
For each of the years ended December 31, 1997, 1996, and
1995, maintenance and repairs expense was $3,501, $2,767 and $1,872,
respectively, and real estate taxes were $4,968, $3,070 and $2,044,
respectively. Such amounts are included in property operating and
maintenance expense in the accompanying consolidated statements of
operations.
During 1997, the Company sold Thieves Market (January
1997) and a portion of Laburnum Park Shopping Center (October 1997).
Thieves Market was sold to a tenant for an approximate price of $1,200.
The gain on sale was approximately $45. The Company sold approximately
5,500 square feet of existing building and .357 acres of land to Ukrops
Supermarket, the property's anchor tenant. Ukrops owns their land and
building and is using the extra space to expand their existing store by
8,000 square feet. The sale price was approximately $900 and the Company
reported a gain on sale of $504.
F-12
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
5. Mortgage Debt
Mortgage and other notes payable consisted of the
following as of December 31, 1997 and 1996, respectively:
1997 1996
-------- ------
Mortgage and other notes with fixed interest
(all-in effective rates):
7.31%, maturing June 1998 (e) $ - $4,151
6.50%, maturing May 1999 (e) - 3,587
9.90%, maturing July 1999 3,826 3,826
8.93%, maturing July 1999 (a)(b)(c) 38,500 38,500
7.50%, maturing June 1999 (e) - 3,500
7.15%, maturing July 1999 3,656 3,656
8.62%, maturing August 1999
(includes $82 premium) 1,827 1,759
9.82%, maturing April 2000 11,489 11,588
8.03%, maturing July 2000 (e) - 4,449
6.65%, to 7.75%,
maturing through June 2007 1,846 9,332
8.75%, maturing July 2005 7,999 8,065
8.76%, maturing October 2005 13,283 13,952
7.50%, maturing December 2005 2,472 2,497
7.86%, maturing January 2006 5,913 6,002
7.22%, maturing March 2006 14,132 14,358
7.89%, maturing May 2006 7,774 7,919
8.01%, maturing January 2007
(includes $349 premium) 6,282 6,000
7.89%, maturing November 2014
(includes $569 premium) 4,783 4,315
8.12%, maturing October 2005 9,909 -
7.16%, maturing through July 1999
(includes $796 premium) 20,972 -
7.10%, maturing June 2005
(includes $1,934 premium) 15,764 -
7.28%, maturing July 2000
(includes $878 premium) 14,354 -
7.42%, maturing May 2003
(includes $722 premium) 10,144 -
-------- --------
Total fixed rate notes 194,925 147,456
------- -------
Mortgage notes with variable rates:
Variable maturing June 2010 (d) 7,075 7,265
Variable maturing February 2020
(1 year T-bill + 2.75%) (e) - 1,530
Variable maturing March 2002
(LIBOR + 2.25%) - 7,851
Variable maturing April 1999
(prime + .25%) - 2,945
Variable maturing January 2001
(LIBOR + 1.50%) 10,030 -
--------- --------
Total variable rate notes 17,105 19,591
--------- -------
$212,030 $167,047
========= =========
F-13
<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 $908 at December 31, 1997, are included in other assets.
(b) On June 27, 1994, the Company borrowed $38,500 under new mortgage loans
(collectively, the "Nomura Mortgage Loan") collateralized by five of the
Properties. These loans, which bear interest at 30-day LIBOR (5.97% at
December 31, 1997) 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 $38,500 that is effective
through the loans maturity, and caps the interest rate at 7.70% through
maturity. The cost of the interest rate protection agreement of
approximately $3,200, 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 $500 at
December 31, 1997.
(c) In December 1995, the Company entered into an interest rate swap contract
with a notional amount of $38,500. The Company intends to hold such
contract until the expiration date. The purpose of the swap is to fix the
interest rate on the $38,500 Nomura loan through its expiration date of
June 1999 at 7.09%. 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. The Company will be
receiving variable payments from the Counter Party based on 30-day LIBOR
through June 1999. The Counter Party has as collateral a $3,500 restriction
on the $5,800 Line of Credit it provided the Company (see below). The fair
market value of the interest rate swap 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, 1997, the Company would have
received approximately $300.
(d) The Company assumed Bond Obligations of $7,600 collateralized by Mayfair
Shopping Center. The Bond Obligations bear interest at a variable rate,
plus a letter of 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 4.25% at December 31, 1997. 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.
The Nomura Mortgage Loan, the Debentures (see Note 6), and the Bond
Obligations, 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 $75,000.
Management believes that the Company is in compliance with all restrictive
covenants.
(e) During 1997, the Company retired approximately $25,900 of mortgage debt
prior to their scheduled maturity dates with proceeds of the September
offering. The Company incurred prepayment penalties and wrote off
unamortized deferred financing costs resulting in an extraordinary loss of
$954.
Maturities of the existing indebtedness at December 31, 1997 are as
follows:
Principal Amortization Balloon
Curtailment of Premiums Amount Total
1998 $2,635 $1,533 $ - $4,168
1999 2,883 995 67,762 71,640
2000 2,856 675 27,522 31,053
2001 2,833 476 7,597 10,906
2002 3,079 472 - 3,551
Thereafter 8,955 1,179 80,578 90,712
-------- ------- --------- --------
$23,241 $5,330 $183,459 $212,030
======= ====== ======== ========
F-14
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
In anticipation of the large amounts of mortgage debt
maturing in 1999 and 2000, the Company has entered into forward interest
rate swap contracts. The Company intends to hold such contracts until
their expiration dates. The purpose of the swaps is to mitigate any
exposure to fluctuations in interest rates until the maturity dates of
the mortgages when the Company expects to refinance these loans. Under
the terms of the swap contract, the Company pays a fixed rate to the
other party to the contract ("Counter Party") while receiving variable
payments from the Counter Party based on 30-day LIBOR. This effectively
fixes the LIBOR rate for the Company during the period of the swap
contracts. The following is a summary of the Company's swap contracts as
of December 31, 1997:
Date of Fixed Rate Fair Market
Notional Amount Agreement Period of Contract Payable Value
(In 000's) (In 000's)
$38,500 12/95 07/01/99 - 12/01/03 6.37% $(534)
$20,000 08/97 03/01/99 - 03/01/04 6.44% $(366)
$15,000 11/97 06/01/99 - 06/01/04 6.18% $(111)
$24,000 01/98 05/01/00 - 05/02/05 5.85% N/A
------- -----
$97,500 6.23%
======= =====
The Company currently has two collateralized revolving lines of credit (the
"Lines of Credit"). The Company has a collateralized revolving Line of Credit of
up to $35,500 with Union Bank of Switzerland. This line is collateralized by six
properties (Kenhorst Plaza, Shoppes of Graylyn, Four Mile Fork, Takoma Park,
Centre Ridge Marketplace and Newtown Square). The line which closed on January
22, 1998 and matures on January 31, 2001 replaces the Lines of Credit the
Company had with Mellon Bank and Corestates Bank. Loans under this line will
bear interest at LIBOR plus one percent (1%). The Company has an additional
collateralized revolving Line of Credit of up to $5,775 from First Union Bank.
Loans under this line will bear interest at LIBOR plus two percent (2%) per
annum, and will mature on June 30, 1998. This Line of Credit is collateralized
by a first mortgage lien on Brafferton Shopping Center. As of December 31, 1997,
there was $3,300 outstanding under the Lines of Credit.
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, 1997, 1996, and 1995 was
$17,437, $12,471, and $8,965, respectively.
F-15
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
6. Debentures
In June 1994, the Company effected a private placement
with respect to $25,000 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 9.0% 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, 1997 and 1996, respectively:
1997 1996
Accrued Real Estate Taxes $2,577 $52
Deferred acquisition payments 2,223 -
Tenant Security Deposits 1,767 1,223
Accrued compensation payable in Company stock 682 2,265
Accounts payable and other accrued expenses 3,665 2,788
------ ------
Total $10,914 $6,328
======= ======
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.
Currently 3,800,000 shares of preferred stock are designated as 9.75%
Convertible Preferred Stock, of which 2,314,189 shares are issued and
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 Stock are convertible on or
after May 31, 1999 into 1.282051 shares of Common Stock. The Company may
redeem the Convertible Preferred Stock commencing July 15, 1999 at a
redemption price of $27.44 per share. The redemption price reduces
annually thereafter to $26.95, $26.46, $25.98, $25.49 and $25.00.
9. Summary of Noncash Investing and Financing Activities
Significant noncash transactions for the years ended
December 31, 1997, 1996, and 1995 were as follows:
F-16
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
1997 1996 1995
--------- -------- -----
Liabilities assumed in purchase
of rental properties $74,657 $20,171 $11,723
Common and Preferred Units in the Operating
Partnership issued in connection with the
purchase of rental properties $33,851 $8,978 $1,630
Convertible Preferred Stock issued in
connection with the purchase of
rental properties - - $8,842
Accrual of tenant improvements - - $700
Accrual of cost of raising capital $55 $216 $128
Decrease (increase) in adjustment
for minority interest's
ownership of the Operating Partnership $(10,613)$(1,868) $1,991
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,
1997 are as follows:
1998 $49,076
1999 42,920
2000 38,245
2001 33,372
2002 27,581
Thereafter 164,298
--------
$355,492
========
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. 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.
F-17
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
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. 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. In addition, the Company received $480
annually of interest income, included in income from Management Company,
on the FWM Note in 1997, 1996 and 1995. The Company's equity in earnings
of FWM for the year ended December 31, 1997, 1996 and 1995 was ($47),
($259) and ($31) respectively.
FWM provides property management, leasing and other
related services to the Company. Management and other fees paid by the
Company in 1997, 1996 and 1995 amounted to $3,687, $1,955
and $1,178, respectively.
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.
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 Stock Option Plan provides that 801,540
shares of Common Stock will be reserved for issuance.
FAS 123 requires pro forma information regarding net
income and earnings per share as if the Company accounted for its stock
options under the fair value method of that statement. The fair value of
the options issued in 1997 and 1996 are estimated to be $221.0 and $5.3
respectively, as of the date of the grant, using a binomial model with
the following weighted-average assumptions: risk-free interest rates of
7.37%; dividend rate of 8.71%; volatility factors of the expected market
price of the Company's shares of 16.96%; and a weighted average expected
life of the options of 3.82 years.
Because option valuation models require input of highly
subjective assumptions, such as the expected stock price volatility, and
because changes in these assumptions can materially affect the fair
value estimate, the existing model may not necessarily provide a
reliable single measure of the fair value of its stock options.
F-18
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
For purposes of pro forma disclosures, the estimated fair
value of the options are amortized to expense over the options' vesting
period. The pro forma income (loss) allocated to Common Stockholders is
as follows:
1997 1996
---- ----
Pro forma net income (loss)
before extraordinary item $2,702 $(1,566)
Extraordinary item (954) -
------- --------
Pro forma net income (loss) $1,748 $(1,566)
====== ========
Pro forma earnings (loss)
per Common Share - Basic
Income (loss) before extraordinary item $0.48 $(0.47)
Extraordinary item (0.17) -
------ -------
Net income (loss) $0.31 $(0.47)
===== =======
Pro forma earnings per Common Share - Diluted
Income (loss) before extraordinary item $0.47 $(0.47)
Extraordinary item (0.17) -
------ ------
Net income (loss) $0.30 $(0.47)
===== =======
A summary of the Company's stock option activity for the years ended
December 31 is as follows:
Shares
Available
for Weighted
Future Average Ranged
Options Option Exercise Exercised
Outstanding Grants Price Price
December 31, 1994 348,619 2,921 $19.50 $19.50
Options expired/forfeited (9,801) 9,801 $19.50 $19.50
-------- -------
December 31,1995 338,818 12,722 $19.50 $19.50
Options granted 3,500 (3,500) $19.50 $19.50
Options expired/forfeited (2,670) 2,670 $19.50 $19.50
-------- -------
December 31, 1996 339,648 11,892 $19.50 $19.50
Amendment of 1994 plan 450,000
Options granted 145,500 (145,500) $24.00 $24.00
Options exercised (2,956) $19.50 $19.50
Options expired/forfeited (228) 228 $19.50 $19.50
------- --------
December 31, 1997 481,964 316,620 $20.86 $19.50-$24.00
======= =======
F-19
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
At December 31, 1997 and 1996 options for 334,131 shares and
336,148 shares, respectively were exercisable. The average remaining
contractual life of options outstanding at December 31, 1997 and 1996
were 7.9 years and 8.0 years, respectively. The weighted average grant
date fair value per options granted in 1997 was $1.52. The exercise
price of options outstanding at December 31, 1997 ranged from $19.50 to
$24.00 per share.
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 $400. No additional shares were issued during 1996. In 1997, 47,380
shares were issued to each of the officers with a total value of
$2,300. Total compensation cost recognized under this plan was $1,100,
$1,500 and $1,800 for the years ended December 31, 1997, 1996 and 1995,
respectively.
In April 1996, the stockholders of the Company approved a
Contingent Stock Agreement and a Restricted Stock Plan for each of
these officers. The Contingent Stock Agreements have reserved for grant
60,000 shares of common 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:
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
======
The Company will record compensation expense as the shares
vest based on the fair market value of the stock as of the date of
issuance (i.e. $24.25 per share).
An additional 50,000 shares of common stock are reserved under
the Restricted Stock Plan for grants to officers and employees of the
Company, of which 21,264 were issued as of December 31, 1997.
F-20
<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)
1997 First Second Third Fourth
---- ----- ------ ----- ------
Total revenues $12,404 $12,888 $14,071 $16,271
Net income before
extraordinary item,
preferred distributions
and minority interest $1,822 $1,617 $2,633 $4,071
Extraordinary item $(134) - $(561) $(259)
Net income (loss) allocated
to Common Stockholders $21 $(35) $323 $1,660
Net income (loss)
per share-Basic:
Income before
extraordinary item $0.03 ($0.01) $0.16 $0.34
Extraordinary item 0.03 - 0.10 0.04
---- ------ ----- -----
Net income (loss) $0.00 $(0.01) $0.06 $0.30
===== ======= ===== =====
Net income (loss) per
share-Diluted:
Income (loss) before
extraordinary item $0.03 $(0.01) $0.16 $0.33
Extraordinary item (0.03) - (0.10) (0.04)
------- -------- ------- -------
Net income (loss) $0.00 $(0.01) $0.06 $0.29
====== ======= ====== ======
1996 First Second Third Fourth
---- ----- ------ ----- ------
Total revenues $9,369 $10,074 $10,442 $10,553
Net income 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 - Basic $(0.13) $(0.17) $(0.09) $(0.07)
Net income (loss) per
Common Share - Diluted $(0.13) $(0.17) $(0.08) $(0.07)
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.
F-21
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
--------
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:
1997 1996
------------------------------------------
Carrying Fair Carrying Fair
Financial Assets: Value Value Value Value
Cash and Equivalents $3,142 $3,142 $11,780 $11,780
Financial Liabilities:
Mortgage notes payable $212,030 $248,200 $167,047 $167,300
Debentures $25,000 $35,256 $25,000 $27,300
Off-Balance Sheet Assets/
Liabilities:
Interest Rate Swaps and
Caps receive/(pay) - $(612) - $1,200
16. Subsequent Events
On January 18, 1998, 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, 1998. On
February 15, 1998, distributions in the amount of $6,200 were paid.
In January 1998, the Company acquired Bowie Plaza Shopping Center
located in Bowie, Maryland. The total acquisition cost of $12,100 was
financed through the issuance of 130,626 Common Units to the seller of
the property with a value of approximately $3,600, assumed mortgage
indebtedness of $5,400, a draw on the Company's Line of Credit of
$3,000 and cash of $100. The mortgage loan carries an all-in effective
interest rate of 7.2% and matures in December 2009. The Center contains
104,036 square feet of GLA and is anchored by Giant Food and
CVS/Pharmacy.
In March 1998, the Company sold its two multi-family properties
(Branchwood and Park Place Apartments) for a combined sales price of
approximately $8,050. The estimated gain on sale is approximately
$1,400 and net proceeds after the payment of the existing mortgage debt
was approximately $3,900. In March 1998, the Company sold one of the
Georgetown retail shops consisting of 5,000 square feet for $750. The
estimated gain on sale is approximately $200 and net proceeds after the
payment of existing mortgage debt was approximately $300. The proceeds
of these sales were used to purchase Watkins Park Plaza (described
below) in a like-kind exchange as defined in Internal Revenue Code
Section 1031.
In March 1998, the Company acquired Watkins Park Plaza located in
Mitchellville, Maryland. The total acquisition cost of $14,295 was
financed with proceeds from the sale of the Company's two multi-family
properties and a retail property of $4,200, a draw on the Company's
Lines of Credit of $10,000, and cash of $95.
F-22
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
for the years Ended December 31, 1997, 1996 and 1995
--------
Balance Additions
at Charged Deduction
Beginning to Amounts Balance
of Bad Debt Written at End
Description Year Expense Off of Year
----------- ----------- --------- ---------- -----------
Allowance for
Doubtful Accounts:
Year Ended December 31, 1997 $683 $1,285 $(515) $1,453
==== ====== ====== ======
Year Ended December 31, 1996 $418 $527 $(262) $683
==== ==== ====== ====
Year Ended December 31, 1995 $391 $483 $(456) $418
==== ==== ====== ====
F-23
<PAGE>
SCHEDULE III - REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1997
(dollars in thousands)
Initial Cost
Building &
Property Location Encumbrance Land Improvements
Retail:
Allen Street (1) Allentown, PA $5,913 $867 $2,404
Ashburn Village Ashburn, VA 6,730 1,973 7,894
Brafferton (2) Garrisonville, VA - 1,595 6,385
Bryans Road (3) Bryans Road ,MD 38,500 1,214 3,314
Capital Corner Landover, MD - 966 0
Centre Ridge
Marketplace (2) Centreville, VA 3,300 4,847 3,807
Chesapeake Bagel
Building Alexandria, VA 735 191 804
City Avenue
Shopping Center Philadelphia, PA 9,909 3,135 12,540
Clinton Square Clinton, MD - 242 1,437
Clopper's Mill Germantown, MD 14,132 4,011 16,006
4483 Connecticut Washington, D.C. - 91 932
Colonial Square York, PA - 639 1,678
Davis Ford Crossing (3) Manassas, VA - 2,574 10,092
Festival at Woodholme Baltimore, MD 11,489 2,915 11,660
Firstfield Gaithersburg, MD 2,472 699 2,797
First State Plaza (3) New Castle, DE - 2,575 10,358
Four Mile Fork (2) Fredericksburg, VA - 1,196 4,783
Fox Mill (4) Reston, VA 25,000 2,752 11,019
Georgetown Shops (5) Washington ,D.C. 411 949 3,174
Glen Lea (6) Richmond, VA 13,283 757 3,027
Hanover Village (6) Mechanicsville, VA - 1,081 4,323
James Island (3) Charleston, SC - 1,321 2,758
Kenhorst Plaza (2) Reading, PA - 2,253 9,013
Kings Park Burke, VA 4,783 1,153 4,613
Laburnum Park (6) Richmond, VA - 1,194 4,774
Laburnum Square (6) Richmond, VA - 1,104 4,418
McHenry Commons McHenry, IL 6,643 1,669 6,676
Mallard Creek Round Lake Beach, IL 11,824 2,674 10,695
Mayfair Philadelphia, PA 7,075 2,463 9,860
Mitchellville Plaza Mitchellville, MD 15,764 4,279 17,114
Newtown Square (2) Newtown Square, PA - 2,508 10,031
Northway Millersville, MD 8,109 1,838 7,400
Penn Station (4) District Heights, MD - 4,275 0
P.G. County Comm
& Tech Pk. Beltsville, MD - 1,309 972
Pheasant Hill Bolingbrook, IL 8,128 2,012 8,047
Potomac Plaza Woodbridge, VA 3,656 795 4,235
Riverside Square /
River's Edge Chicago, IL 2,505 2,772 11,086
Rosecroft Temple Hills, MD - 664 2,723
Shoppes of Graylyn (2) Wilmington, DE - 1,478 5,912
Shoppes of Kildaire Cary, NC 7,774 2,202 8,833
Southside Marketplace Baltimore, MD 7,999 2,209 8,835
Spring Valley Shopping
Center Washington, DC - 1,175 4,698
Stefko Boulevard (1) Bethlehem, PA - 1,149 3,187
Stonebrook Plaza Merrionette Park, IL 6,226 1,657 6,626
Takoma Park (2) Takoma Park - 957 3,829
The Oaks Des Plaines, IL 10,144 2,892 11,570
Valley Center (3) Owings Mills, MD 700 4,718 18,938
Multi-family:
Branchwood Apts. (7) Charleston, SC 142 2,521
Park Place Apts. (7) Charleston, SC 3,826 387 4,396
------- -------- ----------
$237,030 $88,518 $312,194
======== ======= ========
(1) These properties are encumbered by first deeds of trust as collateral for a
$5,913 mortgage loan.
(2) These properties serve as collateral for the Line of
Credit facilities.
(3) These properties are encumbered by first deeds of trust
as collateral for the $38,500 Nomura mortgage loan.
(4) These properties serve
as collateral fro the $25,000 Exchangeable Debentures.
(5) Consists of five
locations in the shopping district of Georgetown in Washington, DC.
One property was subsequently sold in 1998.
(6) These properties are encumbered by first deeds of trust as collateral for a
$13,283 mortgage loan.
(7) These properties were subsequently sold in 1998.
(8) The retail properties and the multi-family properties have depreciable lives
of 31.5 years and 27.5 years respectively.
Capitalized Gross Amounts
Subsequent at which
to carried at the Date
Acquisition close of period Accumul of Date
Property Improvements Land Improvement Total Depreci Constr Acquired
Retail:
Allen Street (1) $1,014 $867 $3,418 $4,285 $221 1958 1996
Ashburn Village 0 2,373 7,494 9,867 198 1996 1997
Brafferton (2) 420 1,595 6,805 8,400 742 1974 1994
Bryans Road (3) 3,778 1,231 7,075 8,306 1,629 1972 1990
Capital Corner 3,498 989 3,475 4,464 1,375 1987 1986
Centre Ridge
Marketplace (2) 2,240 5,108 5,786 10,894 287 1996 1996
Chesapeake Bagel
Building 660 192 1,463 1,655 648 1800's 1983
City Avenue
Shopping Center 23 3,102 12,596 15,698 397 1950-60's 1997
Clinton Square 150 251 1,578 1,829 692 1979 1984
Clopper's Mill 59 4,011 16,065 20,076 915 1995 1996
4483 Connecticut 144 95 1,072 1,167 383 1954 1986
Colonial Square 188 646 1,859 2,505 478 1955 1990
Davis Ford Crossing (3) 201 2,543 10,324 12,867 1,146 1988 1994
Festival at Woodholme 207 2,915 11,867 14,782 993 1986 1995
Firstfield 61 699 2,858 3,557 195 1978 1995
First State Plaza (3) 709 2,575 11,067 13,642 1,310 1988 1994
Four Mile Fork (2) 43 1,196 4,826 6,022 152 1975 1997
Fox Mill (4) 311 2,752 11,330 14,082 1,264 1988 1994
Georgetown Shops (5) 350 970 3,503 4,473 1,382 1800's1983-1989
Glen Lea (6) 190 757 3,217 3,974 259 1969 1995
Hanover Village (6) 182 1,081 4,505 5,586 362 1971 1995
James Island (3) 382 1,324 3,137 4,461 792 1967 1990
Kenhorst Plaza (2) 1,625 2,253 10,638 12,891 751 1990 1995
Kings Park 628 1,153 5,241 6,394 173 1966 1996
Laburnum Park (6) (372) 1,148 4,448 5,596 364 1988 1995
Laburnum Square (6) 877 1,105 5,294 6,399 425 1975 1995
McHenry Commons 12 1,609 6,748 8,357 71 1988 1997
Mallard Creek 29 2,560 10,838 13,398 115 1987 1997
Mayfair 257 2,463 10,117 12,580 1,141 1988 1994
Mitchellville Plaza 0 3,877 17,516 21,393 140 1991 1997
Newtown Square (2) 34 2,508 10,065 12,573 319 1960-70's 1996
Northway 562 1,838 7,962 9,800 253 1987 1996
Penn Station (4) 21,242 4,285 21,232 25,517 5,732 1989 1986
P.G. County Comm
& Tech Pk. 5,474 1,342 6,413 7,755 2,337 1985 1985
Pheasant Hill 22 1,899 8,182 10,081 86 1983 1997
Potomac Plaza 1,162 733 5,459 6,192 1,719 1963 1985
Riverside Square /
River's Edge 33 2,742 11,149 13,891 115 1986 1997
Rosecroft 2,443 688 5,142 5,830 1,795 1963 1985
Shoppes of Graylyn (2) 48 1,478 5,960 7,438 192 1971 1997
Shoppes of Kildaire 1,924 2,208 10,751 12,959 3,520 1986 1986
Southside Marketplace 88 2,209 8,923 11,132 452 1990 1996
Spring Valley Shopping
Center 0 1,175 4,698 5,873 13 1930 1997
Stefko Boulevard (1) 1,366 1,149 4,553 5,702 301 1958-60-75 1996
Stonebrook Plaza 19 1,570 6,732 8,302 71 1984 1997
Takoma Park (2) 974 957 4,803 5,760 226 1960 1996
The Oaks 39 2,735 11,766 14,501 125 1983 1997
Valley Center (3) 1,440 5,550 19,546 25,096 2,175 1987 1994
Multi-family:
Branchwood Apts. (7) 266 143 2,786 2,929 853 1989 1989
Park Place Apts. (7) 1,084 393 5,474 5,867 1,555 1990 1990
----- ----- ------ ----- ------
$56,086 $89,042 $367,756$456,798 $40,839
======== ======= ======== ======= =======
(1) These properties are encumbered by first deeds of trust as collateral for a
$5,913 mortgage loan.
(2) These properties serve as collateral for the Line of
Credit facilities.
(3) These properties are encumbered by first deeds of trust
as collateral for the $38,500 Nomura mortgage loan.
(4) These properties serve
as collateral fro the $25,000 Exchangeable Debentures.
(5) Consists of five
locations in the shopping district of Georgetown in Washington, DC.
One property was subsequently sold in 1998.
(6) These properties are encumbered by first deeds of trust as collateral for a
$13,283 mortgage loan.
(7) These properties were subsequently sold in 1998.
(8) The retail properties and the multi-family properties have depreciable lives
of 31.5 years and 27.5 years respectively.
F-24
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 3,142
<SECURITIES> 0
<RECEIVABLES> 7,274
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 456,798
<DEPRECIATION> 40,839
<TOTAL-ASSETS> 439,141
<CURRENT-LIABILITIES> 0
<BONDS> 212,030
0
23
<COMMON> 72
<OTHER-SE> 179,356
<TOTAL-LIABILITY-AND-EQUITY> 439,141
<SALES> 0
<TOTAL-REVENUES> 55,634
<CGS> 0
<TOTAL-COSTS> 46,473
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,416
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,923
<DISCONTINUED> 0
<EXTRAORDINARY> (954)
<CHANGES> 0
<NET-INCOME> 1,969
<EPS-PRIMARY> .35
<EPS-DILUTED> .34
</TABLE>
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT is made and entered as of
October 8, 1997, by and between (i) SPRING VALLEY JOINT VENTURE, a
District of Columbia Joint Venture (the "Contributor") and (ii) 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, Contributor is the record and beneficial owner of all of those
certain parcels of real property as more particularly described on Exhibit A
hereto (collectively, the "Land"), together with the shopping center known as
Spring Valley Shopping Center located in Washington, D.C., and all other
buildings and improvements not owned by tenants situated thereon (collectively,
the "Building"), and all personal property and fixtures not owned by tenants
located therein (the "Personal Property"), and all appurtenances, rights,
easements, rights-of-way, tenements and hereditaments incident thereto (the
"Additional Property") (the Land, Building, Personal Property 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 of the Property in exchange
for cash and 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) In consideration of the Contribution of the Property to
FWRLP, FWRLP shall assume, pay and issue the following (the "Consideration"):
(i) $2,249,000.00, or such lesser amount which represents the outstanding
principal balance with respect to the Existing Loan (as hereinafter defined) as
of Closing (the "Actual Loan Amount"), by FWRLP paying the Existing Loan as
described below; and
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(ii) issue common partnership units of FWRLP (the "Units") in an aggregate
amount calculated as follows: $5,750,000.00 minus the sum of the Actual Loan
Amount, as adjusted for closing or other adjustments herein provided, such total
divided by $25.00 (the "Unit Price") rounded to the nearest one (1) Unit.
(b) At Closing, the Property shall be contributed to FWRLP
with the Property then being subject to the indebtedness, lien and operation of
the First Trust (as defined below). FWRLP will pay off the Actual Loan Amount at
the Closing.
(c) The Property is presently encumbered by a Deed of Trust
and Security Agreement dated May 1, 1986 (the "First Trust") from the
Contributor, as debtor, for the benefit of Florenz R. Ourisman and The Valley
Vista Apartments, Limited Partnership, as secured party (the "Lender"), which
First Trust secures an original principal indebtedness of $2,500,796.69 with
interest thereon payable over the term thereof at a fixed interest rate of 9%
per annum, as evidenced by two Notes from CJS Partners, a District of Columbia
general partnership, and Spring Valley Partners, a District of Columbia limited
partnership to Lender ("Note"). The First Trust and Note and all documents and
instruments executed in connection therewith are collectively referred to as the
"Existing Loan." The Existing Loan is non-recourse to Contributor and the
Existing Loan may be prepaid in full at any time without any prepayment penalty
or premium. The outstanding principal balance under the Existing Loan as of the
date hereof is approximately $2,248,999.00.
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 to FWRLP being the
"Acceptance Date"), FWRLP shall deliver to Commercial Settlements, Inc., 1413 K
Street, N.W., Washington, D.C. 20005 (the "Title Company"), as escrow agent, a
deposit ("Deposit") of Fifty Thousand Dollars ($50,000.00) by check payable to
the Title Company. If FWRLP shall fail to deliver the Deposit when required to
do so, this Agreement shall become null and void and the parties hereto shall be
relieved of all further liability and obligation to each other.
(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 and shall constitute a part of the Deposit for
all purposes hereof. The Deposit shall be held by the Title Company pursuant to
the terms and conditions of this Agreement.
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(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 ten (10) 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 seven (7) 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 (i) Title Company is acting
solely as escrow agent at their request and for their convenience, (ii) Title
Company shall not be deemed to be the agent of either of the parties, and (iii)
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; provided, however, that if any litigation shall arise
between the Contributor and FWRLP in connection therewith, the non-prevailing
party shall pay all such costs, claims and expenses of the Title Company. In the
event any dispute shall arise between the parties hereto as to the disposition
of the Deposit, the Title Company's sole responsibility may be met, at the Title
Company's option, by paying the Deposit into the court in which relevant
litigation is pending between the parties, or by initiating an interpleader
action, and upon payment of the Deposit into court, neither Contributor nor
FWRLP shall have any further right, claim, demand, or action against the 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 (as
defined and described in Section 13(b) hereof). The Closing shall take place at
the offices of Contributor, or at such other place as may mutually agreed upon
by Contributor and FWRLP.
5. Representations and Warranties of Contributor. In order to induce
FWRLP to enter into this Agreement and to issue the Common Units (among other
things) in consideration for the Property, Contributor hereby makes the
following representations, warranties and covenants, each of which is material:
(a) Authority of Contributor. Contributor is a general partnership duly
organized and in good standing under the laws of the District of Columbia.
Contributor
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has all necessary power and authority and has taken all necessary partnership
action to execute, deliver and perform this Agreement. No consents of any
persons other than those executing this Agreement as Contributor are required
for such execution or to enable 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, except that
such enforcement may be subject to bankruptcy, conservatorship, receivership,
reorganization, insolvency, moratorium or similar laws or procedures relating to
or affecting creditors' rights generally and to general principles of equity.
(b) Title. Contributor is the sole owner of fee simple title
to the Property, and, to the best of Contributor's knowledge, such title is free
and clear of all liens, encumbrances, covenants, conditions, restrictions and
other matters affecting title, except for the Permitted Exceptions (as defined
in Section 8(a)(iii)).
(c) Compliance with Existing Laws. To the best of
Contributor's knowledge, (i) Contributor is not in violation of, and has
complied with any and all 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, (ii) Contributor possesses all licenses, certificates, permits and
authorizations necessary for the use and operation of the Property in the manner
in which it is currently being operated by Contributor, and (iii) the requisite
certificates of the fire marshalls or board of fire underwriters have been
issued for the Property. To the best of Seller's knowledge, the Property is
zoned C2-A, and no variance, exception or other modification of applicable
zoning laws was necessary in order to authorize the use or occupancy of the
Property or any portion thereof.
(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 best of Contributor's knowledge, any
subleases or subtenancies unless otherwise noted therein. Except as otherwise
set forth in Exhibit B or elsewhere in this Agreement:
(i) to the best of Contributor's knowledge, the
Leases are in full force and effect and constitute a legal,
valid and binding obligation of the respective tenants and are
assignable by Contributor to FWRLP;
(ii) no tenant has an option to purchase the Property;
(iii) no renewal or expansion options have been
granted to the tenants, except as provided in the Leases;
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(iv) to the best of Contributor's knowledge, Contributor is not in default
under any of 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) all work for tenant alterations and other work
or materials contracted for by Contributor and any tenant has
been completed, and all work and materials have been fully
paid for or will be paid for by Closing by Contributor and all
contributions to tenants for tenant improvements, if any, have
been paid in full or will be paid for by Closing by
Contributor;
(vii) 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 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"). All of the Service Contracts set forth on Exhibit C shall
be assumed by FWRLP as of the Closing Date, unless FWRLP notifies Contributor
before the end of the Feasibility Period to terminate any or all of the Service
Contracts. No Service Contract will be terminated, amended, modified or
supplemented prior to the Closing Date without FWRLP's prior written approval
(except that any management and leasing agreement shall be terminated as of
Closing).
(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 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. Attached hereto as Exhibit E are copies of all
hazard, liability and other insurance policies presently affording coverage with
respect to the Property. Contributor shall maintain in full force and effect all
such policies until the Closing Date and following expiration of the Feasibility
Period shall cause its insurer to
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name FWRLP as an additional insured as a contract party on its rent loss policy
with respect to the Property.
(h) Condition of Property. Possession of the Property shall be
delivered to FWRLP at Closing in its "as is, where is" condition as of the date
of FWRLP's execution of this Agreement subject to the provisions of Section
6(a). Contributor has no knowledge of any material defect in the structural
elements of the Property.
(i) Tenant Estoppel. Contributor represents and warrants that
it shall use reasonable good faith 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 confirming the information set
forth in Exhibit B attached hereto. Contributor hereby agrees that FWRLP may
participate in the procurement of said tenant estoppel letter(s) subject to the
consent of Contributor.
(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.
(k) Litigation. No litigation is pending or, to the best of
Contributor's knowledge, currently 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 Property as contemplated herein, except as set forth on Exhibit G
hereof.
(l) 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 Contributor is
a party or by which the Contributor or the Property is bound, (ii) violate any
restriction, requirement, covenant or condition to which the Contributor is
subject or by which Contributor or the Property is bound, (iii) 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) Entrances. To the best of Contributor's knowledge, except
for access over property currently owned by Exxon (for which no easement
exists), access to any portion of the Land is not obtained from adjoining public
roads by means of easements, rights-of-way or licenses across lands or premises
not included within the Property.
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(n) Separate Tax Lot and Subdivision. To the best of
Contributor's knowledge, each parcel of Land is the subject of a separate
subdivision, and each parcel of Land is assessed for tax purposes as one or more
separate and distinct parcels.
(o) Hazardous Waste. To the actual knowledge of Contributor
without investigation, there has been no 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.
Contributor has not caused, and shall not permit to exist any condition which
may cause a Spill at, upon, under or within the Land or any contiguous real
estate. To Contributor's actual 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 actual knowledge
without investigation, the Building is free of asbestos. Contributor advises
that the Property is adjacent to a gas station.
(p) Operating Statements. Attached hereto as Exhibit H are
true and correct operating statements of the Property for fiscal years 1994,
1995, 1996 and 1997 (through June 30, 1997). To Contributor's knowledge, there
has been no adverse change in the Property or the operation thereof which would
materially adversely affect the economic condition of the Property. Also
attached as Exhibit H is a copy of the 1997 operating budget for the Property.
(q) 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.
(r) Personal Property. Attached hereto as Exhibit I is a true,
correct and complete inventory of all personal property ("Personal Property"),
if any, owned by Contributor and used in the management, maintenance and
operation of the Property (other than trade fixtures or personal property of
tenants).
(s) Certificates of Occupancy. Contributor will not amend any
certificates of occupancy for the Property and will maintain them in full force
and effect to the extent Contributor is responsible for them.
(t) Licenses and Permits. To the best of Contributor's
knowledge, all licenses and permits have been issued to Contributor by all
applicable governmental
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authorities which are necessary for the ownership, management and operation of
the Property (the "Licenses"). Contributor has received no notice, nor has any
knowledge, that it is lacking any required permit or license.
(u) Leasing Commissions. There are, and at Closing shall be, no outstanding
or contingent leasing commissions or fees payable with respect to the Property.
(v) Securities Law Matters.
(i) Contributor and each of its partners and the
partners of its partners who receive Units (the "Partners") 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) A list of the Partners will be delivered to
FWRLP within five (5) days after the end of the Feasibility
Period;
(iii) The Partners have their primary residence in
the States of Maryland and Virginia and the District of
Columbia;
(iv) Contributor will hold the Units for its own
account for investment purposes only and not with a view to
distribution and does not intend to distribute or resell the
Units, except as expressly set forth in the last paragraph of
this Section 5(v) below;
(v) Taking into account the personnel and resources
Contributor can practically bring to bear on the acquisition
of the Units in FWRLP contemplated hereby, Contributor is
knowledgeable, sophisticated and experienced in making, and is
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 has requested,
received, reviewed and considered all information it deems
relevant in making an informed decision to acquire the Units
(including the Confidential Information Statement, as
supplemented through the date hereof, attached hereto as
Exhibit L which contains the First Amended and Restated
Agreement of Limited Partnership of FWRLP and any Amendments
thereto (the "Partnership Agreement");
(vi) Contributor 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
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promulgated thereunder and with the terms and conditions of
the Partnership Agreement;
(vii) Contributor acknowledges that the Units to be
issued must be held 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;
(viii) Prior to the issuance of the Units,
Contributor 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; and
(ix) Contributor acknowledges and agrees that,
notwithstanding Section 8.6 of the Partnership Agreement, the
Units to be issued hereunder shall not be redeemable for cash
or exchangeable for Common Stock in the REIT for a period of
thirteen (13) months from the date of issuance to Contributor.
FWRLP hereby agrees that, at Closing, Contributor may transfer the
Units to its Partners, or may request FWRLP to issue the Units directly to its
Partners, provided that the Partners receiving such Units shall, in writing,
make the representations, warranties and covenants contained in and agree to be
bound (on a several basis with respect to matters pertaining to such Partners)
by all of the provisions of this Section 5(v) and any other provision of this
Agreement relating to the Units (in lieu of Contributor), and by accepting such
Units hereby make such representations, warranties and covenants and agree to be
so bound.
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 the Property. 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, including the purchase and replacement of fixtures and
equipment, and the continuation of the normal practice with respect to
maintenance and repair in the ordinary course of business so that the Property
will, except for normal wear and tear, be in substantially the same condition on
the Closing Date as on the Effective Date.
(b) Licenses. Contributor shall use its best efforts to
preserve in force all Licenses 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. From the Acceptance Date to the
expiration of the Feasibility Period provided for in Section 13, Contributor
shall have the right to enter into new leases for space at the Property ("New
Lease(s)") or to amend, modify, renew, supplement or extend any Lease in any
respect or approve any assignment of leases or subletting of leased space, or
terminate any Lease (with respect to any provision amending, modifying,
renewing, supplementing or extending, etc. above, "Amended Lease(s)"), and as to
any Amended or New Leases entered into by Contributor during this period,
Contributor shall give FWRLP notice (including therewith copies of the Amended
and New Leases and all relevant data related to the particular Amended or New
Lease) of such Amended and/or new Leases within two (2) days after the entry
into any Amended or New Lease, but, in any event, not later than seven (7) days
prior to the expiration of the Feasibility Period. After the expiration of the
Feasibility Period, Contributor shall not, without FWRLP's prior written consent
which consent shall not be unreasonably withheld, amend, modify, renew or extend
any Lease in any respect unless required by law or the terms of any existing
lease (and then only in accordance with the terms of such lease), or enter into
new leases or approve any assignment of leases or subletting of leased space, or
terminate any Lease. Prior to Closing, Contributor shall not apply all or any
part of the security deposit of any tenant unless such tenant is in default and
has vacated the Property.
(e) Obligations as to Existing Loan. Contributor shall make
all payments required to be made under the Existing Loan when due, shall perform
all obligations under the Existing Loan and shall keep the Existing Loan free
from default.
7. Representations, Warranties and Covenants of FWRLP. In order to
induce Contributor to enter into this Agreement and to contribute the Property
to FWRLP, FWRLP hereby makes the following representations, warranties and
covenants, each of which is material and shall survive Closing to the extent
provided in Section 18(p) herein:
(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. Subject to Section 8(a) (viii), FWRLP has all necessary power and
authority to execute, deliver and perform this Agreement and consummate all of
the transactions contemplated by this Agreement. Subject to Section 8(a) (viii),
this Agreement is the valid and binding obligation of FWRLP, enforceable against
it in accordance with its terms, except that such enforcement may be subject to
bankruptcy, conservatorship, receivership, reorganization, insolvency,
moratorium or similar laws or procedures relating to or affecting creditors'
rights generally and to general principles of equity.
(b) No Defaults. Neither the execution of this Agreement nor
the consummation of the transactions contemplated hereby will: (i) conflict
with, or result in
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a breach of, the terms, conditions or provisions of, or constitute a default
under, the Partnership Agreement or any agreement or instrument to which FWRLP
is a party, (ii) violate any restriction, requirement, covenant or condition to
which the FWRLP is subject, and (iii) constitute a violation of any applicable
code, resolution, law, statute, regulation, ordinance, rule, judgment, decree or
order.
(c) Vacant Space. FWRLP hereby further agrees that if any
rentable space in the Property 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.
(d) Disclosure Documents. Attached hereto as Exhibit L 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 set forth in Exhibit L, and, to the
knowledge of FWRLP, is in full force and effect as of the date hereof, and, to
the knowledge of FWRLP, no default or condition which, with the passage of time
or the giving of notice could become a default, exists on the part of any party
thereunder.
(e) Allocation of Non-Recourse Debt. At least fifteen (15)
days prior to the Closing, FWRLP shall provide the Contributor with a letter
from its independent certified public accountants indicating the amount of FWRLP
non-recourse indebtedness that will be allocated to Contributor's Units for
federal income tax purposes immediately after the Closing. The letter will
contain a computation of the amount of FWRLP non-recourse indebtedness allocable
to Contributor based on certain assumptions (some of which will be provided by
Contributor or its counsel), and the results for the contribution of the
Property by the Contributor. If the aforementioned accountant's letter delivered
to the Contributor prior to the Closing indicates that the amount of FWRLP
non-recourse indebtedness that will be allocated to Contributor's Units
immediately after the Closing is not sufficient to avoid triggering a taxable
gain to Contributor on Contributor's contribution of the Property to FWRLP, then
the Contributor shall have the right to terminate this Agreement by giving
written notice thereof to FWRLP within seven (7) days of receipt of such
accountant's letter by the Contributor, in which event the Deposit and any
interest thereon shall be returned to FWRLP and neither party shall have any
further obligations or liabilities to the other.
(f) Holding Period. 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 pursuant to a condemnation or under threat of condemnation) for a period of
seven (7) years following the Closing Date, unless (i) it is pursuant to a
tax-free exchange such that no taxable gain would be incurred by Contributor, or
the Partners to which Units may be distributed by Contributor, as a result of
such sale or other disposition of the Property or
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(ii) FWRLP indemnifies and agrees to hold harmless Contributor from any Federal
and state income tax consequences attributable to such sale or other
disposition.
(g) FWRLP will use the "traditional" method under Section
704(c) of the Internal Revenue Code in connection with the Contribution of the
Property.
(h) The FWRLP Partnership Agreement provides that Units may be
transferred or pledged only with the consent of the general partner of FWRLP.
FWRLP hereby agrees that such consent of the general partner shall not be
unreasonably withheld with respect to a transfer or pledge of the Units to be
issued to Contributor or the Partners to which the Units may be distributed by
Contributor.
(i) Notwithstanding the provisions of the FWRLP Partnership
Agreement, when the Units issued to Contributor, or the Partners to which the
Units may be distributed by Contributor are redeemable or exchangeable as
provided in this Agreement, such Units will be exchangeable for common stock of
the REIT (rather than redeemable for cash) unless the general partner of FWRLP
reasonably believes that the issuance of common stock would have an adverse
effect on FWRLP or the REIT.
(j) FWRLP will use its best efforts to cause the cash
distributions made with respect to the Units issued to Contributor, or the
Partners hereunder to which the Units may be distributed by Contributor, to be
equal in amount to the cash distributions that would have been paid to
Contributor, or to the Partners to which the Units may be distributed by
Contributor, if it or they had exercised the Exchange Rights as of the date
hereof and received REIT common stock in exchange for such Units.
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. 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
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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 other matters which are listed on Exhibit J
attached hereto. Notwithstanding anything to the
contrary contained in this paragraph (B),
Contributor, at or prior to Closing, shall cause to
be satisfied and released of record all mortgages,
deeds of trust, financing statements, judgements,
liens and other matters that may be satisfied by
payment of a liquidated sum and that first appears of
record after the date hereof.
(iv) 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 without limitation the payment of any
outstanding or contingent claims, shall be the sole
responsibility of Contributor. Contributor agrees that it 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 outstanding and/or contingent leasing
commissions or fees or management fees. The provisions of this
subparagraph (iv) shall survive Closing without limitation.
(v) Performance by Contributor. Contributor shall
have complied in all material respects with and not be in
material breach of any of its covenants or obligations under
this Agreement.
(vi) Tenant Estoppels. FWRLP shall have received (A)
a tenant estoppel letter in the form attached hereto as
Exhibit F from each of the tenants at the Property or such
other form as is reasonably acceptable to FWRLP (or in such
form as required by FWRLP's mortgage lender), confirming the
information set forth in the Leases and Rent Schedule attached
hereto as Exhibit B for such tenants and containing no
material changes therefrom, and (B) any subordination and
attornment agreements required by FWRLP's mortgage lender.
(vii) Existing Mortgages. Contributor shall have
delivered to the Title Company such releases or other
instruments necessary to release of
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record and beneficially any and all existing mortgages, deeds
of trust, financing statements or other security documents
affecting the Property.
(viii) FWRT Board Approval. The Board of Directors of
FWRT shall have approved this Agreement and the transactions
contemplated hereby on or before the last day of the
Feasibility Period. In the event that the aforesaid condition
is not satisfied by the end of the Feasibility Period, FWRLP
may elect to terminate this Agreement by giving Contributor
written notice thereof before the expiration of the
Feasibility Period in which event the Deposit and any interest
thereon shall be returned to FWRLP and neither party shall
have any further obligations or liabilities to the other. If
FWRLP does not terminate this Agreement as set forth in this
subsection 8(a)(viii), then the condition precedent set forth
in this subsection 8(a)(viii) shall be deemed waived.
(b) Failure of Condition. In the event of the failure by the
Closing Date of any condition precedent set forth above, FWRLP shall notify
Contributor in writing, and if Contributor does not correct such failure (if
valid) within five (5) business days after such notice, 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 Closing and, if a default, avail
itself of any legal or equitable remedy FWRLP may have, except as to any default
of Contributor waived in writing by FWRLP or deemed to be waived pursuant to the
provisions of this Agreement on or before the Closing Date; or (c) other than a
failure of item (viii) of Section 8(a) above, 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) Notwithstanding anything in this Agreement to the
contrary, if (a) FWRLP has actual knowledge on the Closing Date that (i) any
representation or warranty made by Contributor is untrue or contains an
omission, or (ii) any condition precedent to Contributor's obligations set forth
in this Agreement cannot be or has not been satisfied, and (b) notwithstanding
such knowledge, FWRLP elects to consummate the Closing under this Agreement,
then (c) FWRLP shall be deemed to have waived such untrue representation,
warranty, or failed condition precedent; provided, however, that such untrue
representation or warranty or failed condition precedent shall not be deemed
waived if such failure was due to the willful misconduct or bad faith of
Contributor after the Acceptance Date.
9. Contributor's Deliveries. Contributor shall execute, acknowledge and
deliver to FWRLP at the Closing the following documents, each dated on the
Closing Date:
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(a) a special warranty deed, in form and substance reasonably
satisfactory to FWRLP and Title Company, conveying good and marketable fee
simple title to the Property, free and clear of all liens, encumbrances,
easements and restrictions of every nature and description, except for the
Permitted Exceptions;
(b) a bill of sale which shall convey to FWRLP good title to
all the Personal Property, free and clear of all liens and encumbrances;
(c) an affidavit setting forth that all of Contributor's
representations and warranties are true and correct in all material respects as
of the Closing Date;
(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, warranties and Service
Contracts, if any, which are to be assumed by FWRLP, together with the
originally executed Service Contracts which are to be assumed;
(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) Tenant estoppel letters as required in Section 8(a)(vi).
(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 as provided in Treas. Reg.
1.1445-2(b)(2)(iii)(B) or in any other form as may be required by the Internal
Revenue Code or the regulations issued thereunder;
(l) a standard title company affidavit as to mechanic's liens
and possession reasonably acceptable to Contributor;
(m) any and all documents necessary to release the cash
constituting the Deposit from escrow with the Title Company and to have said
Deposit returned to FWRLP;
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(n) an amendment to the Partnership Agreement of FWRLP, in a
form reasonably acceptable to FWRLP and Contributor, admitting the Contributor
(or the Partners receiving Units, if applicable) as a limited partner(s) of
FWRLP and issuing the Units to Contributor (or the Partners who are to receive
Units, if applicable) computed in accordance with Section 2 herein; and
(o) 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 pay
the Actual Loan Amount to Lender and issue the Units to Contributor in the
manner specified in Section 2, whereupon the Deposit, and any interest accrued
thereon, shall be returned to FWRLP by the Title Company. In addition to the
Units, FWRLP shall deliver to Contributor at Closing the following items:
(a) an affidavit setting forth that all of FWRLP's
representations and warranties are true and correct in all material respects as
of the Closing Date; and
(b) an assumption of the Leases as of the Closing Date.
11. Settlement Charges; Prorations and Adjustments.
(a) FWRLP shall pay for the title examination, the title
insurance premium, notary fees and other such charges incident to Closing. The
cost of preparation of the deed for the Property shall be borne by Contributor.
All real estate transfer and recording fees and taxes and documentary stamps in
connection with this transaction shall be borne equally by Contributor and
FWRLP. FWRLP and Contributor shall each pay its own legal fees related to the
preparation of this Agreement and all documents required to settle the
transaction contemplated hereby.
(b) In addition to the foregoing, at the Closing, the
following adjustments and prorations shall be computed as of the Closing Date,
as follows:
(i) Taxes. Real estate and personal property taxes
shall be apportioned as of the Closing Date.
(ii) Assessments. All special assessments and other
similar charges which have become a lien upon the Property or
any part thereof at the Closing Date and are due and payable
through the Closing Date, if any, shall be paid in full by
Contributor at the Closing. All other special assessments or
similar charges shall be adjusted as of the Closing Date.
(iii) Rent and Security Deposits. Rent for the month
of, and any month after, Closing collected by Contributor
prior to Closing shall be
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adjusted as of the date of the Closing Date. 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. At
Contributor's election (i) FWRLP will institute suit at the
request of Contributor to collect arrearages due as of the
Closing Date provided all costs (including reasonable
attorneys' fees) in connection therewith are paid by
Contributor, or (ii) FWRLP shall assign to Contributor all
rights with respect to such arrearages and Contributor may
pursue collection thereof. 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,
shall be promptly paid to the other party, which obligation
shall survive the Closing.
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 the Closing, 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 Rent then due to FWRLP
pursuant to the tenant's Lease, which obligation shall survive
the Closing. Notwithstanding the foregoing, FWRLP shall (i)
pay to Contributor at Closing the projected amount of
CVS/Pharmacy monthly percentage rent accrued through the date
of Closing based upon reasonable estimates, and (ii) be
entitled to all CVS/Pharmacy percentage rent collected after
Closing, subject to adjustment as set forth in subsection
11(b)(v) below.
(iv) Debt Service on the Existing Loan. Contributor
shall be liable for all interest payable under the Existing
Loan through the Closing Date.
(v) Miscellaneous. All other charges and fees
customarily prorated and adjusted in similar transactions,
including utilities, insurance premiums and charges for
Service Contracts and other liabilities incurred in the
ordinary course of business to be assumed by FWRLP, shall be
prorated as of the Closing Date. 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,
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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. Contributor agrees that an
appropriate amount in respect of water consumption or other
utility charges may be held in escrow by the Title Company in
connection with its issuance of a title insurance policy to
FWRLP. Contributor shall use its best efforts to have all
utility meters read on the Closing Date so as to accurately
determine its share of current utility bills.
(c) Distributions. The quarterly distributions payable to
Contributor on the Units for the first record date after Closing shall be pro
rated based upon the number of days within the quarter occurring after Closing.
12. Risk of Loss. The risk of loss or damage to the Property by fire or
other casualty until delivery of the deed of conveyance shall be borne by
Contributor. 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 One Hundred Thousand Dollars ($100,000.00) or more or if tenants
of the Property (occupying in excess of 4,000 square feet in the aggregate)
shall exercise a termination right available under its lease because of such
damage, 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, 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 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 (based on the Unit Price) 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. FWRLP shall have
the right to participate in the negotiation and settlement of any casualty or
condemnation- related claim, provided FWRLP shall have previously elected not to
terminate this Agreement or has no such right of termination.
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
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surveys, or any tests, investigations and/or studies relating to the Property or
FWRLP's intended acquisition thereof which FWRLP deems appropriate, in its sole
discretion, during reasonable hours and upon reasonable notice to Contributor.
FWRLP's entry shall be subject to the rights of all tenants of the Property, and
FWRLP shall use reasonable efforts not to interfere with the business being
conducted by the tenants. 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, at FWRLP's cost, to
make copies of same.
(b) Feasibility Period. Any other provisions of this Agreement
to the contrary notwithstanding, FWRLP may, prior to the expiration of thirty
(30) days after the Acceptance Date (such 30-day period herein referred to as
the "Feasibility Period"), cause at FWRLP's sole risk, 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, during reasonable hours and upon
reasonable notice to Contributor. FWRLP's entry shall be subject to the rights
of all tenants of the Property, and FWRLP shall use reasonable efforts not to
interfere with the business being conducted by the tenants. 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 expiration of
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 shall be liable for any damage
to real or personal property or injuries to persons caused by FWRLP's actions in
studying the Property during the Feasibility Period. FWRLP agrees to repair any
such damage to the Property that may be caused by its inspections and to
indemnify and defend Contributor and hold Contributor harmless against any
claim, liability or loss as a result of such damage or injuries to persons
caused by FWRLP. The foregoing repair and indemnification obligation shall
survive Closing and/or any termination of this Agreement.
(c) Audit. Contributor hereby agrees to allow its books and
records related to the Property to be audited (at FWRLP's sole expense) at the
Contributor's office 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.
14. Indemnifications.
(a) Indemnification by Contributor. Contributor hereby
indemnifies and agrees 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
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liabilities (including reasonable attorneys' fees) which may at any time be
asserted against or suffered by FWRLP, any indemnitee, or the Property, or any
part thereof, whether before or after the Closing Date, as a result of, on
account of or arising from (i) any breach of any covenant, representation,
warranty or agreement on the part of Contributor or its Partners made herein or
in any instrument or document delivered pursuant to this Agreement, and/or (ii)
any obligation, claims, suit, liability, contract, agreement, debt or
encumbrance or other occurrence created, arising or accruing on or prior to the
Closing Date, regardless of when asserted, and relating to the Contributor or
the Property or its operations. To the extent an indemnification obligation
under clause (i) above arises out of a breach by any Partner of the several
representations and warranties set forth in Section 5(v) hereof, only the
Partner responsible for such breach shall be obligated to indemnify FWRLP
hereunder.
(b) [Intentionally Omitted].
(c) Indemnification by FWRLP. FWRLP hereby indemnifies and
agrees to defend and hold harmless Contributor and its Partners and their
respective heirs, executors, administrators, personal or legal representatives,
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 Partners
and/or their heirs, executors, administrators, personal or legal
representatives, successors or assigns as a result of, on account of or arising
from (i) 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 (ii) any obligation, claims, suit, liability,
contract, agreement, debt or encumbrance or other occurrence created, arising or
accruing after the Closing Date and relating to FWRLP or 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 other than that payable to Randall
H. Hagner & Co., which shall be payable by Contributor. Contributor and FWRLP
hereby indemnify and hold the other harmless from any and all claims of any
broker or agent so claiming based on action or alleged action of the other. The
provisions of this Section 15 shall survive Closing or any termination of this
Agreement.
16. Default Provisions; Remedies.
(a) FWRLP's Default. Except for any failure waived in writing
by Contributor, if FWRLP fails to consummate the Contribution contemplated
herein when required to do so pursuant to the provisions hereof or otherwise
breaches any of its covenants or obligations under this Agreement and such
breach is not cured within five (5) days after written notice thereof from
Contributor or any representations or warranties made by FWRLP shall be
inaccurate or incorrect in any material respect on the Acceptance Date, then the
Title Company shall deliver the Deposit and all interest
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thereon to Contributor as full and complete liquidated damages, and as the
exclusive and sole right and remedy of Contributor, at law or in equity,
whereupon this Agreement shall terminate and neither party shall have any
further obligations or liabilities to any other party, provided that the repair
and indemnity obligation set forth in Section 13(b) shall nevertheless remain in
full force and effect.
(b) Contributor's Default. Except for any breaches waived in
writing by FWRLP, if Contributor breaches any of its covenants or obligations
under this Agreement or has failed, refused or is unable to consummate the
Contribution contemplated herein by the Closing Date and such breach is not
cured within five (5) days after written notice thereof from FWRLP or if any of
the representations and warranties made by Contributor under this Agreement
shall be inaccurate or incorrect in any material respect on the Acceptance Date,
then FWRLP shall notify Contributor of such breach in writing and, should
Contributor not cure same within five (5) business days of receipt of such
default notice, then FWRLP shall be entitled to (i) waive such breach, default
or failure, and proceed to Closing, (ii) extend the Closing for such reasonable
time or times as may be necessary in order to enable Contributor to remedy such
breach, default or failure (but in no event more than three (3) months), (iii)
terminate this Agreement and obtain the return of the Deposit, and/or (iv)
pursue such remedies as may be available at law or in equity, including without
limitation maintaining any action for damages and/or specific performance
(including without limitation reasonable attorneys' fees and court costs),
provided that any action for damages against Contributor shall be limited to an
amount equal to $50,000.00 (exclusive of reasonable attorneys' fees and court
costs).
(c) The provisions of Sections 16(a) and (b) above shall not
be applicable to any breach or default by a party occurring or first becoming
actually known to the other party after Closing, and, as to any said breach or
default, the non-defaulting party may exercise any and all remedies available at
law or in equity, subject, however, to any applicable limitations on survival
expressly provided for in this Agreement.
17. Registration Rights. First Washington Realty Trust, Inc. (the
"REIT") hereby agrees to use its best efforts to file a registration statement
within thirteen (13) months after Closing to register the issuance and resale,
if required, of REIT Common Stock which may be issued to Contributor in exchange
for its Units, to use its best efforts to cause such registration statement to
become effective and to keep such registration continuously effective (subject
to certain exceptions) for a period for five (5) years thereafter; provided,
however, that the REIT shall be permitted to postpone such filing or suspend the
effectiveness of such shelf registration statement for such periods as the REIT
reasonably determines are in the best interest of the REIT or which are
necessary to comply with securities law requirements (including suspending sales
under the shelf registration statement for such periods as the managing
underwriter in an underwritten offering deems necessary). The obligations of the
REIT under this Section 17 shall survive Closing.
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18. Miscellaneous Provisions.
(a) Completeness and Modification. This Agreement (together
with Exhibits A to L attached hereto) represents the complete understanding
between the parties 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 heirs,
executors, administrators, personal and legal representatives, 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.
(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 District of Columbia.
(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) [Intentionally Omitted].
(i) 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.
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(j) 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: Stuart D. Halpert
Jeffrey S. Distenfeld, Esq.
Telecopy: (301) 907-4911
(ii) if to Contributor:
Spring Valley Partners
c/o Randall H. Hagner & Co.
1321 Connecticut Avenue, N.W.
Washington, DC 20036
Attn: John A. Sargent
Telecopy: (202) 785-7378
with a copy to:
Shaw, Pittman Potts & Trowbridge
2300 N Street, NW
Washington, DC 20037
Attn: Robert Robbins, Esq.
Telecopy: (202) 663-8007
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 18(j).
(k) 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, provided that such execution,
acknowledgment and delivery does not impose any additional costs on such party
(other than such party's attorneys' fees in the review thereof and de minimis
recording costs).
(l) 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
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Agreement which does not fall on a business day shall be automatically extended
until the first business day after such date.
(m) Confidentiality. FWRLP agrees and acknowledges that the
information provided to it by the Contributor hereunder regarding the Property
is confidential, and that it will not disclose such information to any other
person, other than to its employees, agents, attorneys, accountants, lenders and
other consultants or other parties that need to know such information in order
for FWRLP to evaluate the transaction contemplated herein, without the prior
written consent of Contributor. If this Agreement is terminated, all
information, documentation and other materials provided to FWRLP shall be
returned to the Contributor.
(n) Attorneys' Fees. In the event any suit or action is
instituted to interpret or enforce any of the terms of this Agreement, the
prevailing party shall be entitled to recover from the other party such sum as
the court may determine and grant as reasonable attorneys' fees at trial or on
appeal of such suit or action, in addition to all other sums recoverable by
virtue of such action.
(o) Survival. None of the representations, warranties,
covenants and indemnities set forth in this Agreement shall survive Closing
except as follows:
(i) the representations, warranties and covenants contained in Sections
5(a) through (t) and Sections 7(a) through (c) shall survive Closing and shall
terminate one (1) year after the Closing Date except as to claims for breach
thereof asserted by a party within such one (1) year period;
(ii) the representations, warranties and covenants contained in Section
13(b) and Section 17 shall survive Closing and shall terminate five (5) years
after the Closing Date except as to claims for breach thereof asserted by a
party within such five (5) year period;
(iii) the representations, warranties and covenants contained in Sections
5(u) and (v) and Sections 7(d), (e), (f), (g), (h), (i) and (j) shall survive
Closing without any limitation;
(iv) the indemnification for breach of representations or warranties
pursuant to clause (i) of the first sentence of each of Section 14(a) and
Section 14(c) herein, shall terminate one (1) year after the Closing Date,
except as to claims as to which a party hereto has asserted a right of
indemnification within said one (1) year period; and
(v) the indemnification for breach of representations or warranties
pursuant to clause (ii) of the first sentence of each of Section 14(a) and
Section 14(c) herein, shall terminate five (5) years after the Closing Date,
except as to claims as to which a party hereto has asserted a right of
indemnification within said five (5) year period.
-24-
<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
/s/ Jeffrey S. Distenfeld By: /s/ Stuart D. Halpert
Stuart D. Halpert
Chairman
Date of execution: October 7, 1997
CONTRIBUTOR:
SPRING VALLEY JOINT VENTURE
By: CJS Associates, Inc.
WITNESS: General Partner
/s/
By: /s/ John A. Sargent
John A. Sargent
Vice President
Date of execution: October 8, 1997
-25-
<PAGE>
First Washington Realty Trust, Inc. joins herein solely for the purpose of
making the representations, warranties and covenants contained in Section 17
hereof.
FIRST WASHINGTON REALTY
WITNESS: /s/ Jeffrey S. Distenfeld TRUST, INC.
By: /s/ Stuart D. Halpert
Stuart D. Halpert
Chairman
Date of execution: October 7,1997
-26-
<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.
COMMERCIAL SETTLEMENTS, INC.
By: /s/ Stuart S. Levin
Name: Stuart S.Levin
Title: Vice President
Date: October 10, 1997
S:\SHAVER\FWR\SPRING4.AGT
-27-
<PAGE>
LIST OF EXHIBITS
EXHIBIT A. Legal Description of Land Recitals
EXHIBIT B. Leases and Rent Schedule Section 5(d)
EXHIBIT C. Service Contracts Section 5(e)
EXHIBIT D. Tax Bills Section 5(f)
EXHIBIT E. Insurance Policies Section 5(g)
EXHIBIT F. Form of Tenant Estoppel Section 5(i)
EXHIBIT G. Litigation Section 5(k)
EXHIBIT H. Operating Statements and Budget Section 5(p)
EXHIBIT I. Personal Property Section 5(r)
EXHIBIT J. Permitted Exceptions Section 8(a)(iii)
EXHIBIT K. [Intentionally Omitted]
EXHIBIT L. Confidential Information Statement Sections 5(v), 7(e)
[Contributor to Attach Foregoing at Acceptance of this Agreement]
-28-
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF LAND
-29-
<PAGE>
EXHIBIT B
LEASES AND RENT SCHEDULE
-30-
<PAGE>
EXHIBIT C
SERVICE CONTRACTS
-31-
<PAGE>
EXHIBIT D
TAX BILLS
-32-
<PAGE>
EXHIBIT E
INSURANCE POLICIES
-33-
<PAGE>
EXHIBIT F
[Form of Tenant Estoppel]
TENANT ESTOPPEL CERTIFICATE
________________ Shopping Center (the "Shopping Center")
____________, ___________ County, ____________
TO: ________________________ ("Landlord")
First Washington Realty Limited Partnership, or its affiliates,
assignees or designees ("FWRLP") ________________________ ("Lender").
THIS IS TO CERTIFY THAT:
1. The undersigned is the Tenant under that certain lease dated as set
forth on Schedule A hereto annexed (such lease, as guaranteed,
assigned, supplemented, amended or modified as set forth on Schedule A
hereto is herein termed the "Lease") covering certain premises
("Premises") at the Shopping Center.
2. The Lease has not been assigned, supplemented or amended or modified in
any respect except as set forth in said Schedule A. The Lease is valid
and in full force and effect on the date hereof. The Lease is the only
lease or agreement between the Tenant and the Landlord or its
predecessors or the affiliates of either of them (individually and
collectively, the "Landlord") relating to the Premises. The Lease
represents the entire agreement between the Landlord and the Tenant
with respect to the Premises. No oral agreement of any kind exists
between the Landlord and the Tenant.
3. The Tenant hereby certifies that:
A. The Tenant is currently in possession of the Premises.
B. The Tenant's monthly rent under the Lease, as of
_______________, 199__ is $_________ per month, and the Tenant
has paid rent through ____________________, 199__.
C. A security deposit of $__________ has been deposited, and
remains on deposit, with the Landlord.
D. The Tenant's payment to the Landlord for operating expenses
(taxes, insurance, utilities and maintenance) under the Lease
is currently $_________ per month.
E. The Lease commenced on ___________________, 199__.
F. The current term of the Lease expires on __________, 199__.
G. The Tenant has ____ options to renew or extend the Lease for
____ years each.
4. The Tenant is not entitled to, and has made no agreement(s) (orally or
in writing) with the Landlord or its agents or employees concerning
free rent, rebate of rental payments, credit or offset or deduction in
rent, or any other type of rental concession. The Tenant has made no
advanced payment of rent or other payment in advance of any sums due
under the Lease, except rental for the current month. The Landlord has
not provided financing for, made loans or advances to, or invested in
the business of the Tenant.
5. The Tenant has accepted and now occupies all of the Premises and is
doing business therein. To the best of the Tenant's knowledge, the
Premises are free from defects in design, materials and/or workmanship.
6. There is no existing default on the part of the Landlord or the Tenant
in any of the terms and conditions of the Lease and no event has
occurred and no condition exists which, with the giving of notice or
the lapse of time or both, may constitute a default, on the part of
either the Landlord or the Tenant, under the Lease. The Tenant has no
existing defense or offsets against the enforcement of the Lease by the
Landlord, and the Tenant currently has no unasserted claims against the
Landlord. There are no writs, injunctions, decrees, orders or judgments
outstanding, no lawsuits, claims, proceedings, or investigations
pending,
-i-
<PAGE>
threatened or previously settled, relative to the Lease, nor is the
Tenant aware of a basis for any proceeding.
7. All obligations under the Lease to be performed by the Landlord,
including without limitation any obligation to perform construction
work within the Premises or the Shopping Center, have been satisfied.
All required contributions by the Landlord to the Tenant on account of
"tenant improvements" and/or "tenant allowances" (if any) have been
received by the Tenant, and if any other payments from the Landlord to
the Tenant are called for by the terms of the Lease, the Tenant
acknowledges that the Tenant has received the same.
8. The Lease contains, and the Tenant has, no outstanding options or
rights of first refusal to purchase the Premises or any part thereof or
all or any part of the real property of which the Premises are a part,
and the Tenant has no right or option to take on any additional space
or to give back any portion of the Premises.
9. The Tenant has not made nor is the Tenant presently contemplating any
assignment by the Tenant for the benefit of creditors or any filing by
the Tenant of a proceeding under the United States Bankruptcy Court or
similar laws of any state seeking the liquidation or reorganization of
the Tenant, and to the Tenant's knowledge no such proceedings are
currently pending, threatened or contemplated against the Tenant.
10. The Tenant has not sublet the Premises to any sublessee and has not
assigned any of its rights under the Lease, except as set forth on
Schedule A. No one except the Tenant and its employees occupies the
Premises.
11. The address for notices to be sent to the Tenant is as set forth in the
Lease, unless a different address is set forth in said Schedule A.
12. The Tenant does not have, nor has the Tenant disposed of, hazardous
materials (as defined in any federal, state or local statute) in
violation of applicable laws, regulations or rules (collectively, the
"Environmental Laws"), on the Premises or the Shopping Center. Tenant
has not received any notices, written or oral, of violation of any of
the Environmental Laws.
13. The undersigned is authorized to execute this Tenant Estoppel Certificate on
behalf of the Tenant.
14. The undersigned hereby ratifies and confirms the Lease in all respects.
15. This certification is being made to induce FWRLP to acquire the
Shopping Center (or the interests in the Landlord) and to induce the
Lender to grant a loan to the Landlord which loan will be secured by
the Shopping Center.
Dated _____________________, 1997.
__________________________________(TENANT)
By:
Title:
GUARANTOR CONSENT
(IF APPLICABLE):
The undersigned __________________ and ____________________
("Guarantor(s)") hereby consents to and approves of the execution and delivery
of this above certification and agrees that that certain Guaranty dated
______________, 199___ executed by Guarantor with respect to the Lease described
above is in all respects ratified and confirmed and is and shall continue in
full force and effect.
(GUARANTOR(S))
========================
========================
-ii-
<PAGE>
EXHIBIT G
LITIGATION
NONE
-iii-
<PAGE>
EXHIBIT H
OPERATING STATEMENTS AND BUDGET
-iv-
<PAGE>
EXHIBIT I
PERSONAL PROPERTY
Lawn Mower
-v-
<PAGE>
EXHIBIT J
PERMITTED EXCEPTIONS
1. Rights of adjoining property owners on the West in and to party wall
along the West property line to the extent shown on Building Location
Plat made by Frey, Sheehan, Stoker & Assoc., Inc., dated March 18,
1986.
2. Right of Way for Falls Branch Sewer condemned by proceedings in
District Court Case 716, Supreme Court, District of Columbia.
3. Existing unrecorded leases.
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-vi-
<PAGE>
EXHIBIT K
[INTENTIONALLY OMITTED]
-vii-
<PAGE>
EXHIBIT L
CONFIDENTIAL INFORMATION STATEMENT
-viii-
<PAGE>
REVOLVING CREDIT AGREEMENT
dated as of January 22, l998
among
FIRST WASHINGTON REALTY LIMITED PARTNERSHIP,
as Borrower,
UNION BANK OF SWITZERLAND
(New York Branch),
as Bank,
and
UNION BANK OF SWITZERLAND
(New York Branch),
as Administrative Agent
<PAGE>
REVOLVING CREDIT AGREEMENT dated as of January ___, 1998 among
FIRST WASHINGTON REALTY LIMITED PARTNERSHIP, a limited partnership organized and
existing under the laws of the State of Maryland ("Borrower"), UNION BANK OF
SWITZERLAND (New York Branch), as agent for the Banks (in such capacity,
together with its successors in such capacity, "Administrative Agent"), and
UNION BANK OF SWITZERLAND (New York Branch) (in its individual capacity and not
as Administrative Agent, "UBS"; UBS and the lenders who from time to time become
Banks pursuant to Sections 3.07 or 12.05, and, if applicable, any of the
foregoing lenders' Designated Lender, each a "Bank" and collectively, the
"Banks").
Borrower desires that the Banks extend credit as provided herein, and the
Banks are prepared to extend such credit on the terms and conditions hereinafter
set forth. Accordingly, Borrower, each Bank and Administrative Agent agree as
follows:
ARTICLE I. DEFINITIONS, ETC.
Section 1.01 Definitions.
- ---------- -----------
As used in this Agreement the following terms have the following meanings
(except as otherwise provided, terms defined in the singular to have a
correlative meaning when used in the plural and vice versa):
"Additional Costs" has the meaning specified in Section 3.01.
"Administrative Agent" has the meaning specified in the preamble.
"Administrative Agent's Office" means Administrative Agent's
address located at 299 Park Avenue, New York, NY 10171, or such other address in
the United States as Administrative Agent may designate by notice to Borrower
and the Banks.
"Affiliate" means, with respect to any Person (the "first
Person"), any other Person: (1) which directly or indirectly controls, or is
controlled by, or is under common control with the first Person; or (2) 10% or
more of the beneficial interest in which is directly or indirectly owned or held
by the first Person. The term "control" means the possession, directly or
indirectly, of the power, alone, to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract, or otherwise.
"Agreement" means this Revolving Credit Agreement.
"Anchor Stores"; "Anchors" means, for each Property, those
stores to be owned or leased and occupied and operated by major store operators
approved by Administrative Agent, and which, together with the Improvements on
such Property, shall be operated as an integrated shopping center on such
Property; the major store operators owning and operating such stores pursuant to
the applicable REA.
"Annual NOI" means, at any time, the aggregate Net Operating
Income for all Properties for the preceding four calendar quarters.
"Applicable Lending Office" means, for each Bank and for its
LIBOR Loan, Bid Rate Loan(s) or Base Rate Loan, as applicable, the lending
office of such Bank (or of an Affiliate of such Bank) designated as such on its
signature page hereof or in the applicable Assignment and Assumption Agreement,
or such other office of such Bank (or of an Affiliate of such Bank) as such Bank
may from time to time specify to Administrative Agent and Borrower as the office
by which its LIBOR Loan, Bid Rate Loan(s) or Base Rate Loan, as applicable, is
to be made and maintained.
"Applicable Margin" means, with respect to Base Rate Loans and LIBOR Loans,
the respective rates per annum determined, at any time, based on Borrower's
Credit Rating at the time, in accordance with the following table, subject to
possible adjustment in accordance with the definition of "Borrower's Credit
Rating" set forth in this Section 1.01. Any change in Borrower's Credit Rating
causing it to move to a different range on the table shall effect an immediate
change in the Applicable Margin.
===============================================================================
Borrower's Credit Rating
S&P/Moody's/Duff &
Phelps/Fitch Ratings) Applicable Margin Applicable Margin
for Base Rate Loans for LIBOR Loans
(% per annum) (%per annum)
- -------------------------------------------------------------------------------
A-/A3/A-/A- or higher 0.00 0.70
- -------------------------------------------------------------------------------
BBB+/Baa1/BBB+/BBB+ 0.00 0.80
- -------------------------------------------------------------------------------
BBB/Baa2/BBB/BBB 0.00 0.90
- -------------------------------------------------------------------------------
BBB-/Baa3/BBB-/BBB- or below, or unrated 0.00 1.00
===============================================================================
"Assignee" has the meaning specified in Section 12.05.
"Assignment and Assumption Agreement" means an Assignment and
Assumption Agreement, substantially in the form of EXHIBIT E, pursuant to which
a Bank assigns and an Assignee assumes rights and obligations in accordance with
Section 12.05.
"Authorization Letter" means a letter agreement executed by
Borrower in the form of EXHIBIT A.
"Available Total Loan Commitment" has the meaning specified in Section
2.01(b).
"Bank" and "Banks" have the respective meanings specified in
the preamble; provided, however, that the term "Bank" shall exclude each
Designated Lender when used in reference to a Ratable Loan, the Loan Commitments
or terms relating to the Ratable Loans and the Loan Commitments.
"Bank Parties" means Administrative Agent and the Banks.
"Banking Day" means (1) any day on which commercial banks are
not authorized or required to close in New York City and (2) whenever such day
relates to a LIBOR Loan, a Bid Rate Loan, an Interest Period with respect to a
LIBOR Loan or a Bid Rate Loan, or notice with respect to a LIBOR Loan or Bid
Rate Loan, a day on which dealings in Dollar deposits are also carried out in
the London interbank market and banks are open for business in London.
"Base Rate" means, for any day, the higher of (1) the Federal
Funds Rate for such day plus one-half percent (.50%) or (2) the Prime Rate for
such day.
"Base Rate Loan" means all or any portion (as the context
requires) of a Bank's Ratable Loan which shall accrue interest at a rate
determined in relation to the Base Rate.
"Bid Borrowing Limit" means the lesser of 50% of the Total
Loan Commitment or Seventeen Million Dollars ($17,000,000).
"Bid Rate Loan" has the meaning specified in Section 2.01(c).
"Bid Rate Loan Note" has the meaning specified in
Section 2.08.
"Bid Rate Quote" means an offer by a Bank to make a Bid Rate
Loan in accordance with Section 2.02.
"Bid Rate Quote Request" has the meaning specified in
Section 2.02(a).
"Borrower" has the meaning specified in the preamble.
"Borrower's Accountants" means such accounting firm(s)
selected by Borrower and reasonably acceptable to Administrative Agent.
"Borrower's Credit Rating" means the lower of the S&P and
Moody's ratings, if these are the only two (2) ratings (provided, however, that
in the event the ratings by S&P and Moody's are greater than one-half (1/2) step
apart, the Applicable Margin shall be the average of the Applicable Margins
corresponding to such S&P and Moody 's ratings) or the lower of the two (2)
highest ratings if one (1) of these two (2) highest ratings is from either S&P
or Moody's and if, in addition to S&P and Moody's, there exist ratings by either
or both of Duff & Phelps and Fitch (provided, however, if Duff & Phelps and
Fitch are the two (2) highest ratings, then "Borrower's Credit Rating" shall be
the higher of the S&P and Moody's ratings) assigned from time to time by,
respectively, S&P, Moody's, Duff & Phelps and Fitch to Borrower's unsecured and
unsubordinated long term indebtedness. Unless such indebtedness of Borrower is
and continues to be rated by both S&P and Moody's, "Borrower's Credit Rating"
shall be considered unrated for purposes of determining both the Applicable
Margin and the commitment/facility fee required by Section 2.07.
"Borrower's Share of UJV Outstanding Indebtedness" means the
sum of the indebtedness of each of the UJVs contributing to UJV Outstanding
Indebtedness multiplied by Borrower's respective beneficial fractional interests
in each such UJV.
"Borrowing Base" means an amount, effective for any period of
time, equal to the quotient, recomputed as of, and effective for the three
(3)-month period commencing with, the first day of each January, April, July and
October, of (1) Annual NOI for the four calendar quarters immediately preceding
such recomputation date divided by (2) 16%.
"Capitalization Value" means, at any time, the sum of (1)
Combined EBITDA, for the four most recently ended calendar quarters (except that
for purposes of this definition, the aggregate contribution to Combined EBITDA
from leasing commissions and management and development fees shall not exceed 5%
of Combined EBITDA), capitalized at a rate of 9.50% per annum, (2) Borrower's
beneficial share of unrestricted cash and marketable securities of Borrower and
its Consolidated Businesses and UJVs, at such time, as reflected in the FW
Consolidated Financial Statements, and (3) without duplication, the cost basis
of properties of Borrower under construction as certified by Borrower, such
certificate to be accompanied by all appropriate documentation supporting such
figure.
"Capital Lease" means any lease which has been or should be
capitalized on the books of the lessee in accordance with GAAP.
"Center Ridge" means the property owned by Borrower located in
Centreville, Virginia, together with the Improvements thereon.
"Closing Date" means the date this Agreement has been executed
by all parties.
"Code" means the Internal Revenue Code of 1986.
"Combined EBITDA" means, for any period of time, (1) revenues
less operating costs before Interest Expense, income taxes, depreciation and
amortization and extraordinary items (including, without limitation,
non-recurring items such as gains or losses from asset sales) and adjusted for
non-cash revenue attributable to straight lining of rents for Borrower and its
beneficial interest in its Consolidated Businesses, plus (2) Borrower's
beneficial interest in revenues less operating costs before Interest Expense,
income taxes, depreciation and amortization and extraordinary items (including,
without limitation, non-recurring items such as gains or losses from asset
sales) and adjusted for non-cash revenue attributable to straight lining of
rents (after eliminating appropriate intercompany amounts) applicable to each of
the UJVs (to the extent not included above) in all cases as reflected in the FW
Consolidated Financial Statements.
"Commitment Fee Rate" means the rate per annum determined, at any time,
based on Borrower's Credit Rating in accordance with the following table. Any
change in Borrower's Credit Rating which causes it to move into a different
range on the table shall effect an immediate change in the Commitment Fee Rate.
Borrower's Credit Rating Commitment Fee Rate
(S&P/Moody's/Duff & Phelps/Fitch Ratings) (% per annum)
A-/A3/A-/A- or higher 0.15
BBB+/Baa1/BBB+/BBB+ 0.15
BBB/Baa2/BBB/BBB 0.20
BBB-/Baa3/BBB-/BBB- or below, or unrated 0.20
"Consolidated Businesses" means, collectively, each Affiliate
of Borrower who is or should be included in the FW Consolidated Financial
Statements in accordance with GAAP.
"Consolidated Outstanding Indebtedness" means, as of any time,
all indebtedness and liability for borrowed money, secured or unsecured, of
Borrower and all indebtedness and liability for borrowed money, secured or
unsecured, attributable to Borrower's beneficial interest in its Consolidated
Businesses, including mortgage and other notes payable but excluding any
indebtedness which is margin indebtedness secured by cash and cash equivalent
securities, all as reflected in the FW Consolidated Financial Statements.
"Contingent Liabilities" means the sum of (1) those
liabilities, as determined in accordance with GAAP, set forth and quantified as
contingent liabilities in the notes to the FW Consolidated Financial Statements
and (2) contingent liabilities, other than those described in the foregoing
clause (1), which represent direct payment guaranties of Borrower; provided,
however, that Contingent Liabilities shall exclude contingent liabilities which
represent the "Other Party's Share" of "Duplicated Obligations" (as such quoted
terms are hereinafter defined). "Duplicated Obligations" means, collectively,
all those payment guaranties in respect of Debt of UJVs for which Borrower and
another party are jointly and severally liable, where the other party's
unsecured and unsubordinated long-term indebtedness has been assigned a credit
rating of BBB- or better by S&P or Baa3 or better by Moody 's. "Other Party's
Share" means such other party's fractional share of the obligation under the UJV
in question.
"Continue", "Continuation" and "Continued" refer to the
continuation pursuant to Section 2.11 of a LIBOR Loan as a LIBOR Loan from one
Interest Period to the next Interest Period.
"Convert", "Conversion" and "Converted" refer to a conversion
pursuant to Section 2.11 of a Base Rate Loan into a LIBOR Loan or a LIBOR Loan
into a Base Rate Loan, each of which may be accompanied by the transfer by a
Bank (at its sole discretion) of all or a portion of its Ratable Loan from one
Applicable Lending Office to another.
"Debt" means: (1) indebtedness or liability for borrowed
money, or for the deferred purchase price of property or services (including
trade obligations); (2) obligations as lessee under Capital Leases; (3) current
liabilities in respect of unfunded vested benefits under any Plan; (4)
obligations under letters of credit issued for the account of any Person; (5)
all obligations arising under bankers' or trade acceptance facilities; (6) all
guarantees, endorsements (other than for collection or deposit in the ordinary
course of business), and other contingent obligations to purchase any of the
items included in this definition, to provide funds for payment, to supply funds
to invest in any Person, or otherwise to assure a creditor against loss; (7) all
obligations secured by any Lien on property owned by the Person whose Debt is
being measured, whether or not the obligations have been assumed; and (8) all
obligations under any agreement providing for contingent participation or other
hedging mechanisms with respect to interest payable on any of the items
described above in this definition.
"Default" means any event which with the giving of notice or
lapse of time, or both, would become an Event of Default.
"Default Rate" means a rate per annum equal to: (1) with
respect to Base Rate Loans, a variable rate 4% above the rate of interest then
in effect thereon (including the Applicable Margin); and (2) with respect to
LIBOR Loans and Bid Rate Loans, a fixed rate 4% above the rate(s) of interest in
effect thereon (including the Applicable Margin or the LIBOR Bid Margin, as the
case may be) at the time of Default until the end of the then current Interest
Period therefor and, thereafter, a variable rate 4% above the rate of interest
for a Base Rate Loan (including the Applicable Margin).
"Designated Lender" means a special purpose corporation that
(i) shall have become a party to this Agreement pursuant to Section 12.16 and
(ii) is not otherwise a Bank.
"Designating Lender" has the meaning specified in
Section 12.16.
"Designation Agreement" means an agreement in substantially
the form of EXHIBIT J, entered into by a Bank and a Designated Lender and
accepted by Administrative Agent.
"Disposition" means a sale (whether by assignment, transfer or
Capital Lease) of an asset.
"Dollars" and the sign "$" mean lawful money of the United
States of America.
"Duff & Phelps" means Duff & Phelps Credit Rating Company.
"Elect", "Election" and "Elected" refer to elections, if any,
by Borrower pursuant to Section 2.11 to have all or a portion of an advance of
the Ratable Loans be outstanding as LIBOR Loans.
"Engineering Consultant" means the firm designated by
Administrative Agent from time to time for any Property.
"Environmental Discharge" means any material discharge or
release of any Hazardous Materials in violation of any applicable Environmental
Law.
"Environmental Law" means any applicable Law relating to
pollution or the environment, including Laws relating to noise or to emissions,
discharges, releases or threatened releases of Hazardous Materials into the work
place, the community or the environment, or otherwise relating to the
generation, manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials.
"Environmental Notice" means any written complaint, order,
citation, letter, inquiry, notice or other written communication from any Person
(1) affecting or relating to Borrower's or Guarantor's compliance with any
Environmental Law in connection with any activity or operations at any time
conducted by Borrower or Guarantor, (2) relating to the occurrence or presence
of or exposure to or possible or threatened or alleged occurrence or presence of
or exposure to Environmental Discharges or Hazardous Materials at any Property
or at any of Borrower's or Guarantor's other locations or facilities, including,
without limitation: (a) the existence of any contamination or possible or
threatened contamination at any such Property, location or facility and (b)
remediation of any Environmental Discharge or Hazardous Materials at any such
location or facility or any part thereof; and (3) any violation or alleged
violation of any relevant Environmental Law.
"Equity Value" means, at any time, Capitalization Value less
Total Outstanding Indebtedness.
"ERISA" means the Employee Retirement Income Security Act of
1974, including the rules and regulations promulgated thereunder.
"ERISA Affiliate" means any corporation or trade or business
which is a member of the same controlled group of organizations (within the
meaning of Section 414(b) of the Code) as Borrower or Guarantor or is under
common control (within the meaning of Section 414(c) of the Code) with borrower
or Guarantor or is required to be treated as a single employer with Borrower or
Guarantor under Section 414(m) or 414(o) of the Code.
"Event of Default" has the meaning specified in Section 9.01.
"Facility Fee Rate" means the rate per annum determined, at any time, based
on Borrower's Credit Rating in accordance with the following table. Any change
in Borrower's Credit Rating which causes it to move into a different range on
the table shall effect an immediate change in the Facility Fee Rate.
Borrower's Credit Rating Facility Fee Rate
(S&P/Moody's/Duff & Phelps/Fitch Ratings) (% per annum)
A-/A3/A-/A- or higher 0.15
BBB+/Baa1/BBB+/BBB+ 0.15
BBB/Baa2/BBB/BBB 0.20
BBB-/Baa3/BBB-/BBB- or below, or unrated 0.20
"Federal Funds Rate" means, for any day, the rate per annum
(expressed on a 360-day basis of calculation) equal to the weighted average of
the rates on overnight federal funds transactions as published by the Federal
Reserve Bank of New York for such day provided that (1) if such day is not a
Banking Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the immediately preceding Banking Day as so published on the
next succeeding Banking Day, and (2) if no such rate is so published on such
next succeeding Banking Day, the Federal Funds Rate for such day shall be the
average of the rates quoted by three (3) Federal Funds brokers to Administrative
Agent on such day on such transactions.
"Fiscal Year" means each period from January 1 to December 31.
"Fitch" means Fitch Investors Service, LP.
"Four Mile" means the property owned by Borrower located in
Fredericksburg, Virginia, together with the Improvements thereon.
"FW Consolidated Financial Statements" means, collectively,
the consolidated balance sheet and related consolidated statement of operations,
statements of accumulated deficiency in assets and shareholder/partner equity
and statement of cash flows, and footnotes thereto, of Borrower and Guarantor,
in each case prepared in accordance with GAAP.
"FW Principals" means the trustees, officers and directors of
Guarantor at any applicable time.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect from time to time, consistently applied.
"Good Faith Contest" means the contest of an item if: (1) the
item is diligently contested in good faith, and, if appropriate, by proceedings
timely instituted; (2) adequate reserves are established with respect to the
contested item; (3) during the period of such contest, the enforcement and
collection of any contested item is effectively stayed; and (4) the failure to
pay or comply with the contested item during the period of the contest is not
likely to have an adverse effect on any Mortgaged Property or the Banks'
interest therein or to result in a Material Adverse Change.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Graylyn" means the property owned by Borrower located in
Wilmington, Delaware, together with the Improvements thereon.
"Guarantor" means First Washington Realty Trust, Inc., a
Maryland corporation, the sole general partner of Borrower.
"Guaranty" means the guaranty of Borrower's obligations
hereunder and under the Notes and the Mortgages from Guarantor to the Banks.
"Hazardous Materials" means any pollutant, effluents,
emissions, contaminants, toxic or hazardous wastes or substances, as any of
those terms are defined from time to time in or for the purposes of any relevant
Environmental Law, including asbestos fibers and friable asbestos,
polychlorinated biphenyls, and any petroleum or hydrocarbon-based products or
derivatives.
"Improvements" means, for each Property, all improvements now
or hereafter located thereon, including, without limitation, (1) in the case of
Center Ridge, the existing strip shopping center containing approximately
107,354 SFGLA and known as "Centre Ridge Marketplace", (2) in the case of Four
Mile, the existing strip shopping center containing approximately 96,720 SFGLA
and known as "Four Mile Fork Shopping Center", (3) in the case of Kenhorst, the
existing strip shopping center containing approximately 161,434 SFGLA and known
as "Kenhorst Plaza", (4) in the case of Newtown Square, the existing strip
shopping center containing approximately 134,367 SFGLA and known as "Newtown
Square Shopping Center", (5) in the case of Graylyn, the existing strip shopping
center containing approximately 65,746 SFGLA and known as "Shoppes of Graylyn
Shopping Center" and (6) in the case of Takoma Park, the existing strip shopping
center containing approximately 108,168 SFGLA and known as "Takoma Park Shopping
Center".
"Indemnity" means, for each Property, an agreement from
Borrower and Guarantor whereby, among other things, the Bank Parties are
indemnified regarding Hazardous Materials.
"Initial Advance" means the first advance of proceeds of the
Loans.
"Interest Expense" means, for any period of time, the
consolidated interest expense, whether paid, accrued or capitalized (without
deduction of consolidated interest income) of Borrower and that attributable to
Borrower's beneficial interest in its Consolidated Businesses, including,
without limitation or duplication (or, to the extent not so included, with the
addition of), (1) the portion of any rental obligation in respect of any Capital
Lease obligation allocable to interest expense in accordance with GAAP; (2) the
amortization of Debt discounts; (3) any payments or fees (other than up-front
fees) with respect to interest rate swap or similar agreements; and (4) the
interest expense and items listed in clauses (1) through (3) above applicable to
each of the UJVs (to the extent not included above) multiplied by Borrower's
respective beneficial interests in the UJVs, in all cases as reflected in the
applicable FW Consolidated Financial Statements.
"Interest Period" means, (1) with respect to any LIBOR Loan,
the period commencing on the date the same is advanced, converted from a Base
Rate Loan or Continued, as the case may be, and ending, as Borrower may select
pursuant to Section 2.05, on the numerically corresponding day in the first,
second or third calendar month thereafter, provided that each such Interest
Period which commences on the last Banking Day of a calendar month (or on any
day for which there is no numerically corresponding day in the appropriate
subsequent calendar month) shall end on the last Banking Day of the appropriate
calendar month; and provided, further, that if Borrower's Credit Rating is below
BBB-/Bac3/BBB-/BBB-1/ or if Borrower is unrated, Borrower may only select a
period of one month; and (2) with respect to any Bid Rate Loan, the period
commencing on the date the same is advanced and ending, as Borrower may select
pursuant to Section 2.02, on the numerically corresponding day in the first,
second or third calendar month thereafter, provided that each such Interest
Period which commences on the last Banking Day of a calendar month (or on any
day for which there is no numerically corresponding day in the appropriate
subsequent calendar month) shall end on the last Banking Day of the appropriate
calendar month.
"Interest Rate Agreement" means any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar contractual agreement or arrangement entered into for the purpose of
protecting against fluctuations in interest rates.
"Invitation for Bid Rate Quotes" has the meaning specified in
Section 2.02(b).
"Kenhorst" means the property owned by Borrower located in
Reading, Pennsylvania, together with the Improvements thereon.
"Law" means any federal, state or local statute, law, rule,
regulation, ordinance, order, code, or rule of common law, now or hereafter in
effect, and in each case as amended, and any judicial or administrative
interpretation thereof by a Governmental Authority or otherwise, including any
judicial or administrative order, consent decree or judgment.
"Letter of Credit" has the meaning specified in
Section 2.16(a).
"Leverage Ratio" means the ratio, expressed as a percentage,
of Total Outstanding Indebtedness to Capitalization Value.
"LIBOR Base Rate" means, with respect to any Interest Period
therefor, the rate per annum that appears on Dow Jones Page 3750 at
approximately 11:00 a.m. (London time) on the date (the "LIBOR Determination
Date") two (2) Business Days prior to the first day of such Interest Period, for
a period, and in an amount, comparable to such Interest Period and principal
amount of the LIBOR Loan or Bid Rate Loan, as the case may be, in question
outstanding during such Interest Period; or, if such rate does not appear on Dow
Jones Page 3750 as of approximately 11:00 a.m. (London time) on the LIBOR
Determination Date, the rate for deposits in Dollars for a period comparable to
such Interest Period that appears on the Reuters Screen LIBO Page as of
approximately 11:00 a.m. (London time) on the LIBOR Determination Date. If such
rate does not appear on either Dow Jones Page 3750 or on the Reuters Screen LIBO
Page as of approximately 11:00 a.m. (London time) on the LIBOR Determination
Date, the LIBOR Base Rate for such Interest Period will be determined on the
basis of the offered rates for deposits in Dollars for a period, and in an
amount, comparable to such Interest Period and principal amount of the LIBOR
Loan or Bid Rate Loan, as the case may be, in question outstanding during such
Interest Period, that are offered by four (4) major banks in the London
interbank market at approximately 11:00 a.m. (London time) on the LIBOR
Determination Date. Administrative Agent will request that the principal London
office of each of the four (4) major banks provide a quotation of its Dollar
deposit offered rate. If at least two (2) such quotations are provided, the
LIBOR Base Rate will be the arithmetic mean of the quotations. If fewer than two
(2) quotations are provided as requested, the LIBOR Base Rate will be determined
on the basis of the rates quoted for loans in Dollars to leading European banks
for a period, and in an amount, comparable to such Interest Period and principal
amount of the LIBOR Loan or Bid Rate Loan, as the case may be, in question
outstanding during such Interest Period, offered by major banks in New York City
at approximately 11:00 a.m. (New York time) on the LIBOR Determination Date. If
Administrative Agent is unable to obtain any such quotation as provided above,
it will be deemed that the LIBOR Base Rate cannot be determined. For purposes of
the foregoing definition, "Dow Jones Page 3750" means the display designated as
"Page 3750" on the Dow Jones Markets Service (or such other page as may replace
Page 3750 on that service or such other service as may be nominated by the
British Bankers' Association as the information vendor for the purpose of
displaying British Bankers' Association Interest Settlement Rates for Dollar
deposits); and "Reuters Screen LIBO Page" means the display designated as page
"LIBO" on the Reuters Monitor Money Rates Service (or such other page as may
replace the LIBO page on that service for the purposes of displaying interbank
rates from London in Dollars).
"LIBOR Bid Margin" has the meaning specified in Section
2.02(c)(2).
"LIBOR Bid Rate" means the rate per annum equal to the sum of
(1) the LIBOR Interest Rate for the Bid Rate Loan and Interest Period in
question and (2) the LIBOR Bid Margin.
"LIBOR Interest Rate" means, for any LIBOR Loan or Bid Rate
Loan, a rate per annum (rounded upwards, if necessary, to the nearest 1/100 of
1%) determined by Administrative Agent to be equal to the quotient of (1) the
LIBOR Base Rate for such LIBOR Loan or Bid Rate Loan, as the case may be, for
the Interest Period therefor divided by (2) one minus the LIBOR Reserve
Requirement for such LIBOR Loan or Bid Rate Loan, as the case may be, for such
Interest Period.
"LIBOR Loan" means all or any portion (as the context
requires) of any Bank's Ratable Loan which shall accrue interest at rate(s)
determined in relation to LIBOR Interest Rate(s).
"LIBOR Reserve Requirement" means, for any LIBOR Loan or Bid
Rate Loan, the average maximum rate at which reserves (including any marginal,
supplemental or emergency reserves) are required to be maintained during the
Interest Period for such LIBOR Loan or Bid Rate Loan under Regulation D by
member banks of the Federal Reserve System in New York City with deposits
exceeding One Billion Dollars ($1,000,000,000) against "Eurocurrency
liabilities" (as such term is used in Regulation D). Without limiting the effect
of the foregoing, the LIBOR Reserve Requirement shall also reflect any other
reserves required to be maintained by such member banks by reason of any
Regulatory Change against (1) any category of liabilities which includes
deposits by reference to which the LIBOR Base Rate is to be determined as
provided in the definition of "LIBOR Base Rate" in this Section 1.01 or (2) any
category of extensions of credit or other assets which include loans the
interest rate on which is determined on the basis of rates referred to in said
definition of "LIBOR Base Rate".
"Lien" means any mortgage, deed of trust, pledge, security
interest, hypothecation, assignment for collateral purposes, deposit
arrangement, lien (statutory or other), or other security agreement or charge of
any kind or nature whatsoever of any third party (excluding any right of setoff
but including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction to evidence any of
the foregoing).
"Loan" means, with respect to each Bank, its Ratable Loan and
Bid Rate Loan(s), collectively.
"Loan Commitment" means, with respect to each Bank, the
obligation to make a Ratable Loan in the principal amount set forth below, as
such amount may be reduced from time to time in accordance with the provisions
of Section 2.15:
Bank Loan
Commitment
UBS $35,500,000
Total $35,500,000
"Loan Documents" means this Agreement, the Notes, the Mortgage
and related UCC-1 financing statements for each Property, the Indemnity for each
Property, the Guaranty, the Authorization Letter and the Solvency Certificate.
"Major Lease" means any lease demising 5,000 SFGLA or more of
the Improvements on any Property.
"Material Adverse Change" means either (1) a material adverse
change in the status of the business, results of operations, financial
condition, property or prospects of Borrower or Guarantor or (2) any event or
occurrence of whatever nature which is likely to have a material adverse effect
on the ability of Borrower or Guarantor to perform their obligations under the
Loan Documents.
"Material Affiliates" means the Affiliates of Borrower listed
on EXHIBIT F, together with (or excluding) any Affiliates of Borrower which are
hereafter from time to time reasonably determined by Administrative Agent to be
material (or no longer material), upon notice to Borrower, based on the most
recent FW Consolidated Financial Statements.
"Maturity Date" means February 1, 2001.
"Maximum Loan Amount" means, from time to time, the lesser of
(1) the Total Loan Commitment or (2) the Borrowing Base.
"Moody's" means Moody's Investors Service, Inc.
"Mortgage" means, for each Property, the Deed of Trust,
Assignment of Leases and Rents and Security Agreement or the Mortgage,
Assignment of Leases and Rents and Security Agreement in respect thereof, dated
the date hereof, from Borrower for the benefit of Administrative Agent, as agent
for the Banks, to secure the payment and performance of Borrower's obligations
hereunder and under the other Loan Documents.
"Mortgaged Property" means, for each Property, the Property
and other property constituting the "Mortgaged Property", as said quoted term is
defined in the Mortgage.
"Multiemployer Plan" means a Plan defined as such in Section
3(37) of ERISA to which contributions have been made by Borrower or any ERISA
Affiliate and which is covered by Title IV of ERISA.
"Net Operating Income" means, for any period, and with respect
to each Property, an amount equal to:
(a) All actual revenues from the operation of the
Property during such period (adjusted for the straight lining of rents),
determined in accordance with GAAP, including all rental and other payments,
including, without limitation, base rent, additional rent, promotional revenues,
percentage rent and payments for common area maintenance, taxes and operating
expenses;
less
(b) all expenses in connection with the Property during such
period, determined in accordance with GAAP, including insurance
premiums, real estate taxes, leasing expenses, promotional expenses,
maintenance and repair expenses, management fees and any other
operational expenses, all as determined in accordance with GAAP, but
not including (i) debt service payable under the Notes, (ii) that
portion of the cost of any capital improvements which will be
capitalized and depreciated or amortized on Borrower's tax returns,
including non-cash expenses such as depreciation and amortization,
provided that such deduction is in accordance with GAAP, (iii) costs of
repairing or restoring the Property, or portions thereof, after fire,
casualty or condemnation not covered by insurance or condemnation
awards, (iv) interest paid by Borrower to tenants on security deposits
collected under leases of the Property, or portions thereof, and (v)
any security deposits returned by Borrower during such period to
tenants under leases of the Property, or portions thereof.
"Note" and "Notes" have the respective meanings specified in
Section 2.08.
"Newtown Square" means the property owned by Borrower located
in Newtown Square, Pennsylvania, together with the Improvements thereon.
"Obligations" means each and every obligation, covenant and
agreement of Borrower, now or hereafter existing, contained in this Agreement,
and any of the other Loan Documents, whether for principal, reimbursement
obligations, interest, fees, expenses, indemnities or otherwise, and any
amendments or supplements thereto, extensions or renewals thereof or
replacements therefor, including, but not limited to, all indebtedness,
obligations and liabilities of Borrower to Administrative Agent and any Bank now
existing or hereafter incurred under or arising out of or in connection with the
Notes, this Agreement, the other Loan Documents, and any documents or
instruments executed in connection therewith; in each case whether direct or
indirect, joint or several, absolute or contingent, liquidated or unliquidated,
now or hereafter existing, renewed or restructured, whether or not from time to
time decreased or extinguished and later increased, created or incurred, and
including all indebtedness of Borrower, under any instrument now or hereafter
evidencing or securing any of the foregoing.
"Parent" means, with respect to any Bank, any Person
controlling such Bank.
"Participation" and "Participant" have the respective
meanings specified in Section 12.05.
"PBGC" means the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
"Person" means an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association, joint
venture, limited liability company, Governmental Authority or other entity of
whatever nature.
"Plan" means any employee benefit or other plan established or
maintained, or to which contributions have been made, by Borrower or Guarantor
or any ERISA Affiliate and which is covered by Title IV of ERISA or to which
Section 412 of the Code applies.
"presence", when used in connection with any Environmental
Discharge or Hazardous Materials, means and includes presence, generation,
manufacture, installation, treatment, use, storage, handling, repair,
encapsulation, disposal, transportation, spill, discharge and release.
"Prime Rate" means that rate of interest from time to time
announced by UBS at its Principal Office as its prime commercial lending rate.
"Principal Office" means the principal office of UBS in the
United States, presently located at 299 Park Avenue, New York, New York 10171.
"Pro Rata Share" means, for purposes of this Agreement and
with respect to each Bank, a fraction, the numerator of which is the amount of
such Bank's Loan Commitment and the denominator of which is the Total Loan
Commitment.
"Prohibited Transaction" means any transaction proscribed by
Section 406 of ERISA or Section 4975 of the Code and as to which no statutory or
administrative exemption applies.
"Property" and "Properties" mean, respectively, each of Center
Ridge, Four Mile, Kenhorst, Newtown Square, Graylyn and Takoma Park,
individually, and all of such properties, collectively
"Ratable Loan" has the meaning specified in Section 2.01(b).
"Ratable Loan Note" has the meaning specified in Section 2.08.
"REA" means, for each Property, any reciprocal easement and
operating or similar agreement/ by and among Borrower and the Anchors (together
with any agreements supplemental or incidental thereto) pursuant to which the
Improvements and the Anchor Stores are being operated as an integrated community
shopping center.
"Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System, as the same may be amended or supplemented from time
to time, or any similar Law from time to time in effect.
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System, as the same may be amended or supplemented from time
to time, or any similar Law from time to time in effect.
"Regulatory Change" means, with respect to any Bank, any
change after the date of this Agreement in United States federal, state,
municipal or foreign laws or regulations (including Regulation D) or the
adoption or making after such date of any interpretations, directives or
requests applying to a class of banks including such Bank of or under any United
States, federal, state, municipal or foreign laws or regulations (whether or not
having the force of law) by any court or governmental or monetary authority
charged with the interpretation or administration thereof.
"Reportable Event" means any of the events set forth in
Section 4043(c) of ERISA, other than those events as to which the thirty (30)
day notice period is waived under subsections .13, .14, .16, .18, .19 or .20 of
PBGC Reg. ss.2615.
"Required Banks" means at any time the Banks having Pro Rata
Shares aggregating at least 66 2/3%; provided, however, that during the
existence of an Event of Default, the "Required Banks" shall be the Banks
holding at least 66 2/3% of the then aggregate unpaid principal amount of the
Loans.
"SEC Reports" means the reports required to be delivered to
the Securities and Exchange Commission pursuant to the Securities Exchange Act
of 1934, as amended.
"SFGLA" means square feet of gross leaseable area.
"Solvency Certificate" means a certificate in the form of
EXHIBIT D, to be delivered by Borrower pursuant to the terms of this Agreement.
"Solvent" means, when used with respect to any Person, that
(1) the fair value of the property of such Person, on a going concern basis, is
greater than the total amount of liabilities (including, without limitation,
contingent liabilities) of such Person; (2) the present fair saleable value of
the assets of such Person, on a going concern basis, is not less than the amount
that will be required to pay the probable liabilities of such Person on its
debts as they become absolute and matured; (3) such Person does not intend to,
and does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature; (4) such Person is
not engaged in business or a transaction, and is not about to engage in business
or a transaction, for which such Person's property would constitute unreasonably
small capital after giving due consideration to the prevailing practice in the
industry in which such Person is engaged; and (5) such Person has sufficient
resources, provided that such resources are prudently utilized, to satisfy all
of such Person's obligations. Contingent liabilities will be computed at the
amount that, in light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability.
"S&P" means Standard & Poor's Ratings Services, a division of
McGraw-Hill Companies.
"Takoma Park" means the property owned by Borrower located in
Takoma Park, Maryland, together with the Improvements thereon.
"Title Insurer" means, for each Property, the issuer, approved
by Administrative Agent, of the title insurance policy insuring the Mortgage
thereon.
"Total Loan Commitment" means an amount equal to the aggregate
amount of all Loan Commitments.
"Total Outstanding Indebtedness" means the sum, without
duplication, of (1) Consolidated Outstanding Indebtedness, (2) Borrower's Share
of UJV Outstanding Indebtedness and (3) Contingent Liabilities.
"UJV Outstanding Indebtedness" means, as of any time, all
indebtedness and liability for borrowed money, secured or unsecured, of the
UJV's, all as reflected in the balance sheets of each of the UJVs, prepared in
accordance with GAAP.
"UJVs" means the unconsolidated joint ventures in which
Borrower owns a beneficial interest and which are accounted for under the equity
method in the FW Consolidated Financial Statements.
"Unfunded Current Liability" of any Plan means the amount, if
any, by which the actuarial present value of accumulated plan benefits as of the
close of its most recent plan year, based upon the actuarial assumptions used by
the Plan's actuary in the most recent annual valuation of the Plan, exceeds the
fair market value of the assets allocable thereto, determined in accordance with
Section 412 of the Code.
Section 1.02 Accounting Terms.
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All accounting terms not specifically defined herein shall be construed in
accordance with GAAP, and all financial data required to be delivered hereunder
shall be prepared in accordance with GAAP.
Section 1.03 Computation of Time Periods.
- ---------- ---------------------------
Except as otherwise provided herein, in this Agreement, in the computation
of periods of time from a specified date to a later specified date, the word
"from" means "from and including" and words "to" and "until" each means "to but
excluding".
Section 1.04 Rules of Construction. Except as indicated otherwise,
when used in this Agreement: (1) "or" is not exclusive; (2) a reference to a Law
includes any amendment or modification to such Law; (3) a reference to a Person
includes its permitted successors and permitted assigns; (4) all references to
the singular shall include the plural and vice versa; (5) a reference to an
agreement, instrument or document shall include such agreement, instrument or
document as the same may be amended, modified or supplemented from time to time
in accordance with its terms and as permitted by the Loan Documents; (6) all
references to Articles, Sections or Exhibits shall be to Articles, Sections and
Exhibits of this Agreement; and (7) all Exhibits to this Agreement shall be
incorporated into this Agreement.
ARTICLE II. THE LOANS
Section 2.01 Ratable Loans; Bid Rate Loans;
Purpose.
- ---------- -----------------------------------
(a) Subject to the terms and conditions of this Agreement, the Banks agree
to make loans to Borrower, and Borrower agrees to accept such loans from the
Banks, as provided in this Article II.
(b) Each of the Banks severally agrees to make a loan to
Borrower (each such loan by a Bank, a "Ratable Loan") in an amount up to its
Loan Commitment pursuant to which the Bank shall from time to time advance and
re-advance to Borrower an amount equal to its Pro Rata Share of the excess (the
"Available Total Loan Commitment") of the Maximum Loan Amount over the sum of
(1) all previous advances (including Bid Rate Loans) made by the Banks which
remain unpaid and (2) the outstanding amount of all Letters of Credit. Within
the limits set forth herein, Borrower may borrow from time to time under this
paragraph (b) and prepay from time to time pursuant to Section 2.09 (subject,
however, to the restrictions on prepayment set forth in said Section), and
thereafter re-borrow pursuant to this paragraph (b) or paragraph (c) below. The
Ratable Loans may be outstanding as: (1) Base Rate Loans; (2) LIBOR Loans; or
(3) a combination of the foregoing, as Borrower shall elect and notify
Administrative Agent in accordance with Section 2.13. The LIBOR Loan, Bid Rate
Loan and Base Rate Loan of each Bank shall be maintained at such Bank's
Applicable Lending Office.
(c) In addition to Ratable Loans pursuant to paragraph (b)
above, so long as Borrower's unsecured and unsubordinated long term indebtedness
has been assigned a credit rate of BBB- or better by S&P and Baa3 or better by
Moody's, one (1) or more Banks may, at Borrower's request and in their sole
discretion, make non-ratable loans which shall bear interest at the LIBOR Bid
Rate in accordance with Section 2.02 (such loans being referred to in this
Agreement as "Bid Rate Loans"). Borrower may borrow Bid Rate Loans from time to
time pursuant to this paragraph (c) in an amount up to the Available Total Loan
Commitment at the time of the borrowing (taking into account any repayments of
the Loans made simultaneously therewith) and shall repay such Bid Rate Loans as
required by Section 2.08, and it may thereafter re-borrow pursuant to this
paragraph (c) or paragraph (b) above; provided, however, that the aggregate
outstanding principal amount of Bid Rate Loans at any particular time shall not
exceed the Bid Borrowing Limit.
(d) The obligations of the Banks under this Agreement are several, and no
Bank shall be responsible for the failure of any other Bank to make any advance
of a Loan to be made by such other Bank. However, the failure of any Bank to
make any advance of the Loan to be made by it hereunder on the date specified
therefor shall not relieve any other Bank of its obligation to make any advance
of its Loan specified hereby to be made on such date.
(e) Borrower shall use the proceeds of the Loans for general capital and
working capital purposes of Borrower and its Consolidated Businesses and UJVs,
including costs incurred in connection with real estate acquisitions and/or
developments. In no event shall proceeds of the Loans be used for any illegal
purpose or for the purpose, whether immediate, incidental or ultimate, of buying
or carrying "margin stock" within the meaning of Regulation U, or in connection
with any hostile acquisition.
Section 2.02 Bid Rate Loans.
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(a) When Borrower's unsecured and unsubordinated long term indebtedness has
the credit ratings required by Section 2.01(c) and wishes to request offers from
the Banks to make Bid Rate Loans, it shall transmit to Administrative Agent by
facsimile a request (a "Bid Rate Quote Request") substantially in the form of
EXHIBIT G-1 so as to be received not later than 10:30 a.m. (New York time) on
the fifth Banking Day prior to the date for funding of the Bid Rate Loan(s)
proposed therein, specifying:
(1) the proposed date of funding of the Bid Rate Loan(s), which shall be a
Banking Day;
(2) the aggregate amount of the Bid Rate Loans requested, which shall be
Ten Million Dollars ($10,000,000) or a larger integral multiple of One Million
Dollars ($1,000,000); and
(3) the duration of the Interest Period(s) applicable thereto, subject to
the provisions of the definition of "Interest Period" in Section 1.01.
Borrower may request offers to make Bid Rate Loans for more than one (1)
Interest Period in a single Bid Rate Quote Request. No Bid Rate Quote Request
may be submitted by Borrower sooner than fifteen (15) days after the submission
of any other Bid Rate Quote Request.
(b) Promptly upon receipt of a Bid Rate Quote Request, Administrative Agent
shall send to the Banks by facsimile an invitation (an "Invitation for Bid Rate
Quotes") substantially in the form of EXHIBIT G-2, which shall constitute an
invitation by Borrower to the Banks to submit Bid Rate Quotes offering to make
Bid Rate Loans to which such Bid Rate Quote Request relates in accordance with
this Section.
(c) (1) Each Bank may, but shall not be obligated to, submit a
Bid Rate Quote containing an offer or offers to make Bid Rate Loans in response
to any Invitation for Bid Rate Quotes. Each Bid Rate Quote must comply with the
requirements of this paragraph (c) and must be submitted to Administrative Agent
by facsimile not later than 2:00 p.m. (New York time) on the fourth Banking Day
prior to the proposed date of the Bid Rate Loan(s); provided that Bid Rate
Quotes submitted by UBS (or any Affiliate of Administrative Agent) in its
capacity as a Bank may be submitted, and may only be submitted, if UBS or such
Affiliate notifies Borrower of the terms of the offer or offers contained
therein not later than one (1) hour prior to the deadline for the other Banks.
Any Bid Rate Quote so made shall (subject to Borrower's satisfaction of the
conditions precedent set forth in this Agreement to its entitlement to an
advance) be irrevocable except with the written consent of Administrative Agent
given on the instructions of Borrower. Bid Rate Loans to be funded pursuant to a
Bid Rate Quote may, as provided in Section 12.16, be funded by a Bank's
Designated Lender. A Bank making a Bid Rate Quote may, but shall not be required
to, specify in its Bid Rate Quote whether the related Bid Rate Loans are
intended to be funded by such Bank's Designated Lender, as provided in Section
12.16.
(2) Each Bid Rate Quote shall be in substantially the form of EXHIBIT G-3
and shall in any case specify:
(i) the proposed date of funding of the Bid Rate Loan(s);
(ii) the principal amount of the Bid Rate Loan(s) for which
each such offer is being made, which principal amount (w) may be
greater than or less than the Loan Commitment of the quoting Bank,
(x) must be in the aggregate Five Million Dollars ($5,000,000) or a
larger integral multiple of One Million Dollars ($1,000,000), (y)
may not exceed the principal amount of Bid Rate Loans for which
offers were requested and (z) may be subject to an aggregate
limitation as to the principal amount of Bid Rate Loans for which
offers being made by such quoting Bank may be accepted;
(iii) the margin above or below the applicable LIBOR Interest Rate (the
"LIBOR Bid Margin") offered for each such Bid Rate Loan, expressed as a
percentage per annum (specified to the nearest 1/1,000th of 1%) to be added to
(or subtracted from) the applicable LIBOR Interest Rate;
(iv) the applicable Interest Period; and
(v) the identity of the quoting Bank.
A Bid Rate Quote may set forth up to three (3) separate offers by the quoting
Bank with respect to each Interest Period specified in the related Invitation
for Bid Rate Quotes.
(3) Any Bid Rate Quote shall be disregarded if it:
(i) is not substantially in conformity with EXHIBIT G-3 or does not specify
all of the information required by sub-paragraph (c)(2) above;
(ii) contains qualifying, conditional or similar language (except for an
aggregate limitation as provided in sub-paragraph (c)(2)(ii) above);
(iii) proposes terms other than or in addition to those set forth
in the applicable Invitation for Bid Rate Quotes; or
(iv) arrives after the time set forth in subparagraph (c)(1) above.
(d) Administrative Agent shall on the Banking Day of receipt
thereof notify Borrower in writing of the terms of (x) any Bid Rate Quote
submitted by a Bank that is in accordance with paragraph (c) and (y) any Bid
Rate Quote that amends, modifies or is otherwise inconsistent with a previous
Bid Rate Quote submitted by such Bank with respect to the same Bid Rate Quote
Request. Any such subsequent Bid Rate Quote shall be disregarded by
Administrative Agent unless such subsequent Bid Rate Quote is submitted solely
to correct a manifest error in such former Bid Rate Quote. Administrative
Agent's notice to Borrower shall specify (A) the aggregate principal amount of
Bid Rate Loans for which offers have been received for each Interest Period
specified in the related Bid Rate Quote Request, (B) the respective principal
amounts and LIBOR Bid Margins so offered and (C) if applicable, limitations on
the aggregate principal amount of Bid Rate Loans for which offers in any single
Bid Rate Quote may be accepted.
(e) Not later than 5:00 p.m. (New York time) on the fourth
Banking Day prior to the proposed date of funding of the Bid Rate Loan, Borrower
shall notify Administrative Agent of its acceptance or non-acceptance of the
offers so notified to it pursuant to paragraph (d). A notice of acceptance shall
be substantially in the form of EXHIBIT G-4 and shall specify the aggregate
principal amount of offers for each Interest Period that are accepted. Borrower
may accept any Bid Rate Quote in whole or in part; provided that:
(i) the principal amount of each Bid Rate Loan may not exceed the
applicable amount set forth in the related Bid Rate Quote Request or be less
than One Million Dollars ($1,000,000) and shall be an integral multiple of One
Hundred Thousand Dollars ($100,000);
(ii) acceptance of offers with respect to a particular Interest Period may
only be made on the basis of ascending LIBOR Bid Margins offered for such
Interest Period from the lowest effective cost; and
(iii) Borrower may not accept any offer that is described in sub-paragraph
(c)(3) or that otherwise fails to comply with the requirements of this
Agreement.
(f) If offers are made by two (2) or more banks with the same
LIBOR Bid Margins, for a greater aggregate principal amount than the amount in
respect of which such offers are accepted for the related Interest Period, the
principal amount of Bid Rate Loans in respect of which such offers are accepted
shall be allocated by Administrative Agent among such Banks as nearly as
possible (in multiples of One Hundred Thousand Dollars ($100,000), as
Administrative Agent may deem appropriate) in proportion to the aggregate
principal amounts of such offers. Administrative Agent shall promptly (and in
any event within one (1) Banking Day after such offers are accepted) notify
Borrower and each such Bank in writing of any such allocation of Bid Rate Loans.
Determinations by Administrative Agent of the allocation of Bid Rate Loans shall
be conclusive in the absence of manifest error.
(g) In the event that Borrower accepts the offer(s) contained in one (1) or
more Bid Rate Quotes in accordance with paragraph (e), the Bank(s) making such
offer(s) shall make a Bid Rate Loan in the accepted amount (as allocated, if
necessary, pursuant to paragraph (f)) on the date specified therefor, in
accordance with the procedures specified in Section 2.04.
(h) Notwithstanding anything to the contrary contained herein, each Bank
shall be required to fund its Pro Rata Share of the Available Total Loan
Commitment in accordance with Section 2.01(b) despite the fact that any Bank's
Loan Commitment may have been or may be exceeded as a result of such Bank's
making Bid Rate Loans.
(i) A Bank who is notified that it has been selected to make a Bid Rate
Loan as provided above may designate its Designated Lender (if any) to fund such
Bid Rate Loan on its behalf, as described in Section 12.16. Any Designated
Lender which funds a Bid Rate Loan shall on and after the time of such funding
become the obligee under such Bid Rate Loan and be entitled to receive payment
thereof when due. No Bank shall be relieved of its obligation to fund a Bid Rate
Loan, and no Designated Lender shall assume such obligation, prior to the time
the applicable Bid Rate Loan is funded.
Section 2.03 Advances Generally. The Initial Advance shall be in the
minimum amount of One Million Dollars ($1,000,000) and in integral multiples of
One Hundred Thousand Dollars ($100,000) above such amount and shall be made upon
satisfaction of the conditions set forth in Section 4.01. Subsequent advances
shall be made no more frequently than weekly thereafter, upon satisfaction of
the conditions set forth in Section 4.02. The amount of each advance subsequent
to the Initial Advance shall be in the minimum amount of One Million Dollars
($1,000,000) (unless less than One Million Dollars ($1,000,000) is available for
disbursement pursuant to the terms hereof at the time of any subsequent advance,
in which case the amount of such subsequent advance shall be equal to such
remaining availability) and in integral multiples of One Hundred Thousand
Dollars ($100,000) above such amount. Additional restrictions on the amounts and
timing of, and conditions to the making of, advances of Bid Rate Loans are set
forth in Section 2.02.
Each advance shall be subject, in addition to the limitations
and conditions applicable to advances of the Loans generally, to Administrative
Agent's receipt, on or immediately prior to the date the request for such
advance is made, of a certificate, of the sorts required by paragraphs (3)(a)
and (b) of Section 6.09, which shall demonstrate Borrower's compliance (and
shall include the computations and details of the items referred to in paragraph
(3)(c) of Section 6.09 confirming such compliance) and including a calculation
of the then current Borrowing Base, on a pro-forma basis, as of the end of the
most recently ended calendar quarter for which financial results are required
hereunder to have been reported by Borrower, with all covenants enumerated in
said paragraph (3)(b).
In connection with each advance of Loan proceeds such that
with such advance the aggregate amount advanced in any three-month period
exceeds Fifteen Million Dollars ($15,000,000), (1) the advance shall be subject
to Administrative Agent's receipt, simultaneously with the certificate required
by the preceding paragraph, of a certificate by the same officer setting forth
the use of the advance, the income projected to be generated from such advance
for purposes of determining Combined EBITDA and the type of income so generated
and (2), in connection with the certificate to be given in the preceding
paragraph, the following pro-forma adjustments shall be made to the covenant
compliance calculations of paragraph 3(b) of Section 6.09 required as of the end
of the most recently ended calendar quarter for which financial results are
required hereunder to have been reported by Borrower:
(i) Total Outstanding Indebtedness shall be adjusted by adding thereto all
indebtedness and unsecured indebtedness that is incurred by Borrower in
connection with the advance;
(ii) Combined EBITDA, for any period, shall be adjusted by adding the
income to be included as provided in Borrower's certificate; and
(iii) Interest Expense, for any period, shall be adjusted by adding thereto
interest expense to be incurred by Borrower in connection with the advance.
Section 2.04 Procedures for Advances. In the case of advances of
Ratable Loans, Borrower shall submit to Administrative Agent a request for each
advance, stating the amount requested and the expected purpose for which such
advance is to be used, no later than 10:00 a.m. (New York time) on the date
which is three (3) Banking Days prior to the date the advance is to be made. In
the case of advances of Bid Rate Loans, Borrower shall submit a Bid Rate Quote
Request at the time specified in Section 2.02, accompanied by a statement of the
expected purpose for which such advance is to be used. Administrative Agent,
upon its receipt and approval of the request for advance, will so notify the
Banks either by telephone or by facsimile. Not later than 10:00 a.m. (New York
time) on the date of each advance, each Bank (in the case of Ratable Loans) or
the applicable Bank(s) (in the case of Bid Rate Loans) shall, through its
Applicable Lending Office and subject to the conditions of this Agreement, make
the amount to be advanced by it on such day available to Administrative Agent,
at Administrative Agent's Office and in immediately available funds for the
account of Borrower. The amount so received by Administrative Agent shall,
subject to the conditions of this Agreement, be made available to Borrower by
Administrative Agent by federal funds transfer to such account as Borrower may
designate in writing to Administrative Agent.
Section 2.05 Interest Periods: Renewals. In the case of the LIBOR
Loans, Borrower shall select an Interest Period of any duration in accordance
with the definition of Interest Period in Section 1.01, subject to the following
limitations: (1) no Interest Period may extend beyond the Maturity Date; (2) if
an Interest Period would end on a day which is not a Banking Day, such Interest
Period shall be extended to the next Banking Day, unless such Banking Day would
fall in the next calendar month, in which event such Interest Period shall end
on the immediately preceding Banking Day; and (3) only five (5) discrete
segments of a Bank's Ratable Loan bearing interest at a LIBOR Interest Rate for
a designated Interest Period pursuant to a particular Election, Conversion or
Continuation, may be outstanding at any one time (each such segment of each
Bank's Ratable Loan corresponding to a proportionate segment of each of the
other Banks' Ratable Loans, barring a conversion or suspension of the LIBOR
Interest Rate by one (1)or more, but not all, Banks, or the failure of one (1)
or more, but not all, Banks to make an advance).
Upon notice to Administrative Agent as provided in Section
2.13, Borrower may Continue any LIBOR Loan on the last day of the Interest
Period for such LIBOR Loan for the same or different duration in accordance with
the limitations provided above.
Section 2.06 Interest. Borrower shall pay interest to Administrative
Agent for the account of the applicable Bank on the outstanding and unpaid
principal amount of the Loans, at a rate per annum as follows: (1) for Base Rate
Loans at a rate equal to the Base Rate plus the Applicable Margin; (2) for LIBOR
Loans at a rate equal to the applicable LIBOR Interest Rate plus the Applicable
Margin; and (3) for Bid Rate Loans at a rate equal to the applicable LIBOR Bid
Rate. Any principal amount not paid when due (when scheduled, at acceleration or
otherwise) shall bear interest thereafter, payable on demand, at the Default
Rate.
The interest rate on Base Rate Loans shall change when the Base Rate
changes. Interest shall be calculated for the actual number of days elapsed on
the basis of, in the case of Base Rate Loans, LIBOR Loans and Bid Rate Loans,
three hundred sixty (360) days.
Accrued interest shall be due and payable in arrears (x) in
the case of both Base Rate Loans and LIBOR Loans, on the first Banking Day of
each calendar month and (y) in the case of Bid Rate Loans, at the expiration of
the Interest Period applicable thereto; provided, however, that interest
accruing at the Default Rate shall be due and payable on demand.
Section 2.07 Fees.
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(a) During periods when Borrower's unsecured and unsubordinated long term
indebtedness is rated below BBB- by S&P or below Baa3 by Moody's or unrated,
Borrower shall pay to Administrative Agent for the account of each Bank a
commitment fee computed on the daily unused Loan Commitment of such Bank at a
rate per annum equal to the daily Commitment Fee Rate, calculated on the basis
of a year of three hundred sixty (360) days for the actual number of days
elapsed. The accrued commitment fee shall be due and payable in arrears on the
first day of January, April, July and October of each year, commencing on the
first such date after the Closing Date, and upon the Maturity Date (as the same
may be accelerated) or earlier termination of the Loan Commitments;
(b) During periods when Borrower's unsecured and
unsubordinated long term indebtedness is rated BBB- or higher by S&P and Baa3 or
higher by Moody's, Borrower shall pay to Administrative Agent for the account of
each Bank a facility fee computed on the daily Loan Commitment of such Bank
(irrespective of usage) at a rate per annum equal to the daily Facility Fee
Rate, calculated on the basis of a year of three hundred sixty (360) days for
the actual number of days elapsed. The accrued facility fee shall be due and
payable in arrears on the first day of January, April, July and October of each
year, commencing on the first such date after the Closing Date, and upon the
Maturity Date (as the same may be accelerated) or earlier termination of the
Loan Commitments.
Section 2.08 Notes. The Ratable Loan made by each Bank under this
Agreement shall be evidenced by, and repaid with interest in accordance with, a
promissory note of Borrower in the form of EXHIBIT B duly completed and executed
by Borrower, in the principal amount equal to such Bank's Loan Commitment,
payable to such Bank for the account of its Applicable Lending Office (each such
note, as the same may hereafter be amended, modified, extended, severed,
assigned, substituted, renewed or restated from time to time, including any
substitute note pursuant to Section 3.07 or 12.05, a "Ratable Loan Note"). The
Bid Rate Loans of the Banks shall be evidenced by a single global promissory
note of Borrower in the form of EXHIBIT C, duly completed and executed by
Borrower, in the principal amount of Seventeen Million Dollars ($17,000,000),
payable to Administrative Agent for the account of the respective Banks making
Bid Rate Loans (such note, as the same may hereafter be amended, modified,
extended, severed, assigned, substituted, renewed or restated from time to time,
the "Bid Rate Loan Note"). A particular Bank's Ratable Loan Note, together with
its interest, if any, in the Bid Rate Loan Note, are referred to collectively in
this Agreement as such Bank's "Note"; all such Ratable Loan Notes and interests
are referred to collectively in this Agreement as the "Notes". The Ratable Loan
Notes shall mature, and all outstanding principal and accrued interest and other
sums thereunder shall be paid in full, on the Maturity Date, as the same may be
accelerated. The outstanding principal amount of each Bid Rate Loan evidenced by
the Bid Rate Loan Note, and all accrued interest and other sums with respect
thereto, shall become due and payable to the Bank making such Bid Rate Loan at
the earlier of the expiration of the Interest Period applicable thereto or the
Maturity Date, as the same may be accelerated.
Each Bank is hereby authorized by Borrower to endorse on the
schedule attached to the Ratable Loan Note held by it, the amount of each
advance, and each payment of principal received by such Bank for the account of
its Applicable Lending Office(s) on account of its Ratable Loan, which
endorsement shall, in the absence of manifest error, be conclusive as to the
outstanding balance of the Ratable Loan made by such Bank. Administrative Agent
is hereby authorized by Borrower to endorse on the schedule attached to the Bid
Rate Loan Note the amount of each Bid Rate Loan, the name of the Bank making the
same, the date of the advance thereof, the interest rate applicable thereto and
the expiration of the Interest Period applicable thereto (i.e., the maturity
date thereof). The failure by Administrative Agent or any Bank to make such
notations with respect to the Loans or each advance or payment shall not limit
or otherwise affect the obligations of Borrower under this Agreement or the
Notes.
Section 2.09 Prepayments. Without prepayment premium or penalty but
subject to Section 3.05, Borrower may, upon at least three (3) Banking Days'
notice to Administrative Agent, prepay the Ratable Loans in whole or, with
respect to Base Rate Loans only, in part, provided that (1) any partial
prepayment under this Section shall be in integral multiples of One Million
Dollars ($1,000,000); and (2) each prepayment under this Section shall include
all interest accrued on the amount of principal prepaid to (but excluding) the
date of prepayment, provided, however, that, in the case of partial prepayments,
payment of the interest on the principal amount prepaid may, at Administrative
Agent's option, be deferred until the next regularly scheduled interest payment
date.
Section 2.10 Method of Payment. Borrower shall make each payment under
this Agreement and under the Notes not later than 11:00 a.m. (New York time) on
the date when due in Dollars to Administrative Agent at Administrative Agent's
Office in immediately available funds. Administrative Agent will thereafter, on
the day of its receipt of each such payment, cause to be distributed to each
Bank (1) such Bank's appropriate share (based upon the respective outstanding
principal amounts and interest due under the Notes of the Banks) of the payments
of principal and interest in like funds for the account of such Bank's
Applicable Lending Office; and (2) fees payable to such Bank in accordance with
the terms of this Agreement. Borrower hereby authorizes Administrative Agent and
the Banks, if and to the extent payment by Borrower is not made when due under
this Agreement or under the Notes, to charge from time to time against any
account Borrower maintains with Administrative Agent or any Bank any amount so
due to Administrative Agent and/or the Banks.
Except to the extent provided in this Agreement, whenever any
payment to be made under this Agreement or under the Notes is due on any day
other than a Banking Day, such payment shall be made on the next succeeding
Banking Day, and such extension of time shall in such case be included in the
computation of the payment of interest and other fees, as the case may be.
Section 2.11 Elections, Conversions or Continuation of Loans. Subject
to the provisions of Article III and Sections 2.05 and 2.12, Borrower shall have
the right to Elect to have all or a portion of any advance of the Ratable Loans
be LIBOR Loans, to Convert Base Rate Loans into LIBOR Loans, to Convert LIBOR
Loans into Base Rate Loans, or to Continue LIBOR Loans as LIBOR Loans, at any
time or from time to time, provided that: (1) Borrower shall give Administrative
Agent notice of each such Election, Conversion or Continuation as provided in
Section 2.13; and (2) a LIBOR Loan may be Continued only on the last day of the
applicable Interest Period for such LIBOR Loan. Except as otherwise provided in
this Agreement, each Election, Continuation and Conversion shall be applicable
to each Bank's Ratable Loan in accordance with its Pro Rata Share.
Section 2.12 Minimum Amounts.
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With respect to the Ratable Loans as a whole, each Election and each
Conversion shall be in an amount at least equal to Three Million Dollars
($3,000,000) and in integral multiples of One Hundred Thousand Dollars
($100,000).
Section 2.13
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Certain Notices Regarding Elections, Conversions and Continuations of
Loans. Notices by Borrower to Administrative Agent of Elections, Conversions and
Continuations of LIBOR Loans shall be irrevocable and shall be effective only if
received by Administrative Agent not later than 10:00 a.m. (New York time) on
the number of Banking Days prior to the date of the relevant Election,
Conversion or Continuation specified below:
Notice Number of
Banking Days Prior
Conversions into Base Rate Loans one (1)
Elections of, Conversions into or Continuations as, LIBOR Loan three (3)
Promptly following its receipt of any such notice, Administrative Agent shall so
advise the Banks either by telephone or by facsimile. Each such notice of
Election shall specify the portion of the amount of the advance that is to be
LIBOR Loans (subject to Section 2.12) and the duration of the Interest Period
applicable thereto (subject to Section 2.05); each such notice of Conversion
shall specify the LIBOR Loans or Base Rate Loans to be Converted; and each such
notice of Conversion or Continuation shall specify the date of Conversion or
Continuation (which shall be a Banking Day), the amount thereof (subject to
Section 2.12) and the duration of the Interest Period applicable thereto
(subject to Section 2.05). In the event that Borrower fails to Elect to have any
portion of an advance of the Ratable Loans be LIBOR Loans, the entire amount of
such advance shall constitute Base Rate Loans. So long as there exists no Event
of Default, in the event that Borrower fails to Continue LIBOR Loans within the
time period and as otherwise provided in this Section, such LIBOR Loans will
automatically become LIBOR Loans with an Interest Period of one (1) month on the
last day of the then current applicable Interest Period for such LIBOR Loans.
Notwithstanding anything to the contrary contained herein, upon the occurrence
of an Event of Default which is continuing, Borrower shall no longer be entitled
to Convert Base Rate Loans into LIBOR Loans or to Continue LIBOR Loans as LIBOR
Loans and all then existing LIBOR Loans shall be automatically Converted into
Base Rate Loans on the last day of the then current applicable Interest
Period(s) for such LIBOR Loans. The foregoing provisions shall not be construed
as a waiver by the Banks of their right to pursue any other remedies available
to them under any Mortgage or any other Loan Document nor shall they be
construed to limit in any way the application of the Default Rate as provided
herein and in the Mortgages.
Section 2.14 Late Payment Premium.
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Borrower shall pay to Administrative Agent for the account of the Banks a
late payment premium in the amount of 4% of any payments of principal or
interest under the Loans made more than five (5) days after the due date
thereof, which shall be due with any such late payment. Such late charge
represents the reasonable estimate of Borrower and the Banks of a fair average
compensation for the loss that may be sustained by the Banks due to the failure
of Borrower to make timely payments. Such late charge shall be paid without
prejudice to the right of the Banks to collect any other amounts provided herein
or in the other Loan Documents to be paid or to exercise any other remedies
under the Loan Documents.
Section 2.15 Terminations of Commitments. (a) At any time, Borrower
shall have the right, without premium or penalty, to terminate any unused Loan
Commitments existing as of the date of such termination, in whole or in part,
from time to time, provided that: (1) Borrower shall give notice of each such
termination to Administrative Agent no later then 10:00 a.m. (New York time) on
the date which is fifteen (15) Banking Days prior to the effectiveness of such
termination; (2) the Loan Commitments of each of the Banks must be terminated
ratably and simultaneously with those of the other Banks; and (3) each partial
termination of the Loan Commitments as a whole (and corresponding reduction of
the Total Loan Commitment) shall be in an integral multiple of One Million
Dollars ($1,000,000).
(b) The Loan Commitments, to the extent terminated, may not be reinstated.
Section 2.16 Letters of Credit.
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(a) Borrower, by notice to Administrative Agent, may request, in lieu of
advances of proceeds of the Ratable Loans, that Administrative Agent issue
unconditional, irrevocable standby letters of credit (each, a "Letter of
Credit") for the account of Borrower, payable by sight drafts, for such
beneficiaries and with such other terms as Borrower shall specify. Promptly upon
issuance of a Letter of Credit, Administrative Agent shall notify each of the
Banks by telephone or by facsimile.
(b) The amount of any such Letter of Credit shall be limited
to the lesser of (1) Fifteen Million Dollars ($15,000,000) less the amount of
all other Letters of Credit then issued and outstanding or (2) the Available
Total Loan Commitment, it being understood that the amount of each Letter of
Credit issued and outstanding shall effect a reduction, by an equal amount, of
the Available Total Loan Commitment as provided in Section 2.01(b) (such
reduction to be allocated to each Bank's Ratable Loan ratably in accordance with
the Banks' respective Pro Rata Shares).
(c) The amount of each Letter of Credit shall be further subject to the
conditions and limitations applicable to amounts of advances set forth in
Section 2.03 and the procedures for the issuance of each Letter of Credit shall
be the same as the procedures applicable to the making of advances as set forth
in the first sentence of Section 2.04.
(d) Administrative Agent's issuance of each Letter of Credit shall be
subject to Borrower's satisfaction of all conditions precedent to its
entitlement to an advance of proceeds of the Loans.
(e) Each Letter of Credit shall expire no later than the earlier of (x) one
(1) month prior to the Maturity Date or (y) one (1) year after the date of its
issuance.
(f) In connection with, and as a further condition to the issuance of, each
Letter of Credit, Borrower shall execute and deliver to Administrative Agent an
application for the Letter of Credit on Administrative Agent's standard form
therefor, together with such other documents, opinions and assurances as
Administrative Agent shall reasonably require.
(g) In connection with each Letter of Credit, Borrower hereby
covenants to pay to Administrative Agent the following fees, each payable
quarterly in arrears (on the first Banking Day of each calendar quarter
following the issuance of the Letter of Credit): (i) a fee, payable to
Administrative Agent for the account of the Banks, computed daily on the amount
of the Letter of Credit issued and outstanding at a rate per annum equal to the
"Banks' L/C Fee Rate" (as hereinafter defined) and (ii) a fee, payable to
Administrative Agent for its own account, computed daily on the amount of the
Letter of Credit issued and outstanding at a rate per annum of 0.125%. For
purposes of this Agreement, the "Banks' L/C Fee Rate" shall mean, at any time, a
rate per annum equal to the Applicable Margin for LIBOR Loans. It is understood
and agreed that the last installment of the fees provided for in this paragraph
(g) with respect to any particular Letter of Credit shall be due and payable on
the first day of the calendar quarter following the return, undrawn, or
cancellation, of such Letter of Credit.
(h) The parties hereto acknowledge and agree that, immediately
upon notice from Administrative Agent of any drawing under a Letter of Credit,
each Bank shall, notwithstanding the existence of a Default or Event of Default
or the non-satisfaction of any conditions precedent to the making of an advance
of the Loans, advance proceeds of its Ratable Loan, in an amount equal to its
Pro Rata Share of such drawing, which advance shall be made to Administrative
Agent to reimburse Administrative Agent, for its own account, for such drawing.
Each of the Banks further acknowledges that its obligation to fund its Pro Rata
Share of drawings under Letters of Credit as aforesaid shall survive the Banks'
termination of this Agreement or enforcement of remedies hereunder or under the
other Loan Documents.
(i) Borrower agrees, upon the occurrence of an Event of
Default and at the request of Administrative Agent, (x) to deposit with
Administrative Agent cash collateral in the amount of all the outstanding
Letters of Credit, which cash collateral shall be held by Administrative Agent
as security for Borrower's obligations in connection with the Letters of Credit
and (y) to execute and deliver to Administrative Agent such documents as
Administrative Agent requests to confirm and perfect the assignment of such cash
collateral to Administrative Agent.
Section 2.17 Releases. Provided no Default or Event of Default exists,
Administrative Agent shall release any one or more of Takoma, Four Mile, Graylyn
and Kenhorst from the lien of its respective Mortgage (and shall cause UBS
Securities (Swaps) Inc. to release its mortgage on the same Property) upon the
reduction of the Total Loan Commitment (and consequently the Loan Commitments)
by an amount equal to the respective amount set forth in Exhibit K for such
Property and the prepayment, in accordance with Section 2.09, of the Loans to
the extent necessary such that the Maximum Available Amount does not exceed the
Total Loan Commitment as reduced.
ARTICLE III. YIELD PROTECTION; ILLEGALITY; ETC.
Section 3.01 Additional Costs. Borrower shall pay directly to each
Bank from time to time on demand such amounts as such Bank may determine to be
necessary to compensate it for any increased costs which such Bank determines
are attributable to its making or maintaining a LIBOR Loan or a Bid Rate Loan,
or its obligation to make or maintain a LIBOR Loan or a Bid Rate Loan, or its
obligation to Convert a Base Rate Loan to a LIBOR Loan hereunder, or any
reduction in any amount receivable by such Bank hereunder in respect of its
LIBOR Loan or Bid Rate Loan(s) or such obligations (such increases in costs and
reductions in amounts receivable being herein called "Additional Costs"), in
each case resulting from any Regulatory Change which:
(1) changes the basis of taxation of any amounts payable to such Bank under
this Agreement or the Notes in respect of any such LIBOR Loan or Bid Rate Loan
(other than changes in the rate of general corporate, franchise, branch profit,
net income or other income tax imposed on such Bank or its Applicable Lending
Office); or
(2) (other than to the extent the LIBOR Reserve
Requirement is taken into account in determining the LIBOR Rate at the
commencement of the applicable Interest Period) imposes or modifies any
reserve, special deposit, deposit insurance or assessment, minimum
capital, capital ratio or similar requirements relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities of, such Bank (including any LIBOR Loan or Bid Rate Loan or
any deposits referred to in the definition of "LIBOR Interest Rate" in
Section 1.01), or any commitment of such Bank (including such Bank's
Loan Commitment hereunder); or
(3) imposes any other condition affecting this Agreement or the Notes (or
any of such extensions of credit or liabilities).
Without limiting the effect of the provisions of the first
paragraph of this Section, in the event that, by reason of any Regulatory
Change, any Bank either (1) incurs Additional Costs based on or measured by the
excess above a specified level of the amount of a category of deposits of other
liabilities of such Bank which includes deposits by reference to which the LIBOR
Interest Rate is determined as provided in this Agreement or a category of
extensions of credit or other assets of such Bank which includes loans based on
the LIBOR Interest Rate or (2) becomes subject to restrictions on the amount of
such a category of liabilities or assets which it may hold, then, if such Bank
so elects by notice to Borrower (with a copy to Administrative Agent), the
obligation of such Bank to permit Elections of, to Continue, or to Convert Base
Rate Loans into, LIBOR Loans shall be suspended (in which case the provisions of
Section 3.04 shall be applicable) until such Regulatory Change ceases to be in
effect.
Determinations and allocations by a Bank for purposes of this
Section of the effect of any Regulatory Change pursuant to the first or second
paragraph of this Section, on its costs or rate of return of making or
maintaining its Loan or portions thereof or on amounts receivable by it in
respect of its Loan or portions thereof, and the amounts required to compensate
such Bank under this Section, shall be included in a calculation of such amounts
given to Borrower and shall be conclusive so long as made on a reasonable basis.
Section 3.02 Limitation on Types of Loans.
- ---------- ----------------------------
Anything herein to the contrary notwithstanding, if, on or prior to the
determination of the LIBOR Interest Rate for any Interest Period:
(1) Administrative Agent determines (which determination shall be
conclusive so long as made on a reasonable basis) that quotations of interest
rates for the relevant deposits referred to in the definition of "LIBOR Interest
Rate" in Section 1.01 are not being provided in the relevant amounts or for the
relevant maturities for purposes of determining rates of interest for the LIBOR
Loans or Bid Rate Loans as provided in this Agreement; or
(2) a Bank determines (which determination shall be
conclusive so long as made on a reasonable basis) and promptly notifies
Administrative Agent that the relevant rates of interest referred to in
the definition of "LIBOR Interest Rate" in Section 1.01 upon the basis
of which the rate of interest for LIBOR Loans or Bid Rate Loans for
such Interest Period is to be determined do not adequately cover the
cost to such Bank of making or maintaining such LIBOR Loan or Bid Rate
Loan for such Interest Period;
then Administrative Agent shall give Borrower prompt notice thereof, and so long
as such condition remains in effect, the Banks (or, in the case of the
circumstances described in clause (2) above, the affected Bank) shall be under
no obligation to permit Elections of LIBOR Loans, to Convert Base Rate Loans
into LIBOR Loans or to Continue LIBOR Loans and Borrower shall, on the last
day(s) of the then current Interest Period(s) for the affected outstanding LIBOR
Loans or Bid Rate Loans, either (x) prepay the affected LIBOR Loans or Bid Rate
Loans or (y) Convert the affected LIBOR Loans into Base Rate Loans in accordance
with Section 2.11 or convert the rate of interest under the affected Bid Rate
Loans to the rate applicable to Base Rate Loans by following the same procedures
as are applicable for Conversions into Base Rate Loans set forth in Section
2.11.
Section 3.03 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Bank or its Applicable
Lending Office to honor its obligation to make or maintain a LIBOR Loan or Bid
Rate Loan hereunder, to allow Elections of a LIBOR Loan or to Convert a Base
Rate Loan into a LIBOR Loan, then such Bank shall promptly notify Administrative
Agent and Borrower thereof and such Bank's obligation to make or maintain a
LIBOR Loan or Bid Rate Loan, or to permit Elections of, to Continue, or to
Convert its Base Rate Loan into, a LIBOR Loan shall be suspended (in which case
the provisions of Section 3.04 shall be applicable) until such time as such Bank
may again make and maintain a LIBOR Loan or Bid Rate Loan.
Section 3.04 Treatment of Affected Loans. If the obligations of any
Bank to make or maintain a LIBOR Loan or a Bid Rate Loan, or to permit an
Election of a LIBOR Loan, to Continue its LIBOR Loan, or to Convert its Base
Rate Loan into a LIBOR Loan, are suspended pursuant to Sections 3.01 or 3.03
(each LIBOR Loan or Bid Rate Loan so affected being herein called an "Affected
Loan"), such Bank's Affected Loan shall be automatically Converted into a Base
Rate Loan (or, in the case of an Affected Loan that is a Bid Rate Loan, the
interest rate thereon shall be converted to the rate applicable to Base Rate
Loans) on the last day of the then current Interest Period for the Affected Loan
(or, in the case of a Conversion or conversion required by Sections 3.01 or
3.03, on such earlier date as such Bank may specify to Borrower).
To the extent that such Bank's Affected Loan has been so
Converted (or the interest rate thereon so converted), all payments and
prepayments of principal which would otherwise be applied to such Bank's
Affected Loan shall be applied instead to its Base Rate Loan (or to its Bid Rate
Loan bearing interest at the converted rate) and such Bank shall have no
obligation to Convert its Base Rate Loan into a LIBOR Loan.
Section 3.05 Certain Compensation.
- ---------- --------------------
Borrower shall pay to Administrative Agent for the account of the
applicable Bank, upon the request of such Bank through Administrative Agent,
(which request shall include a calculation of the amount(s) due) such amount or
amounts as shall be sufficient (in the reasonable opinion of such Bank) to
compensate it for any loss, cost or expense which such Bank determines is
attributable to:
(1) any payment or prepayment of a LIBOR Loan or Bid Rate Loan made by such
Bank, or any Conversion of a LIBOR Loan (or conversion of the rate of interest
on a Bid Rate Loan) made by such Bank, in any such case on a date other than the
last day of an applicable Interest Period, whether by reason of acceleration or
otherwise; or
(2) any failure by Borrower for any reason to Convert or Continue a LIBOR
Loan to be Converted or Continued by such Bank on the date specified therefor in
the relevant notice under Section 2.13; or
(3) any failure by Borrower to borrow (or to qualify for a borrowing of) a
LIBOR Loan or Bid Rate Loan which would otherwise be made hereunder on the date
specified in the relevant Election notice under Section 2.13 or Bid Rate Quote
acceptance under Section 2.02(e) given or submitted by Borrower.
Without limiting the foregoing, such compensation shall
include an amount equal to the present value (using as the discount rate an
interest rate equal to the rate determined under (2) below) of the excess, if
any, of (1) the amount of interest which otherwise would have accrued on the
principal amount so paid, prepaid, Converted or Continued (or not Converted,
Continued or borrowed) for the period from the date of such payment, prepayment,
Conversion or Continuation (or failure to Convert, Continue or borrow) to the
last day of the then current applicable Interest Period (or, in the case of a
failure to Convert, Continue or borrow, to the last day of the applicable
Interest Period which would have commenced on the date specified therefor in the
relevant notice) at the applicable rate of interest for the LIBOR Loan or Bid
Rate Loan provided for herein, over (2) the amount of interest (as reasonably
determined by such Bank) based upon the interest rate which such Bank would have
bid in the London interbank market for Dollar deposits, for amounts comparable
to such principal amount and maturities comparable to such period. A
determination of any Bank as to the amounts payable pursuant to this Section
shall be conclusive so long as made on a reasonable basis.
Section 3.06 Capital Adequacy. If any Bank shall have determined that,
after the date hereof, the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any Governmental Authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or any request or directive regarding capital adequacy (whether or not
having the force of law) of any such Governmental Authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on capital of such Bank (or its Parent) as a consequence of such Bank's
obligations hereunder to a level below that which such Bank (or its Parent)
could have achieved but for such adoption, change, request or directive (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by such Bank to be material, then from time to time, within fifteen (15)
days after demand by such Bank (with a copy to Administrative Agent), Borrower
shall pay to such Bank such additional amount or amounts as will compensate such
Bank (or its Parent) for such reduction. A certificate of any Bank claiming
compensation under this Section, setting forth in reasonable detail the basis
therefor, shall be conclusive so long as made on a reasonable basis.
Section 3.07 Substitution of Banks. If any Bank (an "Affected Bank")
(i) makes demand upon Borrower for (or if Borrower is otherwise required to pay)
Additional Costs pursuant to Section 3.01 or (ii) is unable to make or maintain
a LIBOR Loan or Bid Rate Loan as a result of a condition described in Section
3.03 or clause (2) of Section 3.02, Borrower may, within ninety (90) days of
receipt of such demand or notice (or the occurrence of such other event causing
Borrower to be required to pay Additional Costs or causing said Section 3.03 or
clause (2) of Section 3.02 to be applicable), as the case may be, give written
notice (a "Replacement Notice") to Administrative Agent and to each Bank of
Borrower's intention either (x) to prepay in full the Affected Bank's Note and
to terminate the Affected Bank's entire Loan Commitment or (y) to replace the
Affected Bank with another financial institution (the "Replacement Bank")
designated in such Replacement Notice.
In the event Borrower opts to give the notice provided for in
clause (x) above, and if the Affected Bank shall not agree within thirty (30)
days of its receipt thereof to waive the payment of the Additional Costs in
question or the effect of the circumstances described in Section 3.03 or clause
(2) of Section 3.02, then, so long as no Default or Event of Default shall
exist, Borrower may (notwithstanding the provisions of clause (2) of Section
2.15(a)) terminate the Affected Bank's entire Loan Commitment, provided that in
connection therewith it pays to the Affected Bank all outstanding principal and
accrued and unpaid interest under the Affected Bank's Note, together with all
other amounts, if any, due from Borrower to the Affected Bank, including all
amounts properly demanded and unreimbursed under Sections 3.01 and 3.05.
In the event Borrower opts to give the notice provided for in
clause (y) above, and if (i) Administrative Agent shall, within thirty (30) days
of its receipt of the Replacement Notice, notify Borrower and each Bank in
writing that the Replacement Bank is reasonably satisfactory to Administrative
Agent and (ii) the Affected Bank shall not, prior to the end of such thirty
(30)-day period, agree to waive the payment of the Additional Costs in question
or the effect of the circumstances described in Section 3.03 or clause (2) of
Section 3.02, then the Affected Bank shall, so long as no Default or Event of
Default shall exist, assign its Note and all of its rights and obligations under
this Agreement to the Replacement Bank, and the Replacement Bank shall assume
all of the Affected Bank's rights and obligations, pursuant to an agreement,
substantially in the form of an Assignment and Assumption Agreement, executed by
the Affected Bank and the Replacement Bank. In connection with such assignment
and assumption, the Replacement Bank shall pay to the Affected Bank an amount
equal to the outstanding principal amount under the Affected Bank's Note plus
all interest accrued thereon, plus all other amounts, if any (other than the
Additional Costs in question), then due and payable to the Affected Bank;
provided, however, that prior to or simultaneously with any such assignment and
assumption, Borrower shall have paid to such Affected Bank all amounts properly
demanded and unreimbursed under Sections 3.01 and 3.05. Upon the effective date
of such assignment and assumption, the Replacement Bank shall become a Bank
Party to this Agreement and shall have all the rights and obligations of a Bank
as set forth in such Assignment and Assumption Agreement, and the Affected Bank
shall be released from its obligations hereunder, and no further consent or
action by any party shall be required. Upon the consummation of any assignment
pursuant to this Section, a substitute Ratable Loan Note shall be issued to the
Replacement Bank by Borrower, in exchange for the return of the Affected Bank's
Ratable Loan Note. The obligations evidenced by such substitute note shall
constitute "Obligations" for all purposes of this Agreement and the other Loan
Documents. In connection with Borrower's execution of substitute notes as
aforesaid, Borrower shall deliver to Administrative Agent evidence, satisfactory
to Administrative Agent, of all requisite corporate, partnership or other action
to authorize Borrower's execution and delivery of the substitute notes and any
related documents. If the Replacement Bank is not incorporated under the laws of
the United States of America or a state thereof, it shall, prior to the first
date on which interest or fees are payable hereunder for its account, deliver to
Borrower and Administrative Agent certification as to exemption from deduction
or withholding of any United States federal income taxes in accordance with
Section 10.13. Each Replacement Bank shall be deemed to have made the
representations contained in, and shall be bound by the provisions of, Section
10.13.
Borrower, Administrative Agent and the Banks shall execute
such modifications to the Loan Documents as shall be reasonably required in
connection with and to effectuate the foregoing .
Section 3.08 "Bank" to Include Participants.
- ---------- ------------------------------
For purposes of Sections 3.01 through 3.06 and of the definition of
"Additional Costs" in Section 1.01, the term "Bank" shall, at each Bank's
option, be deemed to include such Bank's present and future Participants in its
Loan to the extent of each such Participant's actual Additional Costs or other
losses, costs or expenses payable pursuant to this Article III.
ARTICLE IV. CONDITIONS PRECEDENT
Section 4.01 Conditions Precedent to the Loans.
- ---------- ---------------------------------
The obligations of the Banks hereunder and the obligation of each Bank to
make the Initial Advance are subject to the condition precedent that
Administrative Agent shall have received on or before the Closing Date (other
than with respect to paragraph 28 below, which shall be required prior to the
Initial Advance) each of the following documents, and each of the following
requirements shall have been fulfilled:
(1) Fees and Expenses. The payment of all fees and expenses incurred by
Administrative Agent (including, without limitation, the reasonable fees and
expenses of legal counsel, the Engineering Consultant and any valuation,
environmental or insurance consultants);
(2) Note. The Ratable Loan Note for UBS and the Bid Rate Loan Note for
Administrative Agent, each duly executed by Borrower;
(3) Mortgage and UCCs. For each Property, the Mortgage, duly executed by
Borrower and recorded in the appropriate land records, together with duly
executed UCC-1 financing statements filed under the Uniform Commercial Code of
all jurisdictions necessary or, in the opinion of Administrative Agent,
desirable to perfect the lien created by the Mortgage;
(4) Guaranty. The Guaranty, duly executed by Guarantor;
(5) Indemnity. For each Property, the Indemnity, duly
executed by Borrower and Guarantor;
(6) Title Policy. For each Property, a paid title
insurance policy, in the amount of the Mortgage thereon, in form
approved by Administrative Agent, issued by the Title Insurer, which
shall insure the Mortgage to be a valid first lien on the fee interest
of Borrower in the Property, and its interests in the REA, free and
clear of all liens, defects, encumbrances and exceptions except those
previously approved by Administrative Agent, and shall contain (i) a
reference to the survey but no survey exceptions, (ii) a Pending
Disbursements Clause in the form of EXHIBIT H, (iii) if such policy is
dated earlier than the date of the Initial Advance, an endorsement to
such policy, in a form approved by Administrative Agent, conforming to
the pending disbursements requirements set forth above, and setting
forth no additional exceptions except those approved by Administrative
Agent and (iv) such affirmative insurance and endorsements as
Administrative Agent may reasonably require; and shall be accompanied
by such reinsurance agreements between the Title Insurer and title
companies approved by Administrative Agent, in ALTA facultative form
approved by Administrative Agent and with direct access provisions, as
Administrative Agent may require;
(7) Survey. For each Property, an ALTA survey
certified to Administrative Agent and the Title Insurer showing (i) the
location of the perimeter of the Property by courses and distances,
(ii) all easements, rights-of-way, and utility lines referred to in the
title policy required by this Agreement or which actually service or
cross the Property (with instrument, book and page number indicated),
(iii) the lines of the streets abutting the Property and the width
thereof, and any established building lines (and that such roads have
been dedicated for public use and are completed and have been accepted
by all required Governmental Authorities), (iv) any encroachments and
the extent thereof upon the Property, (v) locations of all portions
(with the acreage thereof also identified) of the Property which are
located in an area designated as a "flood prone area" as defined by
U.S. Department of Housing and Urban Development pursuant to the Flood
Disaster Protection Act of 1973 and (vi) all improvements thereon, and
the relationship thereof by distances to the perimeter of the Property,
established building lines and street lines;
(8) Appraisal. An independent M.A.I. appraisal, commissioned by
Administrative Agent, of the aggregate value of the Properties, which appraisal
shall indicate a stabilized value satisfactory to the Banks and shall comply in
all respects with the standards for real estate appraisals established pursuant
to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989;
(9) Insurance Policies. For each Property, the policies and certificates of
hazard and other insurance required by the Mortgage on such Property, together
with evidence of the payment of the premiums therefor; and, generally, evidence
of the insurance referred to in Section 5.17;
(10) List of Prior Owners Etc. For each Property, a list, certified by the
Title Insurer, of the prior owners, tenants and other users, during the period
from January 1, 1940 to the date of such certification, of all or any portion of
the Property or any improvements thereon;
(11) Hazardous Materials Report/Certification. For
each Property, at Borrower's expense, a detailed report and
certification by a properly qualified engineer with regard to Hazardous
Materials affecting the Property, which shall include, inter alia, a
certification that such engineer has obtained and examined the list of
prior owners, tenants and other users required by the immediately
preceding paragraph, and has made an on-site physical examination of
the Property and improvements thereon, and a visual observation of the
surrounding areas, and disclosing the extent of past or present
Hazardous Materials activities or of the presence of Hazardous
Materials;
(12) Consultant's Report. For each Property, a
detailed report from the Engineering Consultant to the effect that (i)
the Improvements are in satisfactory condition and have been
constructed in accordance with the plans and specifications therefor
approved by all Governmental Authorities, (ii) the Improvements, comply
with all applicable zoning and other Laws, all Major Leases and REAs,
(iii) all roads and utilities necessary for the full utilization of the
Improvements for their intended purposes have been completed and (iv)
there exists a sufficient number of parking spaces necessary to satisfy
the requirements of the REA and any leases and all zoning and other
applicable Laws with respect to the Property, and all required
landscaping, sidewalks and other amenities, and all off-site
improvements, related to the Improvements have been completed;
(13) Permits and Other Approvals. For each Property, copies of any and all
authorizations, including plot plan and subdivision approvals, zoning variances,
sewer, building and other permits, required by all Governmental Authorities for
the use, occupancy and operation of the Property and/or Improvements in
accordance with all applicable building, environmental, ecological, landmark,
subdivision and zoning Laws;
(14) Leases. For each Property, copies, certified to
be true and complete, of all leases of the Improvements, accompanied
by, in the case of Major Leases, and such other leases as deemed
necessary by Administrative Agent (i) estoppel certificates from the
tenants thereunder, (ii) notices of assignment in the form of EXHIBIT I
, (iii) at Administrative Agent's option, subordination non-disturbance
and attornment agreements and (iv) to the extent available, current
financial statements of the tenants (and guarantors of the tenants'
obligations, if applicable) thereunder, together with a certified copy
of the standard form of lease Borrower is using in connection with the
leasing of space in the Improvements and the first rent rolls, tenant
sales reports and operating and cash statements required by paragraph
(15) of Section 6.09;
(15) REA. For each Property, a copy, certified to be true and complete, of
the REA, together with estoppel certificates with respect thereto from each of
the Anchors and, if available, current financial statements of such parties;
(16) Management and Leasing Contracts. For each Property, copies, certified
to be true and complete, of all existing contracts providing for the management,
operation or leasing of the Property or any improvements thereon, together with,
in each case, such collateral assignments or "will-serve" letters as
Administrative Agent may require;
(17) Opinions of Counsel. Favorable opinions, dated the Closing Date, of
counsel for Borrower and Guarantor, as to (i) the due authorization, execution
and enforceability of the Loan Documents, (ii) the due formation and existence
of Borrower and Guarantor and (iii) such other matters as Administrative Agent
may reasonably request;
(18) UCC Searches. Uniform Commercial Code searches with respect to
Borrower and advice from the Title Insurer to the effect that searches of the
proper public records disclose no leases of personalty or financing statements
filed or recorded against Borrower or the Mortgaged Property under any of the
Mortgages;
(19) Financial Statements. (i) Audited FW Consolidated Financial
Statements, as of and for the year ended December 31, 1996 and (ii) unaudited FW
Consolidated Financial Statements, certified by the chief financial officer and
as of and for the quarter ended September 30, 1997;
(20) Certificates of Limited Partnership/Incorporation. A copy of the
Certificate of Limited Partnership for Borrower and a copy of the articles of
incorporation of Guarantor, each certified by the appropriate Secretary of State
or equivalent state official;
(21) Agreements of Limited Partnership/Bylaws. A copy of the Agreement of
Limited Partnership for Borrower and a copy of the by-laws of Guarantor,
including all amendments thereto, each certified by the Secretary or an
Assistant Secretary of Guarantor as being in full force and effect on the
Closing Date;
(22) Good Standing Certificates. A certified copy of a certificate from the
Secretary of State or equivalent official of the jurisdictions where Borrower
and Guarantor are organized, dated as of the most recent practicable date,
showing the good standing or partnership qualification of (i) Borrower and (ii)
Guarantor;
(23) Foreign Qualification Certificates. A certified copy of a certificate
from the Secretary of State or equivalent official of the jurisdictions where
Borrower and Guarantor maintain their principal place of business, dated as of
the most recent practicable date, showing the qualification to transact business
in such state as a foreign limited partnership or foreign corporation, as the
case may be, for (i) Borrower and (ii) Guarantor; and such a certificate for
Borrower from each jurisdiction where a Property is located;
(24) Resolution. A copy of a resolution adopted by the Board of Directors
of Guarantor, certified by the Secretary or an Assistant Secretary of Guarantor
as being in full force and effect on the Closing Date, authorizing the Loans
provided for herein and the execution, delivery and performance of the Loan
Documents to be executed and delivered by Guarantor hereunder on behalf of
itself and Borrower;
(25) Incumbency Certificate. A certificate, signed by the Secretary or an
Assistant Secretary of Guarantor and dated the Closing Date, as to the
incumbency, and containing the specimen signature or signatures, of the Persons
authorized to execute and deliver the Loan Documents to be executed and
delivered by Guarantor and Borrower hereunder;
(26) Solvency Certificate. A Solvency Certificate, duly executed, from
Borrower;
(27) Authorization Letter. The Authorization Letter, duly executed by
Borrower;
(28) Request for Advance. A request for an advance in accordance with
Article II;
(29) Certificate. The following statements shall be true and Administrative
Agent shall have received a certificate dated the Closing Date signed by a duly
authorized signatory of Borrower stating, to the best of the certifying party's
knowledge, the following:
(a) All representations and warranties contained in this Agreement and in
each of the other Loan Documents are true and correct on and as of the Closing
Date as though made on and as of such date,
(b) No Default or Event of Default has occurred and is continuing, or could
result from the transactions contemplated by this Agreement and the other Loan
Document, and
(c) None of the Improvements on any Property has been
injured or damaged by fire or other casualty;
(30) Compliance Certificate. A certificate of the sort required by
paragraph (3) of Section 6.09; and
(31) Additional Materials. Such other approvals,
documents, instruments or opinions as Administrative Agent may reasonably
request.
Section 4.02
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Conditions Precedent to Advances After the Initial Advance. The obligation
of each Bank to make advances of the Loans subsequent to the Initial Advance
shall be subject to satisfaction of the following conditions precedent:
(1) All conditions of Section 4.01 shall have been and remain satisfied as
of the date of the advance;
(2) No Default or Event of Default shall have occurred and be continuing as
of the date of the advance;
(3) Each of the representations and warranties contained in this Agreement
and in each of the other Loan Documents shall be true and correct as of the date
of the advance;
(4) Administrative Agent shall have received a request for an advance in
accordance with Section 2.04; and
(5) Within the past six months, Administrative Agent shall have received a
continuation report and endorsement to the title policy insuring each Mortgage,
in the form approved by Administrative Agent, conforming to the pending
disbursements clause contained in said policy and setting forth no additional
exceptions (including survey exceptions) except those approved by Administrative
Agent.
Section 4.03 Deemed Representations.
- ---------- ----------------------
Each request by Borrower for, and acceptance by Borrower of, an advance of
proceeds of the Loans shall constitute a representation and warranty by Borrower
and Guarantor that, as of both the date of such request and the date of the
advance (1) no Default or Event of Default has occurred and is continuing, and
(2) each representation or warranty contained in this Agreement or the other
Loan Documents is true and correct.
ARTICLE V. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Administrative Agent and
each Bank as follows:
Section 5.01 Existence. Borrower is a limited partnership duly
organized and existing under the laws of the State of Maryland, with its
principal place of business in the State of Maryland and is duly qualified as a
foreign limited partnership, properly licensed, in good standing and has all
requisite authority to conduct its business in each jurisdiction in which it
owns properties (including the Properties) or conducts business. Each of its
Consolidated Businesses is duly organized, validly existing and in good standing
under the Laws of its jurisdiction of organization and has all requisite
authority to conduct its business in each jurisdiction in which it owns property
or conducts business. Guarantor is a corporation duly organized and existing
under the laws of the State of Maryland which has elected status as a real
estate investment trust under the Code, with its principal place of business in
the State of Maryland, is duly qualified as a foreign corporation and properly
licensed and in good standing in each jurisdiction where the failure to qualify
or be licensed would constitute a Material Adverse Change with respect to
Guarantor or have a material adverse effect on the business or properties of
Guarantor. The stock of Guarantor is listed and publicly traded on the New York
Stock Exchange.
Section 5.02 Corporate/Partnership Powers.
- ---------- ----------------------------
The execution, delivery and performance of the Loan Documents required to
be delivered by Borrower hereunder are within its partnership authority and the
corporate power of Guarantor, have been duly authorized by all requisite action,
and are not in conflict with the terms of any organizational instruments of such
entity, or any instrument or agreement to which Borrower or Guarantor is a party
or by which Borrower, Guarantor or any of their respective assets may be bound
or affected.
Section 5.03 Power of Officers.
- ---------- -----------------
The officers of Guarantor executing the Loan Documents required to be
delivered by it on its own behalf or that of Borrower hereunder have been duly
elected or appointed and were fully authorized to execute the same at the time
each such Loan Document was executed.
Section 5.04 Power and Authority; No Conflicts; Compliance With Laws.
The execution and delivery of, and the performance of the obligations required
to be performed by Borrower and Guarantor under, the Loan Documents do not and
will not (a) violate any provision of, or require any filing, registration,
consent or approval under, any Law (including, without limitation, Regulation
U), order, writ, judgment, injunction, decree, determination or award presently
in effect having applicability to either of them, (b) result in a breach of or
constitute a default under or require any consent under any indenture or loan or
credit agreement or any other agreement, lease or instrument to which either of
them may be a party or by which either of them or their properties may be bound
or affected except for consents which have been obtained, (c) result in, or
require, the creation or imposition of any Lien, upon or with respect to any of
its properties now owned or hereafter acquired, or (d) cause either of them to
be in default under any such Law, order, writ, judgment, injunction, decree,
determination or award or any such indenture, agreement, lease or instrument; to
the best of Borrower's knowledge, Borrower and Guarantor are in material
compliance with all Laws (including Environmental Laws) applicable to them and
their properties (including the Properties).
Section 5.05 Legally Enforceable Agreements.
- ---------- ------------------------------
Each Loan Document is a legal, valid and binding obligation of Borrower
and/or Guarantor, as the case may be, enforceable in accordance with its terms,
except to the extent that such enforcement may be limited by applicable
bankruptcy, insolvency and other similar laws affecting creditors' rights
generally.
Section 5.06 Litigation. There are no actions, suits or proceedings
pending or, to its knowledge, threatened against Borrower, Guarantor or any of
their Affiliates, any Property, the validity or enforceability of any Mortgage
or the priority of the Lien thereof, at law or in equity, before any court or
arbitrator or any Governmental Authority except actions, suits or proceedings
which have been disclosed to the Bank Parties in writing and which are fully
covered by insurance or would, if adversely determined, not materially impair
the ability of Borrower or Guarantor to pay when due any amounts which may
become payable under the Loan Documents or to otherwise pay and perform their
obligations in connection with the Loans.
Section 5.07 Good Title to Properties. Borrower, Guarantor and each of
their Affiliates have good, marketable and legal title to all of the properties
and assets each of them purports to own (including, without limitation, those
reflected in the December 31, 1996 financial statements referred to in Section
5.15) and only with exceptions which do not materially detract from the value of
such property or assets or the use thereof in Borrower's, Guarantor's and such
Affiliate's business, and except to the extent that any such properties and
assets have been encumbered or disposed of since the date of such financial
statements without violating any of the covenants contained in Article VII or
elsewhere in this Agreement. Borrower and its Material Affiliates enjoy peaceful
and undisturbed possession of all leased property necessary in any material
respect in the conduct of their respective businesses. All such leases are valid
and subsisting and are in full force and effect.
Section 5.08 Taxes.
- ---------- -----
Borrower and Guarantor have filed all tax returns (federal, state and
local) required to be filed and have paid all taxes, assessments and
governmental charges and levies due and payable without the imposition of a
penalty, including interest and penalties, except to the extent they are the
subject of a Good Faith Contest.
Section 5.09 ERISA. Borrower and Guarantor are in compliance in all
material respects with all applicable provisions of ERISA. Neither a Reportable
Event nor a Prohibited Transaction has occurred with respect to any Plan; no
notice of intent to terminate a Plan has been filed nor has any Plan been
terminated within the past five (5) years; no circumstance exists which
constitutes grounds under Section 4042 of ERISA entitling the PBGC to institute
proceedings to terminate, or appoint a trustee to administer, a Plan, nor has
the PBGC instituted any such proceedings; Borrower, Guarantor and the ERISA
Affiliates have not completely or partially withdrawn under Sections 4201 or
4204 of ERISA from a Multiemployer Plan; Borrower, Guarantor and the ERISA
Affiliates have met the minimum funding requirements of Section 412 of the Code
and Section 302 of ERISA of each with respect to the Plans of each and there is
no Unfunded Current Liability with respect to any Plan established or maintained
by each; and Borrower, Guarantor and the ERISA Affiliates have not incurred any
liability to the PBGC under ERISA (other than for the payment of premiums under
Section 4007 of ERISA). No part of the funds to be used by Borrower in
satisfaction of its obligations under this Agreement constitute "plan assets" of
any "employee benefit plan" within the meaning of ERISA or of any "plan" within
the meaning of Section 4975(e)(1) of the Code, as interpreted by the Internal
Revenue Service and the U.S.
Department of Labor in rules, regulations, releases, bulletins or as interpreted
under applicable case law.
Section 5.10
- ---------- ----------------------------------
No Default on Outstanding Judgments or Orders. Borrower and Guarantor have
satisfied all judgments which are not being appealed and are not in default with
respect to any judgment, order, writ, injunction, decree, rule or regulation of
any court, arbitrator or federal, state, municipal or other Governmental
Authority, commission, board, bureau, agency or instrumentality, domestic or
foreign.
Section 5.11 No Defaults on Other Agreements. Except as disclosed to
the Bank Parties in writing, Borrower or Guarantor, to the best of their
knowledge, are not a party to any indenture, loan or credit agreement or any
lease or other agreement or instrument or subject to any partnership, trust or
other restriction which is likely to result in a Material Adverse Change.
Neither Borrower nor Guarantor is in default in any respect in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any agreement or instrument which is likely to result in a Material
Adverse Change.
Section 5.12 Government Regulation.
- ---------- ---------------------
Neither Borrower nor Guarantor is subject to regulation under the
Investment Company Act of 1940 or any other Law limiting any such Person's
ability to incur indebtedness for money borrowed as contemplated hereby.
Section 5.13 Environmental Protection. To Borrower's knowledge, none
of Borrower's or its Affiliates' properties (including the Properties) contains
any Hazardous Materials that, under any Environmental Law currently in effect,
(1) would impose liability on Borrower or Guarantor that is likely to result in
a Material Adverse Change, or (2) is likely to result in the imposition of a
Lien on any Property or on any other assets of Borrower, Guarantor or any
Material Affiliates that is likely to result in a Material Adverse Change. To
Borrower's knowledge, neither it, Guarantor nor any Material Affiliates, nor any
portion of any Property or the Improvements thereon, is in violation of, or
subject to any existing, pending or threatened investigation or proceeding by
any Governmental Authority under any Environmental Law. Borrower is not aware of
any matter, claim, condition or circumstance which would reasonably cause a
Person to make further inquiry with respect to such matters in order to
ascertain whether any Hazardous Materials or their effects have been disposed of
or released on or to any portion of any Property, the Improvements thereon or
any surrounding areas; Borrower is not required by any Environmental Law to
obtain any permits or license to construct or use any improvements, fixtures, or
equipment with respect to any Property, or if such permit or license is required
it has been obtained; and, to the best of Borrower's knowledge, the prior use of
the Properties has not resulted in the disposal or release of any Hazardous
Materials on or to any portion of the Properties or any surrounding areas in
violation of applicable Law.
Section 5.14 Solvency.
- ---------- --------
Borrower and Guarantor are, and upon consummation of the transactions
contemplated by this Agreement, the other Loan Documents and any other
documents, instruments or agreements relating thereto, will be, Solvent.
Section 5.15 Financial Statements.
- ---------- --------------------
The FW Consolidated Financial Statements most recently delivered to the
Banks pursuant to Sections 4.01(19) or 6.09(1) and (2) of this Agreement are in
all material respects complete and correct and fairly present the financial
condition of the subjects thereof as of the dates of and for the periods covered
by such statements, all in accordance with GAAP. There has been no Material
Adverse Change since the date of such most recently delivered FW Consolidated
Financial Statements, and no borrowings which might give rise to a Lien or claim
against the Mortgaged Property under any Mortgage or against the proceeds of the
Loans have been made by Borrower or others since the dates of such most recently
delivered FW Consolidated Financial Statements.
Section 5.16 Valid Existence of Affiliates. At the Closing Date, the
only material Affiliates of Borrower are the Material Affiliates listed on
EXHIBIT F. Each Material Affiliate is an entity duly organized and existing in
good standing under the laws of the jurisdiction of its formation. As to each
Material Affiliate, its correct name, the jurisdiction of its formation,
Borrower's direct or indirect percentage of beneficial interest therein, and the
type of business in which it is primarily engaged, are set forth on said EXHIBIT
F. Borrower and each of its Material Affiliates have the power to own their
respective properties and to carry on their respective businesses now being
conducted. Each Material Affiliate is duly qualified as a foreign corporation to
do business and is in good standing in every jurisdiction in which the nature of
the respective businesses conducted by it or its respective properties, owned or
held under lease, make such qualification necessary.
Section 5.17 Insurance.
- ---------- ---------
Borrower has in force paid insurance as required by the Mortgages and,
generally, Borrower and each of its Affiliates has in force paid insurance with
financially sound and reputable insurance companies or associations in such
amounts and covering such risks as are usually carried by companies engaged in
the same or a similar business and similarly situated.
Section 5.18 Separate Tax and Zoning Lot.
- ---------- ---------------------------
Each Property constitutes a distinct parcel for purposes of zoning and of
taxes, assessments and impositions (public or private) and is not otherwise
considered as part of a larger single lot for purposes of zoning or of taxes,
assessments or impositions (public or private).
Section 5.19
- ---------- ----------------------------------
Zoning and other Laws; Covenants and Restrictions. As to each Property, (i)
the Improvements and the uses thereof comply with applicable zoning,
environmental, ecological, landmark and other applicable Laws, and all
requirements for such uses have been satisfied and (ii) Borrower and the
Property is in compliance with all applicable restrictions and covenants.
Section 5.20 Utilities Available.
- ---------- -------------------
As to each Property, all utility services necessary for the operation of
the Improvements for their intended purposes are available and servicing the
Property, including water supply, storm and sanitary sewer, gas, electric power
and telephone facilities.
Section 5.21 Creation of Liens.
- ---------- -----------------
It has entered into no contract or arrangement of any kind the performance
of which by the other party thereto would give rise to a Lien on all or part of
the Mortgaged Property prior to the Mortgage.
Section 5.22 Roads.
- ---------- -----
As to each Property, all roads necessary for the full utilization of the
Improvements for their intended purposes have been completed and dedicated to
public use and accepted by all appropriate Governmental Authorities.
Section 5.23 REA and Leases.
- ---------- --------------
As to each Property, the REA and all leases are unmodified and in full
force and effect, there are no defaults under any thereof, and all conditions to
the effectiveness and continuing effectiveness thereof required to be satisfied
as of the date hereof have been satisfied.
Section 5.24 Accuracy of Information; Full Disclosure. Neither this
Agreement nor any documents, financial statements, reports, notices, schedules,
certificates, statements or other writings furnished by or on behalf of Borrower
or Guarantor to Administrative Agent or any Bank in connection with the
negotiation of this Agreement or the consummation of the transactions
contemplated hereby, or required herein to be furnished by or on behalf of
Borrower or Guarantor (other than projections which are made by Borrower in good
faith), contains any untrue or misleading statement of a material fact or omits
a material fact necessary to make the statements herein or therein not
misleading. There is no fact which Borrower has not disclosed to Administrative
Agent and the Banks in writing which materially affects adversely or, so far as
Borrower can now foresee, will materially affect adversely any of the Mortgaged
Property under any of the Mortgages or the business or financial condition of
Borrower or Guarantor or the ability of Borrower or Guarantor to perform this
Agreement and the other Loan Documents.
ARTICLE VI. AFFIRMATIVE COVENANTS
So long as any of the Notes shall remain unpaid or the Loan
Commitments remain in effect, or any other amount is owing by Borrower to
Administrative Agent or any Bank hereunder or under any other Loan Document,
Borrower shall:
Section 6.01 Maintenance of Existence.
- ---------- ------------------------
Preserve and maintain its legal existence and, if applicable, good standing
in the jurisdiction of organization and in each jurisdiction where a Property is
located, and, if applicable, qualify and remain qualified as a foreign entity in
each other jurisdiction in which such qualification is required except to the
extent that failure to so qualify is not likely to result in a Material Adverse
Change.
Section 6.02 Maintenance of Records.
- ---------- ----------------------
Keep adequate records and books of account, in which complete entries will
be made in accordance with GAAP, reflecting all of its financial transactions.
Section 6.03 Maintenance of Insurance.
- ---------- ------------------------
At all times, (1) maintain and keep in force the insurance required by each
of the Mortgages and (2) maintain and keep in force, and cause each of its
Material Affiliates to maintain and keep in force, insurance with financially
sound and reputable insurance companies or associations in such amounts and
covering such risks as are usually carried by companies engaged in the same or a
similar business and similarly situated.
Section 6.04 Compliance with Laws; Payment of Taxes.
- ---------- --------------------------------------
Promptly comply in all material respects with all Laws applicable to it or
to any of its properties (including the Properties) or any part thereof, such
compliance to include, without limitation, paying before the same become
delinquent all taxes, assessments and governmental charges imposed upon it,
Guarantor or upon any of their property (including the Properties), except to
the extent they are the subject of a Good Faith Contest.
Section 6.05 Right of Inspection.
- ---------- -------------------
At any reasonable time and from time to time upon reasonable notice, permit
Administrative Agent or any Bank or any agent or representative thereof to
examine and make copies and abstracts from the records and books of account of,
and visit the properties (including the Properties) of, Borrower and Guarantor
and to discuss the affairs, finances and accounts of Borrower and Guarantor with
the financial officers of Borrower and Guarantor and with the independent
accountants of Borrower and Guarantor.
Section 6.06 Compliance With Environmental Laws.
- ---------- ----------------------------------
Promptly comply in all material respects with all applicable Environmental
Laws and immediately pay or cause to be paid all costs and expenses incurred in
connection with such compliance; and, at its sole cost and expense, promptly
remove, or cause removal of, any and all Hazardous Materials or the effects
thereof at any time identified as being on, in, under or affecting any Property
in violation of Environmental Law.
Section 6.07 Payment of Costs.
- ---------- ----------------
Pay all costs and expenses required for the satisfaction of the conditions
of this Agreement, including, without limitation, (i) all document and stamp
taxes, recording and filing expenses and fees and commissions lawfully due to
brokers in connection with the transactions contemplated hereby and (ii) any
taxes, assessments, impositions (public or private), insurance premiums, Liens,
security interests or other claims or charges against each Property.
Section 6.08 Maintenance of Properties.
- ---------- -------------------------
Do all things reasonably necessary to maintain, preserve, protect and keep
its and its Affiliates' properties (including the Properties) in good repair,
working order and condition.
Section 6.09 Reporting and Miscellaneous Document Requirements. Furnish to
Administrative Agent, who shall deliver copies to each of the Banks:
(1) Annual Financial Statements. As soon as available and in any event
within ninety-five (95) days after the end of each Fiscal Year, FW Consolidated
Financial Statements, as of the end of and for such Fiscal Year, in reasonable
detail and stating in comparative form the respective figures for the
corresponding date and period in the prior Fiscal Year and audited by Borrower's
Accountants;
(2) Quarterly Financial Statements. As soon as available and in any event
within fifty (50) days after the end of each calendar quarter (other than the
last quarter of the Fiscal Year), the unaudited FW Consolidated Financial
Statements, certified by the chief financial officer and as of the end of and
for such calendar quarter, in reasonable detail and stating in comparative form
the respective figures for the corresponding date and period in the prior Fiscal
Year;
(3) Certificate of No Default and Financial
Compliance. Within fifty (50) days after the end of each of the first
three quarters of each Fiscal Year and within ninety-five (95) days
after the end of each Fiscal Year, a certificate of the chief financial
officer or treasurer of Guarantor (a) stating that, to the best of his
or her knowledge, no Default or Event of Default has occurred and is
continuing, or if a Default or Event of Default has occurred and is
continuing, specifying the nature thereof and the action which is
proposed to be taken with respect thereto; (b) stating that the
covenants contained in Sections 7.02, 7.03 and 7.04 and in Article VIII
have been complied with (or specifying those that have not been
complied with) and including computations demonstrating such compliance
(or noncompliance); (c) setting forth the details by property of all
items comprising Capitalization Value, Total Outstanding Indebtedness
(including amount, maturity, interest rate and amortization
requirements), Combined EBITDA and Interest Expense; and (d) only at
the end of each Fiscal Year stating Borrower's taxable income;
(4) Calculation of Borrowing Base. Within twenty (20) days of the end of
each calendar quarter, a calculation, accompanied by detailed supporting
information, of the then current Borrowing Base;
(5) Certificate of Borrower's Accountants.
Simultaneously with the delivery of the annual financial statements
required by paragraph (1) of this Section when the audited financial
statements required by paragraph (1) of this Section have a qualified
auditor's opinion or an Event of Default has occurred and is
continuing, (a) a statement of Borrower's Accountants who audited such
financial statements comparing the computations set forth in the
financial compliance certificate required by paragraphs (3)(b) and (d)
of this Section to the audited financial statements required by
paragraph (1) of this Section and (b) a statement of Borrower's
Accountants who audited such financial statements of whether any
Default or Event of Default has occurred and is continuing;
(6) Notice of Litigation. Promptly after the commencement and knowledge
thereof, notice of all actions, suits, and proceedings before any Governmental
Authority, court or arbitrator, affecting (a) Borrower or Guarantor which, if
determined adversely to Borrower or Guarantor is likely to result in a Material
Adverse Change or (b) all or any portion of the Mortgaged Property under any
Mortgage;
(7) Notices of Defaults and Events of Default. As soon as possible and in
any event within ten (10) days after Borrower becomes aware of the occurrence of
a material Default or any Event of Default a written notice setting forth the
details of such Default or Event of Default and the action which is proposed to
be taken with respect thereto;
(8) Sales or Acquisitions of Assets. Promptly after
the occurrence thereof, written notice of any Disposition or
acquisition of assets (other than acquisitions or Dispositions of
investments such as certificates of deposit, Treasury securities and
money market deposits in the ordinary course of Borrower's cash
management) in excess of Twenty Million Dollars ($20,000,000) together
with, in the case of any acquisition of such an asset, historical
financial information and Borrower's projections with respect to the
property acquired and, if requested by Administrative Agent, copies of
the agreements governing the acquisition;
(9) Material Adverse Change. As soon as is practicable and in any event
within five (5) days after knowledge of the occurrence of any event or
circumstance which is likely to result in or has resulted in a Material Adverse
Change, written notice thereof;
(10) Bankruptcy of Anchors/Tenants. Promptly after becoming aware of the
same, written notice of the bankruptcy, insolvency or cessation of operations of
(a) any of the Anchors, (b) any tenant in any of the Properties to which 5% or
more of the Properties' aggregate minimum rent is attributable or (c) any other
property of Borrower or in which Borrower has an interest to which 5% or more of
aggregate minimum rent payable to Borrower directly or through its Consolidated
Businesses or UJVs is attributable;
(11) Offices. Thirty (30) days' prior written notice of any change in the
chief executive office or principal place of business of Borrower;
(12) Environmental and Other Notices. As soon as
possible and in any event within thirty (30) days after receipt, copies
of (a) all Environmental Notices received by Borrower or Guarantor
which are not received in the ordinary course of business and which
relate to a Property or to a situation which is likely to result in a
Material Adverse Change and (b) all reports of any official searches
made by any Governmental Authorities having jurisdiction over any
Property or the Improvements thereon, and of any claims of violations
thereof;
(13) Insurance Coverage. Promptly, such information concerning Borrower's
and Guarantor's insurance coverage as Administrative Agent may reasonably
request;
(14) Proxy Statements, Etc. Promptly after the
sending or filing thereof, copies of all proxy statements, financial
statements and reports which Borrower, its Material Affiliates or
Guarantor sends to its shareholders or partners, and copies of all
regular, periodic and special reports, and all registration statements
which Borrower, its Material Affiliates or Guarantor files with the
Securities and Exchange Commission or any Governmental Authority which
may be substituted therefor, or with any national securities exchange;
(15) Leasing Reports and Property Information. As
soon as available and in any event (a) within fifteen (15) days after
the end of each calendar quarter and within ninety (90) days after the
end of each Fiscal Year, a rent roll, tenant leasing and sales report
and operating and cash statements for each Property and (b) fifteen
(15) days after the end of each semi-annual period and within ninety
(90) days after the end of each Fiscal Year, a rent roll, tenant sales
report and operating statement for each other property directly or
indirectly owned in whole or in part by Borrower;
(16) Capital Expenditures. As soon as available and in any event within
ninety (90) days after the end of each Fiscal Year, a schedule of such Fiscal
Year's capital expenditures and a budget for the next Fiscal Year's planned
capital expenditures for both (a) each Property and (b) each other property
directly or indirectly owned in whole or in part by Borrower;
(17) Change in Borrower's Credit Rating. Within two (2) Banking Days after
any change in Borrower's Credit Rating, written notice of such change; and
(18) General Information. Promptly, such other information respecting the
condition or operations, financial or otherwise, of Borrower and Guarantor or
any of their properties (including the Properties) as Administrative Agent may
from time to time reasonably request.
Section 6.10 Indemnification re: Brokers.
- ---------- -----------------------------
Indemnify the Banks against claims of brokers arising by reason of the
execution hereof or the consummation of the transactions contemplated hereby.
Section 6.11 REA; Leases.
- ---------- ------------------------------------
As to each Property, deliver to Administrative Agent, promptly following
the execution thereof, certified copies of (i) all amendments or supplements to
any REA and (ii) all leases, together with current financial statements of the
tenants thereunder (and of any guarantors of such tenants' obligations), and
notices of assignment in the form of EXHIBIT I; keep all REAs and leases in full
force and effect and at all times do all things necessary to compel performance
by the parties to the REAs or the tenants under such leases, as the case may be,
of all obligations, covenants and agreements by such parties or tenants, as the
case may be, to be performed thereunder; not enter into any REA or Major Lease
without the prior written consent of Administrative Agent; and not modify (other
than de minimus modifications) any REA or Major Lease.
Section 6.12 Compliance with Covenants, Restrictions and Easements . Comply
with all restrictions, covenants and easements affecting each Property or the
Improvements thereon and cause the satisfaction of all conditions of this
Agreement.
Section 6.13 Maintenance, Management, Service and Leasing Contracts .
Deliver to Administrative Agent, as and when executed, certified copies of all
management and leasing contracts entered into with respect to any Property, each
of which shall be entered into with a party, and on terms and conditions,
reasonably acceptable to Administrative Agent; and contemporaneously with
entering into each such contract, at Administrative Agent's option, cause each
of the foregoing to be collaterally assigned to Administrative Agent for the
benefit of the Banks as additional security for the Loans and/or cause the
service provider under each such contract to undertake, inter alia, to continue
performance on the Banks' behalf without additional cost in the event of a
Default; and keep in full force and effect and not materially modify the
management and leasing agreement(s) approved pursuant to paragraph (16) of
Section 4.01 without Administrative Agent's prior written consent.
Section 6.14 Mandatory Principal Payments.
- ---------- ----------------------------
In the event the Total Loan Commitment is reduced due to a decrease in the
Borrowing Base, and, as a result of such reduction, the outstanding principal
amount of the Notes exceeds the Maximum Loan Amount, make to Administrative
Agent, for the account of the Banks, within ten (10) days of Administrative
Agent's written demand therefor, a principal payment in the amount of such
excess.
Section 6.15 Prepayment Event.
- ---------- ----------------------------
If both Stuart Halpert and William Wolfe shall cease for any reason
(including death or disability) to be principally involved in the senior
management of Guarantor on a full-time basis, within ninety (90) days
thereafter, prepay all Loans and cancel all Loan Commitments and this Agreement.
ARTICLE VII. NEGATIVE COVENANTS
So long as any of the Notes shall remain unpaid, or the Loan
Commitments remain in effect, or any other amount is owing by Borrower to
Administrative Agent or any Bank hereunder or under any other Loan Document,
Borrower shall not do any or all of the following:
Section 7.01 Mergers Etc.
- ---------- -----------
Merge or consolidate with (except where Borrower is the surviving entity),
or sell, assign, lease or otherwise dispose of (whether in one transaction or in
a series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) (or enter into any agreement to do any of the
foregoing).
Section 7.02 Investments. Make any loan or advance to any Person or
purchase or otherwise acquire any capital stock, assets, obligations or other
securities of, make any capital contribution to, or otherwise invest in, or
acquire any interest in, any Person (any such transaction, an "Investment" ) if
(x) the amount of such investment, together with the amount of all other
Investments would, in the aggregate, exceed 15% of Capitalization Value or (y)
the amount of such Investment in each of the following categories, together with
the amount of all other Investments in each such category, would, in the
aggregate, exceed the Maximum Percentage of Capitalization Value set forth
below:
Investment Maximum Percentage
of Capitalization Value
Land Holdings (valued at cost; Land Holdings do not include land under option,
land5%nder development or out parcels under a ground lease) Securities (valued
at cost) and Third Party Partner Debt 5% Mortgage Holdings 5% Partnerships/Joint
Ventures in which Borrower does not have a majority interest and10%ich Borrower
does not control Construction in Process 10%.
Section 7.03 Sale of Assets
- ---------- ------------------------------------
. Effect a Disposition of any of its now owned or hereafter acquired
assets, including assets in which Borrower owns a beneficial interest through
its ownership of interests in joint ventures, aggregating more than 15% of
Capitalization Value.
Section 7.04 Management and Leasing of Properties.
- ---------- -----------------------------------
At any time, fail to provide, or fail to cause its Affiliates to provide,
property management and leasing services for both (x) the Properties and (y) at
least 75% of the other properties then owned, directly or indirectly, in whole
or in part by Borrower.
ARTICLE VIII. FINANCIAL COVENANTS
So long as any of the Notes shall remain unpaid, or the Loan
Commitments remain in effect, or any other amount is owing by Borrower to
Administrative Agent or any Bank under this Agreement or under any other Loan
Document, Borrower shall not permit or suffer:
Section 8.01 Equity Value.
- ---------- ------------------------------------
At any time, Equity Value to be less than One Hundred Twenty Five Million
Dollars ($125,000,000); or
Section 8.02 Leverage Ratio.
- ---------- ------------------------------------
As of the end of any calendar quarter, Leverage Ratio to exceed 65%; or
Section 8.03 Relationship of Combined EBITDA to Interest Expense . At any
time, the ratio of (1) Combined EBITDA to (2) Interest Expense, each for the
most recently ended calendar quarter, to be less than 1.60 to 1.00.
- ---------- -----------------------------------
ARTICLE IX. EVENTS OF DEFAULT
Section 9.01 Events of Default.
- ---------- -----------------------------------
Any of the following events shall be an "Event of Default":
(1) If Borrower shall fail to pay the principal of
any Notes as and when due (including, without limitation, any principal
payment required by Sections 6.14 or 6.15); or fail to pay interest
accruing on any Notes as and when due and such failure to pay shall
continue unremedied for five (5) days after the due date of such
amount; or fail to pay any installment of the administration fee which
Borrower has separately agreed to pay to Administrative Agent, or any
fee or any other amount due under this Agreement or any other Loan
Document as and when due, and such failure to pay shall continue
unremedied for two (2) days after notice by Administrative Agent of
such failure to pay; or
(2) If any representation or warranty made by Borrower or Guarantor in this
Agreement or in any other Loan Document or which is contained in any
certificate, document, opinion, financial or other statement furnished at any
time under or in connection with a Loan Document shall prove to have been
incorrect in any material respect on or as of the date made or remade; or
(3) If Borrower shall fail (a) to perform or observe
any term, covenant or agreement contained in Article VII or Article
VIII; or (b) to perform or observe any other term, covenant or
agreement contained in this Agreement (other than obligations
specifically referred to elsewhere in this Section 9.01) or in any
other Loan Document or any other document executed by Borrower and
delivered to Administrative Agent or the Banks in connection with the
transactions contemplated hereby and such failure shall remain
unremedied for thirty (30) consecutive calendar days after notice
thereof (or such shorter cure period as may be expressly prescribed in
the applicable Loan Document or other document); provided, however,
that if any such default under clause (b) above cannot by its nature be
cured within such thirty (30)-day, or shorter, as the case may be,
grace period and so long as Borrower shall have commenced cure within
such thirty (30)-day, or shorter, as the case may be, grace period and
shall, at all times thereafter, diligently prosecute the same to
completion, Borrower shall have an additional period, not to exceed
sixty (60) days, to cure such default; in no event, however, is the
foregoing intended to effect an extension of the Maturity Date; or
(4) If Borrower or Guarantor shall fail (a) to pay
any Debt (other than the payment obligations described in paragraph (1)
of this Section) in an amount equal to or greater than Five Million
Dollars ($5,000,000) when due (whether by scheduled maturity, required
prepayment, acceleration, demand, or otherwise) after the expiration of
any applicable grace period; or (b) to perform or observe any material
term, covenant, or condition under any agreement or instrument relating
to any such Debt, when required to be performed or observed, if the
effect of such failure to perform or observe is to accelerate, or to
permit the acceleration of, after the giving of notice or the lapse of
time, or both (other than in cases where, in the judgment of the
Required Banks, meaningful discussions likely to result in (i) a waiver
or cure of the failure to perform or observe or (ii) otherwise averting
such acceleration are in progress between Borrower and the obligee of
such Debt), the maturity of such Debt, or any such Debt shall be
declared to be due and payable, or required to be prepaid (other than
by a regularly scheduled or otherwise required prepayment), prior to
the stated maturity thereof; or
(5) If any of Borrower, Guarantor or any Affiliate of
Borrower to which Twenty-Five Million Dollars ($25,000,000) or more of
Capitalization Value is attributable, shall (a) generally not, or be
unable to, or shall admit in writing its inability to, pay its debts as
such debts become due; or (b) make an assignment for the benefit of
creditors, petition or apply to any tribunal for the appointment of a
custodian, receiver or trustee for it, any Property, or a substantial
part of its other assets; or (c) commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, whether
now or hereafter in effect; or (d) have had any such petition or
application filed or any such proceeding shall have been commenced,
against it or any Property, in which an adjudication or appointment is
made or order for relief is entered, or which petition, application or
proceeding remains undismissed or unstayed for a period of sixty (60)
days or more; or (e) be the subject of any proceeding under which any
Property or all or a substantial part of its other assets may be
subject to seizure, forfeiture or divestiture; or (f) by any act or
omission indicate its consent to, approval of or acquiescence in any
such petition, application or proceeding or order for relief or the
appointment of a custodian, receiver or trustee for any Property or all
or any substantial part of its other property; or (g) suffer any such
custodianship, receivership or trusteeship for any Property or all or
any substantial part of its other property, to continue undischarged
for a period of sixty (60) days or more; or
(6) If one or more judgments, decrees or orders for the payment of money in
excess of Five Million Dollars ($5,000,000) in the aggregate shall be rendered
against Borrower or Guarantor, and any such judgments, decrees or orders shall
continue unsatisfied and in effect for a period of thirty (30) consecutive days
without being vacated, discharged, satisfied or stayed or bonded in a manner
satisfactory to Administrative Agent pending appeal; or
(7) If any of the following events shall occur or
exist with respect to Borrower, Guarantor or any ERISA Affiliate: (a)
any Prohibited Transaction involving any Plan; (b) any Reportable Event
with respect to any Plan; (c) the filing under Section 4041 of ERISA of
a notice of intent to terminate any Plan or the termination of any
Plan; (d) any event or circumstance which might constitute grounds
entitling the PBGC to institute proceedings under Section 4042 of ERISA
for the termination of, or for the appointment of a trustee to
administer, any Plan, or the institution by the PBGC of any such
proceedings; or (e) complete or partial withdrawal under Section 4201
or 4204 of ERISA from a Multiemployer Plan or the reorganization,
insolvency or termination of any Multiemployer Plan; and in each case
above, if such event or conditions, if any, could in the opinion of any
Bank subject Borrower, Guarantor or any ERISA Affiliate to any tax,
penalty or other liability to a Plan, Multiemployer Plan, the PBGC or
otherwise (or any combination thereof) which in the aggregate exceeds
or may exceed Fifty Thousand Dollars ($50,000); or
(8) If any Mortgage shall at any time and for any reason cease (a) to
create a valid and perfected first priority lien in and to the Mortgaged
Property purported to be subject thereto; or (b) to be in full force and effect
or shall be declared null and void, or the validity or enforceability thereof
shall be contested by any party thereto, or any party thereto shall deny any
further liability or obligation thereunder, or any party thereto shall fail to
perform any of its obligations thereunder; or
(9) If an "Event of Default" (as such quoted term is defined in the
Mortgages) shall occur under any Mortgage; or
(10) If at any time Guarantor is not a qualified real estate investment
trust under Sections 856 through 860 of the Code or is not listed on the New
York Stock Exchange; or
(11) If at any time Borrower or Guarantor constitutes plan assets for ERISA
purposes (within the meaning of C.F.R.ss.2510.3-101).
Section 9.02 Remedies . If any Event of Default shall occur and be
continuing, Administrative Agent shall, upon request of the Required Banks, by
notice to Borrower, (1) declare the unpaid balance of the Notes, all interest
thereon, and all other amounts payable under this Agreement to be forthwith due
and payable, whereupon such balance, all such interest, and all such amounts due
under this Agreement shall become and be forthwith due and payable, without
presentment, demand, protest, or further notice of any kind, all of which are
hereby expressly waived by Borrower; and/or (2) exercise any remedies provided
in any of the Loan Documents or by Law.
ARTICLE X. ADMINISTRATIVE AGENT; RELATIONS AMONG BANKS
Section 10.01 Appointment, Powers and Immunities of Administrative
Agent . Each Bank hereby irrevocably appoints and authorizes Administrative
Agent to act as its agent hereunder and under any other Loan Document with such
powers as are specifically delegated to Administrative Agent by the terms of
this Agreement and any other Loan Document, together with such other powers as
are reasonably incidental thereto. Administrative Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement and any
other Loan Document or required by law, and shall not by reason of this
Agreement be a fiduciary or trustee for any Bank except to the extent that
Administrative Agent acts as an agent with respect to the receipt or payment of
funds (nor shall Administrative Agent have any fiduciary duty to Borrower nor
shall any Bank have any fiduciary duty to Borrower or to any other Bank).
Administrative Agent shall not be responsible to the Banks for any recitals,
statements, representations or warranties made by Borrower or any officer,
partner or official of Borrower or any other Person contained in this Agreement
or any other Loan Document, or in any certificate or other document or
instrument referred to or provided for in, or received by any of them under,
this Agreement or any other Loan Document, or for the value, legality, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document or any other document or instrument referred to or
provided for herein or therein, for the perfection or priority of any Lien
securing the Obligations or for any failure by Borrower to perform any of its
obligations hereunder or thereunder. Administrative Agent may employ agents and
attorneys-in-fact and shall not be responsible, except as to money or securities
received by it or its authorized agents, for the negligence or misconduct of any
such agents or attorneys-in-fact selected by it with reasonable care. Neither
Administrative Agent nor any of its directors, officers, employees or agents
shall be liable or responsible for any action taken or omitted to be taken by it
or them hereunder or under any other Loan Document or in connection herewith or
therewith, except for its or their own gross negligence or willful misconduct.
Borrower shall pay any fee agreed to by Borrower and Administrative Agent with
respect to Administrative Agent's services hereunder.
Section 10.02 Reliance by Administrative Agent . Administrative Agent
shall be entitled to rely upon any certification, notice or other communication
(including any thereof by telephone, telex, telegram or cable) believed by it to
be genuine and correct and to have been signed or sent by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by Administrative Agent.
Administrative Agent may deem and treat each Bank as the holder of the Loan made
by it for all purposes hereof and shall not be required to deal with any Person
who has acquired a participation in any Loan or Participation from a Bank. As to
any matters not expressly provided for by this Agreement or any other Loan
Document, Administrative Agent shall in all cases be fully protected in acting,
or in refraining from acting, hereunder in accordance with instructions signed
by the Required Banks, and such instructions of the Required Banks and any
action taken or failure to act pursuant thereto shall be binding on all of the
Banks and any other holder of all or any portion of any Loan or Participation.
Section 10.03 Defaults.
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Administrative Agent shall not be deemed to have knowledge of the
occurrence of a Default or Event of Default unless Administrative Agent has
received notice from a Bank or Borrower specifying such Default or Event of
Default and stating that such notice is a "Notice of Default." In the event that
Administrative Agent receives such a notice of the occurrence of a Default or
Event of Default, Administrative Agent shall give prompt notice thereof to the
Banks. Administrative Agent, following consultation with the Banks, shall
(subject to Section 10.07) take such action with respect to such Default or
Event of Default which is continuing as shall be directed by the Required Banks;
provided that, unless and until Administrative Agent shall have received such
directions, Administrative Agent may take such action, or refrain from taking
such action, with respect to such Default or Event of Default as it shall deem
advisable in the best interest of the Banks. In no event shall Administrative
Agent be required to take any such action which it determines to be contrary to
Law.
Section 10.04 Rights of Administrative Agent as a Bank . With respect
to its Loan Commitment and the Loan provided by it, Administrative Agent in its
capacity as a Bank hereunder shall have the same rights and powers hereunder as
any other Bank and may exercise the same as though it were not acting as
Administrative Agent, and the term "Bank" or "Banks" shall include
Administrative Agent in its capacity as a Bank. Administrative Agent and its
Affiliates may (without having to account therefor to any Bank) accept deposits
from, lend money to (on a secured or unsecured basis), and generally engage in
any kind of banking, trust or other business with Borrower (and any Affiliates
of Borrower) as if it were not acting as Administrative Agent.
Section 10.05 Sharing of Costs by Banks; Indemnification of
Administrative Agent . Each Bank agrees to pay its ratable share, based on the
respective outstanding principal balances under its Note and the other Notes, of
any expenses incurred (and not paid or reimbursed by Borrower after demand for
payment is made by Administrative Agent) by or on behalf of the Banks in
connection with any Default or Event of Default, including, without limitation,
costs of enforcement of the Loan Documents and any advances to pay taxes or
insurance premiums or otherwise to preserve the Lien of any of the Mortgages or
to preserve or protect any Mortgaged Property. In the event a Bank fails to pay
its share of expenses as aforesaid, and all or a portion of such unpaid amount
is paid by Administrative Agent and/or one (1) or more of the other Banks, then
the defaulting Bank shall reimburse Administrative Agent and/or the other
Bank(s) for the portion of such unpaid amount paid by it or them, as the case
may be, together with interest thereon at the Base Rate from the date of payment
by Administrative Agent and/or the other Bank(s). In addition, each Bank agrees
to reimburse and indemnify Administrative Agent (to the extent it is not paid by
or on behalf of Borrower after demand for payment is made by Administrative
Agent under the applicable provisions hereof or of any other Loan Document, but
without limiting the obligations of Borrower under such provisions), for such
Bank's ratable share, based upon the respective outstanding principal balances
under its Note and the other Notes, of any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against Administrative Agent in any way relating to or
arising out of this Agreement, any other Loan Document or any other documents
contemplated by or referred to herein or the transactions contemplated hereby or
thereby (including, without limitation, the costs and expenses which Borrower is
obligated to pay under Section 12.04) or under the applicable provisions of any
other Loan Document or the enforcement of any of the terms hereof or thereof or
of any such other documents or instruments; provided that no Bank shall be
liable for (1) any of the foregoing to the extent they arise from the gross
negligence or willful misconduct of the party to be indemnified or (2) any loss
of principal or interest with respect to Administrative Agent's Loan.
Section 10.06 Non-Reliance on Administrative Agent and Other Banks .
Each Bank agrees that it has, independently and without reliance on
Administrative Agent or any other Bank, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of
Borrower and Guarantor and the decision to enter into this Agreement and that it
will, independently and without reliance upon Administrative Agent or any other
Bank, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own analysis and decisions in taking or not
taking action under this Agreement or any other Loan Document. Administrative
Agent shall not be required to keep itself informed as to the performance or
observance by Borrower of this Agreement or any other Loan Document or any other
document referred to or provided for herein or therein or to inspect the
properties (including the Properties) or books of Borrower. Except for notices,
reports and other documents and information expressly required to be furnished
to the Banks by Administrative Agent hereunder, Administrative Agent shall not
have any duty or responsibility to provide any Bank with any credit or other
information concerning the affairs, financial condition or business of Borrower,
Guarantor or any of their respective Affiliates which may come into the
possession of Administrative Agent or any of its Affiliates.
Administrative Agent shall not be required to file this Agreement, any other
Loan Document or any document or instrument referred to herein or therein, for
record or give notice of this Agreement, any other Loan Document or any document
or instrument referred to herein or therein, to anyone.
Section 10.07 Failure of Administrative Agent to Act.
- ---------- ---------------------------------------
Except for action expressly required of Administrative Agent hereunder,
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder unless it shall have received further assurances
(which may include cash collateral) of the indemnification obligations of the
Banks under Section 10.05 in respect of any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.
Section 10.08 Resignation or Removal of Administrative Agent .
Administrative Agent shall have the right to resign at any time. Administrative
Agent may be removed at any time with cause by the Required Banks, provided that
Borrower and the other Banks shall be promptly notified thereof. Upon any such
removal or resignation, the Required Banks shall have the right to appoint a
successor Administrative Agent which successor Administrative Agent, so long as
it is reasonably acceptable to the Required Banks and, provided there exists no
Event of Default, to Borrower, shall be that Bank then having the greatest Loan
Commitment. If no successor Administrative Agent shall have been so appointed by
the Required Banks and shall have accepted such appointment within thirty (30)
days after the Required Banks' removal of the retiring Administrative Agent,
then the retiring Administrative Agent may, on behalf of the Banks, appoint a
successor Administrative Agent, which shall be one of the Banks. The Required
Banks or the retiring Administrative Agent, as the case may be, shall upon the
appointment of a successor Administrative Agent promptly so notify Borrower and
the other Banks. Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder. After any retiring Administrative Agent's removal hereunder as
Administrative Agent, the provisions of this Article X shall continue in effect
for its benefit in respect of any actions taken or omitted to be taken by it
while it was acting as Administrative Agent.
Section 10.09 Amendments Concerning Agency Function.
- ---------- --------------------------------------
Notwithstanding anything to the contrary contained in this Agreement,
Administrative Agent shall not be bound by any waiver, amendment, supplement or
modification of this Agreement or any other Loan Document which affects its
duties, rights, and/or function hereunder or thereunder unless it shall have
given its prior written consent thereto.
Section 10.10 Liability of Administrative Agent.
- ---------- -----------------------------------
Administrative Agent shall not have any liabilities or responsibilities to
Borrower on account of the failure of any Bank to perform its obligations
hereunder or to any Bank on account of the failure of Borrower to perform its
obligations hereunder or under any other Loan Document.
Section 10.11 Transfer of Agency Function.
- ---------- ---------------------------------
Without the consent of Borrower or any Bank, Administrative Agent may at
any time or from time to time transfer its functions as Administrative Agent
hereunder to any of its offices wherever located in the United States, provided
that Administrative Agent shall promptly notify Borrower and the Banks thereof.
Section 10.12 Non-Receipt of Funds by Administrative Agent . Unless
Administrative Agent shall have received notice from a Bank or Borrower (either
one as appropriate being the "Payor") prior to the date on which such Bank is to
make payment hereunder to Administrative Agent of the proceeds of a Loan or
Borrower is to make payment to Administrative Agent, as the case may be (either
such payment being a "Required Payment"), which notice shall be effective upon
receipt, that the Payor will not make the Required Payment in full to
Administrative Agent, Administrative Agent may assume that the Required Payment
has been made in full to Administrative Agent on such date, and Administrative
Agent in its sole discretion may, but shall not be obligated to, in reliance
upon such assumption, make the amount thereof available to the intended
recipient on such date. If and to the extent the Payor shall not have in fact so
made the Required Payment in full to Administrative Agent, the recipient of such
payment shall repay to Administrative Agent forthwith on demand such amount made
available to it together with interest thereon, for each day from the date such
amount was so made available by Administrative Agent until the date
Administrative Agent recovers such amount, at the customary rate set by
Administrative Agent for the correction of errors among Banks for three (3)
Banking Days and thereafter at the Base Rate.
Section 10.13 Withholding Taxes . Each Bank represents at all times
during the term of this Agreement that it is entitled to receive any payments to
be made to it hereunder without the withholding of any tax and will furnish to
Administrative Agent and Borrower such forms, certifications, statements and
other documents as Administrative Agent or Borrower may request from time to
time to evidence such Bank's exemption from the withholding of any tax imposed
by any jurisdiction or to enable Administrative Agent or Borrower to comply with
any applicable Laws or regulations relating thereto. Without limiting the effect
of the foregoing, if any Bank is not created or organized under the laws of the
United States of America or any state thereof, such Bank will furnish to
Administrative Agent and Borrower a United States Internal Revenue Service Form
4224 in respect of all payments to be made to such Bank by Borrower or
Administrative Agent under this Agreement or any other Loan Document or a United
States Internal Revenue Service Form 1001 establishing such Bank's complete
exemption from United States withholding tax in respect of payments to be made
to such Bank by Borrower or Administrative Agent under this Agreement or any
other Loan Document, or such other forms, certifications, statements or
documents, duly executed and completed by such Bank as evidence of such Bank's
exemption from the withholding of U.S. tax with respect thereto.
Administrative Agent shall not be obligated to make any payments hereunder to
such Bank in respect of any Loan or participation or such Bank's Loan Commitment
or obligation to purchase participations until such Bank shall have furnished to
Administrative Agent and Borrower the requested form, certification, statement
or document.
Section 10.14 Minimum Commitment by UBS.
- ---------- ----------------------------------
Subsequent to the Closing Date, UBS hereby agrees to maintain a Loan
Commitment in an amount no less than Ten Million Dollar ($10,000,000) for so
long as (x) no Event of Default exists under this Agreement and (y) UBS remains
Administrative Agent hereunder. UBS further agrees to hold and not to
participate or assign any of such amount other than an assignment to a Federal
Reserve Bank or to the Parent or a majority-owned subsidiary of UBS.
Section 10.15 Pro Rata Treatment.
- ---------- -----------------------------------
Except to the extent otherwise provided, (1) each advance of proceeds of
the Ratable Loans shall be made by the Banks, (2) each reduction of the amount
of the Total Loan Commitment under Section 2.15 shall be applied to the Loan
Commitments of the Banks and (3) each payment of the fees accruing under Section
2.07 shall be made for the account of the Banks, ratably according to the
amounts of their respective Loan Commitments.
Section 10.16 Sharing of Payments Among Banks . If a Bank shall obtain
payment of any principal of or interest on any Loan made by it through the
exercise of any right of setoff, banker's lien, counterclaim, or by any other
means (including direct payment), and such payment results in such Bank
receiving a greater payment than it would have been entitled to had such payment
been paid directly to Administrative Agent for disbursement to the banks, then
such Bank shall promptly purchase for cash from the other Banks participations
in the Loans made by the other Banks in such amounts, and make such other
adjustments from time to time as shall be equitable to the end that all the
Banks shall share ratably the benefit of such payment. To such end the Banks
shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if such payment is rescinded or must otherwise
be restored. Borrower agrees that any Bank so purchasing a participation in the
Loans made by other Banks may exercise all rights of setoff, banker's lien,
counterclaim or similar rights with respect to such participation. Nothing
contained herein shall require any Bank to exercise any such right or shall
affect the right of any Bank to exercise, and retain the benefits of exercising,
any such right with respect to any other indebtedness of Borrower.
Section 10.17 Possession of Documents.
- ---------- -----------------------------------
Each Bank shall keep possession of its own Ratable Loan Note.
Administrative Agent shall hold all the other Loan Documents and related
documents in its possession and maintain separate records and accounts with
respect thereto, and shall permit the Banks and their representatives access at
all reasonable times to inspect such Loan Documents, related documents, records
and accounts.
ARTICLE XI. NATURE OF OBLIGATIONS
Section 11.01 Absolute and Unconditional Obligations . Borrower and
Guarantor acknowledge and agree that their obligations and liabilities under
this Agreement and under the other Loan Documents shall be absolute and
unconditional irrespective of: (1) any lack of validity or enforceability of any
of the Obligations, any Loan Documents, or any agreement or instrument relating
thereto; (2) any change in the time, manner or place of payment of, or in any
other term in respect of, all or any of the Obligations, or any other amendment
or waiver of or consent to any departure from any Loan Documents or any other
documents or instruments executed in connection with or related to the
Obligations; (3) any exchange or release of any collateral, if any, or of any
other Person from all or any of the Obligations; or (4) any other circumstances
which might otherwise constitute a defense available to, or a discharge of,
Borrower, Guarantor or any other Person in respect of the Obligations.
The obligations and liabilities of Borrower and Guarantor
under this Agreement and other Loan Documents shall not be conditioned or
contingent upon the pursuit by any Bank or any other Person at any time of any
right or remedy against Borrower, Guarantor or any other Person which may be or
become liable in respect of all or any part of the Obligations or against any
collateral or security or guarantee therefor or right of setoff with respect
thereto.
Section 11.02 Recourse.
- ---------- ---------------------------
This Agreement and the obligations hereunder and under the Loan Documents
are fully recourse to Borrower and Guarantor.
ARTICLE XII. MISCELLANEOUS
Section 12.01 Binding Effect of Request for Advance.
- ---------- --------------------------------------
Borrower agrees that, by its acceptance of any advance of proceeds of the
Loans under this Agreement, it shall be bound in all respects by the request for
advance submitted on its behalf in connection therewith with the same force and
effect as if Borrower had itself executed and submitted the request for advance
and whether or not the request for advance is executed and/or submitted by an
authorized person.
Section 12.02 Amendments and Waivers . No amendment or material waiver
of any provision of this Agreement or any other Loan Document nor consent to any
material departure by Borrower therefrom, shall in any event be effective unless
the same shall be in writing and signed by the Required Banks and, solely for
purposes of its acknowledgment thereof, Administrative Agent, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given, provided, however, that no amendment, waiver
or consent shall, unless in writing and signed by all the Banks, do any of the
following: (1) reduce the principal of, or interest on, the Notes or any fees
due hereunder or any other amount due hereunder or under any Loan Document; (2)
postpone any date fixed for any payment of principal of, or interest on, the
Notes or any fees due hereunder or under any Loan Document; (3) change the
definition of Required Banks; (4) amend this Section or any other provision
requiring the consent of all the Banks; (5) waive any default under paragraph
(5) of Section 9.01 or (6) release Borrower from its obligations hereunder or
release General Partner from its obligations hereunder or under the Guaranty.
Any advance of proceeds of the Loans made prior to or without the fulfillment by
Borrower of all of the conditions precedent thereto, whether or not known to
Administrative Agent and the Banks, shall not constitute a waiver of the
requirement that all conditions, including the non-performed conditions, shall
be required with respect to all future advances. No failure on the part of
Administrative Agent or any Bank to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof or preclude any other or
further exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law. All
communications from Administrative Agent to the Banks requesting the Banks'
determination, consent, approval or disapproval (i) shall be given in the form
of a written notice to each Bank, (ii) shall be accompanied by a description of
the matter or thing as to which such determination, approval, consent or
disapproval is requested and (iii) shall include Administrative Agent's
recommended course of action or determination in respect thereof. Each Bank
shall reply promptly, but in any event within ten (10) Banking Days (or five (5)
Banking Days with respect to any decision to accelerate or stop acceleration of
the Loan) after receipt of the request therefor by Administrative Agent (the
"Bank Reply Period"). Unless a Bank shall give written notice to Administrative
Agent that it objects to the recommendation or determination of Administrative
Agent (together with a written explanation of the reasons behind such objection)
within the Bank Reply Period, such Bank shall be deemed to have approved or
consented to such recommendation or determination.
Section 12.03 Usury.
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Anything herein to the contrary notwithstanding, the obligations of
Borrower under this Agreement and the Notes shall be subject to the limitation
that payments of interest shall not be required to the extent that receipt
thereof would be contrary to provisions of Law applicable to a Bank limiting
rates of interest which may be charged or collected by such Bank.
Section 12.04 Expenses; Indemnification . Borrower agrees to reimburse
Administrative Agent on demand for all costs, expenses, and charges (including,
without limitation, all reasonable fees and charges of engineers, appraisers and
external legal counsel) incurred by Administrative Agent in connection with the
Loans and to reimburse each of the Banks for reasonable legal costs, expenses
and charges incurred by each of the Banks in connection with the performance or
enforcement of this Agreement, the Notes or any other Loan Documents against
Borrower; provided, however, that Borrower is not responsible for costs,
expenses and charges incurred by the Bank Parties in connection with the
administration or syndication of the Loans (other than the administration fee
which Borrower has separately agreed to pay to UBS as Administrative Agent).
Borrower agrees to indemnify Administrative Agent and each Bank and their
respective directors, officers, employees and agents from, and hold each of them
harmless against, any and all losses, liabilities, claims, damages or expenses
incurred by any of them arising out of or by reason of (x) any claims by brokers
due to acts or omissions by Borrower or (y) any investigation or litigation or
other proceedings (including any threatened investigation or litigation or other
proceedings) relating to any actual or proposed use by Borrower of the proceeds
of the Loans, including, without limitation, the reasonable fees and
disbursements of counsel incurred in connection with any such investigation or
litigation or other proceedings (but excluding any such losses, liabilities,
claims, damages or expenses incurred by reason of the gross negligence or
willful misconduct of the Person to be indemnified).
The obligations of Borrower under this Section shall survive
the repayment of all amounts due under or in connection with any of the Loan
Documents and the termination of the Loans.
Section 12.05 Assignment; Participation.
- ---------- -------------------------------
This Agreement shall be binding upon, and shall inure to the benefit of,
Borrower, Administrative Agent, the Banks and their respective successors and
permitted assigns. Borrower may not assign or transfer its rights or obligations
hereunder, in whole or in part.
Any Bank may at any time grant to one (1) or more banks or
other institutions (each a "Participant") participating interests in its Loan
(each a "Participation") with the consent of Administrative Agent, which consent
shall not be unreasonably withheld or delayed. In the event of any such grant by
a Bank of a Participation to a Participant, whether or not Borrower or
Administrative Agent was given notice, such Bank shall remain responsible for
the performance of its obligations hereunder, and Borrower and Administrative
Agent shall continue to deal solely and directly with such Bank in connection
with such Bank's rights and obligations hereunder. Any agreement pursuant to
which any Bank may grant such a participating interest shall provide that such
Bank shall retain the sole right and responsibility to enforce the obligations
of Borrower hereunder and under any other Loan Document, including, without
limitation, the right to approve any amendment, modification or waiver of any
provision of this Agreement or any other Loan Document; provided that such
participation agreement may provide that such Bank will not agree to any
modification, amendment or waiver of this Agreement described in clauses (1)
through (5) of Section 12.02 without the consent of the Participant.
Subject to the provisions of Section 10.14, any Bank may at
any time assign to any bank or other institution with the acknowledgment of
Administrative Agent and the consent of UBS and, provided there exists no Event
of Default, of Borrower, which consents shall not be unreasonably withheld or
delayed (such assignee, a "Consented Assignee"), or to one or more banks or
other institutions which are majority owned subsidiaries of a Bank or to the
Parent of a Bank (each Consented Assignee or subsidiary bank or institution, an
"Assignee") all, or a proportionate part of all, of its rights and obligations
under this Agreement and its Note, and such Assignee shall assume rights and
obligations, pursuant to an Assignment and Assumption Agreement executed by such
Assignee and the assigning Bank, provided that, in each case, after giving
effect to such assignment the Assignee's Loan Commitment and, in the case of a
partial assignment, the assigning Bank's Loan Commitment, each will be equal to
or greater than [Ten Million Dollars ($10,000,000)]. Upon (i) execution and
delivery of such instrument, (ii) payment by such Assignee to the Bank of an
amount equal to the purchase price agreed between the Bank and such Assignee and
(iii) at Administrative Agent's option, payment by such Assignee to
Administrative Agent of a fee, for Administrative Agent's own account, in the
amount of Two Thousand Five Hundred Dollars ($2,500), such Assignee shall be a
Bank Party to this Agreement and shall have all the rights and obligations of a
Bank as set forth in such Assignment and Assumption Agreement, and the assigning
Bank shall be released from its obligations hereunder to a corresponding extent,
and no further consent or action by any party shall be required. Upon the
consummation of any assignment pursuant to this paragraph, substitute Ratable
Loan Notes shall be issued to the assigning Bank (in the case of a partial
assignment) and Assignee by Borrower, in exchange for the return of the original
Ratable Loan Note of the assigning Bank. The obligations evidenced by such
substitute notes shall constitute "Obligations" for all purposes of this
Agreement and the other Loan Documents. In connection with Borrower's execution
of substitute notes as aforesaid, Borrower shall deliver to Administrative Agent
evidence, satisfactory to Administrative Agent, of all requisite corporate,
partnership or other action to authorize Borrower's execution and delivery of
the substitute notes and any related documents. If the Assignee is not
incorporated under the laws of the United States of America or a state thereof,
it shall, prior to the first date on which interest or fees are payable
hereunder for its account, deliver to Borrower and Administrative Agent
certification as to exemption from deduction or withholding of any United States
federal income taxes in accordance with Section 10.13. Each Assignee shall be
deemed to have made the representations contained in, and shall be bound by the
provisions of, Section 10.13.
Any Bank may at any time assign all or any portion of its rights under this
Agreement and its Note to a Federal Reserve Bank. No such assignment shall
release the transferor Bank from its obligations hereunder.
Borrower recognizes that in connection with a Bank's selling
of Participations or making of assignments, any or all documentation, financial
statements, appraisals and other data, or copies thereof, relevant to Borrower
or the Loans may be exhibited to and retained by any such Participant or
assignee or prospective Participant or assignee. In connection with a Bank's
delivery of any financial statements and appraisals to any such Participant or
assignee or prospective Participant or assignee, such Bank shall also indicate
that the same are delivered on a confidential basis. Borrower agrees to provide
all assistance reasonably requested by a Bank to enable such Bank to sell
Participations or make assignments of its Loan as permitted by this Section.
Each Bank agrees to provide Borrower with notice of all Participations sold by
such Bank.
Section 12.06 Documentation Satisfactory . All documentation required
from or to be submitted on behalf of Borrower in connection with this Agreement
and the documents relating hereto shall be subject to the prior approval of, and
be satisfactory in form and substance to, Administrative Agent, its counsel and,
where specifically provided herein, the Banks. In addition, the persons or
parties responsible for the execution and delivery of, and signatories to, all
of such documentation, shall be acceptable to, and subject to the approval of,
Administrative Agent and its counsel and the Banks.
Section 12.07 Notices . Except as expressly provided otherwise, all
notices, demands, consents, approvals and statements required or permitted
hereunder shall be in writing and shall be deemed to have been sufficiently
given or served for all purposes when presented personally, three (3) business
days after mailing by registered or certified mail, postage prepaid, or one (1)
business day after delivery to a nationally recognized overnight courier service
providing evidence of the date of delivery, to a party at its address stated on
its signature page hereof (or in the applicable Assignment and Assumption
Agreement), or at such other address of which a party shall have notified the
party giving such notice in writing in accordance with the foregoing
requirements.
Section 12.08 Setoff . To the extent permitted or not expressly
prohibited by applicable Law, Borrower agrees that, in addition to (and without
limitation of) any right of setoff, bankers' lien or counterclaim a Bank may
otherwise have, each Bank shall be entitled, at its option, to offset balances
(general or special, time or demand, provisional or final) held by it for the
account of Borrower at any of such Bank's offices, in Dollars or in any other
currency, against any amount payable by Borrower to such Bank under this
Agreement or such Bank's Note, or any other Loan Document which is not paid when
due (regardless of whether such balances are then due to Borrower, in which case
it shall promptly notify Borrower and Administrative Agent thereof; provided
that such Bank's failure to give such notice shall not affect the validity
thereof. Payments by Borrower hereunder or under the other Loan Documents shall
be made without setoff or counterclaim.
Section 12.09 Table of Contents: Headings
- ---------- --------------------------------
. Any table of contents and the headings and captions hereunder are for
convenience only and shall not affect the interpretation or construction of this
Agreement.
Section 12.10 Severability.
- ---------- ------------------------------------
The provisions of this Agreement are intended to be severable. If for any
reason any provision of this Agreement shall be held invalid or unenforceable in
whole or in part in any jurisdiction, such provision shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or enforceability
thereof in any other jurisdiction or the remaining provisions hereof in any
jurisdiction.
Section 12.11 Counterparts.
- ---------- ------------------------------------
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one and the same instrument, and any party
hereto may execute this Agreement by signing any such counterpart.
Section 12.12 Integration.
- ---------- ------------------------------------
The Loan Documents set forth the entire agreement among the parties hereto
relating to the transactions contemplated thereby (except with respect to
agreements relating solely to compensation, consideration and the coordinated
syndication of the Loan) and supersede any prior oral or written statements or
agreements with respect to such transactions.
Section 12.13 Governing Law.
- ---------- ------------------------------------
This Agreement shall be governed by, and interpreted and construed in
accordance with, the laws of the State of New York (without giving effect to New
York's principles of conflicts of laws).
Section 12.14 Waivers . In connection with the obligations and
liabilities as aforesaid, Borrower hereby waives: (1) promptness and diligence;
(2) notice of any actions taken by any Bank Party under this Agreement, any
other Loan Document or any other agreement or instrument relating thereto except
to the extent otherwise provided herein; (3) all other notices, demands and
protests, and all other formalities of every kind in connection with the
enforcement of the Obligations, the omission of or delay in which, but for the
provisions of this Section, might constitute grounds for relieving Borrower of
its obligations hereunder or under the other Loan Documents; (4) any requirement
that any Bank Party protect, secure, perfect or insure any Lien on any of the
Mortgaged Property or on any other collateral or exhaust any right or take any
action against Borrower, Guarantor or any other Person or against any of the
Mortgaged Property or any other collateral; (5) any right or claim of right to
cause a marshalling of Borrower's or Guarantor's assets; and (6) all rights of
subrogation or contribution, whether arising by contract or operation of law
(including, without limitation, any such right arising under the Federal
Bankruptcy Code) or otherwise by reason of payment by Borrower pursuant to this
Agreement or other Loan Documents.
Section 12.15 Jurisdiction; Immunities . Borrower, Administrative
Agent and each Bank hereby irrevocably submit to the jurisdiction of any New
York State or United States Federal court sitting in New York City over any
action or proceeding arising out of or relating to this Agreement, the Notes or
any other Loan Document. Borrower, Administrative Agent, and each Bank
irrevocably agree that all claims in respect of such action or proceeding may be
heard and determined in such New York State or United States Federal court.
Borrower, Administrative Agent, and each Bank irrevocably consent to the service
of any and all process in any such action or proceeding by the mailing of copies
of such process to Borrower, Administrative Agent or each Bank, as the case may
be, at the addresses specified herein. Borrower, Administrative Agent and each
Bank agree that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Borrower, Administrative Agent and each
Bank further waive any objection to venue in the State of New York and any
objection to an action or proceeding in the State of New York on the basis of
forum non convenient. Borrower, Administrative Agent and each Bank agree that
any action or proceeding brought against Borrower, Administrative Agent or any
Bank, as the case may be, shall be brought only in a New York State court
sitting in New York City or a United States Federal court sitting in New York
City, to the extent permitted or not expressly prohibited by applicable law.
Nothing in this Section shall affect the right of Borrower,
Administrative Agent or any Bank to serve legal process in any other manner
permitted by law.
To the extent that Borrower, Administrative Agent or any Bank have or
hereafter may acquire any immunity from jurisdiction of any court or from any
legal process (whether from service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect to itself
or its property, Borrower, Administrative Agent and each Bank hereby irrevocably
waive such immunity in respect of its obligations under this Agreement, the
Notes and any other Loan Document.
BORROWER, ADMINISTRATIVE AGENT AND EACH BANK WAIVE ANY RIGHT
EACH SUCH PARTY MAY HAVE TO JURY TRIAL IN CONNECTION WITH ANY SUIT, ACTION OR
PROCEEDING BROUGHT WITH RESPECT TO THIS AGREEMENT, THE NOTES OR THE LOAN. IN
ADDITION, BORROWER HEREBY WAIVES, IN CONNECTION WITH ANY SUIT, ACTION OR
PROCEEDING BROUGHT BY ADMINISTRATIVE AGENT OR THE BANKS WITH RESPECT TO THE
NOTES, ANY RIGHT BORROWER MAY HAVE TO (1) INTERPOSE ANY COUNTERCLAIM THEREIN
(OTHER THAN A COUNTERCLAIM THAT IF NOT BROUGHT IN THE SUIT, ACTION OR PROCEEDING
BROUGHT BY ADMINISTRATIVE AGENT OR THE BANKS COULD NOT BE BROUGHT IN A SEPARATE
SUIT, ACTION OR PROCEEDING OR WOULD BE SUBJECT TO DISMISSAL OR SIMILAR
DISPOSITION FOR FAILURE TO HAVE BEEN ASSERTED IN SUCH SUIT, ACTION OR PROCEEDING
BROUGHT BY ADMINISTRATIVE AGENT OR THE BANKS) OR (2) TO THE EXTENT PERMITTED OR
NOT EXPRESSLY PROHIBITED BY APPLICABLE LAW, HAVE THE SAME CONSOLIDATED WITH ANY
OTHER OR SEPARATE SUIT, ACTION OR PROCEEDING. NOTHING HEREIN CONTAINED SHALL
PREVENT OR PROHIBIT BORROWER FROM INSTITUTING OR MAINTAINING A SEPARATE ACTION
AGAINST ADMINISTRATIVE AGENT OR THE BANKS WITH RESPECT TO ANY ASSERTED CLAIM.
Section 12.16 Designated Lender . Any Bank (other than a Bank who is
such solely because it is a Designated Lender) (each, a "Designating Lender")
may at any time designate one (1) Designated Lender to fund Bid Rate Loans on
behalf of such Designating Lender subject to the terms of this Section and the
provisions in Section 12.05 shall not apply to such designation. No Bank may
designate more than one (1) Designated Lender. The parties to each such
designation shall execute and deliver to Administrative Agent for its acceptance
a Designation Agreement. Upon such receipt of an appropriately completed
Designation Agreement executed by a Designating Lender and a designee
representing that it is a Designated Lender, Administrative Agent will accept
such Designation Agreement and give prompt notice thereto to Borrower,
whereupon, (i) from and after the "Effective Date" specified in the Designation
Agreement, the Designated Lender shall become a party to this Agreement with a
right to make Bid Rate Loans on behalf of its Designating Lender pursuant to
Section 2.02 after Borrower has accepted the Bid Rate Quote of the Designating
Lender and (ii) the Designated Lender shall not be required to make payments
with respect to any obligations in this Agreement except to the extent of excess
cash flow of such Designated Lender which is not otherwise required to repay
obligations of such Designated Lender which are then due and payable; provided,
however, that regardless of such designation and assumption by the Designated
Lender, the Designating Lender shall be and remain obligated to Borrower,
Administrative Agent and the Banks for each and every of the obligations of the
Designating Lender and its related Designated Lender with respect to this
Agreement, including, without limitation, any indemnification obligations under
Section 10.05. Each Designating Lender shall serve as the administrative agent
of its Designated Lender and shall on behalf of, and to the exclusion of, the
Designated Lender: (i) receive any and all payments made for the benefit of the
Designated Lender and (ii) give and receive all communications and notices and
take all actions hereunder, including, without limitation, votes, approvals,
waivers and consents under or relating to this Agreement and the other Loan
Documents. Any such notice, communication, vote, approval, waiver or consent
shall be signed by the Designating Lender as administrative agent for the
Designated Lender and shall not be signed by the Designated Lender on its own
behalf, but shall be binding on the Designated Lender to the same extent as if
actually signed by the Designated Lender. Borrower, Administrative Agent and the
Banks may rely thereon without any requirement that the Designated Lender sign
or acknowledge the same. No Designated Lender may assign or transfer all or any
portion of its interest hereunder or under any other Loan Document, other than
assignments to the Designating Lender which originally designated such
Designated Lender.
Section 12.17 No Bankruptcy Proceedings.
- ---------- ---------------------------
Each of Borrower, the Banks and Administrative Agent hereby agrees that it
will not institute against any Designated Lender or join any other Person in
instituting against any Designated Lender any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding under any federal or state
bankruptcy or similar law, for one (1) year and one (1) day after the payment in
full of the latest maturing commercial paper note issued by such Designated
Lender.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
FIRST WASHINGTON REALTY LIMITED PARTNERSHIP,
a Maryland limited partnership
By: First Washington Realty Trust, Inc., a
Maryland corporation, general
partner
Attest: By __________________________[SEAL]
Name:
By______________________ Title:
Name:
Title:
Address for Notices:
4350 East-West Highway
Suite 400
Bethesda, Maryland 20814
Attention: Mr. James Blumenthal
Telephone: (___) ________
Telecopy: (___) ________
2
<PAGE>
UNION BANK OF SWITZERLAND (New York Branch)(as Bank and Administrative Agent)
By
Name:
Title:
By
Name:
Title:
Address for Notices and Applicable Lending Office:
299 Park Avenue
38th Floor
New York, New York 10171-0026
Attention: Joseph Bassil and
Mara Martez
Telephone: (212) 821-3872
Telecopy: (212) 821-3943
3
<PAGE>
EXHIBIT A
AUTHORIZATION LETTER
____________, 1997
Union Bank of Switzerland
(New York Branch)
299 Park Avenue
New York, New York 10171
Re: Revolving Credit Agreement dated as of the date hereof (the "Loan
Agreement"; capitalized terms not otherwise defined herein shall have the
meanings ascribed to such terms in the Loan Agreement) among us, as Borrower,
the Banks named therein, and you, as Administrative Agent for said Banks
Gentlemen:
In connection with the captioned Loan Agreement, we hereby
designate any of the following persons to give to you instructions, including
notices required pursuant to the Agreement, orally, by telephone or teleprocess,
or in writing:
Instructions may be honored on the oral, telephonic, teleprocess or written
instructions of anyone purporting to be any one of the above designated persons
even if the instructions are for the benefit of the person delivering them. We
will furnish you with confirmation of each such instruction either by telex
(whether tested or untested) or in writing signed by any person designated above
(including any telecopy which appears to bear the signature of any person
designated above) on the same day that the instruction is provided to you but
your responsibility with respect to any instruction shall not be affected by
your failure to receive such confirmation or by its contents.
Without limiting the foregoing, we hereby unconditionally
authorize any one of the above-designated persons to execute and submit requests
for advances of proceeds of the Loans (including the Initial Advance) and
notices of Elections, Conversions and Continuations to you under the Loan
Agreement with the identical force and effect in all respects as if executed and
submitted by us.
You shall be fully protected in, and shall incur no liability to us for,
acting upon any instructions which you in good faith believe to have been given
by any person designated above, and in no event shall you be liable for special,
consequential or punitive damages. In addition, we agree to hold you and your
agents harmless from any and all liability, loss and expense arising directly or
indirectly out of instructions that we provide to you in connection with the
Loan Agreement except for liability, loss or expense occasioned by the gross
negligence or willful misconduct of you or your agents.
Upon notice to us, you may, at your option, refuse to execute
any instruction, or part thereof, without incurring any responsibility for any
loss, liability or expense arising out of such refusal if you in good faith
believe that the person delivering the instruction is not one of the persons
designated above or if the instruction is not accompanied by an authentication
method that we have agreed to in writing.
We will promptly notify you in writing of any change in the
persons designated above and, until you have actually received such written
notice and have had a reasonable opportunity to act upon it, you are authorized
to act upon instructions, even though the person delivering them may no longer
be authorized.
Very truly yours,
FIRST WASHINGTON REALTY LIMITED PARTNERSHIP,
a Maryland limited partnership
By: First Washington Realty Trust, Inc.,
a Maryland corporation, general
partner
By [SEAL]
Name:
Title:
<PAGE>
EXHIBIT B
RATABLE LOAN NOTE
$____________ New York, New York
January ___, 1998
For value received, First Washington Realty Limited
Partnership, a Maryland limited partnership ("Borrower"), hereby promises to pay
to the order of _________ or its successors or assigns (collectively, the
"Bank"), at the principal office of Union Bank of Switzerland (New York Branch)
located at 299 Park Avenue, New York, New York 10171 ("Administrative Agent")
for the account of the Applicable Lending Office of the Bank, the principal sum
of ____________ Dollars ($________ ), or if less, the amount loaned by the Bank
under its Ratable Loan to Borrower pursuant to the Loan Agreement (as defined
below) and actually outstanding, in lawful money of the United States and in
immediately available funds, in accordance with the terms set forth in the Loan
Agreement. Borrower also promises to pay interest on the unpaid principal
balance hereof, for the period such balance is outstanding, in like money, at
said office for the account of said Applicable Lending Office, at the time and
at a rate per annum as provided in the Loan Agreement. Any amount of principal
hereof which is not paid when due, whether at stated maturity, by acceleration,
or otherwise, shall bear interest from the date when due until said principal
amount is paid in full, payable on demand, at the rate set forth in the Loan
Agreement.
The date and amount of each advance of the Ratable Loan made
by the Bank to Borrower under the Loan Agreement referred to below, and each
payment of said Ratable Loan, shall be recorded by the Bank on its books and,
prior to any transfer of this Note (or, at the discretion of the Bank, at any
other time), may be endorsed by the Bank on the schedule attached hereto and any
continuation thereof.
This Note is one of the Ratable Loan Notes referred to in the
Revolving Credit Agreement dated as of January ___, 1998 (as the same may be
amended from time to time, the "Loan Agreement") among Borrower, the Banks named
therein (including the Bank) and Administrative Agent, as administrative agent
for the Banks. All of the terms, conditions and provisions of the Loan Agreement
are hereby incorporated by reference. All capitalized terms used herein and not
defined herein shall have the meanings given to them in the Loan Agreement.
This Note is secured by various Mortgages which contain, among other
things, provisions for the prepayment of and acceleration of this Note upon the
happening of certain stated events. Reference to each of the Mortgages is hereby
made for a description of the "Mortgaged Property" encumbered thereby and the
rights of Borrower and the Banks (including the Bank) with respect to such
Mortgaged Property. In addition, the Loan Agreement contains, among other
things, provisions for the prepayment of and acceleration of this Note upon the
happening of certain stated events.
Borrower agrees that it shall be bound by any agreement
extending the time or modifying the terms of payment set forth above and in the
Loan Agreement, made by or on behalf of the Banks and the owner or owners of the
Mortgaged Property, whether with or without notice to Borrower, and Borrower
shall continue liable to pay the amount due hereunder in accordance with the
terms set forth herein and in the Loan Agreement, but with interest at a rate no
greater than the rate of interest provided therein, according to the terms of
any such agreement of extension or modification.
Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity, or in bankruptcy, receivership or any other court
proceeding (whether at the trial or appellate level), or should this Note be
placed in the hands of attorneys for collection upon default, Borrower agrees to
pay, in addition to the principal, interest and other sums due and payable
hereon, all costs of collecting or attempting to collect this Note, including
reasonable attorneys' fees and expenses.
All parties to this Note, whether principal, surety, guarantor
or endorser, hereby waive presentment for payment, demand, protest, notice of
protest and notice of dishonor.
This Note shall be governed by the laws of the State of New
York, provided that, as to the maximum lawful rate of interest which may be
charged or collected, if the laws applicable to the Bank permit it to charge or
collect a higher rate than the laws of the State of New York, then such law
applicable to the Bank shall apply to the Bank under this Note.
IN WITNESS WHEREOF, Borrower has executed and delivered this
Note on the day and year first above written.
Very truly yours,
FIRST WASHINGTON REALTY LIMITED PARTNERSHIP,
a Maryland limited partnership
By: First Washington Realty
Trust, Inc., a Maryland corporation,
its sole general partner
Attest: By_____________[SEAL]
Name:
By__________________________
Name:
Title:
<PAGE>
This is to certify that this Note was executed in my presence
on the date hereof by the parties whose signatures appear above in the
capacities indicated.
Notary Public
My commission expires:
B-2
<PAGE>
===============================================================================
Date Amount Amount Balance Notation By
of Advance of Payment Outstanding
===============================================================================
B-3
<PAGE>
EXHIBIT C
BID RATE LOAN NOTE
$17,000,000 New York, New York
January ___, 1998
For value received, First Washington Realty Limited
Partnership, a Maryland limited partnership ("Borrower"), hereby promises to pay
to the order of Union Bank of Switzerland (New York Branch) ("Administrative
Agent") or its successors or assigns for the account of the respective Banks
making Bid Rate Loans or their respective successors or assigns (for the further
account of their respective Applicable Lending Offices), at the principal office
of Administrative Agent located at 299 Park Avenue, New York, New York 10171,
the principal sum of Seventeen Million Dollars ($17,000,000), or if less, the
amount loaned by said Banks under their respective Bid Rate Loans to Borrower
pursuant to the Loan Agreement (as defined below) and actually outstanding, in
lawful money of the United States and in immediately available funds, in
accordance with the terms set forth in the Loan Agreement. Borrower also
promises to pay interest on the unpaid principal balance hereof, for the period
such balance is outstanding, in like money, at said office for the account of
said Banks for the further account of their respective Applicable Lending
Offices, at the times and at the rates per annum as provided in the Loan
Agreement. Any amount of principal hereof which is not paid when due, whether at
stated maturity, by acceleration, or otherwise, shall bear interest from the
date when due until said principal amount is paid in full, payable on demand, at
the rate set forth in the Loan Agreement.
The date and amount of each Bid Rate Loan to Borrower under
the Loan Agreement referred to below, the name of the Bank making the same, the
interest rate applicable thereto and the maturity date thereof (i.e., the end of
the Interest Period applicable thereto) shall be recorded by Administrative
Agent on its records and may be endorsed by Administrative Agent on the schedule
attached hereto and any continuation thereof.
This Note is the Bid Rate Loan Note referred to in the
Revolving Credit Agreement dated as of January ___, 1998 (as the same may be
amended from time to time, the "Loan Agreement") among Borrower, the Banks named
therein and Administrative Agent, as administrative agent for the Banks. All of
the terms, conditions and provisions of the Loan Agreement are hereby
incorporated by reference. All capitalized terms used herein and not defined
herein shall have the meanings given to them in the Loan Agreement.
This Note is secured by various Mortgages which contain, among other
things, provisions for the prepayment of and acceleration of this Note upon the
happening of certain stated events. Reference to each of the Mortgages is hereby
made for a description of the "Mortgaged Property" encumbered thereby and the
rights of Borrower and the Banks (including the Bank) with respect to such
Mortgaged Property. In addition, the Loan Agreement contains, among other
things, provisions for the prepayment of and acceleration of this Note upon the
happening of certain stated events.
Borrower agrees that it shall be bound by any agreement
extending the time or modifying the terms of payment set forth above and in the
Loan Agreement, made by or on behalf of the Banks and the owner or owners of the
Mortgaged Property, whether with or without notice to Borrower, and Borrower
shall continue liable to pay the amount due hereunder in accordance with the
terms set forth herein and in the Loan Agreement, but with interest at a rate no
greater than the rate of interest provided therein, according to the terms of
any such agreement of extension or modification.
Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity, or in bankruptcy, receivership or any other court
proceeding (whether at the trial or appellate level), or should this Note be
placed in the hands of attorneys for collection upon default, Borrower agrees to
pay, in addition to the principal, interest and other sums due and payable
hereon, all costs of collecting or attempting to collect this Note, including
reasonable attorneys' fees and expenses.
All parties to this Note, whether principal, surety, guarantor
or endorser, hereby waive presentment for payment, demand, protest, notice of
protest and notice of dishonor.
This Note shall be governed by the laws of the State of New
York, provided that, as to the maximum lawful rate of interest which may be
charged or collected, if the laws applicable to a particular Bank permit it to
charge or collect a higher rate than the laws of the State of New York, then
such law applicable to such Bank shall apply to such Bank under this Note.
Very truly yours,
FIRST WASHINGTON REALTY LIMITED PARTNERSHIP,
a Maryland limited partnership
By: First Washington Realty
Trust, Inc., a Maryland corporation,
its sole general partner
Attest: By_________________________[SEAL]
Name:
By______________________ Title:
Name:
Title:
<PAGE>
This is to certify that this Note was executed in my presence
on the date hereof by the parties whose signatures appear above in the
capacities indicated.
Notary Public
My commission expires:
C-2
<PAGE>
Bid Bank Date of Principal Interest Maturity (i.e., Expiration of
Rate Advance Amount Rate Interest Period
Loan #
C-3
<PAGE>
EXHIBIT D
SOLVENCY CERTIFICATE
The __________ executing this certificate is the ___________
of First Washington Realty Trust, Inc., a __________ real estate investment
trust ("General Partner"), a general partner of First Washington Realty Limited
Partnership, a ___________ limited partnership ("Borrower"), and is familiar
with its properties, assets and businesses, and is duly authorized to execute
this Certificate on behalf of Borrower pursuant to the Revolving Credit
Agreement dated the date hereof (the "Loan Agreement") among Borrower, the banks
party thereto (each a "Bank" and collectively, the "Banks") and Union Bank of
Switzerland (New York Branch), as agent for the Banks (in such capacity,
together with its successors in such capacity, the "Agent"). In executing this
Certificate, such individual is acting solely in [his] [her] capacity as the
__________ of General Partner, and not in [his] [her] individual capacity.
Unless otherwise defined herein, terms defined in the Loan Agreement are used
herein as therein defined.
The undersigned further certifies that [he] [she] has
carefully reviewed the Loan Agreement and the other Loan Documents and the
contents of this Certificate and, in connection herewith, has made such
investigation and inquiries as [he] [she] deems necessary and prudent therefor.
The undersigned further certifies that the financial information and assumptions
which underlie and form the basis for the representations made in this
Certificate were reasonable when made and were made in good faith and continue
to be reasonable as of the date hereof.
The undersigned understands that the Banks and the Agent are
relying on the truth and accuracy of this Certificate in connection with the
transactions contemplated by the Loan Agreement.
The undersigned certifies that Borrower and General Partner
are Solvent.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate on ____________, 1997.
<PAGE>
EXHIBIT E
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT dated as of , 199_, among
[insert name of assigning Bank] ("Assignor"), [insert name of Assignee]
("Assignee"), First Washington Realty Limited Partnership, a _________ limited
partnership ("Borrower") and Union Bank of Switzerland (New York Branch), as
administrative agent for the Banks referred to below (in such capacity, together
with its successors in such capacity, the "Administrative Agent").
Preliminary Statement
1. This Assignment and Assumption Agreement (this "Agreement") relates to
the Revolving Credit Agreement dated __________, 1997 (as the same may be
amended from time to time, the "Loan Agreement") among Borrower, the banks party
thereto (each a "Bank" and, collectively, the "Banks") and the Administrative
Agent. All capitalized terms not otherwise defined herein shall have the
respective meanings set forth in the Loan Agreement.
2. Subject to the terms and conditions set forth in the Loan Agreement,
Assignor has made a Loan Commitment to Borrower in an aggregate principal amount
of _____________ Dollars ($ _______) ("Assignor's Loan Commitment").
3. The aggregate outstanding principal amount of Assignor's Ratable Loan
made pursuant to Assignor's Loan Commitment at commencement of business on the
date hereof is _____________ Dollars ($_______). The aggregate outstanding
principal amount of Bid Rate Loans made by Assignor to Borrower at the
commencement of business on the date hereof is _____________ Dollars ($______).
4. Assignor desires to assign to Assignee (a) all of the rights of Assignor
under the Loan Agreement in respect of a portion of its (i) Ratable Loan and
Loan Commitment thereunder in an amount equal to __________ Dollars ($
_________) and (ii) Bid Rate Loans in an amount equal to _________ Dollars ($
________) (collectively, the "Assigned Loan and Commitment"); and Assignee
desires to accept assignment of such rights and assume the corresponding
obligations from Assignor on such terms.
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements contained herein, the parties hereto agree as follows:
SECTION 1. Assignment. Assignor hereby assigns and sells to
Assignee all of the rights of Assignor under the Loan Agreement in and to the
Assigned Loan and Commitment, and Assignee hereby accepts such assignment from
Assignor and assumes all of the obligations of Assignor under the Loan Agreement
with respect to the Assigned Loan and Commitment. Upon the execution and
delivery hereof by Assignor, Assignee, Borrower and the Administrative Agent and
the payment of the amount specified in Section 2 hereof required to be paid on
the date hereof, (1) Assignee shall, as of the commencement of business on the
date hereof, succeed to the rights and obligations of a Bank under the Loan
Agreement with a Loan and a Loan Commitment in amounts equal to the Assigned
Loan and Commitment, and (2) the Loan and Loan Commitment of Assignor shall, as
of the commencement of business on the date hereof, be reduced correspondingly
and Assignor released from its obligations under the Loan Agreement to the
extent such obligations have been assumed by Assignee. The assignment provided
for herein shall be without recourse to Assignor.
SECTION 2. Payments. As consideration for the assignment and sale
contemplated in Section 1 hereof, Assignee shall pay to Assignor on the date
hereof in immediately available funds an amount equal to ___________Dollars ($
_________) [insert the amount of that portion of Assignor's Loan being
assigned]. It is understood that any fees paid to Assignor under the Loan
Agreement are for the account of Assignor. Each of Assignor and Assignee hereby
agrees that if it receives any amount under the Loan Agreement which is for the
account of the other party hereto, it shall receive the same for the account of
such other party to the extent of such other party's interest therein and shall
promptly pay the same to such other party.
SECTION 3. [Consent of Borrower and UBS and Acknowledgment by the
Administrative Agent;] Execution and Delivery of Note. [This Agreement is
conditioned upon the consent of UBS and, provided there exists no Event of
Default, Borrower and upon the acknowledgment by the Administrative Agent
pursuant to Section 12.05 of the Loan Agreement. The execution of this Agreement
by Borrower and the Administrative Agent is evidence of this consent and
acknowledgment, respectively. Only necessary if Assignee is not a majority owned
subsidiary of a Bank or of the Parent of a Bank] Pursuant to Section 12.05 of
the Loan Agreement, Borrower has agreed to execute and deliver Ratable Loan
Notes payable to the respective orders of Assignee and Assignor to evidence the
assignment and assumption provided for herein.
SECTION 4. Non-Reliance on Assignor. Assignor makes no representation or
warranty in connection with, and shall have no responsibility with respect to,
the solvency, financial condition, or statements of Borrower or any other party
to any Loan Document, or the validity and enforceability of the obligations of
Borrower or any other party to a Loan Document in respect of the Loan Agreement
or any other Loan Document. Assignee acknowledges that it has, independently and
without reliance on Assignor, and based on such documents and information as it
has deemed appropriate, made its own credit analysis and decision to enter into
this Agreement and will continue to be responsible for making its own
independent appraisal of the business, affairs and financial condition of
Borrower and the other parties to the Loan Documents.
SECTION 5. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
SECTION 6. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
SECTION 7. Certain Representations and Agreements by Assignee. Reference is
made to Section 10.13 of the Loan Agreement. Assignee hereby represents that it
is entitled to receive any payments to be made to it under the Loan Agreement or
hereunder without the withholding of any tax and agrees to furnish the evidence
of such exemption as specified therein and otherwise to comply with the
provisions of said Section 10.13.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered by their duly authorized officers as of the date first
above written.
[NAME OF ASSIGNOR]
By:
Name:
Title:
[NAME OF ASSIGNEE]
By:
Name:
Title:
Applicable Lending Office:
Address for Notices:
[Assignee]
[Address]
Attention: ______________
Telephone: (___) ________
Telecopy: (___) ________
E-2
<PAGE>
FIRST WASHINGTON REALTY LIMITED PARTNERSHIP,
a Maryland limited partnership
By: First Washington Realty Trust, Inc.,
a Maryland corporation, general partner
By: [SEAL]
Name:
Title:
Address for Notices:
Attention: _________________
Telephone: (___) ________
Telecopy: (___) ________
E-3
<PAGE>
UNION BANK OF SWITZERLAND
(New York Branch)
(as Bank and Administrative Agent)
By:
Name:
Title:
By:
Name:
Title:
Address for Notices and
Applicable Lending Office:
299 Park Avenue
38th Floor
New York, New York 10171-0026
Attention: Joseph Bassil and
Mara Martez
Telephone: (212) 821-3872
Telecopy: (212) 821-3943
E-4
<PAGE>
EXHIBIT F
MATERIAL AFFILIATES
========================================================================
Name State of Borrower's Principal
Formation %age Interest Business
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
========================================================================
<PAGE>
EXHIBIT G-1
BID RATE QUOTE REQUEST
[Date]
To: Union Bank of Switzerland (New York Branch), as
Administrative Agent (the "Administrative Agent")
From: [Borrower]
Re: Revolving Credit Agreement (the "Loan Agreement") dated as of
__________, 1997 among [Borrower], the Banks parties thereto and the
Administrative Agent
We hereby give notice pursuant to Section 2.02 of the Loan
Agreement that we request Bid Rate Quotes for the following proposed Bid Rate
Loans:
Date of Borrowing: ______________
Principal Amount* Interest Period**
$
Such Bid Rate Quotes should offer a LIBOR Bid Margin.
Terms used herein have the meanings assigned to them in the
Loan Agreement.
[BORROWER]
By:
Name:
Title:
- --------
* Subject to the minimum amount and other requirements set forth in Section
2.02(a) of the Loan Agreement.
* * Subject to the provisions of the definition of "Interest Period" in the
Loan Agreement.
<PAGE>
EXHIBIT G-2
INVITATION FOR BID RATE QUOTES
To: [Bank]
Re: Invitation for Bid Rate Quotes to [Borrower] ("Borrower")
Pursuant to Section 2.02 of the Revolving Credit Agreement
dated as of __________, 1997 among Borrower, the Banks parties thereto and the
undersigned, as Administrative Agent, we are pleased on behalf of Borrower to
invite you to submit Bid Rate Quotes to Borrower for the following proposed Bid
Rate Loans:
Date of Borrowing: ________________________
Principal Amount Interest Period
$
Such Bid Rate Quotes should offer a LIBOR Bid Margin.
Please respond to this invitation by no later than 2:00 P.M.
(New York time) on [date].
UNION BANK OF SWITZERLAND
(New York Branch), as Administrative Agent
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
EXHIBIT G-3
BID RATE QUOTE
To: Union Bank of Switzerland (New York Branch), as Administrative Agent
Re: Bid Rate Quote to [Borrower] ("Borrower") pursuant to Revolving Credit
Agreement dated ____________, 1997 among Borrower, the Banks party thereto and
Administrative Agent (the "Loan Agreement")
In response to your invitation on behalf of Borrower dated
________, 19__, we hereby make the following Bid Rate Quote on the following
terms:
1. Quoting Bank:
2. Person to contact at quoting Bank:
_____________________________________*
3. Date of borrowing: __________________________
4. We hereby offer to make Bid Rate Loan(s) in the following principal amounts,
for the following Interest Periods and at the following rates:
Principal Interest LIBOR Bid
Amount** Period*** Margin****
$
$
[Provided, that the aggregate principal amount of Bid Rate Loans for which
the above offers may be accepted shall not exceed $__________.]
5. LIBOR Reserve Requirement, if any: ________________.
6. Terms used herein have the meanings assigned to them in the Loan Agreement.
We understand and agree that the offer(s) set forth above,
subject to the satisfaction of the applicable conditions set forth in the Loan
Agreement, irrevocably obligates us to make the Bid Rate Loan(s) for which any
offer(s) are accepted, in whole or in part.
Very truly yours,
[NAME OF BANK]
Date: ___________________ By:
Authorized Officer
- --------
* As specified in the related Invitation for Bid Rate Quotes.
* * Principal amount bid for each Interest Period may not exceed principal
amount requested. Specify aggregate limitation if the sum of the individual
offers exceeds the amount the Bank is willing to lend. Amounts of bids are
subject to the requirements of Section 2.02(c) of the Loan Agreement.
* ** No more than three (3) bids are permitted for each Interest Period.
* *** Margin over or under the LIBOR Interest Rate determined for the
applicable Interest Period. Specify percentage (to the nearest 1/1,000 of 1~)
and specify whether "PLUS" or "MINUS".
<PAGE>
EXHIBIT G-4
ACCEPTANCE OF BID RATE QUOTE
To: Union Bank of Switzerland (New York Branch), as Administrative Agent
(the "Administrative Agent")
From: [Borrower]
Re: Amended and Restated Revolving Loan Agreement (the "Loan Agreement")
dated as of ______________, 1997 among [Borrower], the Banks parties thereto and
the Administrative Agent
We hereby accept the offers to make Bid Rate Loan(s) set forth
in the Bid Rate Quote(s) identified below:
Bank Date of Bid Principal Interest LIBOR Bid
Rate Quote Amount Period Margin
Very truly yours,
[BORROWER]
By:
Name:
Title:
<PAGE>
EXHIBIT H
Pending Disbursements Clause
Pending disbursement of the full proceeds of the loan secured
by the insured mortgage or deed of trust described herein, this Policy insures
only to the extent of the principal amount actually outstanding from time to
time plus interest accrued thereon, but in no event to exceed the face amount of
the Policy. Such amount insured by this Policy shall (i) increase with each
disbursement up to the face amount of the Policy as disbursements, including
disbursements which constitute readvances of the principal amount of said loan
after full or partial repayments of the principal amount secured by the insured
mortgage or deed of trust, are made in good faith and without knowledge of any
defects in, or encumbrances prior to, the lien of the insured mortgage or deed
of trust other than exceptions on Schedule B of this Policy not insured against
hereunder and (ii) decrease (subject to later increases upon subsequent
disbursements) as repayment(s) of the loan are received by the insured.
Notwithstanding any provisions of this Policy to the contrary, this Policy
insures all such disbursements, including all readvances of loan proceeds after
full or partial repayment of the amounts advanced and secured by the insured's
mortgage or deed of trust, provided that in no event shall the amount of the
Company's initial liability under this Policy with respect to such disbursements
actually outstanding exceed the face amount of this Policy..
Title shall be continued down to the date of each disbursement
and the Company shall furnish to the Insured a continuation report which shall
note (1) the new effective date and amount of the Policy, (2) all assessments,
taxes, liens, encumbrances, leases, mortgages, easements and other items
including survey variations, encroachments and setback violations then affecting
the insured premises which have been filed of record or discovered by the
Company since the original date of the Policy regardless of whether they affect
the lien of the insured mortgage or deed of trust, (3) which of the aforesaid
items have been filed or recorded since the date of the last preceding
continuation report, and (4) which said items are intended to be added as
exceptions to the coverage of the Policy as to (a) all amounts secured by the
insured mortgage or deed of trust and (b) only amounts secured by the insured
mortgage or deed of trust advanced on or after the new effective date of the
Policy.
In addition, each continuation search will notify the Insured
of any liens which have been discharged by bonding, court deposit or any other
means other than full payment.
<PAGE>
EXHIBIT I
Notice-of-Assignment of Lease
(On Letterhead of Borrower)
_______________, 199_
[Name and Address of Tenant]
Re: Lease Dated:
Lender: Union Bank of Switzerland (New York Branch), as administrative
agent for itself and other lenders Address of Lender: 299 Park Avenue, New York,
NY 10171-0026
Mortgage Dated:
Dear Sir/Madam:
The undersigned has assigned by a mortgage or deed of trust
(the "Mortgage") dated as shown above to the Lender identified above
(hereinafter "Lender") all its estate, right, title and interest in, to and
under the Lease between you and the undersigned dated as set forth above, as
said Lease may have been heretofore modified or amended (the "Lease"), together
with all right, title and interest of the undersigned as lessor thereunder,
including, without limitation, the right upon the occurrence of an Event of
Default (as defined in the Mortgage) to collect and receive all earnings,
revenues, rents, issues, profits and income of the property subject to the
Mortgage.
Said assignment does not impair or diminish any of our
obligations to you under the provisions of the Lease, nor are any such
obligations imposed upon Lender, its successors or assigns.
Pursuant to said assignment you are hereby notified that in
the event of a demand on you by Lender or its successors and assigns for the
payment to it of the rents due under the Lease, you may, and are hereby
authorized and directed to, pay said rent to Lender and we hereby agree that the
receipt by you of such a demand shall be conclusive evidence of Lender's right
to the receipt thereof and that the payment of the rents by you to Lender
pursuant to such demand shall constitute performance in full of your obligation
under the Lease for the payment of rent to the undersigned.
- -----------------------
NOTE: To be sent in accordance with notice requirements of the Lease.
<PAGE>
Kindly indicate your receipt of this letter and your agreement
to the effect set forth below by signing the enclosed copy thereof and mailing
it to Lender at its address identified above to the attention of its Real Estate
Finance Office.
[BORROWER]
By:
Name:
Title:
The undersigned acknowledges receipt of the original of this
letter and agrees for the benefit of Lender that it shall notify Lender of any
default on the part of the landlord under the Lease which would entitle the
undersigned to cancel the Lease or to abate the rent payable thereunder, and
further agrees that, notwithstanding any provision of the Lease, no notice of
cancellation thereof shall be effective unless Lender has received the notice
aforesaid and has failed within 30 days of the date thereof to cure, or if the
default cannot be cured within 30 days has failed to commence and to diligently
prosecute the cure, of landlord's default which gave rise to the right to
cancel.
[NAME OF TENANT]
By
------------------------,
its authorized officer
I-2
<PAGE>
EXHIBIT J
Designation Agreement
Reference is made to that certain Revolving Credit Agreement
dated as of ______________, 1997 (as amended, supplemented or otherwise modified
from time to time, the "Loan Agreement") among First Washington Realty Limited
Partnership, a ____________ limited partnership, the banks parties thereto, and
Union Bank of Switzerland (New York Branch), as administrative agent for said
banks. Terms defined in the Loan Agreement not otherwise defined herein are used
herein with the same meaning.
[BANK] ("Designor") and ____________, a ____________("Designee") agree as
follows:
1. Designor hereby designates Designee, and Designee hereby accepts such
designation, to have a right to make Bid Rate Loans pursuant to Section 2.02 of
the Loan Agreement. Any assignment by Designor to Designee of its rights to make
a Bid Rate Loan pursuant to such Section shall be effective at the time of the
funding of such Bid Rate Loan and not before such time.
2. Except as set forth in Section 6 below, Designor makes no
representation or warranty and assumes no responsibility pursuant to this
Designation Agreement with respect to (a) any statements, warranties or
representations made in or in connection with any Loan Document or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of any Loan Document or any other instrument and document furnished pursuant
thereto and (b) the financial condition of Borrower or the performance or
observance by Borrower of any of its obligations under any Loan Document or any
other instrument or document furnished pursuant thereto.
3. Designee (a) confirms that it has received a copy of each
Loan Document, together with copies of such financial statements and other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Designation Agreement; (b) agrees that
it will independently and without reliance upon Administrative Agent, Designor
or any other sank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under any Loan Document; (c) represents that it is a
Designated Lender; (d) appoints and authorizes Administrative Agent to take such
action as agent on its behalf and to exercise such powers and discretion under
any Loan Document as are delegated to Administrative Agent by the terms thereof,
together with such powers and discretion as are reasonably incidental thereto;
and (e) agrees that it will perform in accordance with their terms all of the
obligations which by the terms of any Loan Document are required to be performed
by it as a Bank.
4. Designee hereby appoints Designor as Designee's agent and
attorney-in-fact, and grants to Designor an irrevocable power of attorney, to
receive payments made for the benefit of Designee under the Loan Agreement, to
deliver and receive all communications and notices under the Loan Agreement and
other Loan Documents and to exercise on Designee's behalf all rights to vote and
to grant and make approvals, waivers, consents or amendments to or under the
Loan Agreement or other Loan Documents. Any document executed by Designor on
Designee's behalf in connection with the Loan Agreement or other Loan Documents
shall be binding on Designee. Borrower, Administrative Agent and each of the
Banks may rely on and are beneficiaries of this Designation Agreement.
5. Following the execution of this Designation Agreement by Designor and
Designee, it will be delivered to Administrative Agent for acceptance by
Administrative Agent. The effective date for this Designation Agreement (the
"Effective Date") shall be the date of acceptance hereof by Administrative
Agent.
6. Designor unconditionally agrees to pay or reimburse
Designee and save Designee harmless against all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed or asserted
by any of the parties to the Loan Documents against Designee, in its capacity as
such, in any way relating to or arising out of this Agreement or any other Loan
Documents or any action taken or omitted by the Designee hereunder or
thereunder, provided that Designor shall not be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements if the same results from Designee's gross
negligence or willful misconduct.
7. As of the Effective Date, Designee shall be a party to the Loan
Agreement with a right to make Bid Rate Loans as a Bank pursuant to Section 2.02
of the Loan Agreement and the rights and obligations of a Bank related thereto;
provided, however, that Designee shall not be required to make payments with
respect to such obligations except to the extent of excess cash flow of such
Designee which is not otherwise required to repay obligations of such Designated
Lender which are then -------- ------- due and payable. Notwithstanding the
foregoing, Designor, as administrative agent for Designee, shall be and remain
obligated to Borrower, Administrative Agent and the Banks for each and every of
the obligations of Designee and its Designor with respect to the Loan Agreement,
including, without limitation, any indemnification obligations under Section
10.05 of the Loan Agreement.
8. This Designation Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
9. This Designation Agreement may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, Designor and Designee have executed and
delivered this Designation Agreement as of the date first set forth above.
[DESIGNOR]
By:
Name:
Title:
[DESIGNEE]
Applicable Lending Office
and Address for Notices:
Attention:
Telephone: (___) ________
Telecopy: (___) ________
ACCEPTED AS OF THE__DAY OF ____, 199_.
UNION BANK OF SWITZERLAND,
(New York Branch), as Administrative
Agent
By:
Name:
Title:
By:
Name:
Title:
J-2
<PAGE>
EXHIBIT K
Release Prices
First Washington Realty Limited Partnership
Secured Line of Credit
Release Price
Four Mile Fork 7,625,000
Kenhorst 19,687,500
Graylyn 9,187,500
Takoma Park 9,625,000
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS, ETC..................................................1
Section 1.01 Definitions 1
Section 1.02 Accounting Terms 17
Section 1.03 Computation of Time Periods 17
Section 1.04 Rules of Construction 17
ARTICLE II. THE LOANS.......................................................17
Section 2.01 Ratable Loans; Bid Rate Loans; Purpose 17
Section 2.02 Bid Rate Loans 18
Section 2.03 Advances Generally 22
Section 2.04 Procedures for Advances 23
Section 2.05 Interest Periods: Renewals 23
Section 2.06 Interest 24
Section 2.07 Fees 24
Section 2.08 Notes 24
Section 2.09 Prepayments 25
Section 2.10 Method of Payment 25
Section 2.11 Elections, Conversions or Continuation of Loans 26
Section 2.12 Minimum Amounts 26
Section 2.13 Certain Notices Regarding Elections, Conversions and
Continuations of Loans 26
Section 2.14 Late Payment Premium 27
Section 2.15 Terminations of Commitments 27
Section 2.16 Letters of Credit 28
Section 2.17 Releases 29
ARTICLE III. YIELD PROTECTION; ILLEGALITY; ETC...............................29
Section 3.01 Additional Costs 29
Section 3.02 Limitation on Types of Loans 30
Section 3.03 Illegality 31
Section 3.04 Treatment of Affected Loans 31
Section 3.05 Certain Compensation 32
Section 3.06 Capital Adequacy 32
Section 3.07 Substitution of Banks 33
Section 3.08 "Bank" to Include Participants 34
ARTICLE IV. CONDITIONS PRECEDENT.............................................34
Section 4.01 Conditions Precedent to the Loans 34
Section 4.02 Conditions Precedent to Advances After the Initial
Advance 39
Section 4.03 Deemed Representations 40
ARTICLE V. REPRESENTATIONS AND WARRANTIES....................................40
Section 5.01 Existence 40
Section 5.02 Corporate/Partnership Powers 40
Section 5.03 Power of Officers 40
Section 5.04 Power and Authority; No Conflicts; Compliance With
Laws 40
Section 5.05 Legally Enforceable Agreements 41
Section 5.06 Litigation 41
Section 5.07 Good Title to Properties 41
Section 5.08 Taxes 41
Section 5.09 ERISA 42
Section 5.10 No Default on Outstanding Judgments or Orders 42
Section 5.11 No Defaults on Other Agreements 42
Section 5.12 Government Regulation 42
Section 5.13 Environmental Protection 42
Section 5.14 Solvency 43
Section 5.15 Financial Statements 43
Section 5.16 Valid Existence of Affiliates 43
Section 5.17 Insurance 43
Section 5.18 Separate Tax and Zoning Lot 44
Section 5.19 Zoning and other Laws; Covenants and Restrictions 44
Section 5.20 Utilities Available 44
Section 5.21 Creation of Liens 44
Section 5.22 Roads 44
Section 5.23 REA and Leases 44
Section 5.24 Accuracy of Information; Full Disclosure 44
ARTICLE VI. AFFIRMATIVE COVENANTS............................................45
Section 6.01 Maintenance of Existence 45
Section 6.02 Maintenance of Records 45
Section 6.03 Maintenance of Insurance 45
Section 6.04 Compliance with Laws; Payment of Taxes 45
Section 6.05 Right of Inspection 45
Section 6.06 Compliance With Environmental Laws 45
Section 6.07 Payment of Costs 45
Section 6.08 Maintenance of Properties 46
Section 6.09 Reporting and Miscellaneous Document Requirements 46
Section 6.10 Indemnification re: Brokers 49
Section 6.11 REA; Leases 49
Section 6.12 Compliance with Covenants,
Restrictions and Easements 49
Section 6.13 Maintenance, Management, Service and Leasing
Contracts 49
Section 6.14 Mandatory Principal Payments 49
Section 6.15 Prepayment Event 50
ARTICLE VII. NEGATIVE COVENANTS..............................................50
Section 7.01 Mergers Etc 50
Section 7.02 Investments 50
Section 7.03 Sale of Assets 50
Section 7.04 Management and Leasing of Properties 51
ARTICLE VIII. FINANCIAL COVENANTS............................................51
Section 8.01 Equity Value 51
Section 8.02 Leverage Ratio 51
Section 8.03 Relationship of Combined EBITDA to Interest Expense 51
ARTICLE IX. EVENTS OF DEFAULT................................................51
Section 9.01 Events of Default 51
Section 9.02 Remedies 54
ARTICLE X. ADMINISTRATIVE AGENT; RELATIONS AMONG BANKS.......................54
Section 10.01 Appointment, Powers and Immunities of Administrative
Agent 54
Section 10.02 Reliance by Administrative Agent 55
Section 10.03 Defaults 55
Section 10.04 Rights of Administrative Agent as a Bank 55
Section 10.05 Sharing of Costs by Banks; Indemnification of
Administrative Agent 55
Section 10.06 Non-Reliance on Administrative Agent and Other Banks 56
Section 10.07 Failure of Administrative Agent to Act 57
Section 10.08 Resignation or Removal of Administrative Agent 57
Section 10.09 Amendments Concerning Agency Function 57
Section 10.10 Liability of Administrative Agent 57
Section 10.11 Transfer of Agency Function 57
Section 10.12 Non-Receipt of Funds by Administrative Agent 58
Section 10.13 Withholding Taxes 58
Section 10.14 Minimum Commitment by UBS 58
Section 10.15 Pro Rata Treatment 59
Section 10.16 Sharing of Payments Among Banks 59
Section 10.17 Possession of Documents 59
ARTICLE XI. NATURE OF OBLIGATIONS............................................59
Section 11.01 Absolute and Unconditional Obligations 59
Section 11.02 Recourse 60
ARTICLE XII. MISCELLANEOUS...................................................60
Section 12.01 Binding Effect of Request for Advance 60
Section 12.02 Amendments and Waivers 60
Section 12.03 Usury 61
Section 12.04 Expenses; Indemnification 61
Section 12.05 Assignment; Participation 62
Section 12.06 Documentation Satisfactory 63
Section 12.07 Notices 63
Section 12.08 Setoff 64
Section 12.09 Table of Contents: Headings 64
Section 12.10 Severability 64
Section 12.11 Counterparts 64
Section 12.12 Integration 64
Section 12.13 Governing Law 64
Section 12.14 Waivers 64
Section 12.15 Jurisdiction; Immunities 65
Section 12.16 Designated Lender 66
Section 12.17 No Bankruptcy Proceedings 67
<PAGE>
EXHIBIT A - Authorization Letter
EXHIBIT B - Ratable Loan Note
EXHIBIT C - Bid Rate Loan Note
EXHIBIT D - Solvency Certificate
EXHIBIT E - Assignment and Assumption Agreement
EXHIBIT F - List of Material Affiliates
EXHIBIT G-1 - Bid Rate Quote Request
EXHIBIT G-2 - Invitation for Bid Rate Quotes
EXHIBIT G-3 - Bid Rate Quote
EXHIBIT G-4 - Borrower's Acceptance of Bid Rate Quote
EXHIBIT H - Pending Disbursements Clause
EXHIBIT I - Notice of Assignment of Lease
EXHIBIT J - Designation Agreement
EXHIBIT K - Release Prices
ii
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in (A) the registration
statements on Form S-3 (File Nos. 33-93490, 33-83960, 333-4966, 33-94728,
333-24543 and 333-46681) of First Washington Realty Trust, Inc. (the "Company")
and (B) the registration statement on Form S-8 (File No. 33-99246) of the
Company of: (1) our report dated January 31, 1998, except for Note 16, as to
which date is March 26, 1998, on our audits of the consolidated financial
statements of the Company as of December 31, 1997 and 1996 and for each of the
three years in the period ended December 31, 1997, which report is included in
this Annual Report on Form 10-K, and (2) our report dated January 31, 1998 on
our audit of the financial statement schedule of the Company as of December
31, 1997 which report is included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Washington, D.C.
March 26, 1998
