-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HOhgPHIiOt/ryyn2BuuXZB5o28EofqJ4OBCY+GAH3fiK1aKF+2n7ZTXxphf9ic6Y 8vz5endO1gARMr7R7ZHzPw== 0000936392-96-000062.txt : 19960314 0000936392-96-000062.hdr.sgml : 19960314 ACCESSION NUMBER: 0000936392-96-000062 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960313 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EXCEL REALTY TRUST INC CENTRAL INDEX KEY: 0000798288 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 330160389 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-12244 FILM NUMBER: 96534484 BUSINESS ADDRESS: STREET 1: 16955 VIA DEL CAMPO STE 110 CITY: SAN DIEGO STATE: CA ZIP: 92127 BUSINESS PHONE: 6194859400 MAIL ADDRESS: STREET 1: 16955 VIA DEL CAMPO SUITE 110 CITY: SAN DIEGO STATE: CA ZIP: 92127 FORMER COMPANY: FORMER CONFORMED NAME: EXCEL REALTY ADVISORS INC DATE OF NAME CHANGE: 19900514 FORMER COMPANY: FORMER CONFORMED NAME: INVESTORS REALTY TRUST INC DATE OF NAME CHANGE: 19890612 10-K405 1 FORM 10-K FOR THE FISCAL YEAR ENDED 12-31-95 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 - ------------------------------------------------------------------------------- FORM 10-K Annual Report Under Sections 13 Or 15(d) Of The Securities Exchange Act of 1934 For The Fiscal Year Ended Commission File Number: DECEMBER 31, 1995 1-12244 EXCEL REALTY TRUST, INC. (Exact Name of Registrant, As Specified In Its Charter) MARYLAND 33-0160389 (State Or Other Jurisdiction Of (IRS Employer Identification Number) Incorporation Or Organization) 16955 VIA DEL CAMPO, SUITE 110, SAN DIEGO, CALIFORNIA 92127 (Address Of Principal Executive Offices) Registrant's Telephone Number, Including Area Code: (619) 485-9400 Securities Registered Pursuant To Section 12(b) Of The Act: Title of Each Class Name of Each Exchange Common Stock, $0.01 on which Registered Par Value Per Share New York Stock Exchange Securities Registered Pursuant to Section 12(g) Of The Act: WARRANTS FOR THE PURCHASE OF COMMON STOCK (Title Of Class) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), (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 the Form 10-K or any amendment to this Form 10-K. [ X ] The aggregate market value of the Registrant's shares of common stock held by non-affiliates: $230,005,241 as of March 7, 1996 based on the $19.00 closing price of the NYSE. Indicate the number of shares outstanding of each of the issuer's class of common stock, as of the latest practical date. Class Outstanding At March 7, 1996 COMMON STOCK $0.01 PAR VALUE PER SHARE 13,233,805 Documents incorporated by reference: Portions of the Proxy Statement for the 1996 Annual Meeting of the stockholders of the Registrant to be filed subsequently with the Commission, are incorporated by reference into part III of this report. 2 EXCEL REALTY TRUST, INC. PART I ITEM 1. BUSINESS General. Excel Realty Trust, Inc. (the "Company") was incorporated under the laws of California in 1985 and reincorporated as a Maryland corporation in 1993. The Company is a self-administered, self-managed equity real estate investment trust ("REIT") which owns and manages neighborhood and community shopping centers and other retail and commercial properties primarily leased on a long-term basis to major retail companies. The terms of such leases typically provide that the tenant is responsible for costs and expenses associated with the ongoing maintenance of the property. The majority of the single tenant property leases also require that tenants pay for structural repairs and maintenance. At December 31, 1995, the Company owned 109 operating properties and managed 3 additional operating properties under master lease agreements. The 112 properties are located in 27 states as outlined in Item 2. The Company has operated and intends to operate in a manner to qualify as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986. In order to maintain qualification as a REIT, the Company must distribute at least 95% of its real estate investment trust taxable income and meet certain other asset and income tests. As a REIT, the Company is not subject to federal income tax with respect to that portion of its income which meets certain criteria and is distributed annually to the stockholders. Additionally, ownership of the shares of common stock of the Company, directly or constructively, by any single person is limited, by the Company, to 9.8% of the total number of outstanding shares, subject to certain exceptions. Any purported ownership in excess of such limit will be void ab initio. As of March 7, 1996, the Company employed 53 persons. Its executive offices are located at 16955 Via Del Campo, Suite 110, San Diego, California 92127 and its telephone number is (619) 485-9400. Properties The Company emphasizes investments in retail and commercial properties where a substantial majority of gross leasable area ("GLA") is subject to long-term net leases to national or regional tenants. The properties consist of three primary types: (i) multi-tenant retail properties (the "Shopping Centers"); (ii) single tenant net leased retail properties (the "Single Tenant Properties"); and (iii) commercial properties and office buildings (the "Commercial Properties"). At December 31, 1995, the Company and its subsidiaries owned (i) 38 Shopping Centers (three of which were master leased) which accounted for approximately 61% of the Company's scheduled annualized base rent ("ABR") at December 31, 1995; (ii) 71 Single Tenant Properties which accounted for approximately 38% of the Company's ABR at December 31, 1995; and (iii) 3 Commercial Properties which accounted for approximately 1% of the Company's ABR at December 31, 1995. These 112 properties total approximately 7.4 million square feet of GLA, of which the Shopping Centers, Single Tenant Properties, and Commercial Properties comprise approximately 60%, 39%, and 1% respectively. During 1995, the Company purchased 10 properties for a total purchase price of approximately $48 million. All ten properties were Shopping Centers. At December 31, 1995, the Company operated an additional three Shopping Centers under master lease agreements. These three properties were purchased and the master lease agreements terminated in January and February of 1996. Also during 1995, the Company sold nine Single Tenant Properties and one Commercial Property for net sales proceeds of $29 million. 2 3 Strategy and Philosophy The following is a brief discussion of the Company's current strategies and policies concerning acquisitions, management, dispositions, investments, finances and operations, and certain support practices. The Company may, however, from time to time, alter or change one or more of these strategies or its policies in these areas. There can be no assurance that the Company's strategies will be successful. In general, the Company's policies and strategies are determined by the Board of Directors and implemented by its executive officers. Certain policies and objectives of the Company are subject to restrictions set forth in the Company's bylaws which may not be altered without the majority vote of the directors, including the Independent Directors, and by the Company's shareholders. The Company's objectives are to acquire, own, and manage a portfolio of commercial retail properties that will provide cash for quarterly distributions to stockholders, while protecting investor capital and providing potential for capital appreciation. Aggressive Management - The Company aggressively manages its properties, with an emphasis on maintaining high occupancy rates and a strong base of nationally recognized anchor tenants. In addition, the Company emphasizes monitoring of the physical condition of the properties and the financial condition of the tenants. Over time, the Company will seek to increase cash flow and portfolio value primarily through contractual rent increases during the terms of its leases, reletting of existing space at higher rents, expansion of existing properties and the minimization of overhead and operating costs. Acquisition of Properties - The Company intends to continue its portfolio focus on retail properties with predictable cash flow and growth potential. The Company seeks to expand its portfolio by acquiring well-located neighborhood and community shopping centers and other retail properties with comparable rents. In addition, the Company seeks to acquire properties with tenants that have a national or regional presence and an established credit quality. The Company intends to continue to concentrate its property acquisitions in the southwestern and southeastern United States, where a majority of its current properties are located. Management believes that such emphasis will allow the Company to utilize its current property management and maintenance personnel in these areas. The Company may, however, acquire properties in other areas of the United States. Additionally, the Company intends to continue to evaluate its property type mix and may purchase from time to time other properties that the Company believes will meet its objectives. Such properties may include power centers, which are anchored by multiple major retail tenants, or other types of properties which management believes will meet the Company's objectives. Occasionally, the Company may acquire certain "opportunity" properties which may be either retail or non-retail, but are well located and present significant appreciation potential when combined with the Company's aggressive style of management. These are typically properties which are purchased at a great discount to their replacement cost. Acquisitions through Partnerships - The Company may from time to time acquire properties from unaffiliated property owners by forming partnerships and exchanging limited partnership units in such partnerships for the property owners' equity in the acquired properties. Such partnership units are generally exchangeable for shares of common stock under certain circumstances. The Company believes that this acquisition method may permit the Company to acquire properties at attractive prices from property owners wishing to enter into tax deferred transactions. In 1994, the Company acquired six properties through a single partnership using the foregoing structure. In 1995, the Company formed a second partnership, Excel Realty Partners, L.P. ("ERP"), a Delaware limited partnership, to facilitate the acquisition of five properties and additional potential acquisitions in the southeastern United States (see "Recent Developments"). 3 4 Ground Lease Developments - The Company may from time to time finance properties under development. In such circumstances, the Company generally requires that the developer of such property has previously obtained (i) all necessary entitlements allowing completion of the property, and (ii) signed leases from the principal tenant(s) who will occupy the property. Under this financing method, the Company purchases the undeveloped property and leases such property back to the developer, and upon completion, the Company has the option to purchase the development. The Company believes that this method of financing may give the Company opportunities to purchase developed properties at capitalization rates slightly above those which might otherwise be available after completion of development. Disposition of Properties - The Company continually analyzes each asset in its portfolio and identifies those properties which can be sold (to the extent consistent with REIT qualification requirements) for optimal sales prices given prevailing market conditions and the particular characteristics of each property. Through this strategy, the Company seeks to continually update its core property portfolio and redeploy capital into newer properties or properties where its aggressive management techniques may maximize property values. The Company, however, holds its properties for investment and the production of rental income and not for sale to customers or other buyers in the ordinary course of the Company's business. If the Company were treated as holding properties for sale to customers in the ordinary course of its business, it would be subject to tax equal to 100% of its gain from each property sold (with no offset allowed for properties sold at a loss). In addition, if the gain recognized in any taxable year from certain asset dispositions were to exceed specified limits, such gain could cause the disqualification of the Company as a REIT. The Company intends to take appropriate measures before entering into any binding agreement to dispose of an asset to determine that such disposition will not result in the imposition of such tax on the Company and will not result in the disqualification of the Company as a REIT. Financing - The Company intends to finance future acquisitions with the most advantageous sources of capital available to the Company at the time, which may include the sale of common stock, preferred stock or debt securities through public offerings or private placements, the incurrence of additional indebtedness through secured or unsecured borrowings, and the reinvestment of proceeds from the disposition of assets. The Company may acquire properties subject to seller financing, existing loans secured by mortgages, deeds of trust or similar liens. The Company may obtain mortgage financing for properties it acquires and refinance its existing properties. (See "Recent Developments" for financing transactions completed in 1995). Environmental Matters Under various federal, state and local laws, ordinances and regulations, an owner of real estate generally is liable for the costs of removal or remediation of certain hazardous or toxic substances located on or in, or emanating from, such property, as well as related costs of investigation and property damage. Such laws often impose such liability without regard to whether the owner knew of, or was responsible for, the presence of such hazardous or toxic substances. The presence of such substances, or the failure to properly remediate such substances, may adversely affect the owner's ability to sell or lease a property or to borrow using such real estate as collateral. Other federal and state laws require the removal or encapsulation of asbestos-containing material in poor condition in the event of remodeling or renovation. Other statutes may require the removal of underground storage tanks that are out of service or out of compliance. Noncompliance with these and other environmental, health or safety requirements may result in the need to cease or alter operations at a property, which could affect the financial reliability of the property. The Company seeks to protect itself from environmental liabilities associated with properties it acquires in a number of ways. As part of its internal due diligence process, the Company undertakes environmental site assessments prior to purchasing a property. The Company will normally not purchase a property in the event these assessments reveal potential environmental liabilities. The Company may however, evaluate the risks and attempt to quantify the potential costs associated with such liabilities, and then make a determination of whether to acquire the property. 4 5 If the Company chooses to acquire the property, it will typically require the prospective seller/tenant to agree to remediate any environmental problems and may obtain a letter of credit or other security to provide adequate assurance to the Company that sufficient funds will be available to complete the work. The Company will continue to obtain environmental reports on all properties it seeks to acquire. Moreover, to protect itself against environmental liabilities that were not discovered during its pre-purchase investigations as well as those that were disclosed, the Company, in the purchase agreement and/or lease, will typically require the seller/tenant to indemnify the Company against any and all environmental liabilities arising from the property acquired. Substantially all of the Company's properties have been subject to environmental reports (which typically involve inspection without soil sampling or ground water analysis) by independent environmental consultants. The environmental reports have not revealed any material environmental liability, except for the presence of certain asbestos-containing material at the Mesa, Arizona, Kmart property. Although the asbestos discovered is thought to present no immediate health hazard, its removal (at an estimated cost of $300,000 to $600,000) would likely be required prior to commencing any improvements on the property. The terms of the lease for such property require the tenant to assume the cost of any required environmental remediation, including the removal of asbestos. The Company is not aware of any other material environmental liability with respect to any of its properties. No assurance can be given that the environmental studies that were performed at the properties would disclose all environmental liabilities thereon, that any prior owner thereof did not create a material environmental condition not known to the Company or that a material environmental condition does not otherwise exist with respect to any of its properties. Principal Tenants Wal-Mart Stores, Inc. ("Wal-Mart") is the Company's largest tenant in terms of both GLA and base rental revenues. Wal-Mart is the nation's largest retailer and operates over 2,000 discount department stores, over 400 warehouse clubs and four hypermarkets. Wal- Mart is listed on the New York Stock Exchange and as of December 31, 1995, had credit ratings of AA from Standard and Poor's Corporation ("Standard and Poor's") and Aa2 from Moody's Investor Services, Inc. ("Moody's"). Kmart Corporation ("Kmart") is the Company's second largest tenant in terms of both GLA and base rental revenues. Kmart's principal business is general merchandise retailing through a chain of discount department stores. It is one of the world's largest retailers based on sales volume. Kmart has experienced flat or declining earnings in recent periods, and had announced plans to eliminate a significant number of jobs and close certain of its existing stores. In January 1996, Moody's lowered its rating on Kmart's long-term debt to Ba2. Standard and Poor's rating on Kmart's long-term debt at December 31, 1995 was BB. Kmart has closed five stores that were leased from the Company. The Company negotiated receipt of lease termination fees on four of these properties, two of which were subsequently sold. The Company is currently in the process of re-leasing or selling the other two properties. Kmart has continued to make its lease payments on the fifth closed property. Should Kmart in the future announce additional store closures, the Company believes Kmart would continue its lease payments for the term of the leases unless a lease termination fee is negotiated, or the properties would be released at equal or greater rents. 5 6 The table below sets forth information concerning the five largest tenants of the Company and its subsidiaries at December 31, 1995:
Percent of Percent of Company Company Total Number Total GLA Total GLA Scheduled Scheduled Tenant Leases Under Lease Under Leases ABR ABR - ------ ------ ----------- ------------ --- --- (in thousands) (in thousands) Wal-Mart 18 1,543 20.9% $ 6,618 14.7% Kmart 17 1,373 18.6% 6,501 14.5% Kroger 14 504 6.8% 3,242 7.2% Lucky 15 484 6.6% 2,796 6.2% Food Lion 11 299 4.1% 1,669 3.7% -- ----- ---- ------- ---- 75 4,203 57.0% $20,826 46.3% == ===== ==== ======= ====
Certain leases related to the tenants in the table have either been subleased or the leases relating thereto have been assigned to such party. Nevertheless, the original tenant under the lease remains responsible for payment of all rents and all other obligations due under such lease. An assignment of the lease would not affect the terms of the lease. Generally, all subtenants are currently required to pay the same rent to the tenant as the tenant is required to pay to the Company and have been subleased for a term that is approximately the same as the remaining term of the lease. In the event that the subtenant defaults under the sublease and vacates the property, or in the event that the term of the sublease expires earlier than the term of the lease, the property could remain unoccupied until a new subtenant is located. In any event, the original tenant will remain responsible for payment of all rents and all other obligations due under the lease for the full remaining term of the lease. Recent Developments In May 1995, the Company filed with the Securities and Exchange Commission a $250 million shelf registration statement. This registration statement was filed for the purpose of issuing debt securities, preferred stock, depositary shares, common stock or warrants. Subsequently in 1995, the Company issued from the shelf, 2.14 million shares of common stock in a publicly underwritten offering at a price of $20.125 per share. Net proceeds of approximately $40.5 million from the offering were used to repay debt, purchase properties, and make loans to facilitate the development of certain properties. In December 1995, the Company received a two-year unsecured revolving credit facility up to $150 million through December 1997 from a consortium of six banks (the "Credit Facility"). The actual amount available to the Company is dependent on certain covenants such as the value of unencumbered assets and the ratio of earnings before interest, depreciation, and amortization to fixed charges. Upon obtaining the Credit Facility, the Company borrowed $82.8 million, primarily to repay existing secured debt on 52 properties.. With the Company's unsecured real estate base at December 31, 1995, the Company had an additional $16 million available under the Credit Facility. The Credit Facility carries an interest rate of LIBOR plus 1.75% (7.5% at December 31, 1995). In January 1995, the Company entered into master lease and option agreements with respect to 11 shopping centers, containing approximately 1.4 million square feet of GLA, located in North Carolina. The master leases required the payment equal to eight percent of the lessor/sellers equity and gave the Company all management and operating responsibilities for the shopping centers. Under the master leases, the Company received all cash flow, if any, in excess of the master lease payments. The option agreements gave the Company the option to purchase the properties. In 1995, the Company purchased seven of the properties under the option agreements. The Company terminated the master lease and purchase option on one 6 7 property on December 31, 1995. In January and February of 1996, the Company purchased the three remaining properties. In April 1995, the Company formed a Delaware limited partnership, Excel Realty Partners, L.P. ("ERP") to own and manage certain real estate properties. The Company is a 1% partner and the sole general partner of ERP. In May 1995, ERP entered into an agreement for certain unaffiliated entities to contribute to the partnership several shopping centers located in the southeastern United States. The Company anticipates that a minimum of 13 properties will be contributed to ERP under this agreement. The contributing partners will receive partnership units which will be exchangeable into common shares of the Company at prices of $21.50 and $20.70 per share. The units priced at $21.50 will be exchangeable anytime after one year from closing and adjust to the existing market price, but exchange on a basis of one partnership unit for one common share of the Company. The units priced at $20.70 are exchangeable anytime after two years and do not adjust to the prevailing market price of the common stock. As part of the agreement, after the partners receive annual per unit distributions of $1.72 for the $21.50 units and $1.78 for the $20.70 units, the Company will be entitled to receive 99% of all remaining income and gains, if any. The Company is committed to make loans to ERP to pay partner distributions in the event ERP is unable to. In 1995, ERP's cash flows were sufficient to make the limited partner distributions. The Company has initially contributed cash for a 1% equity position in the partnership. In 1995, five real estate properties with a value of $28.5 million subject to outstanding mortgages of $18 million, were contributed to ERP for limited partnership units and cash. During 1995, the Company loaned ERP approximately $6 million to help facilitate these transactions. At December 31, 1995, the Company is committed to advance ERP an additional $2 million under existing credit agreements and may advance additional amounts in the future. The approximate value of the 8 additional properties scheduled to be contributed to the partnership is $57 million of which ERP would assume approximately $40 million of indebtedness and pay $17 million in a combination of cash and units. It is anticipated that the cash requirements would be principally loaned to ERP by the Company. There is no assurance that all or any of such properties will be contributed. In February 1996, one additional property was contributed to ERP. The Company primarily used existing cash deposits to make advances to ERP of approximately $1.5 million to facilitate this transaction. In April 1995, ERT Development Corporation ("EDV"), a Delaware Corporation, was organized. The Company owns 100% of the outstanding preferred shares of EDV. The preferred shares receive 95% of the dividends, if any, from EDV. EDV was formed to acquire, develop, hold, and sell real estate in the short-term for capital gains and/or receive fee income. At December 31, 1995, the Company had notes receivable outstanding to EDV of $12.6 million to facilitate certain transactions. The Company is currently in the process of evaluating other potential property acquisitions and financing alternatives. The Company intends to continue to emphasize the acquisition of shopping centers and other retail properties under long-term lease to creditworthy national or regional tenants. ITEM 2. PROPERTIES General. At December 31, 1995, the Company and its subsidiaries owned or master leased 112 operating properties in 27 states, principally in the southwestern, midwestern and southeastern United States. Three of the properties were master leased and managed by the Company at December 31, 1995 and were purchased in January and February of 1996. The Company also purchased one additional shopping center in February 1996 located in Georgia. Additionally, the Company owns one real estate property located in Arizona which is held for sale and not included in the schedule on the next page. 7 8 Minimum base rental revenues and operating expense reimbursements accounted for approximately 99.5% of the Company's total revenues for the year ended December 31, 1995. The Company's management believes that the average base rent per square foot of the Company's existing leases are generally lower than the prevailing market rate base rents for new leases in the geographical regions where the Company operates, reflecting the potential for growth as leases renew. At December 31, 1995, the Company owned a 100% interest in all of its properties except eight properties in which it owned an undivided 50% or greater equity interest. The Company's properties are either owned directly or through its wholly-owned subsidiaries, or through partnerships or joint ventures. Six of the properties with a net carrying value of $22,226,000 at December 31, 1995 are owned by E.H. Properties, L.P., in which the Company is the sole general partner and owns a 94.17% ownership and profit sharing percentage. The distribution of the consolidated GLA and scheduled consolidated annual gross rental income of the Company and its subsidiaries as of December 31, 1995 is as follows:
Percent of Number of Total GLA Percent of Scheduled Scheduled State Properties (Square Feet) Total GLA ABR ABR - ----- ---------- ------------- --------- --- --- (in thousands) (in thousands) Alabama 3 94 1.2% $ 531 1.2% Arizona 11 791 10.7% 5,694 12.7% Arkansas 2 105 1.4% 529 1.2% California 3 42 0.5% 743 1.6% Colorado 3 157 2.1% 628 1.4% Florida 6 543 7.4% 3,461 7.7% Georgia 5 472 6.4% 3,230 7.2% Illinois 9 397 5.4% 2,596 5.8% Iowa 3 104 1.4% 563 1.2% Indiana 13 490 6.6% 2,715 6.0% Kentucky 4 613 8.3% 3,741 8.3% Louisiana 1 41 0.6% 229 0.5% Michigan 3 108 1.4% 553 1.2% Minnesota 2 12 0.2% 166 0.4% Missouri 4 189 2.6% 1,117 2.5% Nebraska 3 71 1.0% 429 0.9% New Jersey 1 56 0.8% 272 0.6% North Carolina 12 1,363 18.5% 8,153 18.1% North Dakota 1 56 0.8% 295 0.7% Ohio 5 450 6.1% 2,324 5.2% Oklahoma 1 46 0.6% 280 0.6% Pennsylvania 3 180 2.5% 1,156 2.6% South Carolina 3 148 2.0% 1,169 2.6% Tennessee 3 293 4.0% 1,206 2.7% Texas 6 301 4.1% 1,865 4.1% Virginia 1 193 2.6% 1,115 2.5% Wisconsin 1 59 0.8% 218 0.5% --- ------ ----- -------- ----- TOTALS 112 7,374 100.0% $ 44,978 100.0% === ====== ===== ======== =====
8 9 The Shopping Centers At December 31, 1995, the Company and its subsidiaries owned 38 Shopping Centers. The Shopping Centers accounted for approximately 60% of the Company's GLA and approximately 61% of the Company's ABR at December 31, 1995. The Shopping Centers ranged in size from approximately 30,000 to 255,000 square feet. The Company intends to maintain its policy of acquiring shopping centers for long-term investment. The Company maintains an aggressive leasing program to enhance the income potential of each property. It also follows a schedule of regular physical maintenance with a view towards tenant expansion, renovations and refurbishing to preserve and increase the value of its properties. Renovations include upgrading of existing facades, updating signage, resurfacing parking lots and improving parking lot and exterior building lighting. The majority of the Shopping Centers are anchored by one or more national or regional retailers. The remaining space is generally subject to shorter-term net leases to smaller tenants. A substantial portion of the Company's income from Shopping Centers consists of rent received under long-term leases. Most of these leases provide for payment of fixed base rentals monthly in advance and for the payment by tenants of their pro-rata share of real estate taxes, insurance, utilities and common area maintenance of the shopping center. In general, the Company's Shopping Center leases require the Company to make roof and structural repairs as needed. However, certain of the tenant leases place that responsibility on the tenant. The Company's standard small store lease provides for roof repairs and exterior repairs to be reimbursed by the tenant as part of the common area maintenance. The Single Tenant Properties At December 31, 1995, the Company and its subsidiaries owned 71 Single Tenant Properties under long-term net leases to national or regional tenants. The GLA of these properties ranged in size from approximately 3,000 square feet to 126,000 square feet and accounted for approximately 39% of the Company's total GLA. At December 31, 1995, the Single Tenant Properties accounted for approximately 38% of the Company's ABR. With few exceptions, the tenants are required to pay all operating expenses including roof and structural repairs. The Commercial Properties At December 31, 1995, approximately 1% of the total GLA owned by the Company and its subsidiaries was attributable to the 3 Commercial Properties under long-term leases to single tenants or group of tenants. These properties accounted for approximately 1% of the ABR of the Company and its subsidiaries at December 31, 1995 and the GLA ranged in size from approximately 8,700 square feet to the 21,560 square foot office building which is the headquarters of the Company. ITEM 3. LEGAL PROCEEDINGS The Company is not a party to any legal proceedings other than various claims and lawsuits arising in the normal course of its business which, in the opinion of the Company's management, are not individually or in the aggregate material to its business. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 9 10 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock is listed on the New York Stock Exchange under the symbol "XEL". As of March 7, 1996 there were approximately 1,654 record holders of the Company's common stock, plus those who hold their shares in street name. The Company has paid regular distributions since its commencement of operations in 1987 and intends to pay regular quarterly distributions in the future. Payment of distributions depends upon a number of factors (including primarily the Company's cash flow), and there can be no assurance that distributions will be paid. The following table sets forth the high and low sales price as reported by the New York Stock Exchange composite tape and the distributions declared each calendar quarter during 1995 and 1994 with respect to the Company's common stock:
Distributions Quarter Ended High Low Declared ------------- ---- --- -------- March 31, 1994 22.250 18.125 0.415 June 30, 1994 20.875 19.500 0.430 September 30, 1994 20.375 18.000 0.430 December 31, 1994 18.375 15.625 0.430 March 31, 1995 19.125 16.375 0.430 June 30, 1995 20.750 18.125 0.000 [a] September 30, 1995 20.125 19.000 0.445 December 31, 1995 21.125 18.250 0.445
[a] In April 1995, the Company adopted a policy of declaring distributions to stockholders of record on the first day of the succeeding quarter, instead of the last day of the current quarter. The payment date of 15 days following each quarter remained unchanged. In 1996, a distribution of $0.445 per share was declared on January 1 and paid on January 15. 10 11 ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
YEAR ENDED DECEMBER 31 --------------------------------------------------------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION) INCOME STATEMENT DATA Total revenue $ 55,229 $ 41,014 $ 22,525 $ 5,827 $ 2,472 Operating and G&A expenses 15,470 7,278 5,049 2,749 882 Total revenue less operating and G&A expenses 39,759 33,736 17,476 3,078 1,590 Depreciation and amortization 6,933 6,887 4,186 608 280 Interest expense 22,458 14,190 9,360 2,218 1,340 Net income 18,192 13,796 3,232 454 65 Per share data: Net income $ 1.51 $ 1.27 $ 0.55 $ 0.41 $ 0.11 Distributions 1.32[a] 1.71 1.42 1.14 1.02 Weighted average number of shares 12,084 10,883 5,878 1,110 615 BALANCE SHEET DATA Net real estate $372,016 $349,255 $273,362 $112,971 $22,890 Total assets 428,307 375,100 290,226 116,621 24,768 Mortgages payable 123,813 201,157 113,487 89,442 14,582 Notes payable 86,984 15 6,575 1,102 16 Stockholders' equity 208,678 163,898 161,962 22,312 9,649
- ------- [a] In April 1995, the Company adopted a policy of declaring distributions to stockholders of record on the first day of the succeeding quarter, instead of the last day of the current quarter. The payment date of 15 days following each quarter remained unchanged. In 1996, a distribution of $0.445 per share was declared on January 1 and paid on January 15. Had the Company not changed its distribution declaration date, the distributions would have been $1.77 in 1995. 11 12 ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following discussion should be read in conjunction with the Consolidated Financial Statements and the Notes thereto. Comparison of year ended December 31, 1995 to year ended December 31, 1994. On January 1, 1995, the Company entered into master lease and option agreements to manage and/or purchase eleven shopping centers in North Carolina (the "North Carolina Properties"). During 1995, seven of these properties were purchased. Furthermore, the Company experienced a full year of operations on the 19 income producing properties acquired during 1994 and almost a full year of operations on one property sold in December 1995. In addition, the Company sold a total of nine single tenant properties and one office building in 1995. Total revenue increased $14,215,000 or 35%, to $55,229,000 in 1995 from $41,014,000 in 1994 due to the acquisitions mentioned above. The North Carolina Properties accounted for $9,041,000 of this revenue. Additionally, approximately $3,855,000 of lease termination fees were recognized as base rents in 1995 compared to $988,000 in 1994. Two of the four properties the Company received lease termination fees for in 1995 were sold. The Company is in the process of selling or re-leasing the other two properties and is recognizing the fees as base rents over the estimated time the Company will take to sell or re-lease these properties at comparable rents. Expense reimbursements increased $1,562,000 related to the increase in property related expenses as noted below. Total operating expenses increased $8,192,000, or 113%, to $15,470,000 in 1995 from $7,278,000 in 1994. Operating expenses increased as a percentage of total revenue to 28% in 1995 from 17% in 1994, primarily due to the master lease expenses. Master lease expenses accounted for $4,681,000 and other expenses related to the North Carolina Properties accounted for $1,141,000. General and administrative expenses increased by $210,000 but decreased as a percentage of total revenue from 6% in 1994 to 5% in 1995. General and administrative expenses in 1995 did not include $655,000 which were paid by EDV which commenced operations in 1995. Netted against this decrease in 1995 was an accrual for an estimated state tax liability of $380,000. In the prior year, the Company made an $80,000 accrual. Interest expense increased from $14,190,000 in 1994 to $22,458,000 in 1995, or 58%. The increase is primarily attributable to additional outstanding debt and loan costs written-off during 1995. In December 1995, upon obtaining a new credit facility, the Company repaid its securitized mortgage financing known as a real estate mortgage investment conduit (the "REMIC") and a former bank line. The Company wrote-off loan costs of $2,806,000 related to the REMIC debt, and $254,000 related to the former bank line. Total loan costs written-off in 1995 including other REMIC debt repayments during the year amounted to $3,663,000. Additionally, the Company wrote-down its interest rate protection agreement by $790,000. Loan costs written off in 1994 and charged to interest expense in 1994 were $88,000. Finally, overall mortgages and notes payable increased. At December 31, 1995, mortgage and notes payable of $210,797,000 were $9,625,000 greater than the debt of $201,172,000 outstanding at December 31, 1994. Depreciation expense for 1995 was $6,929,000 compared to $6,119,000 in 1994, or a 13% increase. The increase is primarily due to a full period of depreciation in 1995 on properties acquired in 1994, and the ten Shopping Centers acquired in 1995 which had greater carrying values than the properties sold during the year. Amortization expense decreased by $764,000 in 1995 due to a management contract which was fully amortized in 1994. 12 13 Interest and other income increased $2,896,000 or 233% from 1994 primarily related to additional cash invested and loans made to Excel Development Corporation and other development companies. The Company had $22,850,000 in notes receivable outstanding at December 31, 1995 compared to $9,099,000 outstanding at December 31, 1994. The Company recognized a net gain of $3,683,000 on real estate sales in 1995 compared to a net loss of $108,000 in 1994. The gain was primarily associated with the sale of an office building in Arizona. Net income increased $4,396,000, or 32%, to $18,192,000 ($1.51 per share) in 1995 from $13,796,000 ($1.27 per share) in 1994. Quarterly distributions per share increased from $0.43 to $0.445 in the third quarter of 1995. Comparison of year ended December 31, 1994 to year ended December 31, 1993. During 1994, the Company acquired 19 income producing properties. Additionally, the Company experienced a full year of operations on the 59 properties acquired in 1993 of which 54 were acquired in the second half of the year. Also, during 1993, the Company acquired all of the assets and liabilities of Excel Realty Advisors, Inc. ("ERA"), an affiliate of the Company, and terminated the advisory contract between ERA and the Company. Total revenue increased $18,489,000 or 82%, to $41,014,000 in 1994 from $22,525,000 in 1993. The increase was due to the increase in the Company's property portfolio as mentioned above. Lease termination fees of $988,000 were recognized as rental income in 1994. No lease termination fees were recognized as income in 1993. Total operating expenses increased $2,229,000, or 44%, to $7,278,000 in 1994 from $5,049,000 in 1993. Total operating expenses as a percentage of total revenue decreased from 22% in 1993 to 17% in 1994. This was primarily due to efficiencies gained in operations from the increase in the Company's portfolio. Included in the increase were general and administrative expenses of $709,000 which decreased as a percentage of total revenue from 8% to 6%. This decrease was also due to operational efficiencies gained from the increase in the property portfolio. Of the increase in general and administrative expenses, approximately $572,000 was attributable to salaries and wages. This increase was primarily due to the payment and accrual of 1993 and 1994 bonuses to the executive officers of the Company, and the hiring of additional personnel needed to manage the Company's growth. The increase in other property expenses was directly related to the increased property portfolio. Interest expense increased 52% from $9,360,000 in 1993 to $14,190,000 in 1994. The increase was primarily due to new mortgage debt incurred in 1994. Total mortgage debt at December 31, 1994 was $201,157,000 or $87,670,000 higher than the mortgage debt of $113,487,000 at December 31, 1993. The REMIC notes during the year averaged approximately 5.6% while the mortgage debt which was replaced of approximately $39,800,000 carried interest at 6.5% to 10.25%. Depreciation and amortization expense increased $2,701,000 due to the new properties acquired during 1994 and the recognition of a full year's depreciation on the 59 properties acquired during 1993. The acquisition costs of ERA, totaled approximately $1,655,000 and were charged to expense in 1993. Net income increased $10,564,000, or 327%, to $13,796,000 ($1.27 per share) in 1994 from $3,232,000 ($0.55 per share) in 1993. Distributions per share increased from $1.42 in 1993 to $1.71 in 1994. 13 14 LIQUIDITY AND CAPITAL RESOURCES Cash flow from operations has been the principal source of capital to fund the Company's ongoing operations. The Company's issuance of common shares, use of the Company's credit facilities, and long-term mortgage financing have been the principal sources of capital required to fund its property acquisitions. In order to continue to expand and develop its portfolio of properties, the Company may seek to obtain funds through additional equity offerings or debt financing in a manner consistent with its intention to operate with what it believes to be an appropriate debt level with respect to prudent interest coverage ratios. In April 1995, the Company increased its quarterly distributions from $0.43 per share to $0.445 per share. The Company anticipates that adequate cash will be available to fund its operating and administrative expenses, continuing debt service obligations and payment of distributions in both the short and long-term. During the year, property acquisitions were primarily funded through property sales and the proceeds from an equity offering. In May 1995, the Company filed with the Securities and Exchange Commission a $250,000,000 shelf registration statement. This registration statement was filed for the purpose of issuing debt securities, preferred stock, depositary shares, common stock or warrants for general corporate purposes. In 1995, the company issued from the shelf 2,140,000 shares of common stock in a publicly underwritten offering at a price of $20.125 per share. Net proceeds of approximately $40,500,000 from the offering were used to repay an existing loan agreement, purchase properties, and make loans to ERT Development Corporation (see below) and other development companies for the purpose of taking advantage of short-term development opportunities. In December 1995, the Company received a two-year unsecured revolving credit facility for up to $150,000,000 through December 1997 from a consortium of six banks (the "Credit Facility"). The actual amount available to the Company is dependent on certain covenants such as the value of unencumbered assets and the ratio of earnings before interest, depreciation, and amortization to fixed charges. Upon obtaining the Credit Facility, the Company borrowed $82,800,000. The proceeds were used primarily to repay the outstanding debt of $76,000,000, to repay a former bank line, and to pay loan costs. With the Company's unsecured real estate base at December 31, 1995, the Company had an additional $16,000,000 available under the Credit Facility. The Credit Facility carries an interest rate of LIBOR plus 1.75% (7.5% at December 31, 1995), while the REMIC carried interest rates of LIBOR + 0.6% to 0.8%, plus a servicing fee of 0.1865%. Although the REMIC debt carried lower interest rates than the Credit Facility, the Company believes that other capital resources may become accessible at lower costs with the increase in the Company's unsecured real estate portfolio. The Company also has a $4,000,000 line of credit due September 1996 and an unsecured $1,000,000 revolving bank line. The amounts from these facilities were primarily used to loan funds to ERT Development Corporation (see results of operations). Approximately $800,000 in total is available under these two facilities at December 31, 1995. During the year, the Company also used other former loan agreements to make loans to ERP (see below) and fund other operating costs. In April 1995, the Company formed a Delaware limited partnership, Excel Realty Partners, L.P. ("ERP") to own and manage certain real estate properties. At December 31, 1995, the Company is committed to advance ERP an additional $2,000,000 under existing credit agreements and may advance additional amounts in the future. Also, the Company is committed to make loans to ERP to pay partner distributions in the event ERP is unable to. The approximate value of eight properties scheduled to be contributed to ERP in 1996 under existing agreements is $57,000,000 of which ERP would assume approximately $40,000,000 of indebtedness and pay $17,000,000 in a combination of cash and partnership units. It is anticipated that the cash requirements would be principally loaned to ERP by the Company. There is no assurance that all or any of the eight properties will be contributed to ERP. In 1996, the Company loaned $2,000,000 to a developer and is committed to loan an additional $12,000,000 related to a development project in Florida. 14 15 The Company has elected REIT status for federal income tax purposes and must distribute at least 95% of its taxable income to its stockholders in order to avoid income taxes. Although the Company receives most of its rental payments on a monthly basis, it intends to make quarterly distribution payments. Amounts accumulated for distributions will be invested by the Company in short-term marketable instruments including deposits at commercial banks, money market accounts, certificates of deposit, U.S. government securities or other liquid investments (including GNMA, FNMA, and FHLMC mortgage-backed securities) as the Board of Directors deems appropriate. With $9,812,000 in cash and net accounts receivable of $2,156,000 at December 31, 1995, the Company had sufficient funds available to cover current accounts payable and accrued liabilities of $4,806,000 and the January 1996 stockholders' distribution payment of $5,861,000. The Company used escrow and other cash deposits it had at December 31, 1995 to fund its four acquisitions made in January and February 1996. The cash position of the Company at December 31, 1995 increased by a net $5,681,000 when compared to December 31, 1994. Cash provided by operations amounted to $28,895,000, primarily related to net income of $18,192,000, and depreciation and amortization of $13,350,000 which did not require the use of cash, less the net gain on real estate sales of $3,683,000. Amortization expenses included loan costs written-off and a write-down of an interest rate protection agreement which both totaled $4,200,000. Expenses included in net income which had not yet been paid due to the increase in accounts payable of $2,213,000 and other liabilities of $1,378,000 also added to the cash position of the Company. This was offset by increases in accounts receivable of $1,121,000 and other assets of $1,843,000. These increases in current assets and liabilities are primarily the result of the Company's growth in operations. Net cash used in investing activities amounted to $28,425,000. During 1995, $36,881,000 was used to make loans to EDV ($23,315,000), ERP ($5,950,000) and other development companies, $26,281,000 was used for real estate acquisitions, and $17,146,000 were paid in escrow and other cash deposits of which $10,657,000 relates to proceeds from the sale of an office building and $4,000,000 relates to deposits on the North Carolina Properties the Company purchased in 1995 and 1996. These escrow deposits are not listed as cash on the balance sheet but are deposits which will be available to the Company in 1996 for property acquisitions. Receipts of cash from investing activities include $29,397,000 obtained from the sale of ten properties in 1995, $23,130,000 received from payments on notes receivable, and $4,751,000 in deposits collected. Cash provided by financing activities amounted to $5,211,000. The net increase is primarily due to the Company's offering of common stock as previously described. Total cash received from stock issued was $44,451,000 less stock selling and offering costs of $2,812,000. Additionally the Company received from its credit facility $82,800,000 of which $76,000,000 was used to repay existing mortgage debt. Total proceeds from notes payable amounted to $105,253,000 and repayments on mortgage and notes payable totaled $118,516,000. The Company also paid distributions of $20,949,000 in 1995. 15 16 The Company calculates funds from operations ("FFO") as net income plus depreciation, amortization, amortized loan and leasing commission costs and loan costs written off, before gains or losses on real estate sales. FFO does not represent cash flows from operations as defined by generally accepted accounting principles. The Company believes however, that to facilitate a clear understanding of its operating results, FFO should be examined in conjunction with its net income as reductions for certain items are not meaningful in evaluating income-producing real estate, which historically has not depreciated. The following information is included to show the items included in the Company's FFO for the past three years (in thousands except per share amounts):
1995 1994 1993 ---- ---- ---- Net income $ 18,192 $13,796 $ 3,232 Depreciation: Buildings 6,314 5,685 3,157 Tenant improvements 531 353 213 Amortization (1): Leasing commissions 724 166 157 Management contract -- 766 766 Organization costs 4 2 -- Loan costs written off 4,453 88 110 Buy out of advisory contract -- -- 1,655 (Gain) loss on sale of buildings (3,682) 108 (399) -------- ------- ------- Funds from operations - revised definition (2) 26,536 20,964 8,891 Loan cost amortization 1,240 824 117 Depreciation on furniture, equipment and vehicles 85 81 50 -------- ------- ------- Funds from operations $ 27,861 $21,869 $ 9,058 ======== ======= ======= Funds from operations per share $ 2.31 $ 2.01 $ 1.54 ======== ======= ======= Other Information: Leasing commissions paid $ 335 $ 329 $ 228 Tenant improvements paid 741 1,095 796 Building improvements paid 716 459 631
(1) Only amortization of the management contract and organizational costs are shown as amortization expense in the Consolidated Statements of Income. The management contract was fully amortized in 1994. Loan cost amortization and loan costs written-off are classified as interest expense and leasing commission amortization is classified as other operating expenses in the Consolidated Statements of Income. (2) Beginning in 1996, the Company will revise its definition of FFO to exclude the amortization of loan costs and depreciation of furniture, equipment and vehicles as add-back items. Under this revised definition of FFO, the per share amounts would have been $2.20, $1.93, and $1.51 for the years 1995, 1994, and 1993, respectively. ECONOMIC CONDITIONS The majority of the Company's leases contain provisions deemed to mitigate the adverse impact of inflation. Such provisions include clauses enabling the Company to receive percentage rents which generally increase as prices rise, and/or escalation clauses which are typically related to increases in the consumer price index or similar inflation indices. In addition, the Company believes that many of its existing lease rates are below current market levels for comparable space and that upon renewal or re-rental such rates may be increased to current market rates. This belief is based upon an analysis of relevant market conditions, including a 16 17 comparison of comparable market rental rates, and upon the fact that many of such leases have been in place for a number of years and may not contain escalation clauses sufficient to match the increase in market rental rates over such time. Most of the Company's leases require the tenant to pay its share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing the Company's exposure to increases in costs and operating expenses resulting from inflation. In addition, the Company periodically evaluates its exposure to interest rate fluctuations, and may enter into interest rate protection agreements which mitigate, but do not eliminate, the effect of changes in interest rates on its floating rate loans. Many regions of the United States, including regions in which the Company owns property, may experience economic recessions. Such recessions, 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 shopping centers are typically anchored by discount department stores, supermarkets and drug stores which usually offer day-to-day necessities rather than high priced luxury items. These types of tenants, in the experience of the Company, generally continue to maintain their volume of sales despite a slowdown in economic conditions. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Financial statements required by this item appear with an Index to Financial Statements and Schedules, starting on page F-1 of this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There were no changes in or disagreement with accountants on accounting and financial disclosure in 1995 or 1994. ITEMS 10 THROUGH 13 Incorporated by reference to the Company's Proxy Statement for its 1996 annual meeting to be filed subsequently hereto. 17 18 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Financial Statements and Financial Statement Schedules:
Page ---- (1) (A) Report of Independent Accountants F-2 (B) Financial Statements (i) Consolidated Balance Sheets December 31, 1995 and 1994 F-3 (ii) Consolidated Statements of Income Years Ended December 31, 1995, 1994 and 1993 F-4 (iii) Consolidated Statements of Changes in Stockholders' Equity December 31, 1995, 1994 and 1993 F-5 (iv) Consolidated Statements of Cash Flows December 31, 1995, 1994, 1993 F-6 (v) Notes to Consolidated Financial Statements F-7 (2) Financial Statement Schedules: Schedule Page II Valuation and Qualifying Accounts Years Ended December 31, 1995, 1994 and 1993 F-19 III Real Estate and Accumulated Depreciation F-20 December 31, 1995
All other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule or because the information required is included in the consolidated financial statements and notes thereto. (b) No reports on Form 8-K were filed during the last quarter of the period covered by this annual report. (c) Exhibits: Refer to Exhibit Index as follows. 18 19 Exhibit Index 3.1 Articles of Incorporation of Excel Realty Trust, Inc., a Maryland corporation (the "Company"), as amended. (1) 3.2 Bylaws of the Company. (1) 4.1 Trust and Servicing Agreement, dated as of March 1, 1994, by and among Excel Credit Corporation ("ECC"), EQ Services ("EQ"), and State Street Bank and Trust Company, as Trustee ("Trustee"), with respect to the Commercial Mortgage Pass-Through Certificates, Series 1994-1, of ECC. (3) 4.2 Indenture, dated as of March 1, 1994 by and among Excel Mortgage Funding Corporation ("EMFC"), Wilmington Trust Company, as Trustee (the "Indenture Trustee"), and EQ, with respect to the Collateralized Floating Rate Notes due 2001 of EMFC (the "EMFC Notes"). (3) 4.3 Form of Mortgages entered into between Excel Mortgage Funding Corporation and the Indenture Trustee, with respect to the EMFC Notes. (3) 4.4 Interest Rate Cap Agreement, dated as of March 1, 1994, by and between ECC, Trustee, and Deutsche Bank AG - New York (the "Cap Provider") . (3) 4.5 Interest Rate Cap Agreement, dated as of March 1, 1994, by and between ECC, Trustee, and the CAP provider. (3) 10.1 Amended Option and Contract for Purchase of Real Estate, dated as of September 11, 1992, by and between Excel California and Horne Properties, Inc., a Tennessee corporation ("Horne"). (1) 10.2 General Partnership Agreement of Horne & Excel Properties, a Tennessee general partnership, dated as of October 13, 1992, by and between Horne and Excel California. (1) Exhibit 10.2A 10.3 General Partnership Agreement of Horne & Excel Properties (Chapman), a Tennessee general partnership, dated as of December 30, 1992, by and between Horne and Excel California. (1) Exhibit 10.2B 10.4 Employment Contract, dated as of April 1, 1993, by and between Excel California and Gary Sabin, an individual. (1) Exhibit 10.8 10.5 Employment Contract, dated as of April 1, 1993, by and between Excel California and Richard Muir, an individual. (1) Exhibit 10.8A 10.6 Employment Contract, dated as of April 1, 1993, by and between Excel California and Graham Bullick, an individual. (1) Exhibit 10.9 10.7 Employment Contract, dated as of April 1, 1993, by and between Excel California and Ronald Sabin an individual. (1) Exhibit 10.9A 10.8 1993 Stock Option Plan of the Company. (1) Exhibit 10.10 10.9 Form of Incentive Stock Option Agreement under the Company's 1993 Stock Option Plan. (1) Exhibit 10.11 19 20 10.10 Form of Non-Qualified Stock Option Agreement under the Company's 1993 Stock Option Plan. (1) Exhibit 10.12 10.11 401(k) Retirement Plan of the Company. (1) Exhibit 10.13 10.12 Form of Common Stock Purchase Option, dated as of March 15, 1993 by and between Excel California and each of seven directors thereof. (1) Exhibit 10.27 10.13 Form of Common Stock Purchase Option, dated as of March 15, 1993, by and between Excel California and each of the seven directors thereof. (1) Exhibit 10.28 10.14 Form of 1993 Executive Officer Common Stock Purchase Option, dated as of April 1, 1993 by and between Excel California and each of six executive officers thereof. (1) Exhibit 10.29 10.15 Assignment of Beneficial Interest Under Existing Leases, Deed of Trust, Collateral Assignment of Leases and Rent, and Other Loan Documents between BG Development Corporation ('BG") and the Company, dated September 29, 1993. (2) Exhibit 10.30 10.16 Master Lease between Excel Realty Trust, Inc. as landlord, and BG Development Corporation ("BG") as tenant, dated September 29, 1993. (2) Exhibit 10.31 10.17 Side Letter Agreement between Excel Realty Trust, Inc. and BG. (2) Exhibit 10.32 10.18 Term Loan Agreement among EMFC, the Company, and Casco Northern Bank, N.A. dated December 29, 1993. (2) Exhibit 10.33 10.19 Property Management Agreement, dated as of March 17, 1994, by and between the Company and EMFC. (2) Exhibit 10.34 10.20 Agreement of Limited Partnership of EH Properties, L.P., a Delaware limited partnership, dated as of March 25, 1994, by and between the Company, as general partner, and Horne, as limited partner. (3) Exhibit 10.37 10.21 Partnership Contribution Closing Agreement dated as of March 28, 1994, by and between Horne, the Company, and EH Properties, L.P., a Delaware limited partnership. (3) Exhibit 10.38 10.22 1994 Director's Stock Plan of the Company. (3) Exhibit 10.39 10.23 Form of Stock Option Agreement under the 1994 Director's Stock Plan of the Company. (3) Exhibit 10.40 10.24 Loan Agreement, dated as of December 29, 1994, by and among the Company and the First National Bank of Boston ("FNBB"). (3) Exhibit 10.41 10.25 Note, dated as of December 29, 1994, executed by the Company in favor of FNBB. (3) Exhibit 10.42 10.26 Unconditional Guaranty of Payment and Performance, dated as of December 29, 1994, executed by EH Properties, L.P. in favor of FNBB. (3) Exhibit 10.43 10.27 Collateral Assignment of Partnership Interests, dated as of December 29, 1994, executed by the Company in favor of FNBB. (3) Exhibit 10.44 20 21 10.28 Master Agreement, dated as of January 1, 1995, by and among the Company and the limited partnerships named therein (the "Tricor Partnerships"). (3) Exhibit 10.45 10.29 Closing Memorandum, dated as of January 20, 1995, by and among the Company and the Tricor Partnerships. (3) Exhibit 10.46 10.30 Agreement, dated as of January 20, 1995, by and among the Company and the Tricor Partnerships. (3) Exhibit 10.47 10.31 Loan modification agreement dated as of December 1994, by and amount the Company and B.G. (3) Exhibit 10.48 10.32 Agreement of Limited Partnership of Excel Realty Partners, L.P., a Delaware limited partnership ("ERP"). (4) 10.33 Contribution Agreement by and between each of the partnerships named therein and ERP. (4) 10.34 Credit Agreement Among the Company, as Borrower, and the First National Bank of Boston, Wells Fargo Bank, N.A., First Interstate Bank of California, Dresdner Bank AG, and NBD Bank, as Lenders, and the First National Bank of Boston, as Agent dated December 27, 1995. (4) 21.1 Subsidiaries of the Registrant. (4) 23.1 Consent of Coopers and Lybrand L.L.P. (4) 27.1 Financial data schedules. (4) - ------------- (1) Incorporated by reference to the Company's Registration Statement on Form S-11, File No. 33-063160, filed with the Commission on May 21, 1993, as amended, in which this exhibit bore the same number, unless otherwise indicated. (2) Incorporated by reference from the Company's report on Form 10-K dated March 30, 1994 in which this exhibit bore the same number, unless otherwise indicated. (2) Incorporated by reference from the Company's report on Form 10-K dated March 13, 1995 in which this exhibit bore the same number, unless otherwise indicated. (4) Filed herewith. 21 22 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned there unto duly authorized. EXCEL REALTY TRUST, INC. DATED: March 7, 1996 By: /s/ Gary B. Sabin ------------------------- GARY B. SABIN President and Chief Executive Officer DATED: March 7, 1996 By: /s/ David A. Lund ------------------------- DAVID A. LUND Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Registrant and in the capacities and on the dates indicated. /s/ Gary B. Sabin March 7, 1996 - ------------------------------------- -------------------- GARY B. SABIN, Director, Date President, Chief Executive Officer and Chairman of the Board /s/ Richard B. Muir March 7, 1996 - ------------------------------------- -------------------- RICHARD B. MUIR, Director Date and Executive Vice President /s/ Boyd A. Lindquist March 7, 1996 - ------------------------------------- -------------------- BOYD A. LINDQUIST, Director Date /s/ Charles Marston March 7, 1996 - ------------------------------------- -------------------- D. CHARLES MARSTON, Director Date /s/ Robert E. Parsons, Jr. March 7, 1996 - ------------------------------------- -------------------- ROBERT E. PARSONS, JR., Director Date /s/ Bruce A. Staller March 7, 1996 - ------------------------------------- -------------------- BRUCE A. STALLER, Director Date /s/ John H. Wilmot March 7, 1996 - ------------------------------------- -------------------- JOHN H. WILMOT, Director Date 22 23 EXCEL REALTY TRUST, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ----------
PAGE ---- 1. CONSOLIDATED FINANCIAL STATEMENTS: Report of Independent Accountants .......................... F-2 Consolidated Balance Sheets December 31, 1995 and 1994 .............................. F-3 Consolidated Statements of Income Years Ended December 31, 1995, 1994 and 1993 ............ F-4 Consolidated Statements of Changes in Stockholders' Equity Years Ended December 31, 1995, 1994 and 1993 ............ F-5 Consolidated Statements of Cash Flows Years Ended December 31, 1995, 1994 and 1993 ............ F-6 Notes to Consolidated Financial Statements ................. F-7 2. CONSOLIDATED FINANCIAL STATEMENT SCHEDULES: Schedule II - Valuation and Qualifying Accounts Years Ended December 31, 1995, 1994 and 1993 ............ F-19 Schedule III - Real Estate and Accumulated Depreciation December 31, 1995 ....................................... F-20
F-1 24 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Excel Realty Trust, Inc. We have audited the consolidated financial statements and the financial statement schedules of Excel Realty Trust, Inc. and subsidiaries as listed in the index on page F-1 of this Form 10-K. These financial statements and financial statement schedules are the responsibility of the Company's management. 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Excel Realty Trust, Inc. and subsidiaries as of December 31, 1995 and 1994 and the consolidated results of operations and their cash flows for the each of the three years in the period ended December 31, 1995, 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. San Diego, California February 5, 1996 F-2 25 EXCEL REALTY TRUST, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1995 AND 1994 (IN THOUSANDS, EXCEPT SHARE AMOUNTS) ----------
1995 1994 --------- -------- ASSETS Real estate: Land $122,394 $115,614 Buildings 251,012 243,869 Less accumulated depreciation (14,909) (10,228) Real estate held for sale 13,519 - -------- -------- Net real estate 372,016 349,255 Cash 9,812 4,131 Escrow and other cash deposits 14,890 2,494 Accounts receivable, less allowance for bad debts of $726 and $318 in 1995 and 1994, respectively 2,156 1,443 Notes receivable from affiliates 18,561 - Notes receivable - other 4,289 9,099 Loan acquisition costs 2,662 5,060 Other assets 3,921 3,618 -------- -------- $428,307 $375,100 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Mortgages payable $123,813 $201,157 Notes payable 86,984 15 Accounts payable and accrued liabilities 4,806 2,683 Distributions payable - 4,685 Deferred rental income 2,760 1,713 Other liabilities 1,266 949 -------- -------- Total liabilities 219,629 211,202 -------- -------- Commitments and contingencies - - Stockholders' equity: Preferred stock, $.01 par value, 10,000,000 shares authorized - - Common stock, $.01 par value, 100,000,000 shares authorized, 13,171,352 and 10,883,570 shares issued and outstanding in 1995 and 1994, respectively 132 109 Additional paid-in capital 218,531 175,702 Accumulated distributions in excess of net income (9,985) (11,913) -------- -------- Total stockholders' equity 208,678 163,898 -------- -------- $428,307 $375,100 ======== ========
The accompanying notes are an integral part of the financial statements. F-3 26 EXCEL REALTY TRUST, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) ----------
1995 1994 1993 ----------- ------------ --------- Revenue: Base rent $ 51,160 $ 38,603 $20,736 Percentage rent 293 197 519 Expense reimbursements 3,776 2,214 1,270 -------- -------- ------- Total revenue 55,229 41,014 22,525 -------- -------- ------- Operating expenses: Master lease 4,681 -- -- Property taxes 2,877 1,822 1,199 General and administrative expenses 2,821 2,611 1,902 Repairs and maintenance 1,861 1,007 621 Utilities 923 752 577 Other property expenses 2,307 1,086 750 -------- -------- ------- Total operating expenses 15,470 7,278 5,049 -------- -------- ------- Operating income 39,759 33,736 17,476 Other income (expense): Interest expense (22,458) (14,190) (9,360) Depreciation and amortization (6,933) (6,887) (4,186) Interest and other income 4,141 1,245 558 Buy out of advisory contract -- -- (1,655) -------- -------- ------- Income before real estate sales 14,509 13,904 2,833 Gain (loss) on sale of real estate 3,683 (108) 399 -------- -------- ------- Net income $ 18,192 $ 13,796 $ 3,232 ======== ======== ======= Net income per common share $ 1.51 $ 1.27 $ 0.55 ======== ======== =======
The accompanying notes are an integral part of the financial statements. F-4 27 EXCEL REALTY TRUST, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993 (IN THOUSANDS, EXCEPT NUMBER OF SHARE AMOUNTS) ----------
ACCUMULATED DISTRIBUTIONS IN EXCESS OF NET INCOME ACCUMULATED COMMON STOCK ADDITIONAL OTHER THAN UNDISTRIBUTED TOTAL ---------------------- PAID-IN GAIN ON SALE GAIN ON SALE STOCKHOLDERS' NUMBER AMOUNT CAPITAL OF PROPERTIES OF PROPERTIES EQUITY ------ ------ ------- ------------- ------------- ------ Balance at January 1, 1993 1,798,739 $ 23,439 $ - $ (1,127) $ - $ 22,312 Change in par value of common stock - (23,421) 23,421 - - - Common stock no longer subject to repurchase 64,438 1 966 - - 967 Issuance of new shares of common stock 8,606,128 86 155,630 - - 155,716 Redemption of common stock (3,662) - (61) - - (61) Selling expenses - - (10,994) - - (10,994) Net income - - - 2,833 399 3,232 Distributions declared - - - (8,811) (399) (9,210) ---------- -------- -------- -------- ------- -------- Balance at December 31, 1993 10,465,643 105 168,962 (7,105) - 161,962 Issuance of new shares of common stock 462,927 5 7,476 - - 7,481 Repurchase of common stock (45,000) (1) (736) - - (737) Net income - - - 13,796 - 13,796 Distributions declared - - - (18,604) - (18,604) ---------- -------- -------- -------- ------- -------- Balance at December 31, 1994 10,883,570 109 175,702 (11,913) - 163,898 Issuance of new shares of common stock 2,287,783 23 45,641 - - 45,664 Selling expenses - - (2,812) - - (2,812) Net income - - - 18,192 3,683 21,875 Distributions declared - - - (16,264) (3,683) (19,947) ---------- -------- -------- -------- ------- -------- Balance at December 31, 1995 13,171,353 $ 132 $218,531 $ (9,985) $ - $208,678 ========== ======== ======== ======== ======= ========
The accompanying notes are an integral part of the financial statements. F-5 28 EXCEL REALTY TRUST, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993 (IN THOUSANDS) ----------
1995 1994 1993 ---------- ---------- ---------- Cash flows from operating activities: Net income $ 18,192 $ 13,796 $ 3,232 Adjustments to reconcile net income to net cash provided by operations: Depreciation 6,929 6,119 3,420 Amortization of loan costs and leasing commissions 6,417 1,085 386 Amortization 4 768 766 (Gain) loss on sale of real estate (3,683) 108 (399) Provision for bad debts, net of accounts written off 409 19 250 Buy out of advisory contract - - 1,655 Changes in operating assets and liabilities: (Increase) decrease in assets: Accounts receivable (1,121) 2,401 (3,351) Other assets (1,843) (380) (261) Increase (decrease) in liabilities: Accounts payable and accrued liabilities 2,213 (10) 492 Other liabilities 1,378 746 73 --------- -------- --------- Net cash provided by operating activities 28,895 24,652 6,263 --------- -------- --------- Cash flows from investing activities: Advances for notes receivable (36,881) (11,154) (3,710) Proceeds from real estate sales 29,397 4,244 966 Real estate acquisitions and building improvements (26,281) (55,399) (109,315) Principal payments on notes receivable 23,130 5,999 1,269 Escrow and other deposits paid (17,146) (8,020) (201) Escrow and other deposits collected 4,751 5,717 1,131 Other (5,395) (259) (745) --------- -------- --------- Net cash used in investing activities (28,425) (58,872) (110,605) --------- -------- --------- Cash flows from financing activities: Principal payments of mortgages and notes payable (118,516) (52,569) (31,667) Proceeds from mortgages and notes payable 105,253 109,574 14,953 Issuance of common stock 44,451 891 143,965 Distributions paid (20,949) (18,240) (5,046) Selling and offering costs (2,812) (36) (10,994) Loan costs paid (2,216) (5,909) (1,869) Repurchase and redemption of common stock - (736) (61) --------- -------- --------- Net cash provided by financing activities 5,211 32,975 109,281 --------- -------- --------- Net increase (decrease) in cash 5,681 (1,245) 4,939 Cash at beginning of year 4,131 5,376 437 --------- -------- --------- Cash at end of year $ 9,812 $ 4,131 $ 5,376 ========= ======== =========
The accompanying notes are an integral part of the financial statements. F-6 29 EXCEL REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ---------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: ORGANIZATION Excel Realty Trust, Inc. (the "Company") was formed in the State of California in 1985 and reincorporated as a Maryland corporation in 1993. The Company is in the business of purchasing and operating commercial real estate. The Company is operated as a self-administered, self-managed real estate investment trust (REIT). PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Excel Mortgage Funding Corporation, Excel Credit Corporation, Excel Realty Trust NC, Excel Realty Trust - TX, Excel Realty - NE, Inc., Excel Realty Trust - ST, Inc., and Excel Realty - PA, Inc. Intercompany accounts and transactions have been eliminated. INVESTMENTS The equity method of accounting is used for investments in partnerships which the Company owns less than 50% but is able to exercise significant influence over the partnership's operations. These investments are recorded initially at cost and subsequently adjusted for net equity in income (loss) and cash contributions and distributions. The cost method of accounting is used for the Company's investment in ERT Development Corporation ("EDV") (see Note 8). Under this method, the Company recognizes income from distributions received from net accumulated earnings of the investee, if any. INCOME TAXES The Company has elected to be treated as a real estate investment trust under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended. Under these provisions, the Company and its subsidiaries will not be subject to federal income tax if 95% of its real estate investment trust taxable income (before distributions paid deduction) is distributed to shareholders and certain gross income, asset diversification, share ownership and disclosure requirements are met. Accordingly, no provision for federal income taxes is included in the accompanying consolidated financial statements. Continued F-7 30 EXCEL REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED ---------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED: REAL ESTATE Land, buildings and building improvements are recorded at cost. Depreciation is computed using the straight-line method over estimated useful lives of 40 years for buildings and 2 to 40 years for building improvements. Expenditures for maintenance and repairs are charged to expense as incurred and significant renovations are capitalized. LEASE TERMINATION FEES Revenue recognition of fees received for lease terminations are deferred as deferred rental income and amortized using the straight line method over the estimated time to re-lease the related property at comparable rents, or until the property is sold, whichever comes first. DEFERRED LEASING AND LOAN ACQUISITION COSTS Costs incurred in obtaining tenant leases and long-term financing are amortized to leasing commission expense and interest expense, respectively, on the straight-line method over the terms of the related leases or debt agreements. REVENUE RECOGNITION Base rental income attributable to leases is recorded when due from tenants. Certain of the leases provide for additional rental revenue by way of percentage rents to be paid based upon the level of sales achieved by the lessee. These percentage rents are recorded on the accrual basis. The leases also typically provide for tenant reimbursement of common area maintenance and other operating expenses which are included in the accompanying Consolidated Statements of Income as expense reimbursements. NET INCOME PER COMMON SHARE Net income per common share is based upon the weighted average number of common shares and common share equivalents outstanding during each period. Common share equivalents included in the computation represent shares issuable upon assumed exercise of common stock options and warrants which would have a dilutive effect. The weighted average shares outstanding for the years ended December 31, 1995, 1994, and 1993 were 12,084,305, 10,882,728 and 5,877,500 respectively. Continued F-8 31 EXCEL REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED ---------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED: USE OF 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 at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. RECLASSIFICATIONS Certain reclassifications have been made to the consolidated financial statements for the years ended December 31, 1994 and 1993 in order to conform with the current period's presentation. In July 1993, the Company reincorporated in the State of Maryland and effected a one-for-three reverse stock split. The 1993 share information has been changed to give effect to the reverse stock split. 2. REGISTRATION STATEMENT: In May 1995, the Company filed with the Securities and Exchange Commission a $250,000,000 shelf registration statement. This registration statement was filed for the purpose of issuing debt securities, preferred stock, depositary shares, common stock or warrants for general corporate purposes. In 1995, the Company issued from the shelf 2,140,000 shares of common stock in a publicly underwritten offering at a price of $20.125 per share. Net proceeds of approximately $40,500,000 from the offering were used to repay debt, purchase properties, and to make loans to EDV to facilitate the development of certain properties (see Note 8 and 16). 3. REAL ESTATE ACQUISITIONS: In 1995, the Company acquired, in separate transactions, seven shopping centers in North Carolina (see Note 6), two shopping centers in Tennessee, and one shopping center in South Carolina. The total cost of the ten properties was approximately $47,583,000 of which the Company assumed $22,888,000 in mortgage debt. Also in 1995, five properties were contributed to Excel Realty Partners, L.P. (see Note 8). In 1994, the Company purchased six shopping centers, six single tenant buildings, and one office building. The total cost of the 13 properties was approximately $62,565,000 of which the Company assumed $17,498,000 in mortgage debt. Additionally in 1994, the Company contributed $14,753,000 for a 93.16% general partnership interest in E.H. Properties, L.P., a Delaware limited partnership. The partnership owns six shopping centers valued at $22,226,000. In 1995, the limited partner converted a portion of its equity interest into common stock of the Company at $22.25 per share. At December 31, 1995, the Company owned 94.17% of the partnership. Continued F-9 32 EXCEL REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED ---------- 4. SALES OF REAL ESTATE PROPERTIES: In 1995, the Company sold nine single tenant properties and one office building. The net sales prices of the ten properties totaled $29,397,000. Of this amount, the net sales price of the office building was $16,310,000 which resulted in a gain of $4,960,000. In 1995, a net gain of $3,683,000 was recognized on all real estate sales. In 1994, five single tenant properties and a parcel of land were sold for $4,232,000. A net loss of $108,000 was recognized on these sales. On the above properties, lease termination fees totaling $2,419,000 and $988,000 were received from tenants and recognized as revenue in 1995 and 1994, respectively, prior to the sale of certain of the properties. 5. REAL ESTATE HELD FOR SALE In preparation for the sale of an undeveloped shopping mall in Arizona, the Company terminated a master lease to an unaffiliated developer on August 1, 1995. As part of the termination agreement, the Company paid the lessee $5,000,000 which was capitalized as part of the asset held for sale. The property, net of accumulated depreciation, was reclassified to real estate held for sale on the Company's Consolidated Balance Sheet. Depreciation expense is no longer being charged to the property and costs to hold the property until sale are being capitalized. 6. MASTER LEASE AND OPTION AGREEMENT: In January 1995, the Company entered into master lease and option agreements with respect to eleven shopping centers in North Carolina. The master leases required the payment equal to eight percent of the lessor/sellers equity in the properties and gave the Company all management and operating responsibilities for the shopping centers. Under the master leases, the Company received all cash flow, if any, in excess of the master lease payments. The option agreements gave the Company the option to purchase the properties. In 1995, the Company purchased seven of the properties (see Note 3). The Company terminated the master lease and purchase option on one property on December 31, 1995. In January and February of 1996, the Company purchased the three remaining properties for approximately $32,000,000 assuming mortgage debt of approximately $22,000,000. Upon purchase of these properties, the Company received funds of $3,225,000 it had on deposit in an escrow account related to the option agreements and the remaining master leases were canceled. Continued F-10 33 EXCEL REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED ---------- 7. NOTES RECEIVABLE (IN THOUSANDS): The Company had the following notes receivable at December 31, 1995 and 1994:
1995 1994 ------- ------ Notes from affiliates, interest on 12-14% per annum, collateralized by real estate. Due on demand (see Note 8 and 16) $18,561 $ - Notes from development companies, monthly interest from 10% - 14% per annum. Maturity dates vary depending on the completion or sale of certain properties 3,500 8,306 Other 789 793 ------- ------ Total $22,850 $9,099 ======= ======
8. INVESTMENTS: In April 1995, Excel Realty Partners, L.P. ("ERP"), a Delaware Limited partnership, was formed to own and manage certain real estate properties. The Company is a 1% partner and the sole general partner of ERP. In May 1995, ERP entered into an agreement for certain unaffiliated entities to contribute to the partnership shopping centers in the southeastern United States. The Company anticipates that a minimum of 13 properties will be contributed to ERP under this agreement. In 1995, five real estate properties with a value of $28,500,000, with outstanding mortgages of $20,700,000, were contributed to ERP for limited partnership units valued at $4,500,000 and cash of approximately $3,300,000. ERP also repaid $2,700,000 of mortgages payable on the properties at the time two of the properties were contributed. The cash used in the transactions was funded by the Company in exchange for notes from ERP and general partnership contributions to ERP. The Company is entitled to receive 99% of all earnings, if any, after the limited partners receive their distributions. Annual distributions approximate $400,000 based on the limited partner units held at December 31, 1995. The partnership had net income in 1995 of $84,000. At December 31, 1995, the partnership had total assets of $29,079,000 and total liabilities of $24,367,000 including mortgage debt of $17,954,000. The Company's 1% investment in the partnership at December 31, 1995 was $139,000 (see Note 16) which is included in other assets on the Consolidated Balance Sheet. In April 1995, EDV, a Delaware Corporation, was organized. The Company owns 100% of the outstanding preferred shares of EDV. The preferred shares receive 95% of the dividends, if any, from EDV. EDV was formed to acquire, develop, hold, and sell real estate in the short-term for capital gains and/or receive fee income (see Note 16). Continued F-11 34 EXCEL REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED ---------- 9. MORTGAGES PAYABLE, (IN THOUSANDS): The Company had the following mortgages payable at December 31, 1995 and 1994:
1995 1994 ---------- --------- Mortgage notes at 6.86% to 10%, payable in installments through 2018 (monthly payments at December 31, 1995 of $1,153), collateralized by real estate and an assignment of rents: Pass through certificates/bonds: Public $ - $ 96,486 Private 29,907 31,187 Insurance companies 67,356 68,622 Banks 23,602 1,914 Other 2,948 2,948 -------- -------- Total mortgages payable $123,813 $201,157 ======== ======== The principal payments required to be made on mortgages payable are as follows: YEAR 1996 $ 6,493 1997 3,522 1998 6,149 1999 21,625 2000 8,916 Thereafter 77,108 -------- $123,813 ========
Mortgages of $55,903 are fully amortizing with the final monthly payments to be made between the years 2004 and 2018. In March 1994, the Company's wholly-owned subsidiary, Excel Mortgage Funding Corporation ("EMFC"), and EMFC's wholly-owned subsidiary, Excel Credit Corporation ("ECC"), completed a securitized mortgage financing known as a Real Estate Mortgage Investment Conduit (a "REMIC"). Pursuant to this transaction, ECC issued and sold publicly, in an underwritten offering, $100,000 aggregate principal amount of its Commercial Mortgage Pass-Through Certificates. The Certificates were originally collateralized by 65 retail commercial properties. In December 1995, the REMIC was repaid with advances from the Company's credit facility (see Note 10). Continued F-12 35 EXCEL REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED ---------- 10. NOTES PAYABLE (IN THOUSANDS): The Company had the following notes payable at December 31, 1995 and 1994:
1995 1994 -------- ------ Unsecured credit agreement of $150,000, interest at LIBOR + 1.75% (7.5% at December 31, 1995) $82,800 $ - Line of credit of $4,000 payable to a financial institution, interest at the lender's base rate plus 1.25% (8.91% at December 31, 1995) 3,184 - Unsecured revolving line of credit of $1,000, interest at 9.5% 1,000 - Other - 15 ------- -- Total notes payable $86,984 $15 ======= ==
In December 1995, the Company received a two-year revolving credit facility up to $150,000 in unsecured advances through December 1997, from a group of six banks. The actual amount available to the Company is dependent on certain covenants such as the value of unencumbered assets and the ratio of earnings before interest, depreciation, and amortization to fixed charges. The principal amount outstanding is due in December 1997. Upon obtaining the credit facility, the Company borrowed $82,800. The Company used the proceeds primarily to repay the outstanding REMIC debt of $76,000 (see Note 9), repay a former bank line of $5,100, and pay loan costs. The Company wrote-off loan costs of $2,806 related to the REMIC debt and $254 related to a former bank line. Total loan costs written-off in 1995, including other REMIC debt repayments during the year and the write-down of the interest rate protection agreement (see Note 12), amounted to $4,453 which were charged to interest expense. The Company also has a $4,000 line of credit due September 1996 that is collateralized by certain notes receivable, and an unsecured $1,000 revolving bank line. 11. COMMITMENTS AND CONTINGENCIES As part of an agreement with an unaffiliated developer to contribute certain properties to ERP for limited partnership units and cash (see Note 8), the limited partners are guaranteed distributions as defined by the contribution agreement. The Company is obligated to make advances to ERP to pay the distributions in the event ERP is unable to make these payments. In 1995, ERP's cash flows were sufficient to make the limited partner distributions. At December 31, 1995, ERP mortgage debt of $8,150,000 was guaranteed by the Company. Also, the Company is committed to advance ERP up to $2,000,000 in additional advances in conjunction with existing credit agreements with ERP. Continued F-13 36 EXCEL REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED ---------- 12. FINANCIAL INSTRUMENTS AND CREDIT RISK: Financial instruments which potentially subject the Company to concentrations of risk consist principally of cash, accounts receivable and notes receivable. The following fair value disclosure was determined by the Company, using available market information and discounted cash flow analyses as of December 31, 1995. However, considerable judgement is necessary to interpret market data and to develop the related estimates of fair value. Accordingly, the estimates presented are not necessarily indicative of the amounts that the Company could realize upon disposition. The use of different estimation methodologies may have a material effect on the estimated fair value amounts. The Company believes that the carrying values reflected in the balance sheet at December 31, 1995 approximates the fair values for cash, accounts receivables and payables, notes receivable, and variable-rate debt. The Company believes the market value of its real estate held for sale exceeds the carrying value at December 31, 1995. At December 31, 1995, the carrying value of the interest rate protection agreements were written down to the estimated fair market value. The write down of $803,000 was charged to interest expense. The Company estimates that the fair values of its fixed-rate mortgage debt at December 31, 1995 is approximately $107 million which is $9 million lower than the historical carrying value of approximately $116 million. At December 31, 1995, the Company's largest and second largest tenants each account for approximately 15% of the Company's scheduled annual base rental revenue ("ABR"). The Company's next three largest tenants account for approximately 18% in total, of the Company's ABR. At December 31, 1995, the Company owned or master leased 113 properties located in 27 states. There were 13 properties in Indiana, 12 properties in North Carolina, 11 properties in Arizona, and 9 properties in Illinois. Approximately 42% of the Company's ABR are derived from these four states. 13. DISTRIBUTIONS: In April 1995, the Company adopted a policy of declaring distributions to stockholders of record on the first day of the succeeding quarter, instead of the last day of the current quarter. The payment date of 15 days following each quarter remained unchanged. As such, in 1995, distributions of $0.43 per share were declared on March 31 and paid on April 15 and distributions of $0.445 per share were declared on July 1 and October 1 and paid on July 15 and October 15 respectively. In 1996, distributions of $0.445 per share or $5,861,000 were declared on January 1 and paid on January 15. Distributions of $0.415, $0.43, $0.43 and $0.43 per share were declared for the four quarters in 1994, respectively and distributions of $0.315, $0.315, $0.37 and $0.415 per share were declared for the four quarters in 1993, respectively. For the years ended December 31 1995, 1994, and 1993, approximately 27%, 14% and 29%, respectively, of the distributions received by shareholders were considered to be a return of capital for tax purposes. Continued F-14 37 EXCEL REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED ---------- 14. STATEMENT OF CASH FLOWS - SUPPLEMENTAL DISCLOSURE (IN THOUSANDS): The amounts paid for interest during the years ended December 31, 1995, 1994 and 1993 were $16,507, $13,236 and $9,040 respectively. The Company acquired real estate properties and interests in partnerships, without the use of cash, for the years ended December 31, 1995, 1994, and 1993 as summarized below:
1995 1994 1993 -------- --------- ------- Mortgage notes payable assumed $22,888 $24,106 $48,810 Common stock issued 1,213 6,626 6,221 Other assets received and payables assumed (104) 154 651 ------- ------- ------- Net real estate acquired without cash $23,997 $30,886 $55,682 ======= ======= =======
15. MINIMUM FUTURE RENTALS: The Company leases its shopping centers and single-tenant buildings to tenants under noncancelable operating leases generally requiring the tenant to pay a minimum rent adjusted by either (i) fixed increases, (ii) a percentage of gross sales, or (iii) a CPI index. The leases either (i) require the tenant to pay all expenses of operating the property such as insurance, property taxes, and structural repairs and maintenance, or (ii) require the tenant to reimburse the Company for the tenant's share of real estate taxes and other common area maintenance expenses. Minimum future rental revenue for the next five years for the commercial real estate owned (or master leased) at December 31, 1995 and subject to noncancelable operating leases is as follows (in thousands):
YEAR ----- 1996 $ 43,061 1997 41,103 1998 38,726 1999 36,162 2000 and thereafter 338,242
Continued F-15 38 EXCEL REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED ---------- 16. RELATED PARTY TRANSACTIONS: Notes receivable at December 31, 1995 included $12,611,000 and $5,950,000 from EDV and ERP respectively (see Note 7). Total interest income recognized in 1995 from EDV and ERP amounted to $1,628,000 and $135,000, respectively. Also in 1995, the Company recognized as income, $344,000 in development fees from EDV. In April 1993, the Company terminated its management contract with its real estate manager, Excel Management Corporation ("EMC"), and issued 110,000 shares of its common stock to Excel Interfinancial Corporation ("EIC"), the parent of EMC, in consideration for such termination. The amount paid in connection with the termination of the management contract was capitalized as an "other asset" and was amortized over an 18-month period, ending in September 1994. 17. OPTIONS AND WARRANTS: The Company has adopted the 1993 Stock Option Plan (the "1993 Stock Plan") for executive officers and other key employees of the Company and its subsidiaries. In May 1994, the Company also adopted the Directors 1994 Stock Option Plan (the "1994 Stock Plan") for directors options. Options may be granted under the 1993 Stock Plan for a period through 2003 and under the 1994 Stock Plan through the year 2004. Options under these plans are exercisable for 10 years from the date of grant. The exercise price of stock options may not be less than 100% of the fair market value of the stock on the date of grant. The aggregate number of shares issuable upon exercise of options under the 1993 Stock Plan may not exceed the greater of (a) 500,000 shares or (b) 5% of the outstanding shares minus 300,000 shares, but in no event exceeding 700,000 shares. The aggregate number of shares issuable upon exercise of options under the 1994 Stock Plan may not exceed 240,000 shares. Continued F-16 39 EXCEL REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED ---------- 17. OPTIONS AND WARRANTS, CONTINUED:
Stock option and warrant activity is summarized below: EXERCISE PRICE SHARES PER SHARE ------ --------- Outstanding at January 1, 1993 11,662 $ 13.92 Stock options granted - 1993 11,662 $ 13.92 Stock options granted - 1993 325,000 $ 19.75 Stock options exercised - 1993 (9,996) $ 13.92 Warrants issued - 1993 253,591 $15.00 - $18.15 Stock options granted - 1994 14,000 $ 20.13 Stock options exercised - 1994 (3,332) $ 13.92 Stock options granted - 1995 3,000 $ 16.38 Stock options granted - 1995 14,000 $ 19.63 Stock options granted - 1995 131,250 $ 19.25 Warrants expired - 1995 (18,028) $ 18.15 Warrants exercised - 1995 (87,585) $15.00 - $18.15 ------- --------------- Outstanding December 31, 1995 645,224 $13.92 - $20.25 ======= ===============
At December 31, 1995, options were exercisable as follows: 9,996 shares at $13.92 per share, 17,000 shares at $16.38 per share, 131,250 shares at $19.25 per share, 300,000 shares at $19.75 per share and 14,000 shares at $20.13 per share. Warrants exercisable at December 31, 1995 were 20,840 at $15.00 per share, 5,750 at $18.00 per share, and 121,388 at $20.25 per share. The options and warrants expire at various dates through May 2005. Of the options and warrants, 472,246 were issued to officers, directors or affiliates of the Company. Options for 365,750 shares are available for granting under the 1993 Stock Plan at December 31, 1995. 18. DISTRIBUTION REINVESTMENT PLAN: The Company has adopted a distribution reinvestment plan (the "Plan"). Shares purchased under the Plan will be, at the Company's discretion, either newly issued shares of the Company, shares purchased in the open market or a combination of the foregoing. Distributions may be invested in newly issued shares at a 5% discount from the average closing price for the five trading days prior to the distribution pay date or in shares purchased in the open market without brokerage commissions or service charges. Continued F-17 40 EXCEL REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED ---------- 19. 401(K) PLAN: In 1993, the Company established and implemented a 401(k) retirement plan (the "401(k) Plan") covering substantially all of the officers and employees of the Company. The 401(k) Plan permits participants to defer, until termination of employment with the Company, up to a maximum of 15% of their compensation. In addition, contributions of participants are matched by the Company in an amount equal to 50% of the participant's contribution (up to a maximum of 3% of such person's compensation) plus an annual discretionary contribution, to be determined by the Board of Directors, based upon the performance of the Company. For the years ended December 31, 1995, 1994 and 1993, the Company incurred costs of $46,000, $32,000 and $27,000, respectively, in connection with the 401(k) Plan. 20. SUBSEQUENT EVENTS In January 1996, the Company acquired, for cash, a real estate property in Georgia for approximately $2,700,000. Additionally, the Company purchased three properties in North Carolina which were previously master leased (see Note 6). 21. QUARTERLY FINANCIAL DATA (UNAUDITED): Summarized quarterly financial data for the periods ended December 31, 1995 and 1994 is as follows (in thousands except per share amounts):
NET INCOME REVENUES NET INCOME PER SHARE -------- ---------- --------- 1995: December 31 $15,301 $5,048 $0.39 September 30 13,521 5,534 0.43 June 30 12,981 3,693 0.33 March 31 13,426 3,917 0.36 1994: December 31 $11,095 $3,501 $0.32 September 30 10,648 3,537 0.33 June 30 10,144 3,514 0.32 March 31 9,127 3,244 0.30
F-18 41 EXCEL REALTY TRUST, INC. AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (IN THOUSANDS) ----------
ADDITIONS DEDUCTIONS ACCOUNTS BALANCE AT CHARGED TO RECEIVABLE BALANCE AT BEGINNING BAD DEBT WRITTEN END OF DESCRIPTION OF YEAR EXPENSE OFF YEAR ----------- ------- ------- --- ---- Allowance for bad debts: Year ended December 31, 1995 $318 $445 $37 $726 ==== ==== === ==== Year ended December 31, 1994 $280 $ 67 $29 $318 ==== ==== === ==== Year ended December 31, 1993 $128 $250 $98 $280 ==== ==== === ====
F-19 42 EXCEL REALTY TRUST, INC. AND SUBSIDIARIES SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1995 (IN THOUSANDS) ----------
COST CAPITALIZED (SOLD) SUBSEQUENT TO GROSS AMOUNT AT WHICH INITIAL COST ACQUISITION CARRIED AT CLOSE OF PERIOD ------------------- -------------------- ------------------------------ BUILDINGS AND BUILDINGS AND BUILDINGS AND TOTAL DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS [a] ----------- ------------ ---- ------------- ---- ------------- ---- ------------ ------- Office Building $ - $2,610 $2,610 $ - $ - $2,610 $2,610 $ 5,220 Burbank, CA Genetrix Building - 666 1,434 - - 666 1,434 2,100 Scottsdale, AZ Shopping Center - 2,394 3,132 (14) 210 2,380 3,342 5,722 Mesa, AZ Office Building 424 175 525 - 2 175 527 702 Stillwater, MN Kinder Care #1182 - 170 397 - - 170 397 567 Kalamazoo, MI Shopping Center - 7,312 8,995 - 961 7,312 9,956 17,268 Phoenix, AZ Shopping Center - 1,559 7,711 315 140 1,874 7,851 9,725 Norton, VA Shopping Center 7,514 2,025 8,075 - 469 2,025 8,544 10,569 Perry, GA Shopping Center - 1,436 4,584 30 650 1,466 5,234 6,700 Leesburg, FL Shopping Center (50)% 3,293 527 3,817 - 4 527 3,821 4,348 Knoxville, TN Wal-Mart Building 1,776 680 1,586 - - 680 1,586 2,266 Berlin, WI Wal-Mart Building 2,641 1,011 2,359 - - 1,011 2,359 3,370 Decatur, IN Wal-Mart Building 2,620 1,052 2,455 (10) - 1,042 2,455 3,497 Big Rapids, MI
LIFE ON WHICH DEPRECIATION IN LATEST ACCUMULATED INCOME DEPRECIATION DATE OF DATE STATEMENTS DESCRIPTION [b] CONSTRUCTION ACQUIRED IS COMPUTED* ----------- ------------ ------------ -------- ----------- Office Building $ 405 1988 1989-90 40 years Burbank, CA Genetrix Building 181 1971 1990 40 years Scottsdale, AZ Shopping Center 471 1970 1990 40 years Mesa, AZ Office Building 59 1985 1991 40 years Stillwater, MN Kinder Care #1182 48 1990 1991 40 years Kalamazoo, MI Shopping Center 1,194 1988 1991-92 40 years Phoenix, AZ Shopping Center 598 1989 1992 40 years Norton, VA Shopping Center 645 1992 1992 40 years Perry, GA Shopping Center 451 1986 1992 40 years Leesburg, FL Shopping Center (50)% 291 1990 1992 40 years Knoxville, TN Wal-Mart Building 120 1992 1992 40 years Berlin, WI Wal-Mart Building 179 1992 1992 40 years Decatur, IN Wal-Mart Building 187 1992 1992 40 years Big Rapids, MI
F-20 43 EXCEL REALTY TRUST, INC. AND SUBSIDIARIES SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED DECEMBER 31, 1995 (IN THOUSANDS) ----------
COST CAPITALIZED (SOLD) SUBSEQUENT TO GROSS AMOUNT AT WHICH INITIAL COST ACQUISITION CARRIED AT CLOSE OF PERIOD ----------------------- ---------------------- ------------------------------ BUILDINGS AND BUILDINGS AND BUILDINGS AND TOTAL DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS [a] ----------- ------------ ---- ------------- ---- ------------ ---- ------------ ------- Wal-Mart Building 5,276 2,118 4,942 - - 2,118 4,942 7,060 Wyomissing, PA Wal-Mart Building 2,663 1,069 2,494 - - 1,069 2,494 3,563 Brighton, CO Wal-Mart Bldg. l4,888 1,963 4,580 30 - 1,993 4,580 6,573 and outparcel Temple, TX Wal-Mart Building 2,908 1,167 2,724 - - 1,167 2,724 3,891 Wabash, IN Mtn. Jacks #210310 - 303 708 - - 303 708 1,011 Mentor, OH Mtn. Jacks #210303 [1] 378 1,134 - - 378 1,134 1,512 Dearborn Heights, MI Autoworks #125 [1] 105 332 - - 105 332 437 Hastings, NE Autoworks #138 [1] 189 421 - - 189 421 610 Grand Island, NE Kinder Care #125 [1] 63 146 - - 63 146 209 Indianapolis, IN Kinder Care #126 [1] 63 146 - - 63 146 209 Indianapolis, IN Kinder Care #577 [1] 60 238 - - 60 238 298 High Ridge, MO Kinder Care #162 [1] 59 235 - - 59 235 294 Fenton, MO
LIFE ON WHICH DEPRECIATION IN LATEST ACCUMULATED INCOME DEPRECIATION DATE OF DATE STATEMENTS DESCRIPTION [b] CONSTRUCTION ACQUIRED IS COMPUTED* ----------- ------------ ------------- -------- ------------- Wal-Mart Building 376 1992 1992 40 years Wyomissing, PA Wal-Mart Building 190 1992 1992 40 years Brighton, CO Wal-Mart Bldg. 348 1992 1992 40 years and outparcel Temple, TX Wal-Mart Building 207 1992 1992 40 years Wabash, IN Mtn. Jacks #210310 60 1974 1992 40 years Mentor, OH Mtn. Jacks #210303 86 1980 1992 40 years Dearborn Heights, MI Autoworks #125 25 1988 1992 40 years Hastings, NE Autoworks #138 32 1988 1992 40 years Grand Island, NE Kinder Care #125 11 1975 1992 40 years Indianapolis, IN Kinder Care #126 11 1976 1992 40 years Indianapolis, IN Kinder Care #577 18 1980 1992 40 years High Ridge, MO Kinder Care #162 18 1977 1992 40 years Fenton, MO
F-21 44 EXCEL REALTY TRUST, INC. AND SUBSIDIARIES SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED DECEMBER 31, 1995 (IN THOUSANDS) ----------
COST CAPITALIZED (SOLD) SUBSEQUENT TO GROSS AMOUNT AT WHICH INITIAL COST ACQUISITION CARRIED AT CLOSE OF PERIOD ----------------------- ----------------------- ------------------------------ BUILDINGS AND BUILDINGS AND BUILDINGS AND TOTAL DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS [a] ----------- ------------ ---- ------------- ---- ------------ ---- ------------ ------- Kinder Care #128 - 90 211 - - 90 211 301 Indianapolis, IN Kinder Care #134 - 90 211 - - 90 211 301 Indianapolis, IN Kinder Care #132 [1] 63 146 - - 63 146 209 Ft. Wayne, IN Kinder Care #1075(61.36)% - 212 495 - - 212 495 707 Ventura, CA DHG - 74 110 - - 74 110 184 Houston, TX DHG - 103 155 - - 103 155 258 Houston, TX Egghead Software - 172 258 - - 172 258 430 Maplewood, MN United Artists - 247 576 - - 247 576 823 Pueblo, CO Lowes Building 3,876 1,325 3,446 530 - 1,855 3,446 5,301 Terra Haute, IN Wal-Mart Building 6,712 2,631 6,140 - - 2,631 6,140 8,771 Orland Hills, IL Kmart Building - 698 1,297 - - 698 1,297 1,995 Durango, CO Kmart Building - 1,033 1,918 - - 1,033 1,918 2,951 Albany, GA Kmart Building - 951 1,767 - 152 951 1,919 2,870 DeSoto, TX
LIFE ON WHICH DEPRECIATION IN LATEST ACCUMULATED INCOME DEPRECIATION DATE OF DATE STATEMENTS DESCRIPTION [b] CONSTRUCTION ACQUIRED IS COMPUTED* ----------- ------------ ------------ -------- ------------ Kinder Care #128 16 1976 1992 40 years Indianapolis, IN Kinder Care #134 16 1976 1992 40 years Indianapolis, IN Kinder Care #132 11 1976 1992 40 years Ft. Wayne, IN Kinder Care #1075(61.36)% 38 1989 1992 40 years Ventura, CA DHG 8 1985 1992 40 years Houston, TX DHG 12 1985 1992 40 years Houston, TX Egghead Software 20 1987 1992 40 years Maplewood, MN United Artists 44 1977 1992 40 years Pueblo, CO Lowes Building 219 1993 1992/1993 40 years Terra Haute, IN Wal-Mart Building 429 1992 1993 40 years Orland Hills, IL Kmart Building 77 1982 1993 40 years Durango, CO Kmart Building 114 1981 1993 40 years Albany, GA Kmart Building 124 1980 1993 40 years DeSoto, TX
F-22 45 EXCEL REALTY TRUST, INC. AND SUBSIDIARIES SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED DECEMBER 31, 1995 (IN THOUSANDS) ----------
COST CAPITALIZED (SOLD) SUBSEQUENT TO GROSS AMOUNT AT WHICH INITIAL COST ACQUISITION CARRIED AT CLOSE OF PERIOD ----------------------- ----------------------- ------------------------------ BUILDINGS AND BUILDINGS AND BUILDINGS AND TOTAL DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS [a] ----------- ------------ ---- ------------- ---- ------------- ---- ------------ ------- Kmart Building - 912 1,693 - 19 912 1,712 2,624 Fargo, ND Kmart Building - 924 1,715 - - 924 1,715 2,639 Omaha, NE Kmart Building - 892 1,656 - - 892 1,656 2,548 Pine Bluff, AR Kmart Building - 836 1,553 - - 836 1,553 2,389 Somerville, NJ Kmart Building - 1,293 2,401 - - 1,293 2,401 3,694 Springfield, MO Kmart Building - 936 1,738 - 182 936 1,920 2,856 St. Charles, MO Kmart Building - 414 768 - 8 414 776 1,190 Waverly, OH Lucky Building - 698 1,295 - - 698 1,295 1,993 Brandon, FL Kroger Building - 731 1,357 - - 731 1,357 2,088 Clearfield, PA Kroger Building - 639 1,186 - - 639 1,186 1,825 East Albany, GA Kroger Building - 722 1,340 - - 722 1,340 2,062 James Island, SC Safeway Building - 790 1,466 - - 790 1,466 2,256 Missouri City, TX Kroger Building - 817 1,517 - - 817 1,517 2,334 Muscle Shoals, AL
LIFE ON WHICH DEPRECIATION IN LATEST ACCUMULATED INCOME DEPRECIATION DATE OF DATE STATEMENTS DESCRIPTION [b] CONSTRUCTION ACQUIRED IS COMPUTED* ----------- ------------ ------------- -------- ------------ Kmart Building 105 1982 1993 40 years Fargo, ND Kmart Building 102 1981 1993 40 years Omaha, NE Kmart Building 98 1981 1993 40 years Pine Bluff, AR Kmart Building 92 1982 1993 40 years Somerville, NJ Kmart Building 143 1982 1993 40 years Springfield, MO Kmart Building 140 1981 1993 40 years St. Charles, MO Kmart Building 46 1981 1993 40 years Waverly, OH Lucky Building 77 1982 1993 40 years Brandon, FL Kroger Building 81 1982 1993 40 years Clearfield, PA Kroger Building 70 1982 1993 40 years East Albany, GA Kroger Building 80 1982 1993 40 years James Island, SC Safeway Building 87 1982 1993 40 years Missouri City, TX Kroger Building 90 1982 1993 40 years Muscle Shoals, AL
F-23 46 EXCEL REALTY TRUST, INC. AND SUBSIDIARIES SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED DECEMBER 31, 1995 (IN THOUSANDS) ----------
COST CAPITALIZED (SOLD) SUBSEQUENT TO GROSS AMOUNT AT WHICH INITIAL COST ACQUISITION CARRIED AT CLOSE OF PERIOD -------------------- ---------------------- ------------------------------ BUILDINGS AND BUILDINGS AND BUILDINGS AND TOTAL DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS [a] ----------- ------------ ---- ------------- ---- ------------- ---- ------------ ------- Kroger Building - 902 1,674 - - 902 1,674 2,576 Ottawa, IL Kroger Building - 703 1,305 - - 703 1,305 2,008 Scottsboro, AL Ben Franklin Building - 511 949 - - 511 949 1,460 Tucson, AZ Payless Drug Building - 389 723 - - 389 723 1,112 Yuma, AZ Lucky Building - 471 875 - - 471 875 1,346 Phoenix, AZ Lucky Building - 558 1,037 - - 558 1,037 1,595 Coralville, IA Lucky Building - 588 1,093 - - 588 1,093 1,681 Decatur, IL Lucky Building - 744 1,382 - - 744 1,382 2,126 Dubuque, IA Lucky Building - 617 1,145 - - 617 1,145 1,762 Hobart, IN Lucky Building - 435 809 - - 435 809 1,244 Mesa, AZ Lucky Building - 511 948 - - 511 948 1,459 Michigan City, IN Lucky Building - 735 1,365 - - 735 1,365 2,100 Moline, IL Lucky Building - 908 1,686 - - 908 1,686 2,594 New Lenox, IL
LIFE ON WHICH DEPRECIATION IN LATEST ACCUMULATED INCOME DEPRECIATION DATE OF DATE STATEMENTS DESCRIPTION [b] CONSTRUCTION ACQUIRED IS COMPUTED* ----------- ------------ ------------ -------- ------------ Kroger Building 100 1982 1993 40 years Ottawa, IL Kroger Building 77 1981 1993 40 years Scottsboro, AL Ben Franklin Building 56 1984 1993 40 years Tucson, AZ Payless Drug Building 43 1980 1993 40 years Yuma, AZ Lucky Building 43 1981 1993 40 years Phoenix, AZ Lucky Building 62 1981 1993 40 years Coralville, IA Lucky Building 65 1983 1993 40 years Decatur, IL Lucky Building 82 1980 1993 40 years Dubuque, IA Lucky Building 68 1983 1993 40 years Hobart, IN Lucky Building 48 1982 1993 40 years Mesa, AZ Lucky Building 56 1983 1993 40 years Michigan City, IN Lucky Building 81 1981 1993 40 years Moline, IL Lucky Building 100 1982 1993 40 years New Lenox, IL
F-24 47 EXCEL REALTY TRUST, INC. AND SUBSIDIARIES SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED DECEMBER 31, 1995 (IN THOUSANDS) ----------
COST CAPITALIZED (SOLD) SUBSEQUENT TO GROSS AMOUNT AT WHICH INITIAL COST ACQUISITION CARRIED AT CLOSE OF PERIOD ----------------------- ----------------------- ------------------------------ BUILDINGS AND BUILDINGS AND BUILDINGS AND TOTAL DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS [a] ----------- ------------ ---- ------------- ---- ------------- ---- ------------- ------- Lucky Building - 673 1,249 - - 673 1,249 1,922 Peoria, IL Kroger Building - 862 1,601 - - 862 1,601 2,463 Pittsburgh, PA Lucky Building - 582 1,081 - - 582 1,081 1,663 Springfield, IL Lucky Building - 744 1,382 - - 744 1,382 2,126 Sterling, IL Lucky Building - 364 676 - - 364 676 1,040 Tucson, AZ Kroger Building - 670 1,243 - - 670 1,243 1,913 Waterloo, IL Safeway Building - 906 1,683 - - 906 1,683 2,589 Muskogee, OK Safeway Building - 778 1,445 - - 778 1,445 2,223 Sherwood, AR Safeway Building - 739 1,373 - - 739 1,373 2,112 West Monroe, LA Rite Aid Building - 176 328 - - 176 328 504 East Albany, GA Super X Building - 195 363 - - 195 363 558 Muscle Shoals, AL Shopping Center 5,157 1,888 4,981 - 23 1,888 5,004 6,892 Elizabethtown, KY Shopping Center 4,717 629 5,555 - 24 629 5,579 6,208 Glasgow, KY
LIFE ON WHICH DEPRECIATION IN LATEST ACCUMULATED INCOME DEPRECIATION DATE OF DATE STATEMENTS DESCRIPTION [b] CONSTRUCTION ACQUIRED IS COMPUTED* ----------- ------------ ------------ -------- ------------ Lucky Building 74 1983 1993 40 years Peoria, IL Kroger Building 95 1982 1993 40 years Pittsburgh, PA Lucky Building 64 1982 1993 40 years Springfield, IL Lucky Building 82 1980 1993 40 years Sterling, IL Lucky Building 40 1983 1993 40 years Tucson, AZ Kroger Building 74 1982 1993 40 years Waterloo, IL Safeway Building 100 1981 1993 40 years Muskogee, OK Safeway Building 86 1981 1993 40 years Sherwood, AR Safeway Building 82 1981 1993 40 years West Monroe, LA Rite Aid Building 19 1982 1993 40 years East Albany, GA Super X Building 22 1982 1993 40 years Muscle Shoals, AL Shopping Center 360 1992 1993 40 years Elizabethtown, KY Shopping Center 391 1992 1993 40 years Glasgow, KY
F-25 48 EXCEL REALTY TRUST, INC. AND SUBSIDIARIES SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED DECEMBER 31, 1995 (IN THOUSANDS) ----------
COST CAPITALIZED (SOLD) SUBSEQUENT TO GROSS AMOUNT AT WHICH INITIAL COST ACQUISITION CARRIED AT CLOSE OF PERIOD ----------------------- ----------------------- ------------------------------- BUILDINGS AND BUILDINGS AND BUILDINGS AND TOTAL DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS [a] ----------- ------------ ---- ------------- ---- ------------- ---- ------------ -------- Shopping Center 8,743 3,469 8,125 - - 3,469 8,125 11,594 Deland, FL Shopping Center 3,209 1,655 3,074 - 6 1,655 3,080 4,735 Irving, TX Shopping Center - 2,689 4,994 35 144 2,724 5,138 7,862 Ashland, OH Shopping Center - 3,188 5,921 - 23 3,188 5,944 9,132 Covington, GA Kmart Building - 564 1,048 - - 564 1,048 1,612 Atlantic, IA Kash N' Karry Building - 378 702 - - 378 702 1,080 Homosassa Springs, FL Shopping Center (94.17)% - 1,779 3,305 44 159 1,823 3,464 5,287 Brooksville, FL Shopping Center (94.17)% - 1,552 2,882 58 113 1,610 2,995 4,605 Celina, OH Shopping Center (94.17)% 2,455 984 1,827 62 118 1,046 1,945 2,991 Albemarle, NC Shopping Center (94.17)% - 656 1,219 21 40 677 1,259 1,936 Marion, IN Shopping Center (94.17)% - 568 1,056 71 133 639 1,189 1,828 Warsaw, IN Shopping Center (94.17)% 3,060 1,618 3,013 80 148 1,698 3,161 4,859 Terre Haute, IN Office Building 1,889 753 1,762 - 5 753 1,767 2,520 San Diego, CA
LIFE ON WHICH DEPRECIATION IN LATEST ACCUMULATED INCOME DEPRECIATION DATE OF DATE STATEMENTS DESCRIPTION [b] CONSTRUCTION ACQUIRED IS COMPUTED* ----------- ------------ ------------ -------- ---------- -- Shopping Center 521 1993 1993 40 years Deland, FL Shopping Center 177 1987 1993 40 years Irving, TX Shopping Center 294 1990 1993 40 years Ashland, OH Shopping Center 304 1991 1993 40 years Covington, GA Kmart Building 51 1980 1994 40 years Atlantic, IA Kash N' Karry Building 34 1982 1994 40 years Homosassa Springs, FL Shopping Center (94.17)% 156 1987 1994 40 years Brooksville, FL Shopping Center (94.17)% 132 1990 1994 40 years Celina, OH Shopping Center (94.17)% 84 1988 1994 40 years Albemarle, NC Shopping Center (94.17)% 56 1989 1994 40 years Marion, IN Shopping Center (94.17)% 50 1989 1994 40 years Warsaw, IN Shopping Center (94.17)% 139 1989 1994 40 years Terre Haute, IN Office Building 87 1988 1994 40 years San Diego, CA
F-26 49 EXCEL REALTY TRUST, INC. AND SUBSIDIARIES SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED DECEMBER 31, 1995 (IN THOUSANDS) ----------
COST CAPITALIZED (SOLD) SUBSEQUENT TO GROSS AMOUNT AT WHICH INITIAL COST ACQUISITION CARRIED AT CLOSE OF PERIOD ----------------------- ----------------------- ------------------------------ BUILDINGS AND BUILDINGS AND BUILDINGS AND TOTAL DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS [a] ----------- ------------ ---- ------------- ---- ------------ ---- ------------ ------- Shopping Center 4,398 2,431 4,515 - 14 2,431 4,529 6,960 Hilton Head, SC Shopping Center - 2,028 3,767 - - 2,028 3,767 5,795 Lake Wales, FL Shopping Center 8,165 3,882 7,209 - 6 3,882 7,215 11,097 Versailles, KY Shopping Center - 1,300 2,415 - 257 1,300 2,672 3,972 Mesa, AZ Shopping Center 5,389 3,351 6,223 - 18 3,351 6,241 9,592 London, KY Q-Club Building - 1,822 3,385 - - 1,822 3,385 5,207 Scottsdale, AZ Q-Club Building - 1,813 3,366 - - 1,813 3,366 5,179 Phoenix, AZ Lowe's Building 4,265 2,187 4,061 - - 2,187 4,061 6,248 Middletown, OH Shopping Center 2,265 1,035 1,924 69 127 1,104 2,051 3,155 Kannapolis, NC Shopping Center 4,107 2,109 3,917 - - 2,109 3,917 6,026 Asheboro, NC Shopping Center 2,634 1,100 2,043 - - 1,100 2,043 3,143 Kernersville, NC Shopping Center 3,363 1,846 3,429 - - 1,846 3,429 5,275 Roxboro, NC Shopping Center 5,462 2,335 4,337 - - 2,335 4,337 6,672 Siler City, NC
LIFE ON WHICH DEPRECIATION IN LATEST ACCUMULATED INCOME DEPRECIATION DATE OF DATE STATEMENTS DESCRIPTION [b] CONSTRUCTION ACQUIRED IS COMPUTED* ----------- ------------ ------------ -------- ------------ Shopping Center 204 1994 1994 40 years Hilton Head, SC Shopping Center 153 1994 1994 40 years Lake Wales, FL Shopping Center 308 1994 1994 40 years Versailles, KY Shopping Center 136 1981 1994 40 years Mesa, AZ Shopping Center 263 1994 1994 40 years London, KY Q-Club Building 117 1994 1994 40 years Scottsdale, AZ Q-Club Building 136 1994 1994 40 years Phoenix, AZ Lowe's Building 190 1993 1994 40 years Middletown, OH Shopping Center 53 1992 1994 40 years Kannapolis, NC Shopping Center 69 1988 1995 40 years Asheboro, NC Shopping Center 27 1988 1995 40 years Kernersville, NC Shopping Center 47 1989 1995 40 years Roxboro, NC Shopping Center 59 1988 1995 40 years Siler City, NC
F-27 50 EXCEL REALTY TRUST, INC. AND SUBSIDIARIES SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED DECEMBER 31, 1995 (IN THOUSANDS) ----------
COST CAPITALIZED (SOLD) SUBSEQUENT TO GROSS AMOUNT AT WHICH INITIAL COST ACQUISITION CARRIED AT CLOSE OF PERIOD ----------------------- ----------------------- ------------------------------ BUILDINGS AND BUILDINGS AND BUILDINGS AND TOTAL DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS [a] ----------- ------------ ---- ------------- ---- ------------- ---- ------------ ------- Shopping Center - 2,267 4,211 - - 2,267 4,211 6,478 Wadesboro, NC Shopping Center 1,916 824 1,531 - - 824 1,531 2,355 Jonesville, NC Shopping Center - 2,876 5,341 - - 2,876 5,341 8,217 Kinston, NC Shopping Center 2,500 1,157 2,149 - - 1,157 2,149 3,306 Hilton Head, SC Shopping Center 2,580 1,325 2,461 - - 1,325 2,461 3,786 Hendersonville, TN Shopping Center - 807 1,499 - - 807 1,499 2,306 Manchester, TN All encompassing mortgage debt on properties marked [1] above 2,948 - - - - - - - -------- -------- -------- ------ ------- -------- -------- -------- $123,813 $121,073 $246,857 $1,321 $ 4,155 $122,394 $251,012 $373,406 ======== ======== ======== ====== ======= ======== ======== ========
LIFE ON WHICH DEPRECIATION IN LATEST ACCUMULATED INCOME DEPRECIATION DATE OF DATE STATEMENTS DESCRIPTION [b] CONSTRUCTION ACQUIRED IS COMPUTED* ----------- ------------ ------------ -------- ------------ Shopping Center 39 1988 1995 40 years Wadesboro, NC Shopping Center 21 1988 1995 40 years Jonesville, NC Shopping Center 61 1991 1995 40 years Kinston, NC Shopping Center 11 1989 1995 40 years Hilton Head, SC Shopping Center 8 1989 1995 40 years Hendersonville, TN Shopping Center 2 1990 1995 40 years Manchester, TN All encompassing mortgage debt on properties marked [1] above - ------- $14,909 =======
Listing does not include one real estate property held for sale in Scottsdale, AZ. The net carrying cost of this property is $8,519. * Tenant improvements and other costs capitalized subsequent to acquisition are depreciated over 2 - 40 years. F-28 51 EXCEL REALTY TRUST, INC. AND SUBSIDIARIES SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED DECEMBER 31, 1995 (IN THOUSANDS) ---------- [a] Reconciliation of total real estate carrying value for the past three years is as follows:
1995 1994 1993 ---- ---- ---- Balance at beginning of year $359,459 $277,412 $113,639 Acquisitions 47,583 84,926 163,768 Improvements and other additions 2,473 1,554 1,427 Cost of property sold (27,590) (4,433) (1,422) -------- -------- -------- Balance at end of year $381,925 $359,459 $277,412 ======== ======== ======== Total cost for federal income tax purposes at the end of each year (difference is from tax free exchanges) $381,062 $358,689 $276,642 ======== ======== ========
[b] Reconciliation of accumulated depreciation for the past three years is as follows:
1995 1994 1993 ---- ---- ---- Balance at beginning of year $10,228 $ 4,270 $ 998 Depreciation expense 6,845 6,038 3,369 Deletions - property sold (1,918) (80) (97) Reclass to real estate held for sale (246) -- -- ------- ------- ------ Balance at end of year $14,909 $10,228 $4,270 ======= ======= ======
F-29 EX-10.32 2 AGREEMENT OF LIMITED PARTNERSHIP DATED 4-24-95 1 EXHIBIT 10.32 ================================================================================ AGREEMENT OF LIMITED PARTNERSHIP OF EXCEL REALTY PARTNERS, L.P. a Delaware limited partnership --------------------------- THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO THE PARTNERSHIP AN OPINION OF COUNSEL SATISFACTORY TO THE PARTNERSHIP, IN FORM AND SUBSTANCE SATISFACTORY TO THE PARTNERSHIP, TO THE EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS. dated as of April 24, 1995 ================================================================================ 2 TABLE OF CONTENTS
Page ---- ARTICLE 1 DEFINED TERMS........................................................................ 1 ARTICLE 2 ORGANIZATIONAL MATTERS............................................................... 15 Section 2.1 Organization......................................................................... 15 Section 2.2 Name................................................................................. 15 Section 2.3 Registered Office and Agent; Principal Office........................................ 15 Section 2.4 Power of Attorney.................................................................... 15 Section 2.5 Term................................................................................. 16 ARTICLE 3 PURPOSE.............................................................................. 16 Section 3.1 Purpose and Business................................................................. 16 Section 3.2 Powers............................................................................... 17 Section 3.3 Partnership Only for Purposes Specified.............................................. 17 Section 3.4 Representations and Warranties by the Limited Partners............................... 17 ARTICLE 4 CAPITAL CONTRIBUTIONS................................................................ 18 Section 4.1 Capital Contributions of the Initial Partners........................................ 18 Section 4.2 Additional Limited Partners.......................................................... 19 Section 4.3 Loans by Third Parties............................................................... 19 Section 4.4 Additional Funding and Capital Contributions......................................... 19 A. General....................................................................................... 19 B. Notice of Additional Funds Requirement........................................................ 19 C. General Partner Loans......................................................................... 19 D. Additional General Partner Contributions; Additional Limited Partners......................... 20 Section 4.5 No Interest; No Return............................................................... 20 ARTICLE 5 DISTRIBUTIONS........................................................................ 20 Section 5.1 Requirement and Characterization of Distributions.................................... 20 Section 5.2 Distributions in Kind................................................................ 21 Section 5.3 Amounts Withheld..................................................................... 21 Section 5.4 Distributions Upon Liquidation....................................................... 21 Section 5.5 Restricted Distributions............................................................. 21 ARTICLE 6 ALLOCATIONS.......................................................................... 21 Section 6.1 Timing and Amount of Allocations of Net Income and Net Loss.......................... 21 Section 6.2 General Allocations.................................................................. 21 Section 6.3 Additional Allocation Provisions..................................................... 21 A. Special Allocations........................................................................... 22 B. Regulatory Allocations........................................................................ 22
i 3
Page ---- (a) Minimum Gain Chargeback......................................................... 22 (b) Partner Minimum Gain Chargeback................................................. 22 (c) Nonrecourse Deductions and Partner Nonrecourse Deductions....................... 22 (d) Qualified Income Offset......................................................... 22 (e) Gross Income Allocation......................................................... 23 (f) Limitation on Allocation of Net Loss............................................ 23 (g) Section 754 Adjustment.......................................................... 23 (h) Curative Allocations............................................................ 23 C. Special Allocations Upon Liquidation.................................................. 23 D. Allocation of Excess Nonrecourse Liabilities.......................................... 23 Section 6.4 Tax Allocations.............................................................. 24 A. In General............................................................................ 24 B. Allocations Respecting Section 704(c) Revaluations.................................... 24 Section 6.5 Other Provisions............................................................. 24 A. Other Allocations Upon Change in Law.................................................. 24 B. Consistent Tax Reporting.............................................................. 24 ARTICLE 7 MANAGEMENT AND OPERATIONS OF BUSINESS........................................ 24 Section 7.1 Management................................................................... 24 Section 7.2 Certificate of Limited Partnership........................................... 27 Section 7.3 Restrictions on General Partner's Authority.................................. 27 Section 7.4 Reimbursement of the General Partner......................................... 29 Section 7.5 Other Business of General Partner............................................ 30 Section 7.6 Contracts with Affiliates.................................................... 30 Section 7.7 Indemnification.............................................................. 30 Section 7.8 Liability of the General Partner............................................. 32 Section 7.9 Other Matters Concerning the General Partner................................. 33 Section 7.10 Title to Partnership Assets.................................................. 33 Section 7.11 Reliance by Third Parties.................................................... 33 ARTICLE 8 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS................................... 34 Section 8.1 Limitation of Liability...................................................... 34 Section 8.2 Management of Business....................................................... 34 Section 8.3 Outside Activities of Limited Partners....................................... 34 Section 8.4 Return of Capital............................................................ 34 Section 8.5 Rights of Limited Partners Relating to the Partnership....................... 35 Section 8.6 Redemption Rights of Qualifying Parties...................................... 35 Section 8.7 Partnership Right to Call Limited Partner Interests.......................... 39 Section 8.8 Other Redemptions............................................................ 39
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Page ---- ARTICLE 9 BOOKS, RECORDS, ACCOUNTING AND REPORTS............................................... 39 Section 9.1 Records and Accounting............................................................... 39 Section 9.2 Fiscal Year.......................................................................... 40 Section 9.3 Reports.............................................................................. 40 ARTICLE 10 TAX MATTERS.......................................................................... 40 Section 10.1 Preparation of Tax Returns........................................................... 40 Section 10.2 Tax Elections........................................................................ 40 Section 10.3 Tax Matters Partner.................................................................. 40 Section 10.4 Withholding.......................................................................... 41 ARTICLE 11 TRANSFERS AND WITHDRAWALS............................................................ 42 Section 11.1 Transfer............................................................................. 42 Section 11.2 Transfer of General Partner's Partnership Interest................................... 42 Section 11.3 Limited Partners' Rights to Transfer................................................. 43 A. General....................................................................................... 43 (1) General Partner Right of First Refusal.................................................. 43 (2) Qualified Transferee.................................................................... 43 (3) Minimum Transfer Restriction............................................................ 43 (4) Transferee Agreement to Effect a Redemption............................................. 43 (5) No Further Transfers.................................................................... 44 (6) Exception for Permitted Transfers....................................................... 44 B. Incapacity.................................................................................... 44 C. Opinion of Counsel............................................................................ 44 D. Adverse Tax Consequences...................................................................... 44 Section 11.4 Substituted Limited Partners......................................................... 44 Section 11.5 Assignees............................................................................ 45 Section 11.6 General Provisions................................................................... 45 ARTICLE 12 ADMISSION OF PARTNERS................................................................ 47 Section 12.1 Admission of Successor General Partner............................................... 47 Section 12.2 Admission of Additional Limited Partners............................................. 47 Section 12.3 Amendment of Agreement and Certificate of Limited Partnership........................ 48 Section 12.4 Admission of Initial Limited Partners................................................ 48 Section 12.5 Limit on Number of Partners.......................................................... 48 ARTICLE 13 DISSOLUTION, LIQUIDATION AND TERMINATION............................................. 48 Section 13.1 Dissolution.......................................................................... 48 Section 13.2 Winding Up........................................................................... 49 Section 13.3 Deemed Distribution and Recontribution............................................... 50 Section 13.4 Rights of Limited Partners........................................................... 50 Section 13.5 Notice of Dissolution................................................................ 50
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Page ---- Section 13.6 Cancellation of Certificate of Limited Partnership................................... 50 Section 13.7 Reasonable Time for Winding-Up....................................................... 50 ARTICLE 14 PROCEDURES FOR ACTIONS AND CONSENTS OF PARTNERS; AMENDMENTS; MEETINGS......................................................................... 51 Section 14.1 Procedures for Actions and Consents of Partners...................................... 51 Section 14.2 Amendments........................................................................... 51 Section 14.3 Meetings of the Partners............................................................. 51 ARTICLE 15 GENERAL PROVISIONS................................................................... 52 Section 15.1 Addresses and Notice................................................................. 52 Section 15.2 Titles and Captions.................................................................. 52 Section 15.3 Pronouns and Plurals................................................................. 52 Section 15.4 Further Action....................................................................... 52 Section 15.5 Binding Effect....................................................................... 52 Section 15.6 Waiver............................................................................... 52 Section 15.7 Counterparts......................................................................... 53 Section 15.8 Applicable Law....................................................................... 53 Section 15.9 Entire Agreement..................................................................... 53 Section 15.10 Invalidity of Provisions............................................................. 53 Section 15.11 Limitation to Preserve REIT Status................................................... 53 Section 15.12 No Partition......................................................................... 54 Section 15.13 No Third-Party Rights Created Hereby................................................. 54 EXHIBIT A PARTNERS AND ADDRESSES............................................................... 56 EXHIBIT B EXAMPLES REGARDING ADJUSTMENT FACTOR................................................. 57 EXHIBIT C NOTICE OF REDEMPTION................................................................. 58 EXHIBIT D FORM OF PARTNER SCHEDULE............................................................. 60 EXHIBIT E FORM OF PARTNERSHIP UNIT CERTIFICATE................................................. 66
iv 6 AGREEMENT OF LIMITED PARTNERSHIP OF EXCEL REALTY PARTNERS, L.P. THIS AGREEMENT OF LIMITED PARTNERSHIP OF EXCEL REALTY PARTNERS, L.P., dated as of April 24, 1995 (the "EFFECTIVE DATE"), is entered into by and among Excel Realty Trust, Inc., a Maryland corporation, as the General Partner, and the Persons whose names are set forth on Exhibit A as attached hereto, as the Limited Partners, together with any other Persons who become Partners in the Partnership as provided herein. ARTICLE 1 DEFINED TERMS The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement. "ACT" means the Delaware Revised Uniform Limited Partnership Act, as it may be amended from time to time, and any successor to such statute. "ACTIONS" has the meaning set forth in Section 7.7 hereof. "ADDITIONAL FUNDS" has the meaning set forth in Section 4.4.A hereof. "ADDITIONAL LIMITED PARTNER" means a Person admitted to the Partnership as a Limited Partner pursuant to Section 4.2 or Section 4.4.D and Section 12.2 hereof and who is shown as such on the books and records of the Partnership. "ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any Partner, the deficit balance, if any, in such Partner's Capital Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments: (a) decrease such deficit by any amounts that such Partner is obligated to restore pursuant to this Agreement or by operation of law upon liquidation of such Partner's Partnership Interest or is deemed to be obligated to restore pursuant to the penultimate sentence of each of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and (b) increase such deficit by the items described in Regulations Section 1.704-1 (b)(2)(ii)(d)(4), (5) and (6). The foregoing definition of "Adjusted Capital Account Deficit" is intended to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith. "ADJUSTMENT FACTOR" means 1.0; provided, however, that in the event that: (a) the General Partner (i) declares or pays a dividend on its outstanding REIT Shares in REIT Shares or makes a distribution to all holders of its outstanding REIT Shares in REIT Shares, (ii) splits or subdivides its outstanding REIT Shares or (iii) effects a reverse stock split or otherwise combines its outstanding REIT Shares into a smaller number of REIT Shares, the Adjustment Factor shall be adjusted by multiplying the Adjustment Factor previously in effect by a fraction, (1) the numerator of which shall be the number of REIT Shares issued and outstanding 7 on the record date for such dividend, distribution, split, subdivision, reverse split or combination (assuming for such purposes that such dividend, distribution, split, subdivision, reverse split or combination has occurred as of such time) and (2) the denominator of which shall be the actual number of REIT Shares (determined without the above assumption) issued and outstanding on the record date for such dividend, distribution, split, subdivision, reverse split or combination; (b) in the event that the General Partner distributes any rights, options or warrants to all holders of its REIT Shares to subscribe for or to purchase or to otherwise acquire REIT Shares (or other securities or rights convertible into, exchangeable for or exercisable for REIT Shares) at a price per share less than the Value of a REIT Share on the record date for such distribution (each a "DISTRIBUTED RIGHT"), then the Adjustment Factor shall be adjusted by multiplying the Adjustment Factor previously in effect by a fraction, (i) the numerator of which shall be the number of REIT Shares issued and outstanding on the record date plus the maximum number of REIT Shares purchasable under such Distributed Rights and (ii) the denominator of which shall be the number of REIT Shares issued and outstanding on the record date plus a fraction, (1) the numerator of which is the maximum number of REIT Shares purchasable under such Distributed Rights times the minimum purchase price per REIT Share under such Distributed Rights and (2) the denominator of which is the Value of a REIT Share as of the record date; provided, however, that, if any such Distributed Rights expire or become no longer exercisable, then the Adjustment Factor shall be adjusted, effective retroactive to the date of distribution of the Distributed Rights, to reflect a reduced maximum number of REIT Shares or any change in the minimum purchase price for the purposes of the above fractions; and (c) in the event that the General Partner shall, by dividend or otherwise, distribute to all holders of its REIT Shares evidences of its indebtedness or assets (including securities, but excluding any dividend or distribution referred to in subsection (a) above), which evidences of indebtedness or assets relate to assets not received by the General Partner pursuant to a pro rata distribution by the Partnership, then the Adjustment Factor shall be adjusted to equal the amount determined by multiplying the Adjustment Factor in effect immediately prior to the close of business on the date fixed for determination of shareholders entitled to receive such distribution by a fraction, (i) the numerator shall be such Value of a REIT Share on the date fixed for such determination and (ii) the denominator shall be the Value of a REIT Share on the dated fixed for such determination less the then fair market value (as determined by the General Partner, whose determination shall be conclusive) of the portion of the evidences of indebtedness or assets so distributed applicable to one REIT Share. Any adjustments to the Adjustment Factor shall become effective immediately after the effective date of such event, retroactive to the record date, if any, for such event; provided, however, that any Limited Partner may waive, by written notice to the General Partner, the effect of any adjustment to the Adjustment Factor applicable to the Partnership Units held by such Limited Partner, and, thereafter, such adjustment will not be effective as to such Partnership Units. For illustrative purposes, examples of adjustments to the Adjustment Factor are set forth on Exhibit B attached hereto. "AFFILIATE" means, with respect to any Person, any Person directly or indirectly controlling or controlled by or under common control with such Person. For the purposes of this definition, "control" when used with respect to any Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "AGREEMENT" means this Agreement of Limited Partnership of Excel Realty Partners, L.P., as it may be amended, supplemented or restated from time to time. "APPLICABLE PERCENTAGE" has the meaning set forth in Section 8.6.B hereof. 2 8 "APPRAISAL" means, with respect to any assets, the written opinion of an independent third party experienced in the valuation of similar assets, selected by the General Partner in good faith. Such opinion may be in the form of an opinion by such independent third party that the value for such property or asset as set by the General Partner is fair, from a financial point of view, to the Partnership. "ASSIGNEE" means a Person to whom one or more Partnership Units have been Transferred in a manner permitted under this Agreement, but who has not become a Substituted Limited Partner, and who has the rights set forth in Section 11.5 hereof. "AVAILABLE CASH" means, with respect to any period for which such calculation is being made, (a) the sum, without duplication, of: (1) the Partnership's Net Income or Net Loss (as the case may be) for such period, (2) Depreciation and all other noncash charges to the extent deducted in determining Net Income or Net Loss for such period, (3) the amount of any reduction in reserves of the Partnership referred to in clause (b)(6) below (including, without limitation, reductions resulting because the General Partner determines such amounts are no longer necessary), (4) the excess, if any, of the net cash proceeds from the sale, exchange, disposition, financing or refinancing of Partnership property for such period over the gain (or loss, as the case may be) recognized from such sale, exchange, disposition, financing or refinancing during such period (excluding Terminating Capital Transactions), and (5) all other cash received (including amounts previously accrued as Net Income and amounts of deferred income) or any net amounts borrowed by the Partnership for such period that was not included in determining Net Income or Net Loss for such period; (b) less the sum, without duplication, of: (1) all principal debt payments made during such period by the Partnership, (2) capital expenditures made by the Partnership during such period, (3) investments in any entity (including loans made thereto) to the extent that such investments are not otherwise described in clause (b)(1) or clause (b)(2) above, (4) all other expenditures and payments not deducted in determining Net Income or Net Loss for such period (including amounts paid in respect of expenses previously accrued), (5) any amount included in determining Net Income or Net Loss for such period that was not received by the Partnership during such period, 3 9 (6) the amount of any increase in reserves (including, without limitation, working capital reserves) established during such period that the General Partner determines are necessary or appropriate in its sole and absolute discretion, and (7) any amount distributed or paid in redemption of any Limited Partner Interest or Partnership Units pursuant to Section 8.6, Section 8.7 or Section 8.8 hereof, including, without limitation, any Cash Amount paid. Notwithstanding the foregoing, Available Cash shall not include (i) any cash received or reductions in reserves, or take into account any disbursements made, or reserves established, after dissolution and the commencement of the liquidation and winding up of the Partnership or (ii) any Capital Contributions, whenever received. "BUSINESS DAY" means any day except a Saturday, Sunday or other day on which commercial banks in San Diego, California, Los Angeles, California or New York, New York are authorized or required by law to close. "CAPITAL ACCOUNT" means, with respect to any Partner, the Capital Account maintained by the General Partner for such Partner on the Partnership's books and records in accordance with the following provisions: (a) To each Partner's Capital Account, there shall be added such Partner's Capital Contributions, such Partner's distributive share of Net Income and any items in the nature of income or gain that are specially allocated pursuant to Section 6.3 hereof, and the principal amount of any Partnership liabilities assumed by such Partner or that are secured by any property distributed to such Partner. (b) From each Partner's Capital Account, there shall be subtracted the amount of cash and the Gross Asset Value of any property distributed to such Partner pursuant to any provision of this Agreement, such Partner's distributive share of Net Losses and any items in the nature of expenses or losses that are specially allocated pursuant to Section 6.3 hereof, and the principal amount of any liabilities of such Partner assumed by the Partnership or that are secured by any property contributed by such Partner to the Partnership. (c) In the event any interest in the Partnership is Transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent that it relates to the Transferred interest. (d) In determining the principal amount of any liability for purposes of subsections (a) and (b) hereof, there shall be taken into account Code Section 752(c) and any other applicable provisions of the Code and Regulations. (e) The provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulations Sections 1.704-1(b) and 1.704-2, and shall be interpreted and applied in a manner consistent with such Regulations. If the General Partner shall determine that it is prudent to modify the manner in which the Capital Accounts are maintained in order to comply with such Regulations, the General Partner may make such modification provided that such modification will not have a material effect on the amounts distributable to any Partner without such Partner's Consent. The General Partner also shall (i) make any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts of the Partners and the amount of Partnership capital reflected on the Partnership's balance sheet, as computed for book purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q) and (ii) make any appropriate modifications in the event that unanticipated events might otherwise cause this Agreement not to comply with Regulations Section 1.704-1(b) or Section 1.704-2. 4 10 "CAPITAL CONTRIBUTION" means, with respect to any Partner, the amount of money and the initial Gross Asset Value of any Contributed Property that such Partner contributes to the Partnership pursuant to Section 4.1, Section 4.2 or Section 4.4 hereof. "CASH AMOUNT" means the lesser of (a) an amount of cash equal to the product of (i) the Value of a REIT Share and (ii) the REIT Shares Amount determined as of the applicable Valuation Date or (b) in the case of a Declination followed by a Public Offering Funding, the Public Offering Funding Amount. "CERTIFICATE" means the Certificate of Limited Partnership of the Partnership filed in the office of the Secretary of State of the State of Delaware, as amended from time to time in accordance with the terms hereof and the Act. "CHARTER" means the Articles of Incorporation of the General Partner filed with the Maryland State Department of Assessments and Taxation on May 13, 1993, as amended, supplemented or restated from time to time. "CODE" means the Internal Revenue Code of 1986, as amended and in effect from time to time or any successor statute thereto, as interpreted by the applicable Regulations thereunder. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of future law. "CONSENT" means the consent to, approval of, or vote on a proposed action by a Partner given in accordance with Article 14 hereof. "CONSENT OF THE LIMITED PARTNERS" means the Consent of a Majority in Interest of the Limited Partners, which Consent shall be obtained prior to the taking of any action for which it is required by this Agreement and, except as otherwise provided in this Agreement, may be given or withheld by a Majority in Interest of the Limited Partners, in their reasonable discretion. "CONTRIBUTED PROPERTY" means each Property or other asset, in such form as may be permitted by the Act, but excluding cash, contributed or deemed contributed to the Partnership (or deemed contributed to the Partnership on termination and reconstitution thereof pursuant to Code Section 708). "CONTROLLED ENTITY" means, as to any Limited Partner, (a) any corporation more than fifty percent (50%) of the outstanding voting stock of which is owned by such Limited Partner or such Limited Partner's Family Members, (b) any trust, whether or not revocable, of which such Limited Partner or such Limited Partner's Family Members are the sole beneficiaries, (c) any partnership of which such Limited Partner is the managing partner and in which such Limited Partner or such Limited Partner's Family Members hold partnership interests representing at least twenty-five percent (25%) of such partnership's capital and profits and (d) any limited liability company of which such Limited Partner is the manager and in which such Limited Partner or such Limited Partner's Family Members hold membership interests representing at least twenty-five percent (25%) of such limited liability company's capital and profits. "CONTROLLING PERSON" means any Person, whatever his or her title, who performs executive or senior management functions for the General Partner or its Affiliates similar to those of directors, executive management and senior management, or any Person who either holds a two percent (2%) or more equity interest in the General Partner or its Affiliates, or has the power to direct or cause the direction of the General Partner or its Affiliates, whether through the ownership of voting securities, by contract or otherwise, or, in the absence of a specific role or title, any Person having the power to direct or cause the direction of the management-level employees and policies of the General Partner or its Affiliates. It is not intended that every Person who carries a title such as vice president, senior vice president, secretary or treasurer be included in the definition of "Controlling Person." "CUT-OFF DATE" means the twentieth (20th) calendar day (or, if such day is not a Business Day, then the next following Business Day) after the General Partner's receipt of a Notice of Redemption. 5 11 "DEBT" means, as to any Person, as of any date of determination, (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services; (ii) all amounts owed by such Person to banks or other Persons in respect of reimbursement obligations under letters of credit, surety bonds and other similar instruments guaranteeing payment or other performance of obligations by such Person; (iii) all indebtedness for borrowed money or for the deferred purchase price of property or services secured by any lien on any property owned by such Person, to the extent attributable to such Person's interest in such property, even though such Person has not assumed or become liable for the payment thereof; and (iv) lease obligations of such Person that, in accordance with generally accepted accounting principles, should be capitalized. "DECLINATION" has the meaning set forth in Section 8.6.D hereof. "DEPRECIATION" means, for each Fiscal Year or other applicable period, an amount equal to the federal income tax depreciation, amortization or other cost recovery deduction allowable with respect to an asset for such year or other period, except that, if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such year or period, Depreciation shall be in an amount that bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization or other cost recovery deduction for such year or other period bears to such beginning adjusted tax basis; provided, however, that, if the federal income tax depreciation, amortization or other cost recovery deduction for such year or period is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the General Partner. "DESIGNATED PARTIES" means the Persons designated as such on the Partner Schedules then in effect. "DISTRIBUTED RIGHT" has the meaning set forth in the definition of "Adjustment Factor." "EFFECTIVE DATE" has the meaning set forth in the preamble to this Agreement. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. "FAMILY MEMBERS" means, as to a Person that is an individual, (a) such Person's spouse, (b) such Person's ancestors, (c) such Person's descendants (whether by blood or by adoption), (d) such Person's brothers and sisters, (e) inter vivos or testamentary trusts of which only such Person and/or his spouse, ancestors, descendants (whether by blood or by adoption), brothers and/or sisters are beneficiaries and (f) any partnership or limited liability company all of whose partners or members consist of such Person and/or his spouse, ancestors, descendants (whether by blood or by adoption), brothers and/or sisters and/or inter vivos or testamentary trusts of which only such Person and/or his spouse, ancestors, descendants (whether by blood or by adoption), brothers and/or sisters are beneficiaries.. "FISCAL YEAR" means the fiscal year of the Partnership, which shall be the calendar year. "FUNDING DEBT" means any Debt incurred by or on behalf of the General Partner for the purpose of providing funds to the Partnership. "FUNDING NOTICE" has the meaning set forth in Section 4.4.B hereof. "GENERAL PARTNER" means Excel Realty Trust, Inc., a Maryland corporation, and its successors and assigns, as the general partner of the Partnership in their capacities as general partner of the Partnership. 6 12 "GENERAL PARTNER INTEREST" means the Partnership Interest held by the General Partner, which Partnership Interest is an interest as a general partner under the Act. A General Partner Interest may be expressed as a number of Partnership Units. "GENERAL PARTNER LOAN" has the meaning set forth in Section 4.4.C hereof. "GROSS ASSET VALUE" means, with respect to any asset, the asset's adjusted basis for federal income tax purposes, except as follows: (a) The initial Gross Asset Value of any asset contributed by a Limited Partner to the Partnership shall be set forth on the Partner Schedule with respect to such Limited Partner. (b) The Gross Asset Values of all Partnership assets immediately prior to the occurrence of any event described in clause (1), clause (2), clause (3), clause (4) or clause (5) hereof shall be adjusted to equal their respective gross fair market values, as determined by the General Partner using such reasonable method of valuation as it may adopt, as of the following times: (1) the acquisition of an additional interest in the Partnership (other than in connection with the execution of this Agreement but including, without limitation, acquisitions pursuant to Section 4.4 hereof or contributions or deemed contributions by the General Partner pursuant to Section 4.4 hereof) by a new or existing Partner in exchange for more than a de minimis Capital Contribution, if the General Partner reasonably determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Partners in the Partnership; (2) the distribution by the Partnership to a Partner of more than a de minimis amount of Partnership property as consideration for an interest in the Partnership, if the General Partner reasonably determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Partners in the Partnership; (3) the liquidation of the Partnership within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g); (4) upon the admission of a successor General Partner pursuant to Section 12.1 hereof; and (5) at such other times as the General Partner shall reasonably determine necessary or advisable in order to comply with Regulations Sections 1.704-1(b) and 1.704-2. (c) The Gross Asset Value of any Partnership asset distributed to a Partner shall be the gross fair market value of such asset on the date of distribution as determined by the distributee and the General Partner, provided that, if the distributee is the General Partner or if the distributee and the General Partner cannot agree on such a determination, such gross fair market value shall be determined by Appraisal. (d) The Gross Asset Values of Partnership assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m); provided, however, that Gross Asset Values shall not be adjusted pursuant to this subsection (d) to the extent 7 13 that the General Partner reasonably determines that an adjustment pursuant to subsection (b) above is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this subsection (d). (e) If the Gross Asset Value of a Partnership asset has been determined or adjusted pursuant to subsection (a), subsection (b) or subsection (d) above, such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Net Income and Net Losses. "HOLDER" means either (a) a Partner or (b) an Assignee, owning a Partnership Unit, that is treated as a member of the Partnership for federal income tax purposes. "INCAPACITY" or "INCAPACITATED" means, (i) as to any Partner who is an individual, death, total physical disability or entry by a court of competent jurisdiction adjudicating such Partner incompetent to manage his or her person or his or her estate; (ii) as to any Partner that is a corporation or limited liability company, the filing of a certificate of dissolution, or its equivalent, for the corporation or limited liability company or the revocation of its charter; (iii) as to any Partner that is a partnership, the dissolution and commencement of winding up of the partnership; (iv) as to any Partner that is an estate, the distribution by the fiduciary of the estate's entire interest in the Partnership; (v) as to any trustee of a trust that is a Partner, the termination of the trust (but not the substitution of a new trustee); or (vi) as to any Partner, the bankruptcy of such Partner. For purposes of this definition, bankruptcy of a Partner shall be deemed to have occurred when (a) the Partner commences a voluntary proceeding seeking liquidation, reorganization or other relief of or against such Partner under any bankruptcy, insolvency or other similar law now or hereafter in effect, (b) the Partner is adjudged as bankrupt or insolvent, or a final and nonappealable order for relief under any bankruptcy, insolvency or similar law now or hereafter in effect has been entered against the Partner, (c) the Partner executes and delivers a general assignment for the benefit of the Partner's creditors, (d) the Partner files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the Partner in any proceeding of the nature described in clause (b) above, (e) the Partner seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator for the Partner or for all or any substantial part of the Partner's properties, (f) any proceeding seeking liquidation, reorganization or other relief under any bankruptcy, insolvency or other similar law now or hereafter in effect has not been dismissed within one hundred twenty (120) days after the commencement thereof, (g) the appointment without the Partner's consent or acquiescence of a trustee, receiver or liquidator has not been vacated or stayed within ninety (90) days of such appointment, or (h) an appointment referred to in clause (g) above is not vacated within ninety (90) days after the expiration of any such stay. "INDEMNITEE" means (i) any Person made a party to a proceeding by reason of its status as (A) the General Partner or (B) a director of the General Partner or an officer or employee of the Partnership or the General Partner and (ii) such other Persons (including Affiliates of the General Partner or the Partnership) as the General Partner may designate from time to time (whether before or after the event giving rise to potential liability), in its sole and absolute discretion. "INTEREST" means interest, original issue discount and other similar payments or amounts paid by the Partnership for the use or forbearance of money. "IRS" means the Internal Revenue Service, which administers the internal revenue laws of the United States. "LIMITED PARTNER" means any Person named as a Limited Partner in Exhibit A attached hereto, as such Exhibit A may be amended from time to time, or any Substituted Limited Partner or Additional Limited Partner, in such Person's capacity as a Limited Partner in the Partnership. "LIMITED PARTNER INTEREST" means a Partnership Interest of a Limited Partner in the Partnership representing a fractional part of the Partnership Interests of all Limited Partners and includes any and all benefits to which the 8 14 holder of such a Partnership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement. A Limited Partner Interest may be expressed as a number of Partnership Units. "LIQUIDATING EVENT" has the meaning set forth in Section 13.1 hereof. "LIQUIDATOR" has the meaning set forth in Section 13.2.A hereof. "MAJORITY IN INTEREST OF THE LIMITED PARTNERS" means those Limited Partners (other than any Limited Partner fifty percent (50%) or more of whose equity is owned, directly or indirectly, by the General Partner) holding in the aggregate more than fifty percent (50%) of the aggregate Partnership Units of all Limited Partners (other than any Limited Partner fifty percent (50%) or more of whose equity is owned, directly or indirectly, by the General Partner). "NET INCOME" or "NET LOSS" means, for each Fiscal Year of the Partnership, an amount equal to the Partnership's taxable income or loss for such year, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments: (a) Any income of the Partnership that is exempt from federal income tax and not otherwise taken into account in computing Net Income (or Net Loss) pursuant to this definition of "Net Income" or "Net Loss" shall be added to (or subtracted from, as the case may be) such taxable income (or loss); (b) Any expenditure of the Partnership described in Code Section 705(a)(2)(B) or treated as a Code Section 705(a)(2)(B) expenditure pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Net Income (or Net Loss) pursuant to this definition of "Net Income" or "Net Loss," shall be subtracted from (or added to, as the case may be) such taxable income (or loss); (c) In the event that the Gross Asset Value of any Partnership asset is adjusted pursuant to subsection (b) or subsection (c) of the definition of "Gross Asset Value," the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Net Income or Net Loss; (d) Gain or loss resulting from any disposition of property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the property disposed of, notwithstanding that the adjusted tax basis of such property differs from its Gross Asset Value; (e) In lieu of the depreciation, amortization and other cost recovery deductions that would otherwise be taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such Fiscal Year; (f) To the extent that an adjustment to the adjusted tax basis of any Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts as a result of a distribution other than in liquidation of a Partner's interest in the Partnership, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis of the asset) from the disposition of the asset and shall be taken into account for purposes of computing Net Income or Net Loss; and 9 15 (g) Notwithstanding any other provision of this definition of "Net Income" or "Net Loss," any item that is specially allocated pursuant to Section 6.3 hereof shall not be taken into account in computing Net Income or Net Loss. The amounts of the items of Partnership income, gain, loss or deduction available to be specially allocated pursuant to Section 6.3 hereof shall be determined by applying rules analogous to those set forth in this definition of "Net Income" or "Net Loss." "NONRECOURSE DEDUCTIONS" has the meaning set forth in Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Fiscal Year shall be determined in accordance with the rules of Regulations Section 1.704-2(c). "NONRECOURSE LIABILITY" has the meaning set forth in Regulations Section 1.752-1(a)(2). "NOTICE OF REDEMPTION" means the Notice of Redemption substantially in the form of Exhibit C attached to this Agreement. "ORIGINAL LIMITED PARTNERS" means the Persons executing a Partner Schedule together with the General Partner and being admitted to the Partnership either as an initial Limited Partner or as an Additional Limited Partner; provided, however, that "Original Limited Partners" does not include any Assignee or other transferee, including, without limitation, any Substituted Limited Partner succeeding to all or any part of the Partnership Interest of any such Person. The initial Original Limited Partners are listed on Exhibit A attached hereto. "OWNERSHIP LIMIT" means the applicable restriction on ownership of shares of the General Partner imposed under the Charter. "PARTNER" means the General Partner or a Limited Partner, and "PARTNERS" means the General Partner and the Limited Partners. "PARTNER MINIMUM GAIN" means an amount, with respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Regulations Section 1.704-2(i)(3). "PARTNER NONRECOURSE DEBT" has the meaning set forth in Regulations Section 1.704-2(b)(4). "PARTNER NONRECOURSE DEDUCTIONS" has the meaning set forth in Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse Deductions with respect to a Partner Nonrecourse Debt for a Fiscal Year shall be determined in accordance with the rules of Regulations Section 1.704-2(i)(2). "PARTNER SCHEDULE" means a schedule, substantially in the form attached hereto as Exhibit D and executed by the General Partner and a Limited Partner (including any Original Limited Partner and any Substituted Limited Partner), that shall set forth, with respect to a Limited Partner to which Partnership Units are issued pursuant to this Agreement, (a) the Gross Asset Values, as determined by the General Partner and agreed to by the contributing Limited Partner, for any Contributed Properties contributed by such contributing Limited Partner, (b) the initial Partnership Units issued to such Limited Partner, (c) the Preferred Return Per Unit, (d) the Specific Adjustment Factor and (e) any Specific Adjustment Limitations. "PARTNERSHIP" means the limited partnership formed under the Act and pursuant to this Agreement, and any successor thereto. "PARTNERSHIP INTEREST" means an ownership interest in the Partnership representing a Capital Contribution by either a Limited Partner or the General Partner and includes any and all benefits to which the holder of such a Partnership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to 10 16 comply with the terms and provisions of this Agreement. A Partnership Interest may be expressed as a number of Partnership Units. "PARTNERSHIP MINIMUM GAIN" has the meaning set forth in Regulations Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as any net increase or decrease in Partnership Minimum Gain, for a Fiscal Year shall be determined in accordance with the rules of Regulations Section 1.704-2(d). "PARTNERSHIP RECORD DATE" means the record date established by the General Partner for the distribution of Available Cash pursuant to Section 5.1.A hereof, which record date shall generally be the same as the record date established by the General Partner for a distribution to its shareholders of some or all of its portion of such distribution. "PARTNERSHIP UNIT" means a fractional share of the Partnership Interests of all Partners issued pursuant to Section 4.1, Section 4.2 or Section 4.4 hereof; provided, however, that the General Partner Interest and the Limited Partner Interests shall have the differences in rights and privileges as specified in this Agreement. The ownership of Partnership Units may (but need not, in the sole and absolute discretion of the General Partner) be evidenced by the form of certificate for Partnership Units attached hereto as Exhibit E. "PERMITTED TRANSFER" has the meaning set forth in Section 11.3.A hereof. "PERSON" means an individual or a corporation, partnership, trust, unincorporated organization, association, limited liability company or other entity. "PLEDGE" has the meaning set forth in Section 11.3.A hereof. "PREFERRED RETURN PER UNIT" means (a) as to a Limited Partner or its Assignee (including, without limitation, the General Partner following the acquisition of Tendered Units pursuant to Section 8.6 hereof), the amount specified, as an amount distributable quarterly (or upon such other frequency as may be provided in the relevant Partner Schedule) from Available Cash as provided in Section 5.1.1 hereof, as such on the Partner Schedule with respect to such Limited Partner; or (b) in the case of additional Partnership Units issued to the General Partner in exchange for additional Capital Contributions as provided in Section 4.4.D, an amount, distributable quarterly from Available Case as provided in Section 5.1.1 hereof, equal to the then current dividend yield on a REIT Share. The Preferred Return Per Unit need not be the same amount for each Partnership Limited Partner or Assignee or with respect to each Partnership Unit and, being determined with regard to the Partnership's income, shall not constitute a "guaranteed payment" under Code Section 707(c). "PRIMARY OFFERING NOTICE" has the meaning set forth in Section 8.6.F(4) hereof. "PROPERTIES" means any assets and property of the Partnership such as, but not limited to, interests in real property and personal property, including, without limitation, fee interests, interests in ground leases, interests in limited liability companies, joint ventures or partnerships, interests in mortgages, and Debt instruments as the Partnership may hold from time to time. "PUBLIC OFFERING FUNDING" has the meaning set forth in Section 8.6.D(2) hereof. "PUBLIC OFFERING FUNDING AMOUNT" means the dollar amount equal to (i) the product of (x) the number of Registrable Shares sold in a Public Offering Funding and (y) the public offering price per share of such 11 17 Registrable Shares in such Public Offering Funding, less (ii) the aggregate underwriting discounts and commissions in such Public Offering Funding. "QUALIFIED TRANSFEREE" means an "accredited investor" as defined in Rule 501 promulgated under the Securities Act. "QUALIFYING PARTY" means (a) an Original Limited Partner, (b) an Additional Limited Partner (unless otherwise provided in the applicable Partner Schedule), (c) a Designated Party that is either a Substituted Limited Partner or an Assignee, (d) a Family Member, or a lending institution as the pledgee of a Pledge, who is the transferee in a Permitted Transfer or (e) with respect to any Notice of Redemption delivered to the General Partner within the time period set forth in Section 11.3.A(4) hereof, a Substituted Limited Partner succeeding to all or part of the Limited Partner Interest of (i) an Original Limited Partner, (ii) an Additional Limited Partner (unless such Additional Limited Partner was not a Qualifying Party), (iii) a Designated Party that is either a Substituted Limited Partner or an Assignee or (iv) a Family Member, or a lending institution as the pledgee of a Pledge, who is the transferee in a Permitted Transfer. "REDEMPTION" has the meaning set forth in Section 8.6.A hereof. "REDEMPTION AMOUNT" has the meaning set forth in Section 5.1.B hereof. "REGISTRABLE SHARES" has the meaning set forth in Section 8.6.D(2) hereof. "REGULATIONS" means the applicable income tax regulations under the Code, whether such regulations are in proposed, temporary or final form, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). "REGULATORY ALLOCATIONS" has the meaning set forth in Section 6.3.B(h) hereof. "REIT" means a real estate investment trust qualifying under Code Section 856. "REIT PARTNER" means a Partner or Assignee that is, or has made an election to qualify as, a REIT. "REIT PAYMENT" has the meaning set forth in Section 15.11 hereof. "REIT REQUIREMENTS" has the meaning set forth in Section 5.1.A hereof. "REIT SHARE" means a share of the General Partner's Common Stock, par value $.01 per share. "REIT SHARES AMOUNT" means a number of REIT Shares equal to the product of (a) the number of Tendered Units, (b) the Adjustment Factor and (c) the applicable Specific Adjustment Factor, taking into account any applicable Specific Adjustment Limitations; provided, however, that, in the event that the General Partner issues to all holders of REIT Shares as of a certain record date rights, options, warrants or convertible or exchangeable securities entitling the General Partner's shareholders to subscribe for or purchase REIT Shares, or any other securities or property (collectively, the "RIGHTS"), with the record date for such Rights issuance falling within the period starting on the date of the Notice of Redemption and ending on the day immediately preceding the Specified Redemption Date, which Rights will not be distributed before the relevant Specified Redemption Date, then the REIT Shares Amount shall also include such Rights that a holder of that number of REIT Shares would be entitled to receive, expressed, where relevant hereunder, in a number of REIT Shares determined by the General Partner in good faith. "RELATED PARTY" means, with respect to any Person, any other Person whose ownership of shares of the General Partner's capital stock would be attributed to the first such Person under Code Section 544 (as modified by Code Section 856(h)(1)(B)). 12 18 "RIGHTS" has the meaning set forth in the definition of "REIT Shares Amount." "SEC" means the Securities and Exchange Commission. "SECURITIES ACT" means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. "SINGLE FUNDING NOTICE" has the meaning set forth in Section 8.6.D(3) hereof. "SPECIFIC ADJUSTMENT FACTOR" means, as to a Limited Partner or its Assignee, the amount specified as such on the Partner Schedule with respect to such Limited Partner; provided, however, that, if no such amount is specified on such Partner Schedule, the Specific Adjustment Factor shall be 1.0. The Specific Adjustment Factor need not be the same for each Limited Partner and Assignee. "SPECIFIC ADJUSTMENT LIMITATIONS" means, as to a Limited Partner or its Assignee, the limitations and restrictions, if any, specified as such on the Partner Schedule with respect to such Limited Partner. The Specific Adjustment Limitations need not be the same for each Limited Partner and Assignee. "SPECIFIED REDEMPTION DATE" means the later of (a) the thirtieth (30th) calendar day (or, if such day is not a Business Day, the next following Business Day) after the receipt by the General Partner of a Notice of Redemption or (b) in the case of a Declination followed by a Public Offering Funding, the Business Day next following the date of the closing of the Public Offering Funding; provided, however, that no Specified Redemption Date shall occur during the first Twelve-Month Period; provided, further, that the Specified Redemption Date, as well as the closing of a Redemption, or an acquisition of Tendered Units by the General Partner pursuant to Section 8.6.B hereof, on any Specified Redemption Date, may be deferred, in the General Partner's sole and absolute discretion, for such time (but in any event not more than one hundred fifty (150) days in the aggregate) as may reasonably be required to effect, as applicable, (i) a Public Offering Funding or other necessary funding arrangements, (ii) compliance with the Securities Act or other law (including, but not limited to, (a) state "blue sky" or other securities laws and (b) the expiration or termination of the applicable waiting period, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and (iii) satisfaction or waiver of other commercially reasonable and customary closing conditions and requirements for a transaction of such nature. "SUBSIDIARY" means, with respect to any Person, any corporation or other entity of which a majority of (i) the voting power of the voting equity securities or (ii) the outstanding equity interests is owned, directly or indirectly, by such Person; provided, however, that, with respect to the Partnership, "Subsidiary" means solely a partnership or limited liability company (taxed, for federal income tax purposes, as a partnership and not as an association or publicly traded partnership taxable as a corporation) of which the Partnership is a member unless the General Partner has received an unqualified opinion from independent counsel of recognized standing, or a ruling from the IRS, that the ownership of shares of stock of a corporation or other entity will not jeopardize the General Partner's status as a REIT, in which event the term "Subsidiary" shall include the corporation or other entity which is the subject of such opinion or ruling. "SUBSTITUTED LIMITED PARTNER" means an Assignee who is admitted as a Limited Partner to the Partnership pursuant to Section 11.4 hereof. The term "Substituted Limited Partner" shall not include any Additional Limited Partner. "TAX ITEMS" has the meaning set forth in Section 6.4.A hereof. "TENDERED UNITS" has the meaning set forth in Section 8.6.A hereof. "TENDERING PARTY" has the meaning set forth in Section 8.6.A hereof. 13 19 "TERMINATING CAPITAL TRANSACTION" means any sale or other disposition of all or substantially all of the assets of the Partnership or a related series of transactions that, taken together, result in the sale or other disposition of all or substantially all of the assets of the Partnership. "TRANSFER," when used with respect to a Partnership Unit or all or any portion of a Partnership Interest, means any sale, assignment, bequest, conveyance, devise, gift (outright or in trust), Pledge, encumbrance, hypothecation, mortgage, exchange, transfer or other disposition or act of alienation, whether voluntary or involuntary or by operation of law; provided, however, that, when the term is used in Article 11 hereof, Transfer does not include (a) any Redemption of Partnership Units by the Partnership, or acquisition of Tendered Units from the Limited Partners by the General Partner, pursuant to Section 8.6 hereof or (b) any redemption of Partnership Units pursuant to Section 8.7 or Section 8.8 hereof. The terms "Transferred" and "Transferring" have correlative meanings. "TWELVE-MONTH PERIOD" means a twelve-month period (or, as to a particular Qualifying Party, such shorter period as the General Partner may, in its sole and absolute discretion, agree to in the relevant Partner Schedule) ending on the day before the first (1st) anniversary of either (i) the admission of such Qualifying Party as a Limited Partner in the Partnership or (ii) the Transfer of Partnership Units to such Qualifying Party, or on the day before a subsequent anniversary thereof (or, in the case of a period shorter than twelve (12) months, such other period as may be provided in the relevant Partner Schedule). "UNITHOLDER" means the General Partner or a Holder of Partnership Units. "VALUATION DATE" means (a) in the case of a tender of Partnership Units for Redemption, the date of receipt by the General Partner of a Notice of Redemption or, if such date is not a Business Day, the immediately preceding Business Day or (b) in any other case, the date specified in this Agreement. "VALUE" means, on any Valuation Date with respect to a REIT Share, the average of the daily market prices for twenty (20) consecutive trading days immediately preceding the Valuation Date. The market price for any such trading day shall be: (1) if the REIT Shares are listed or admitted to trading on any securities exchange or The Nasdaq Stock Market's National Market System, the closing price, regular way, on such day, or if no such sale takes place on such day, the average of the closing bid and asked prices on such day, in either case as reported in the principal consolidated transaction reporting system, (2) if the REIT Shares are not listed or admitted to trading on any securities exchange or The Nasdaq Stock Market's National Market System, the last reported sale price on such day or, if no sale takes place on such day, the average of the closing bid and asked prices on such day, as reported by a reliable quotation source designated by the General Partner, or (3) if the REIT Shares are not listed or admitted to trading on any securities exchange or The Nasdaq Stock Market's National Market System and no such last reported sale price or closing bid and asked prices are available, the average of the reported high bid and low asked prices on such day, as reported by a reliable quotation source designated by the General Partner, or if there shall be no bid and asked prices on such day, the average of the high bid and low asked prices, as so reported, on the most recent day (not more than ten (10) days prior to the date in question) for which prices have been so reported; provided, however, that, if there are no bid and asked prices reported during the ten (10) days prior to the date in question, the Value of the REIT Shares shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate. In the event that the REIT Shares Amount includes Rights that a holder of REIT Shares would be entitled to receive, then the Value 14 20 of such Rights shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate. ARTICLE 2 ORGANIZATIONAL MATTERS SECTION 2.1 ORGANIZATION The Partnership is a limited partnership organized pursuant to the provisions of the Act and upon the terms and subject to the conditions set forth in this Agreement. Except as expressly provided herein to the contrary, the rights and obligations of the Partners and the administration and termination of the Partnership shall be governed by the Act. The Partnership Interest of each Partner shall be personal property for all purposes. SECTION 2.2 NAME The name of the Partnership is Excel Realty Partners, L.P. The Partnership's business may be conducted under any other name or names deemed advisable by the General Partner, including the name of the General Partner or any Affiliate thereof. The words "Limited Partnership," "L.P.," "Ltd." or similar words or letters shall be included in the Partnership's name where necessary for the purposes of complying with the laws of any jurisdiction that so requires. The General Partner in its sole and absolute discretion may change the name of the Partnership at any time and from time to time and shall notify the Partners of such change in the next regular communication to the Partners. SECTION 2.3 REGISTERED OFFICE AND AGENT; PRINCIPAL OFFICE The address of the registered office of the Partnership in the State of Delaware is located at 32 Loockerman Square, Suite L-100, Dover, Delaware 19901, and the registered agent for service of process on the Partnership in the State of Delaware at such registered office is The Prentice-Hall Corporation System, Inc. The principal office of the Partnership is located at 16955 Via Del Campo, Suite 110, San Diego, California 92127, or such other place as the General Partner may from time to time designate by notice to the Limited Partners. The Partnership may maintain offices at such other place or places within or outside the State of Delaware as the General Partner deems advisable. SECTION 2.4 POWER OF ATTORNEY A. Each Limited Partner and each Assignee hereby irrevocably constitutes and appoints the General Partner, any Liquidator, and authorized officers and attorneys-in-fact of each, and each of those acting singly, in each case with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead to: (1) execute, swear to, seal, acknowledge, deliver, file and record in the appropriate public offices (a) all certificates, documents and other instruments (including, without limitation, this Agreement and the Certificate and all amendments, supplements or restatements thereof) that the General Partner or the Liquidator deems appropriate or necessary to form, qualify or continue the existence or qualification of the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability to the extent provided by applicable law) in the State of Delaware and in all other jurisdictions in which the Partnership may conduct business or own property; (b) all instruments that the General Partner deems appropriate or necessary to reflect any amendment, change, modification or restatement of this Agreement in accordance with its terms; (c) all conveyances and other instruments or documents that the General Partner or the Liquidator 15 21 deems appropriate or necessary to reflect the dissolution and liquidation of the Partnership pursuant to the terms of this Agreement, including, without limitation, a certificate of cancellation; (d) all conveyances and other instruments or documents that the General Partner or the Liquidator deems appropriate or necessary to reflect the distribution or exchange of assets of the Partnership pursuant to the terms of this Agreement; (e) all instruments relating to the admission, withdrawal, removal or substitution of any Partner pursuant to, or other events described in, Article 11, Article 12 or Article 13 hereof or the Capital Contribution of any Partner; and (f) all certificates, documents and other instruments relating to the determination of the rights, preferences and privileges relating to Partnership Interests; and (2) execute, swear to, acknowledge and file all ballots, consents, approvals, waivers, certificates and other instruments appropriate or necessary, in the sole and absolute discretion of the General Partner, to make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action that is made or given by the Partners hereunder or is consistent with the terms of this Agreement or appropriate or necessary, in the sole and absolute discretion of the General Partner, to effectuate the terms or intent of this Agreement. Nothing contained herein shall be construed as authorizing the General Partner to amend this Agreement except in accordance with Article 14 hereof or as may be otherwise expressly provided for in this Agreement. B. The foregoing power of attorney is hereby declared to be irrevocable and a special power coupled with an interest, in recognition of the fact that each of the Limited Partners and Assignees will be relying upon the power of the General Partner to act as contemplated by this Agreement in any filing or other action by it on behalf of the Partnership, and it shall survive and not be affected by the subsequent Incapacity of any Limited Partner or Assignee and the Transfer of all or any portion of such Limited Partner's or Assignee's Partnership Units or Partnership Interest and shall extend to such Limited Partner's or Assignee's heirs, successors, assigns and personal representatives. Each such Limited Partner or Assignee hereby agrees to be bound by any representation made by the General Partner, acting in good faith pursuant to such power of attorney; and each such Limited Partner or Assignee hereby waives any and all defenses that may be available to contest, negate or disaffirm the action of the General Partner, taken in good faith under such power of attorney. Each Limited Partner or Assignee shall execute and deliver to the General Partner or the Liquidator, within fifteen (15) days after receipt of the General Partner's or the Liquidator's request therefor, such further designation, powers of attorney and other instruments as the General Partner or the Liquidator, as the case may be, deems necessary to effectuate this Agreement and the purposes of the Partnership. SECTION 2.5 TERM The term of the Partnership commenced on April 24, 1995, the date that the original Certificate was filed in the office of the Secretary of State of Delaware in accordance with the Act, and shall continue until December 31, 2093 unless the Partnership is dissolved sooner pursuant to the provisions of Article 13 hereof or as otherwise provided by law. ARTICLE 3 PURPOSE SECTION 3.1 PURPOSE AND BUSINESS The purpose and nature of the Partnership is to conduct any business, enterprise or activity permitted by or under the Act, including, but not limited to, (i) to conduct the business of ownership, construction, development and operation of shopping centers or other real estate rental properties, (ii) to enter into any partnership, joint venture, business trust arrangement, limited liability company or other similar arrangement to engage in any business permitted by or under the Act, or to own interests in any entity engaged in any business permitted by or under the Act, and (iii) to do anything necessary or incidental to the foregoing; provided, however, such business and arrangements and interests may be limited to and conducted in such a manner as to permit the General Partner, in its sole and absolute discretion, at all times to be classified as a REIT. 16 22 SECTION 3.2 POWERS A. The Partnership shall be empowered to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of the purposes and business described herein and for the protection and benefit of the Partnership. B. Notwithstanding any other provision in this Agreement, the General Partner may cause the Partnership not to take, or to refrain from taking, any action that, in the judgment of the General Partner, in its sole and absolute discretion, (i) could adversely affect the ability of the General Partner to continue to qualify as a REIT, (ii) could subject the General Partner to any additional taxes under Code Section 857 or Code Section 4981 or (iii) could violate any law or regulation of any governmental body or agency having jurisdiction over the General Partner, its securities or the Partnership, unless such action (or inaction) under clause (i), clause (ii) or clause (iii) above shall have been specifically consented to by the General Partner in writing. SECTION 3.3 PARTNERSHIP ONLY FOR PURPOSES SPECIFIED The Partnership shall be a limited partnership only for the purposes specified in Section 3.1 hereof, and this Agreement shall not be deemed to create a company, venture or partnership between or among the Partners with respect to any activities whatsoever other than the activities within the purposes of the Partnership as specified in Section 3.1 hereof. Except as otherwise provided in this Agreement, no Partner shall have any authority to act for, bind, commit or assume any obligation or responsibility on behalf of the Partnership, its properties or any other Partner. No Partner, in its capacity as a Partner under this Agreement, shall be responsible or liable for any indebtedness or obligation of another Partner, nor shall the Partnership be responsible or liable for any indebtedness or obligation of any Partner, incurred either before or after the execution and delivery of this Agreement by such Partner, except as to those responsibilities, liabilities, indebtedness or obligations incurred pursuant to and as limited by the terms of this Agreement and the Act. SECTION 3.4 REPRESENTATIONS AND WARRANTIES BY THE LIMITED PARTNERS A. Each Limited Partner that is an individual (including, without limitation, each Additional Limited Partner or Substituted Limited Partner as a condition to becoming an Additional Limited Partner or a Substituted Limited Partner) represents and warrants to the Partnership, the General Partner and each other Limited Partner that (i) the consummation of the transactions contemplated by this Agreement to be performed by such Limited Partner will not result in a breach or violation of, or a default under, any material agreement by which such Limited Partner or any of such Limited Partner's property is bound, or any statute, regulation, order or other law to which such Limited Partner is subject, (ii) such Limited Partner is neither a "foreign person" within the meaning of Code Section 1445(f) nor a "foreign partner" within the meaning of Code Section 1446(e), (iii) such Limited Partner does not own, directly or indirectly, (a) nine and eight-tenths percent (9.8%) or more of the total combined voting power of all classes of stock entitled to vote, or nine and eight-tenths percent (9.8%) or more of the total number of shares of all classes of stock, of any corporation that is a tenant of either (I) the General Partner, (II) the Partnership or (III) any partnership, venture or limited liability company of which the General Partner or the Partnership is a member or (b) an interest of nine and eight-tenths percent (9.8%) or more in the assets or net profits of any tenant of either (I) the General Partner, (II) the Partnership or (III) any partnership, venture or limited liability company of which the General Partner or the Partnership is a member and (iv) this Agreement is binding upon, and enforceable against, such Limited Partner in accordance with its terms. B. Each Limited Partner that is not an individual (including, without limitation, each Additional Limited Partner or Substituted Limited Partner as a condition to becoming an Additional Limited Partner or a Substituted Limited Partner) represents and warrants to the Partnership, the General Partner and each other Limited Partner that (i) all transactions contemplated by this Agreement to be performed by it have been duly authorized by all necessary action, including, without limitation, that of its general partner(s), committee(s), trustee(s), beneficiaries, directors and/or shareholder(s), as the case may be, as required, (ii) the consummation of such transactions shall not result in a breach or violation of, or a default under, its partnership or operating agreement, trust agreement, 17 23 charter or bylaws, as the case may be, any material agreement by which such Limited Partner or any of such Limited Partner's properties or any of its partners, members, beneficiaries, trustees or shareholders, as the case may be, is or are bound, or any statute, regulation, order or other law to which such Limited Partner or any of its partners, members, trustees, beneficiaries or shareholders, as the case may be, is or are subject, (iii) such Limited Partner is neither a "foreign person" within the meaning of Code Section 1445(f) nor a "foreign partner" within the meaning of Code Section 1446(e), (iv) such Limited Partner does not own, directly or indirectly, (a) nine and eight-tenths percent (9.8%) or more of the total combined voting power of all classes of stock entitled to vote, or nine and eight-tenths percent (9.8%) or more of the total number of shares of all classes of stock, of any corporation that is a tenant of either (I) the General Partner, (II) the Partnership or (III) any partnership, venture or limited liability company of which the General Partner or the Partnership is a member or (b) an interest of nine and eight-tenths percent (9.8%) or more in the assets or net profits of any tenant of either (I) the General Partner, (II) the Partnership or (III) any partnership, venture or limited liability company of which the General Partner or the Partnership is a member and (v) this Agreement is binding upon, and enforceable against, such Limited Partner in accordance with its terms. C. Each Limited Partner (including, without limitation, each Substituted Limited Partner as a condition to becoming a Substituted Limited Partner) represents, warrants and agrees that it has acquired and continues to hold its interest in the Partnership for its own account for investment only and not for the purpose of, or with a view toward, the resale or distribution of all or any part thereof, nor with a view toward selling or otherwise distributing such interest or any part thereof at any particular time or under any predetermined circumstances. Each Limited Partner further represents and warrants that it is a sophisticated investor, able and accustomed to handling sophisticated financial matters for itself, particularly real estate investments, and that it has a sufficiently high net worth that it does not anticipate a need for the funds that it has invested in the Partnership in what it understands to be a highly speculative and illiquid investment. D. The representations and warranties contained in Sections 3.4.A, 3.4.B and 3.4.C hereof shall survive the execution and delivery of this Agreement by each Limited Partner (and, in the case of an Additional Limited Partner or a Substituted Limited Partner, the admission of such Additional Limited Partner or Substituted Limited Partner as a Limited Partner in the Partnership) and the dissolution, liquidation and termination of the Partnership. The General Partner may, in its sole and absolute discretion on behalf of the Partnership and its Partners, grant waivers and exceptions to the representations and warranties contained in Sections 3.4.A, 3.4.B and 3.4.C hereof, but any such waiver or exception must be in writing, must refer to this Section 3.4.D and must describe with particularity the representation or warranty as to which such waiver or exception shall apply. E. Each Limited Partner (including, without limitation, each Substituted Limited Partner as a condition to becoming a Substituted Limited Partner) hereby acknowledges that no representations as to potential profit, tax consequences of any sort (including, without limitation, the tax consequences resulting from making a Capital Contribution, being admitted to the Partnership or being allocated Tax Items), cash flows, funds from operations or yield, if any, in respect of the Partnership or the General Partner have been made by any Partner or any employee or representative or Affiliate of any Partner, and that projections and any other information, including, without limitation, financial and descriptive information and documentation, that may have been in any manner submitted to such Limited Partner shall not constitute any representation or warranty of any kind or nature, express or implied. ARTICLE 4 CAPITAL CONTRIBUTIONS SECTION 4.1 CAPITAL CONTRIBUTIONS OF THE INITIAL PARTNERS At the time of the execution of this Agreement, each initial Limited Partner shall make the Capital Contribution as set forth in the Partner Schedule for such Partner, and the General Partner shall make the Capital Contribution shown on Exhibit A attached hereto. Each initial Limited Partner shall own Partnership Units in the amount set forth for such Partner in the Partner Schedule with respect to such Partner, as the same may be amended 18 24 from time to time. The General Partner shall initially own Partnership Units in the amount set forth for the General Partner on Exhibit A attached hereto. Except as provided in a particular Partner Schedule, by law or in Section 4.4.D or Section 10.4 hereof, the Partners shall have no obligation or right to make any additional Capital Contributions or loans to the Partnership. SECTION 4.2 ADDITIONAL LIMITED PARTNERS The General Partner is authorized to admit one or more Additional Limited Partners to the Partnership from time to time, on terms and conditions and for such Capital Contributions as may established by the General Partner in its reasonable discretion. No action or consent by the Limited Partners shall be required in connection with the admission of any Additional Limited Partner. In the sole and absolute discretion of the General Partner, the Partnership may acquire in the future additional Properties by means of Capital Contributions by other Persons, which Capital Contributions shall be set forth in one or more Partner Schedules. Persons making such Capital Contributions and executing such Partner Schedules together with the General Partner shall be admitted to the Partnership as Additional Limited Partners, with such number of Partnership Units, Preferred Returns Per Unit, Specific Adjustment Factors and Specific Adjustment Limitations as may be set forth in such Partner Schedules. To the extent that the Partnership acquires in the future any property by the merger of any other Person into the Partnership, Persons who receive Partnership Interests in exchange for their interests in the Person merging into the Partnership shall become Partners and shall be deemed to have made Capital Contributions as provided in the applicable merger agreement and as set forth in one or more Partner Schedules. SECTION 4.3 LOANS BY THIRD PARTIES The Partnership may incur or assume Debt, or enter into other similar credit, guarantee, financing or refinancing arrangements, for any purpose (including, without limitation, in connection with any further acquisition of Properties from any Person), upon such terms as the General Partner determines appropriate; provided, however, that the Partnership shall not incur or assume any Debt under which a breach, violation or default would be deemed to occur by virtue of the Transfer of any Limited Partner Interest or General Partner Interest; provided, further, that any Debt shall be nonrecourse to the General Partner unless the General Partner otherwise agrees. SECTION 4.4 ADDITIONAL FUNDING AND CAPITAL CONTRIBUTIONS A. GENERAL. The General Partner may, at any time and from time to time, determine that the Partnership requires additional funds ("ADDITIONAL FUNDS") for the acquisition or development of additional Properties or for such other purposes as the General Partner may determine. Additional Funds may be raised by the Partnership, at the election of the General Partner, in any manner provided in, and in accordance with, the terms of this Section 4.4 or, alternatively, the terms of Section 4.3 hereof. No Person, including, without limitation, any Partner or Assignee, shall have any preemptive, preferential, participation or similar right or rights to subscribe for or acquire any Partnership Interest. B. NOTICE OF ADDITIONAL FUNDS REQUIREMENT. The General Partner may, but shall not be required to, give written notice (the "FUNDING NOTICE") to the Limited Partners of the need for Additional Funds and the anticipated source(s) thereof. C. GENERAL PARTNER LOANS. Whether or not a Funding Notice is given to the Limited Partners, the General Partner may enter into a Funding Debt (including, but not limited to, a Funding Debt that is convertible into REIT Shares) and lend the Additional Funds to the Partnership (a "GENERAL PARTNER LOAN"). If the General Partner enters into such a Funding Debt, the General Partner Loan will consist of the net proceeds from such Funding Debt and, to the extent permitted by law, will be on the same terms and conditions, including interest rate and repayment schedule, and providing for the reimbursement of costs and expenses, as shall be applicable with respect to or incurred in connection with such Funding Debt. Otherwise, all General Partner Loans made pursuant to this Section 4.4 shall be on terms and conditions no less favorable to the Partnership than would be available to the Partnership from any third party. 19 25 D. ADDITIONAL GENERAL PARTNER CONTRIBUTIONS; ADDITIONAL LIMITED PARTNERS. Whether or not a Funding Notice is given to the Limited Partners, the General Partner on behalf of the Partnership may raise all or any portion of the Additional Funds by making additional Capital Contributions and/or accepting additional Capital Contributions from any other Partners and/or third parties and either (a) in the case of Partners (including the General Partner), increasing such Partner's Partnership Units or (b) in the case of a third party, admitting such third party as an Additional Limited Partner as contemplated by Section 4.2 of this Agreement. Subject to the terms of this Section 4.4 and to the definition of "Gross Asset Value," the General Partner shall determine in good faith the amount, terms and conditions of such additional Capital Contributions; provided, however, that, in the case of an additional Capital Contribution by the General Partner, the Partnership shall issue to the General Partner the number of Partnership Units derived by dividing (1) the amount of the additional Capital Contribution (net of any liabilities assumed or taken subject to by the Partnership) by (2) the Value determined as of the date of such Capital Contribution. SECTION 4.5 NO INTEREST; NO RETURN No Partner shall be entitled to interest on its Capital Contribution or on such Partner's Capital Account. Except as provided herein or by law, no Partner shall have any right to demand or receive the return of its Capital Contribution from the Partnership. ARTICLE 5 DISTRIBUTIONS SECTION 5.1 REQUIREMENT AND CHARACTERIZATION OF DISTRIBUTIONS The General Partner shall cause the Partnership to distribute quarterly (or, with respect to a particular Holder of Partnership Units, in installments upon such other frequency as may be provided in the relevant Partner Schedule) all, or such portion as the General Partner may in its sole and absolute discretion determine, of Available Cash generated by the Partnership during such quarter (or other period) to the Unitholders on the Partnership Record Date with respect to such quarter (or other period) as follows: (1) First, to each Holder of Partnership Units, pari passu, an amount equal to the sum of (a) the product of (i) the Preferred Return Per Unit for such Holder (or its predecessor) for such quarter (or for such other period as provided in the relevant Partner Schedule) and (ii) the number of Partnership Units held by such Holder as of the Partnership Record Date and (b) any unpaid amounts previously distributable to such Holder (or its predecessor) under this Section 5.1.1; provided, however, that, except as may otherwise be provided in a particular Partner Schedule, the amount distributable pursuant to clause (a) to any Additional Limited Partner admitted to the Partnership in the quarter immediately preceding and ending with such Partnership Record Date shall be prorated based on the number of days that such Additional Limited Partner was a Holder of Partnership Units during such quarter; and (2) Second, the balance, (a) ninety-nine percent (99%) to the General Partner and (b) one percent (1%) to the Holders (including, without limitation, the General Partner) in proportion to their Partnership Units as of the Partnership Record Date. The General Partner in its sole and absolute discretion may distribute to the Unitholders Available Cash in accordance with foregoing priorities on a more frequent basis and provide for an appropriate record date. The General Partner shall take such reasonable efforts, as determined by it in its sole and absolute discretion and consistent with the General Partner's qualification as a REIT, to cause the Partnership to distribute sufficient amounts to enable the General Partner to pay shareholder dividends that will (a) satisfy the requirements for qualifying as a REIT under the Code and Regulations (the "REIT REQUIREMENTS") and (b) avoid any federal income or excise tax liability of the General Partner. 20 26 SECTION 5.2 DISTRIBUTIONS IN KIND No right is given to any Unitholder to demand and receive property other than cash as provided in this Agreement. The General Partner may determine, in its sole and absolute discretion, to make a distribution in kind of Partnership assets to the Unitholders, and, subject to Section 8.8 hereof, such assets shall be distributed in such a fashion as to ensure that the fair market value is distributed and allocated in accordance with Articles 5, 6 and 10 hereof. SECTION 5.3 AMOUNTS WITHHELD All amounts withheld pursuant to the Code or any provisions of any state or local tax law and Section 10.4 hereof with respect to any allocation, payment or distribution to any Unitholder shall be treated as amounts paid or distributed to such Unitholder pursuant to Section 5.1 hereof for all purposes under this Agreement. SECTION 5.4 DISTRIBUTIONS UPON LIQUIDATION Notwithstanding the other provisions of this Article 5, net proceeds from a Terminating Capital Transaction, and any other cash received or reductions in reserves made after commencement of the liquidation of the Partnership, shall be distributed to the Unitholders in accordance with Section 13.2 hereof. SECTION 5.5 RESTRICTED DISTRIBUTIONS Notwithstanding any provision to the contrary contained in this Agreement, neither the Partnership nor the General Partner, on behalf of the Partnership, shall make a distribution to any Unitholder on account of its Partnership Interest or interest in Partnership Units if such distribution would violate Section 17-607 of the Act or other applicable law. ARTICLE 6 ALLOCATIONS SECTION 6.1 TIMING AND AMOUNT OF ALLOCATIONS OF NET INCOME AND NET LOSS Net Income and Net Loss of the Partnership shall be determined and allocated with respect to each Fiscal Year of the Partnership as of the end of each such year. Except as otherwise provided in this Article 6, and subject to Section 11.6.C hereof, an allocation to a Unitholder of a share of Net Income or Net Loss shall be treated as an allocation of the same share of each item of income, gain, loss or deduction that is taken into account in computing Net Income or Net Loss. SECTION 6.2 GENERAL ALLOCATIONS Except as otherwise provided in this Article 6 and subject to Section 11.6.C hereof, Net Income and Net Loss shall be allocated as follows: (1) ninety-nine percent (99%) to the General Partner; and (2) one percent (1%) to the Holders of Partnership Units in accordance with their respective Partnership Units at the end of each Fiscal Year. SECTION 6.3 ADDITIONAL ALLOCATION PROVISIONS Notwithstanding the foregoing provisions of this Article 6: 21 27 A. SPECIAL ALLOCATIONS. Gross income and, if necessary, gain shall be allocated to each Holder of Partnership Units for any Fiscal Year (and, if necessary, subsequent Fiscal Years) to the extent that such Holder receives a distribution of the Preferred Return Per Unit pursuant to Section 5.1.1 of this Agreement. B. REGULATORY ALLOCATIONS (a) MINIMUM GAIN CHARGEBACK. Except as otherwise provided in Regulations Section 1.704-2(f), notwithstanding the provisions of Section 6.2 hereof, or any other provision of this Article 6, if there is a net decrease in Partnership Minimum Gain during any Fiscal Year, each Unitholder shall be specially allocated items of Partnership income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Unitholder's share of the net decrease in Partnership Minimum Gain, as determined under Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Unitholder pursuant thereto. The items to be allocated shall be determined in accordance with Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section 6.3.B(a) is intended to qualify as a "minimum gain chargeback" within the meaning of Regulations Section 1.704-2(f) and shall be interpreted consistently therewith. (b) PARTNER MINIMUM GAIN CHARGEBACK. Except as otherwise provided in Regulations Section 1.704-2(i)(4) or in Section 6.3.B(a) hereof, if there is a net decrease in Partner Minimum Gain attributable to a Partner Nonrecourse Debt during any Fiscal Year, each Unitholder who has a share of the Partner Minimum Gain attributable to such Partner Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(5), shall be specially allocated items of Partnership income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Unitholder's share of the net decrease in Partner Minimum Gain attributable to such Partner Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each General Partner, Limited Partner and other Holder pursuant thereto. The items to be so allocated shall be determined in accordance with Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2). This Section 6.3.B(b) is intended to qualify as a "chargeback of partner nonrecourse debt minimum gain" within the meaning of Regulations Section 1.704-2(i) and shall be interpreted consistently therewith. (c) NONRECOURSE DEDUCTIONS AND PARTNER NONRECOURSE DEDUCTIONS. Any Nonrecourse Deductions for any Fiscal Year shall be specially allocated to the Holders of Partnership Units in accordance with their Partnership Units. Any Partner Nonrecourse Deductions for any Fiscal Year shall be specially allocated to the Unitholder(s) who bears the economic risk of loss with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable, in accordance with Regulations Section 1.704-2(i). (d) QUALIFIED INCOME OFFSET. If any Unitholder unexpectedly receives an adjustment, allocation or distribution described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Partnership income and gain shall be allocated, in accordance with Regulations Section 1.704-1(b)(2)(ii)(d), to such Unitholder in an amount and manner sufficient to eliminate, to the extent required by such Regulations, the Adjusted Capital Account Deficit of such Unitholder as quickly as possible, provided that an allocation pursuant to this Section 6.3.B(d) shall be made if and only to the extent that such Unitholder would have an Adjusted Capital Account Deficit after all other allocations provided in this Article 6 have been tentatively made as if this Section 6.3.B(d) were not in the Agreement. It is intended that this Section 6.3.B(d) qualify and be construed as a "qualified income offset" within the meaning of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith. 22 28 (e) GROSS INCOME ALLOCATION. In the event that any Unitholder has a deficit Capital Account at the end of any Fiscal Year that is in excess of the sum of (i) the amount (if any) that such Unitholder is obligated to restore to the Partnership upon complete liquidation of such Unitholder's Partnership Interest and (ii) the amount that such Unitholder is deemed to be obligated to restore pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Unitholder shall be specially allocated items of Partnership income and gain in the amount of such excess to eliminate such deficit as quickly as possible, provided that an allocation pursuant to this Section 6.3.B(e) shall be made if and only to the extent that such Unitholder would have a deficit Capital Account in excess of such sum after all other allocations provided in this Article 6 have been tentatively made as if this Section 6.3.B(e) and Section 6.3.B(d) hereof were not in the Agreement. (f) LIMITATION ON ALLOCATION OF NET LOSS. To the extent that any allocation of Net Loss would cause or increase an Adjusted Capital Account Deficit as to any Holder of Partnership Units, such allocation of Net Loss shall be reallocated among the other Holders of Partnership Units in accordance with their respective Partnership Units, subject to the limitations of this Section 6.3.B(f). (g) SECTION 754 ADJUSTMENT. To the extent that an adjustment to the adjusted tax basis of any Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as the result of a distribution to a Holder of Partnership Units in complete liquidation of its interest in the Partnership, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such gain or loss shall be specially allocated to the Holders in accordance with their Partnership Units in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Holders to whom such distribution was made in the event that Regulations Section 1.704- 1(b)(2)(iv)(m)(4) applies. (h) CURATIVE ALLOCATIONS. The allocations set forth in Sections 6.3.B(a), (b), (c), (d), (e), (f) and (g) hereof (the "REGULATORY ALLOCATIONS") are intended to comply with certain regulatory requirements, including the requirements of Regulations Sections 1.704-1(b) and 1.704-2. Notwithstanding the provisions of Section 6.1 hereof, the Regulatory Allocations shall be taken into account in allocating other items of income, gain, loss and deduction among the Unitholders so that, to the extent possible without violating the requirements giving rise to the Regulatory Allocations, the net amount of such allocations of other items and the Regulatory Allocations to each Unitholder shall be equal to the net amount that would have been allocated to each such Unitholder if the Regulatory Allocations had not occurred. C. SPECIAL ALLOCATIONS UPON LIQUIDATION. Notwithstanding any provision in this Article VI to the contrary, in the event that the Partnership disposes of all or substantially all of its assets in a transaction that will lead to a liquidation of the Partnership pursuant to Article XIII hereof, then any Net Income or Net Loss realized in connection with such transaction and thereafter (and, if necessary, constituent items of income, gain, loss and deduction) shall be specially allocated among the Partners as required so as to cause liquidating distributions pursuant to Section 13.2.A(4) hereof to be made in the same amounts and proportions as would have resulted had such distributions instead been made pursuant to Section 5.1.A hereof. D. ALLOCATION OF EXCESS NONRECOURSE LIABILITIES. For purposes of determining a Holder's proportional share of the "excess nonrecourse liabilities" of the Partnership within the meaning of Regulations Section 1.752- 3(a)(3), each Holder's interest in Partnership profits shall be such Holder's share of Partnership Units. 23 29 SECTION 6.4 TAX ALLOCATIONS A. IN GENERAL. Except as otherwise provided in this Section 6.4, for income tax purposes under the Code and the Regulations each Partnership item of income, gain, loss and deduction (collectively, "TAX ITEMS") shall be allocated among the Unitholders in the same manner as its correlative item of "book" income, gain, loss or deduction is allocated pursuant to Sections 6.2 and 6.3 hereof. B. ALLOCATIONS RESPECTING SECTION 704(c) REVALUATIONS. Notwithstanding Section 6.4.A hereof, Tax Items with respect to Property that is contributed to the Partnership with a Gross Asset Value that varies from its basis in the hands of the contributing Partner immediately preceding the date of contribution shall be allocated among the Unitholders for income tax purposes pursuant to Regulations promulgated under Code Section 704(c) so as to take into account such variation. The Partnership shall account for such variation under any method approved under Code Section 704(c) and the applicable Regulations as chosen by the General Partner, including, without limitation, the "traditional method" as described in Regulations Section 1.704-3(b). In the event that the Gross Asset Value of any Partnership asset is adjusted pursuant to subsection (b) of the definition of "Gross Asset Value" (provided in Article 1 hereof), subsequent allocations of Tax Items with respect to such asset shall take account of the variation, if any, between the adjusted basis of such asset and its Gross Asset Value in the same manner as under Code Section 704(c) and the applicable Regulations. SECTION 6.5 OTHER PROVISIONS A. OTHER ALLOCATIONS UPON CHANGE IN LAW. In the event that the Code or any Regulations require allocations of items of income, gain, loss, deduction or credit different from those set forth in this Article 6, the General Partner is hereby authorized to make new allocations in reliance on the Code and such Regulations, such new allocations shall be deemed to be made pursuant to the fiduciary duty of the General Partner to the Partnership and the other Partners, and no such new allocation shall give rise to any claim or cause of action by any Partner. B. CONSISTENT TAX REPORTING. The Partners acknowledge and are aware of the income tax consequences of the allocations made by this Article 6 and hereby agree to be bound by the provisions of this Article 6 in reporting their shares of Net Income, Net Losses and other items of income, gain, loss, deduction and credit for federal, state and local income tax purposes. ARTICLE 7 MANAGEMENT AND OPERATIONS OF BUSINESS SECTION 7.1 MANAGEMENT A. Except as otherwise expressly provided in this Agreement, all management powers over the business and affairs of the Partnership are and shall be exclusively vested in the General Partner, and no Limited Partner shall have any right to participate in or exercise control or management power over the business and affairs of the Partnership. The General Partner may not be removed by the Partners with or without cause, except with the Consent of the General Partner. In addition to the powers now or hereafter granted a general partner of a limited partnership under applicable law or that are granted to the General Partner under any other provision of this Agreement, the General Partner, subject to the other provisions hereof including Section 7.3, shall have full power and authority to do all things deemed necessary or desirable by it to conduct the business of the Partnership, to exercise all powers set forth in Section 3.2 hereof and to effectuate the purposes set forth in Section 3.1 hereof, including, without limitation: (1) the making of any expenditures, the lending or borrowing of money (including, without limitation, making prepayments on loans and borrowing money to permit the Partnership to make distributions to its Partners in such amounts as will permit the General Partner (so long as the General Partner qualifies as a REIT) to avoid the payment of any federal income tax (including, for this purpose, any excise tax pursuant to Code Section 4981) and to make 24 30 distributions to its shareholders sufficient to permit the General Partner to maintain REIT status or otherwise to satisfy the REIT Requirements), the assumption or guarantee of, or other contracting for, indebtedness and other liabilities, the issuance of evidences of indebtedness (including the securing of same by deed to secure debt, mortgage, deed of trust or other lien or encumbrance on the Partnership's assets) and the incurring of any obligations that it deems necessary for the conduct of the activities of the Partnership; (2) the making of tax, regulatory and other filings, or rendering of periodic or other reports to governmental or other agencies having jurisdiction over the business or assets of the Partnership; (3) the acquisition, sale, transfer, exchange or other disposition of any assets of the Partnership (including, but not limited to, the exercise or grant of any conversion, option, privilege or subscription right or any other right available in connection with any assets at any time held by the Partnership) or the merger, consolidation, reorganization or other combination of the Partnership with or into another entity; (4) the mortgage, pledge, encumbrance or hypothecation of any assets of the Partnership (including, without limitation, any Contributed Property), the use of the assets of the Partnership (including, without limitation, cash on hand) for any purpose consistent with the terms of this Agreement and on any terms that it sees fit, including, without limitation, the financing of the operations and activities of the General Partner, the Partnership or any of the Partnership's Subsidiaries, the lending of funds to other Persons (including, without limitation, the Partnership's Subsidiaries) and the repayment of obligations of the Partnership, its Subsidiaries and any other Person in which it has an equity investment, and the making of capital contributions to and equity investments in the Partnership's Subsidiaries; (5) the management, operation, leasing, landscaping, repair, alteration, demolition, replacement or improvement of any Property, including, without limitation, any Contributed Property, or other asset of the Partnership or any Subsidiary; (6) the negotiation, execution and performance of any contracts, leases, conveyances or other instruments that the General Partner considers useful or necessary to the conduct of the Partnership's operations or the implementation of the General Partner's powers under this Agreement, including contracting with property managers (including, without limitation, as to any Contributed Property or other Property, contracting with the contributing or any other Limited Partner or its Affiliates for property management services), contractors, developers, consultants, accountants, legal counsel, other professional advisors and other agents and the payment of their expenses and compensation out of the Partnership's assets; (7) the distribution of Partnership cash or other Partnership assets in accordance with this Agreement, the holding, management, investment and reinvestment of cash and other assets of the Partnership, and the collection and receipt of revenues, rents and income of the Partnership; (8) the selection and dismissal of employees of the Partnership or the General Partner (including, without limitation, employees having titles or offices such as "president," "vice president," "secretary" and "treasurer"), and agents, outside attorneys, accountants, consultants and contractors of the Partnership or the General Partner and the determination of their compensation and other terms of employment or hiring; (9) the maintenance of such insurance for the benefit of the Partnership and the Partners as it deems necessary or appropriate; 25 31 (10) the formation of, or acquisition of an interest in, and the contribution of property to, any further limited or general partnerships, limited liability companies, joint ventures or other relationships that it deems desirable (including, without limitation, the acquisition of interests in, and the contributions of property to, any Subsidiary and any other Person in which it has an equity investment from time to time); provided, however, that, as long as the General Partner has determined to continue to qualify as a REIT, the General Partner may not engage in any such formation, acquisition or contribution that would cause the General Partner to fail to qualify as a REIT; (11) the control of any matters affecting the rights and obligations of the Partnership, including the settlement, compromise, submission to arbitration or any other form of dispute resolution, or abandonment, of any claim, cause of action, liability, debt or damages, due or owing to or from the Partnership, the commencement or defense of suits, legal proceedings, administrative proceedings, arbitrations or other forms of dispute resolution, and the representation of the Partnership in all suits or legal proceedings, administrative proceedings, arbitrations or other forms of dispute resolution, the incurring of legal expense, and the indemnification of any Person against liabilities and contingencies to the extent permitted by law; (12) the undertaking of any action in connection with the Partnership's direct or indirect investment in any Subsidiary or any other Person (including, without limitation, the contribution or loan of funds by the Partnership to such Persons); (13) the determination of the fair market value of any Partnership property distributed in kind using such reasonable method of valuation as it may adopt, provided that such methods are otherwise consistent with the requirements of this Agreement; (14) the enforcement of any rights against any Partner pursuant to representations, warranties, covenants and indemnities relating to such Partner's contribution of property or assets to the Partnership; (15) the exercise, directly or indirectly, through any attorney-in-fact acting under a general or limited power of attorney, of any right, including the right to vote, appurtenant to any asset or investment held by the Partnership; (16) the exercise of any of the powers of the General Partner enumerated in this Agreement on behalf of or in connection with any Subsidiary of the Partnership or any other Person in which the Partnership has a direct or indirect interest, or jointly with any such Subsidiary or other Person; (17) the exercise of any of the powers of the General Partner enumerated in this Agreement on behalf of any Person in which the Partnership does not have an interest, pursuant to contractual or other arrangements with such Person; (18) the making, execution and delivery of any and all deeds, leases, notes, deeds to secure debt, mortgages, deeds of trust, security agreements, conveyances, contracts, guarantees, warranties, indemnities, waivers, releases or legal instruments or agreements in writing necessary or appropriate in the judgment of the General Partner for the accomplishment of any of the powers of the General Partner enumerated in this Agreement; (19) the issuance of additional Partnership Units, as appropriate and in the General Partner's sole and absolute discretion, in connection with Capital Contributions by Additional 26 32 Limited Partners and additional Capital Contributions by Partners pursuant to Article 4 hereof; and (20) an election to dissolve the Partnership pursuant to Section 13.1.C hereof. B. Each of the Limited Partners agrees that, except as provided in Section 7.3 hereof, the General Partner is authorized to execute, deliver and perform the above-mentioned agreements and transactions on behalf of the Partnership without any further act, approval or vote of the Partners, notwithstanding any other provision of this Agreement (except as provided in Section 7.3 hereof), the Act or any applicable law, rule or regulation. The execution, delivery or performance by the General Partner or the Partnership of any agreement authorized or permitted under this Agreement shall not constitute a breach by the General Partner of any duty that the General Partner may owe the Partnership or the Limited Partners or any other Persons under this Agreement or of any duty stated or implied by law or equity. C. At all times from and after the date hereof, the General Partner may cause the Partnership to obtain and maintain (i) casualty, liability and other insurance on the Properties of the Partnership and (ii) liability insurance for the Indemnitees hereunder. D. At all times from and after the date hereof, the General Partner may cause the Partnership to establish and maintain working capital and other reserves in such amounts as the General Partner, in its sole and absolute discretion, deems appropriate and reasonable from time to time. E. In exercising its authority under this Agreement, the General Partner may, but shall be under no obligation to, take into account the tax consequences to any Partner (including the General Partner) of any action taken by it. The General Partner and the Partnership shall not have liability to a Limited Partner under any circumstances as a result of an income tax liability incurred by such Limited Partner as a result of an action (or inaction) by the General Partner pursuant to its authority under this Agreement so long as the action or inaction is taken in good faith. SECTION 7.2 CERTIFICATE OF LIMITED PARTNERSHIP To the extent that such action is determined by the General Partner to be reasonable and necessary or appropriate, the General Partner shall file amendments to and restatements of the Certificate and do all the things to maintain the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) under the laws of the State of Delaware and each other state, the District of Columbia or any other jurisdiction in which the Partnership may elect to do business or own property. Subject to the terms of Section 8.5.A(4) hereof, the General Partner shall not be required, before or after filing, to deliver or mail a copy of the Certificate or any amendment thereto to any Limited Partner. The General Partner shall use all reasonable efforts to cause to be filed such other certificates or documents as may be reasonable and necessary or appropriate for the formation, continuation, qualification and operation of a limited partnership (or a partnership in which the limited partners have limited liability to the extent provided by applicable law) in the State of Delaware and any other state, or the District of Columbia or other jurisdiction in which the Partnership may elect to do business or own property. SECTION 7.3 RESTRICTIONS ON GENERAL PARTNER'S AUTHORITY A. The General Partner may not take any action in contravention of this Agreement. Specifically (but without limitation), the General Partner may not: (1) take any action that would make it impossible to carry on the ordinary business of the Partnership, except as otherwise provided in this Agreement; (2) possess Partnership property, or assign any rights in specific Partnership property, for other than a Partnership purpose except as otherwise provided in this Agreement; 27 33 (3) admit a Person as a Partner, except as otherwise provided in this Agreement; (4) perform any act that would subject a Limited Partner to liability as a general partner in any jurisdiction or any other liability except as provided herein or under the Act; or (5) enter into any contract, mortgage, loan or other agreement that prohibits or restricts, or has the effect of prohibiting or restricting, the ability of (a) the General Partner or the Partnership from satisfying its obligations under Section 8.6 hereof in full or (b) a Limited Partner from exercising its rights under Section 8.6 hereof to effect a Redemption in full, except, in either case, with the written consent of such Limited Partner affected by the prohibition or restriction. B. The General Partner shall not, without the prior Consent of the Limited Partners, undertake, on behalf of the Partnership, any of the following actions or enter into any transaction that would have the effect of such transactions: (1) except as provided in Section 7.3.C hereof, amend, modify or terminate this Agreement other than to reflect the admission, substitution, termination or withdrawal of Partners pursuant to Article 11 or Article 12 hereof; (2) make a general assignment for the benefit of creditors or appoint or acquiesce in the appointment of a custodian, receiver or trustee for all or any part of the assets of the Partnership; (3) institute any proceeding for bankruptcy on behalf of the Partnership; or (4) subject to the rights of Transfer provided in Section 11.2 hereof, approve or acquiesce to the Transfer of the Partnership Interest of the General Partner, or admit into the Partnership any additional or successor General Partners. C. Notwithstanding Section 7.3.B hereof, the General Partner shall have the power, without the Consent of the Limited Partners, to amend this Agreement as may be required to facilitate or implement any of the following purposes: (1) to add to the obligations of the General Partner or surrender any right or power granted to the General Partner or any Affiliate of the General Partner for the benefit of the Limited Partners; (2) to reflect the admission, substitution or withdrawal of Partners or the termination of the Partnership in accordance with this Agreement, and to amend Exhibit A in connection with such admission, substitution or withdrawal; (3) to reflect a change that is of an inconsequential nature and does not adversely affect the Limited Partners in any material respect, or to cure any ambiguity, correct or supplement any provision in this Agreement not inconsistent with law or with other provisions, or make other changes with respect to matters arising under this Agreement that will not be inconsistent with law or with the provisions of this Agreement; (4) to satisfy any requirements, conditions or guidelines contained in any order, directive, opinion, ruling or regulation of a federal or state agency or contained in federal or state law; (5) to reflect such changes as are reasonably necessary for the General Partner to maintain its status as a REIT or to satisfy the REIT Requirements; and 28 34 (6) to modify the manner in which Capital Accounts are computed (but only to the extent set forth in the definition of "Capital Account" or contemplated by the Code or the Regulations). The General Partner will provide notice to the Limited Partners when any action under this Section 7.3.C is taken. D. Notwithstanding Section 7.3.B and 7.3.C hereof, this Agreement shall not be amended, and no action may be taken by the General Partner, without the Consent of each Partner adversely affected, if such amendment or action would (i) convert a Limited Partner Interest in the Partnership into a General Partner Interest (except as a result of the General Partner acquiring such Partnership Interest), (ii) modify the limited liability of a Limited Partner, (iii) alter rights of the Partner to receive distributions pursuant to Article 5 or Section 13.2.A(4) hereof, or the allocations specified in Article 6 hereof (except in any case as permitted pursuant to Sections 4.4 and 7.3.C hereof), (iv) alter or modify the Redemption rights, Cash Amount or REIT Shares Amount as set forth in Sections 8.6 and 11.2 hereof, or amend or modify any related definitions, or (v) amend this Section 7.3.D. Further, no amendment may alter the restrictions on the General Partner's authority set forth elsewhere in this Section 7.3 without the Consent specified therein. Any such amendment or action consented to by any Partner shall be effective as to that Partner, notwithstanding the absence of such consent by any other Partner. SECTION 7.4 REIMBURSEMENT OF THE GENERAL PARTNER A. The General Partner shall not be compensated for its services as general partner of the Partnership except as provided elsewhere in this Agreement (including the provisions of Articles 5 and 6 hereof regarding distributions, payments and allocations to which it may be entitled in its capacity as the General Partner). B. Subject to Sections 7.4.C and 15.11 hereof, the Partnership shall be liable, and shall reimburse the General Partner on a monthly basis (or such other basis as the General Partner may determine in its sole and absolute discretion), for all sums expended in connection with the Partnership's business. Any such reimbursements shall be in addition to any reimbursement of the General Partner as a result of indemnification pursuant to Section 7.7 hereof. C. To the extent practicable, Partnership expenses shall be billed directly to and paid by the Partnership. Subject to Section 15.11 hereof, reimbursements to the General Partner or any of its Affiliates by the Partnership shall be allowed, however, for the actual cost to the General Partner or any of its Affiliates of operating and other expenses of the Partnership, including, without limitation, the actual cost of goods, materials and administrative services related to (i) Partnership operations, (ii) Partnership accounting, (iii) communications with Partners, (iv) legal services, (v) tax services, (vi) computer services, (vii) risk management, (viii) mileage and travel expenses and (ix) such other related operational and administrative expenses as are necessary for the prudent organization and operation of the Partnership. "Actual cost of goods and materials" means the actual cost to the General Partner or any of its Affiliates of goods and materials used for or by the Partnership obtained from entities not affiliated with the General Partner, and "actual cost of administrative services" means the pro rata cost of personnel (as if such persons were employees of the Partnership) providing administrative services to the Partnership. The cost for such services to be reimbursed to the General Partner or any Affiliate thereof shall be the lesser of the General Partner's or Affiliate's actual cost, or the amount the Partnership would be required to pay to independent parties for comparable administrative services in the same geographic location. Notwithstanding the foregoing, the Partner ship shall not reimburse the General Partner or any Affiliate thereof under this Section 7.4 for: (1) Any rent, depreciation, utilities or other administrative items generally constituting the General Partner's or Affiliate's overhead; or (2) Any of the salaries or fringe benefits incurred or allocated to any Controlling Person of any General Partner or any Affiliate thereof. Subject to Section 15.11 hereof, reimbursements to the General Partner or any of its Affiliates by the Partnership pursuant to this Section 7.4 shall be treated as "guaranteed payments" within the meaning of Code Section 707(c). 29 35 SECTION 7.5 OTHER BUSINESS OF GENERAL PARTNER The General Partner may engage independently or with others in other business ventures of every nature and description, including, without limitation, the ownership of other properties and the making or management of other investments. Nothing in this Agreement shall be deemed to prohibit the General Partner or any Affiliate of the General Partner from dealing, or otherwise engaging in business with, Persons transacting business with the Partnership, or from providing services related to the purchase, sale, financing, management, development or operation of real or personal property and receiving compensation therefor, not involving any rebate or reciprocal arrangement that would have the effect of circumventing any restriction set forth herein upon dealings with the General Partner or any Affiliate of the General Partner. Neither the Partnership nor any Partner shall have any right by virtue of this Agreement or the Partnership relationship created hereby in or to such other ventures or activities or to the income or proceeds derived therefrom, and the pursuit of such ventures, even if competitive with the business of the Partnership, shall not be deemed wrongful or improper. SECTION 7.6 CONTRACTS WITH AFFILIATES A. The Partnership may lend or contribute funds or other assets to its Subsidiaries or other Persons in which it has an equity investment, and such Persons may borrow funds from the Partnership, on terms and conditions established in the sole and absolute discretion of the General Partner. The foregoing authority shall not create any right or benefit in favor of any Subsidiary or any other Person. B. The Partnership may transfer assets to joint ventures, limited liability companies, partnerships, corporations, business trusts or other business entities in which it is or thereby becomes a participant upon such terms and subject to such conditions consistent with this Agreement and applicable law as the General Partner, in its sole and absolute discretion, believes to be advisable. C. Except as expressly permitted by this Agreement, neither the General Partner nor any of its Affiliates shall sell, transfer or convey any property to the Partnership, directly or indirectly, except pursuant to transactions that are determined by the General Partner in good faith to be fair and reasonable. D. The General Partner is expressly authorized to enter into, in the name and on behalf of the Partnership, a right of first opportunity arrangement and other conflict avoidance agreements with various Affiliates of the Partnership and the General Partner, on such terms as the General Partner, in its sole and absolute discretion, believes are advisable. SECTION 7.7 INDEMNIFICATION A. To the fullest extent permitted by applicable law, the Partnership shall indemnify each Indemnitee from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including, without limitation, attorney's fees and other legal fees and expenses), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, that relate to the operations of the Partnership ("ACTIONS") as set forth in this Agreement in which such Indemnitee may be involved, or is threatened to be involved, as a party or otherwise; provided, however, that the Partnership shall not indemnify an Indemnitee (i) for willful misconduct or a knowing violation of the law or (ii) for any transaction for which such Indemnitee received an improper personal benefit in violation or breach of any provision of this Agreement. Without limitation, the foregoing indemnity shall extend to any liability of any Indemnitee, pursuant to a loan guaranty or otherwise, for any indebtedness of the Partnership or any Subsidiary of the Partnership (including, without limitation, any indebtedness which the Partnership or any Subsidiary of the Partnership has assumed or taken subject to), and the General Partner is hereby authorized and empowered, on behalf of the Partnership, to enter into one or more indemnity agreements consistent with the provisions of this Section 7.7 in favor of any Indemnitee having or potentially having liability for any such indebtedness. It is the intention of this Section 7.7.A that the Partnership indemnify each Indemnitee to the fullest extent permitted by law. The termination of any proceeding by judgment, order or settlement does not create a presumption that the Indemnitee 30 36 did not meet the requisite standard of conduct set forth in this Section 7.7.A. The termination of any proceeding by conviction of an Indemnitee or upon a plea of nolo contendere or its equivalent by an Indemnitee, or an entry of an order of probation against an Indemnitee prior to judgment, does not create a presumption that such Indemnitee acted in a manner contrary to that specified in this Section 7.7.A with respect to the subject matter of such proceeding. Any indemnification pursuant to this Section 7.7 shall be made only out of the assets of the Partnership, and neither the General Partner nor any Limited Partner shall have any obligation to contribute to the capital of the Partnership or otherwise provide funds to enable the Partnership to fund its obligations under this Section 7.7. B. To the fullest extent permitted by law, expenses incurred by an Indemnitee who is a party to a proceeding or otherwise subject to or the focus of or is involved in any Action shall be paid or reimbursed by the Partnership as incurred by the Indemnitee in advance of the final disposition of the Action upon receipt by the Partnership of (i) a written affirmation by the Indemnitee of the Indemnitee's good faith belief that the standard of conduct necessary for indemnification by the Partnership as authorized in this Section 7.7.A has been met, and (ii) a written undertaking by or on behalf of the Indemnitee to repay the amount if it shall ultimately be determined that the standard of conduct has not been met. C. The indemnification provided by this Section 7.7 shall be in addition to any other rights to which an Indemnitee or any other Person may be entitled under any agreement, pursuant to any vote of the Partners, as a matter of law or otherwise, and shall continue as to an Indemnitee who has ceased to serve in such capacity and shall inure to the benefit of the heirs, successors, assigns and administrators of the Indemnitee unless otherwise provided in a written agreement with such Indemnitee or in the writing pursuant to which such Indemnitee is indemnified. D. The Partnership may, but shall not be obligated to, purchase and maintain insurance, on behalf of any of the Indemnitees and such other Persons as the General Partner shall determine, against any liability that may be asserted against or expenses that may be incurred by such Person in connection with the Partnership's activities, regardless of whether the Partnership would have the power to indemnify such Person against such liability under the provisions of this Agreement. E. Any liabilities which an Indemnitee incurs as a result of acting on behalf of the Partnership or the General Partner (whether as a fiduciary or otherwise) in connection with the operation, administration or maintenance of an employee benefit plan or any related trust or funding mechanism (whether such liabilities are in the form of excise taxes assessed by the IRS, penalties assessed by the Department of Labor, restitutions to such a plan or trust or other funding mechanism or to a participant or beneficiary of such plan, trust or other funding mechanism, or otherwise) shall be treated as liabilities or judgments or fines under this Section 7.7, unless such liabilities arise as a result of (i) such Indemnitee's intentional misconduct or knowing violation of the law, or (ii) any transaction in which such Indemnitee received a personal benefit in violation or breach of any provision of this Agreement or applicable law. F. In no event may an Indemnitee subject any of the Partners to personal liability by reason of the indemnification provisions set forth in this Agreement. G. An Indemnitee shall not be denied indemnification in whole or in part under this Section 7.7 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement. H. The provisions of this Section 7.7 are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons. Any amendment, modification or repeal of this Section 7.7 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the Partnership's liability to any Indemnitee under this Section 7.7 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating 31 37 to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted. I. It is the intent of the Partners that any amounts paid by the Partnership to the General Partner pursuant to this Section 7.7 shall be treated as "guaranteed payments" within the meaning of Code Section 707(c). SECTION 7.8 LIABILITY OF THE GENERAL PARTNER A. Notwithstanding anything to the contrary set forth in this Agreement, neither the General Partner nor any of its directors or officers shall be liable or accountable in damages or otherwise to the Partnership, any Partners or any Assignees for losses sustained, liabilities incurred or benefits not derived as a result of errors in judgment or mistakes of fact or law or of any act or omission if the General Partner or such director or officer acted in good faith. B. The Limited Partners expressly acknowledge that the General Partner is acting for the benefit of the Partnership, the Limited Partners and the General Partner's shareholders collectively and that the General Partner is under no obligation to give priority to the separate interests of the Limited Partners or the General Partner's shareholders (including, without limitation, the tax consequences to Limited Partners, Assignees or the General Partner's shareholders) in deciding whether to cause the Partnership to take (or decline to take) any actions. C. Subject to its obligations and duties as General Partner set forth in Section 7.1.A hereof, the General Partner may exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its employees or agents (subject to the supervision and control of the General Partner). The General Partner shall not be responsible for any misconduct or negligence on the part of any such agent appointed by it in good faith. D. Any amendment, modification or repeal of this Section 7.8 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the General Partner's, and its officers' and directors', liability to the Partnership and the Limited Partners under this Section 7.8 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted. E. Notwithstanding anything herein to the contrary, except for fraud, willful misconduct or gross negligence, or pursuant to any express indemnities given to the Partnership by any Partner pursuant to any other written instrument, no Partner shall have any personal liability whatsoever, to the Partnership or to the other Partner(s), for the debts or liabilities of the Partnership or the Partnership's obligations hereunder, and the full recourse of the other Partner(s) shall be limited to the interest of that Partner in the Partnership. To the fullest extent permitted by law, no officer, director or shareholder of the General Partner shall be liable to the Partnership for money damages except for (i) active and deliberate dishonesty established by a non-appealable final judgment or (ii) actual receipt of an improper benefit or profit in money, property or services. Without limitation of the foregoing, and except for fraud, willful misconduct or gross negligence, or pursuant to any such express indemnity, no property or assets of any Partner, other than its interest in the Partnership, shall be subject to levy, execution or other enforcement procedures for the satisfaction of any judgment (or other judicial process) in favor of any other Partner(s) and arising out of, or in connection with, this Agreement. This Agreement is executed by the officers of the General Partner solely as officers of the same and not in their own individual capacities. F. To the extent that, at law or in equity, the General Partner has duties (including fiduciary duties) and liabilities relating thereto to the Partnership or the Limited Partners, the General Partner shall not be liable to the Partnership or to any other Partner for its good faith reliance on the provisions of this Agreement. The provisions of this Agreement, to the extent that they restrict the duties and liabilities of the General Partner otherwise existing at law or in equity, are agreed by the Partners to replace such other duties and liabilities of such General Partner. 32 38 SECTION 7.9 OTHER MATTERS CONCERNING THE GENERAL PARTNER A. The General Partner may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture or other paper or document believed by it in good faith to be genuine and to have been signed or presented by the proper party or parties. B. The General Partner may consult with legal counsel, accountants, appraisers, management consultants, investment bankers, architects, engineers, environmental consultants and other consultants and advisers selected by it, and any act taken or omitted to be taken in reliance upon the opinion of such Persons as to matters that the General Partner reasonably believes to be within such Person's professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion. C. The General Partner shall have the right, in respect of any of its powers or obligations hereunder, to act through any of its duly authorized officers and a duly appointed attorney or attorneys-in-fact. Each such attorney shall, to the extent provided by the General Partner in the power of attorney, have full power and authority to do and perform all and every act and duty that is permitted or required to be done by the General Partner hereunder. D. Notwithstanding any other provisions of this Agreement or the Act, any action of the General Partner on behalf of the Partnership or any decision of the General Partner to refrain from acting on behalf of the Partnership, undertaken in the good faith belief that such action or omission is necessary or advisable in order (i) to protect the ability of the General Partner to continue to qualify as a REIT, (ii) for the General Partner otherwise to satisfy the REIT Requirements or (iii) to avoid the General Partner incurring any taxes under Code Section 857 or Code Section 4981, is expressly authorized under this Agreement and is deemed approved by all of the Limited Partners. SECTION 7.10 TITLE TO PARTNERSHIP ASSETS Title to Partnership assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partner, individually or collectively with other Partners or Persons, shall have any ownership interest in such Partnership assets or any portion thereof. Title to any or all of the Partnership assets may be held in the name of the Partnership, the General Partner or one or more nominees, as the General Partner may determine, including Affiliates of the General Partner. The General Partner hereby declares and warrants that any Partnership assets for which legal title is held in the name of the General Partner or any nominee or Affiliate of the General Partner shall be held by the General Partner for the use and benefit of the Partnership in accordance with the provisions of this Agreement; provided, however, that the General Partner shall use its best efforts to cause beneficial and record title to such assets to be vested in the Partnership as soon as reasonably practicable. All Partnership assets shall be recorded as the property of the Partnership in its books and records, irrespective of the name in which legal title to such Partnership assets is held. SECTION 7.11 RELIANCE BY THIRD PARTIES Notwithstanding anything to the contrary in this Agreement, any Person dealing with the Partnership shall be entitled to assume that the General Partner has full power and authority, without the consent or approval of any other Partner or Person, to encumber, sell or otherwise use in any manner any and all assets of the Partnership and to enter into any contracts on behalf of the Partnership, and take any and all actions on behalf of the Partnership, and such Person shall be entitled to deal with the General Partner as if it were the Partnership's sole party in interest, both legally and beneficially. Each Limited Partner hereby waives any and all defenses or other remedies that may be available against such Person to contest, negate or disaffirm any action of the General Partner in connection with any such dealing. In no event shall any Person dealing with the General Partner or its representatives be obligated to ascertain that the terms of this Agreement have been complied with or to inquire into the necessity or expediency of any act or action of the General Partner or its representatives. Each and every certificate, document or other instrument executed on behalf of the Partnership by the General Partner or its 33 39 representatives shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (i) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect, (ii) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Partnership and (iii) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Partnership. ARTICLE 8 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS SECTION 8.1 LIMITATION OF LIABILITY The Limited Partners shall have no liability under this Agreement except as expressly provided in this Agreement (including, without limitation, Section 10.4 hereof) or under the Act. SECTION 8.2 MANAGEMENT OF BUSINESS No Limited Partner or Assignee (other than the General Partner, any of its Affiliates or any officer, director, member, employee, partner, agent or trustee of the General Partner, the Partnership or any of their Affiliates, in their capacity as such) shall take part in the operations, management or control (within the meaning of the Act) of the Partnership's business, transact any business in the Partnership's name or have the power to sign documents for or otherwise bind the Partnership. The transaction of any such business by the General Partner, any of its Affiliates or any officer, director, member, employee, partner, agent, representative, or trustee of the General Partner, the Partnership or any of their Affiliates, in their capacity as such, shall not affect, impair or eliminate the limitations on the liability of the Limited Partners or Assignees under this Agreement. SECTION 8.3 OUTSIDE ACTIVITIES OF LIMITED PARTNERS Subject to any agreements entered into pursuant to Section 7.6.D hereof and any other agreements entered into by a Limited Partner or its Affiliates with the General Partner, the Partnership or a Subsidiary (including, without limitation, any employment agreement), any Limited Partner and any Assignee, officer, director, employee, agent, trustee, Affiliate or shareholder of any Limited Partner shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including business interests and activities that are in direct or indirect competition with the Partnership or that are enhanced by the activities of the Partnership. Neither the Partnership nor any Partners shall have any rights by virtue of this Agreement in any business ventures of any Limited Partner or Assignee. Subject to such agreements, none of the Limited Partners nor any other Person shall have any rights by virtue of this Agreement or the partnership relationship established hereby in any business ventures of any other Person (other than the General Partner, to the extent expressly provided herein), and such Person shall have no obligation pursuant to this Agreement, subject to Section 7.6.D hereof and any other agreements entered into by a Limited Partner or its Affiliates with the General Partner, the Partnership or a Subsidiary, to offer any interest in any such business ventures to the Partnership, any Limited Partner or any such other Person, even if such opportunity is of a character that, if presented to the Partnership, any Limited Partner or such other Person, could be taken by such Person. SECTION 8.4 RETURN OF CAPITAL Except pursuant to the rights of Redemption set forth in Section 8.6 hereof, no Limited Partner shall be entitled to the withdrawal or return of its Capital Contribution, except to the extent of distributions made pursuant to this Agreement or upon termination of the Partnership as provided herein. Except to the extent provided in Article 6 hereof or otherwise expressly provided in this Agreement, no Limited Partner or Assignee shall have priority over any other Limited Partner or Assignee either as to the return of Capital Contributions or as to profits, losses or distributions. 34 40 SECTION 8.5 RIGHTS OF LIMITED PARTNERS RELATING TO THE PARTNERSHIP A. In addition to other rights provided by this Agreement or by the Act, and except as limited by Section 8.5.C hereof, each Limited Partner shall have the right, for a purpose reasonably related to such Limited Partner's interest as a limited partner in the Partnership, upon written demand with a statement of the purpose of such demand and at such Limited Partner's own expense: (1) to obtain a copy of (i) the most recent annual and quarterly reports filed with the SEC by the General Partner pursuant to the Exchange Act and (ii) each report or other written communication sent to the shareholders of the General Partner; (2) to obtain a copy of the Partnership's federal, state and local income tax returns for each Fiscal Year; (3) to obtain a current list of the name and last known business, residence or mailing address of each Partner; (4) to obtain a copy of this Agreement and the Certificate and all amendments thereto, together with executed copies of all powers of attorney pursuant to which this Agreement, the Certificate and all amendments thereto have been executed; and (5) to obtain true and full information regarding the amount of cash and a description and statement of any other property or services contributed by each Partner and that each Partner has agreed to contribute in the future, and the date on which each became a Partner. B. On written request, the Partnership shall notify any Limited Partner that is a Qualifying Party of the then current Adjustment Factor or any change made to the Adjustment Factor or to the REIT Shares Amount, Preferred Return Per Unit or Specific Adjustment Factor applicable to such Limited Partner. C. Notwithstanding any other provision of this Section 8.5, the General Partner may keep confidential from the Limited Partners, for such period of time as the General Partner determines in its sole and absolute discretion to be reasonable, any information that (i) the General Partner believes to be in the nature of trade secrets or other information the disclosure of which the General Partner in good faith believes is not in the best interests of the Partnership or the General Partner or (ii) the Partnership or the General Partner is required by law or by agreements with unaffiliated third parties to keep confidential. SECTION 8.6 REDEMPTION RIGHTS OF QUALIFYING PARTIES A. After the first Twelve-Month Period (or such shorter or longer period as may be provided in a particular Partner Schedule), a Qualifying Party, but no other Limited Partner or Assignee, shall have the right (subject to the terms and conditions set forth herein) to require the Partnership to redeem all or a portion of the Partnership Units held by such Tendering Party (such Partnership Units being hereafter called "TENDERED UNITS") in exchange (a "REDEMPTION") for the Cash Amount payable on the Specified Redemption Date. Any Redemption shall be exercised pursuant to a Notice of Redemption delivered to the General Partner by the Qualifying Party when exercising the Redemption right (the "TENDERING PARTY"). The Partnership's obligation to effect a Redemption, however, shall not arise or be binding against the Partnership (i) until and unless there has been a Declination and (ii) before the first Business Day following the Cut-Off Date. Regardless of the binding or non-binding nature of a pending Redemption, a Tendering Party shall have no right to receive distributions with respect to any Tendered Units (other than the Cash Amount) paid after delivery of the Notice of Redemption, whether or not the Partnership Record Date for such distribution precedes or coincides with such delivery of the Notice of Redemption. In the event of a Redemption, the Cash Amount shall be delivered as a certified check payable to the Tendering Party or, in the General Partner's sole and discretion, in immediately available funds. 35 41 B. Notwithstanding the provisions of Section 8.6.A hereof, on or before the close of business on the CutOff Date, the General Partner may, in its sole and absolute discretion but subject to the Ownership Limit and the transfer restrictions and other limitations of the Charter, elect to acquire some or all (such percentage being referred to as the "APPLICABLE PERCENTAGE") of the Tendered Units from the Tendering Party in exchange for REIT Shares. If the General Partner so elects, on the Specified Redemption Date the Tendering Party shall sell such number of the Tendered Units to the General Partner in exchange for a number of REIT Shares equal to the product of the REIT Shares Amount and the Applicable Percentage. The Tendering Party shall submit (i) such information, certification or affidavit as the General Partner may reasonably require in connection with the application of the Ownership Limit and other restrictions and limitations of the Charter to any such acquisition and (ii) such written representations, investment letters, legal opinions or other instruments necessary, in the General Partner's view, to effect compliance with the Securities Act. In the event of a purchase of the Tendered Units pursuant to this Section 8.6.B, the Tendering Party shall no longer have the right to cause the Partnership to effect a Redemption of such Tendered Units, and, upon notice to the Tendering Party by the General Partner, given on or before the close of business on the Cut-Off Date, that the General Partner has elected to acquire some or all of the Tendered Units pursuant to this Section 8.6.B, the obligation of the Partnership to effect a Redemption of the Tendered Units as to which the General Partner's notice relates shall not accrue or arise. The product of the Applicable Percentage and the REIT Shares Amount, if applicable, shall be delivered by the General Partner as duly authorized, validly issued, fully paid and nonassessable REIT Shares and, if applicable, Rights, free of any pledge, lien, encumbrance or restriction, other than the Ownership Limit and other restrictions provided in the Charter, the Bylaws of the General Partner, the Securities Act and relevant state securities or "blue sky" laws. Neither any Tendering Party whose Tendered Units are acquired by the General Partner pursuant to this Section 8.6.B, any other Partner, any Assignee nor any other interested Person shall have any right to require or cause the General Partner to register, qualify or list any REIT Shares owned or held by such Person, whether or not such REIT Shares are issued pursuant to this Section 8.6.B, with the SEC, with any state securities commissioner, department or agency, under the Securities Act or the Exchange Act or with any stock exchange; provided, however, that this limitation shall not be in derogation of any registration or similar rights granted pursuant to any other written agreement between the General Partner and any such Person. Notwithstanding any delay in such delivery, the Tendering Party shall be deemed the owner of such REIT Shares and Rights for all purposes, including, without limitation, rights to vote or consent, receive dividends, and exercise rights, as of the Specified Redemption Date. REIT Shares issued upon an acquisition of the Tendered Units by the General Partner pursuant to this Section 8.6.B may contain such legends regarding restrictions under the Securities Act and applicable state securities laws as the General Partner in good faith determines to be necessary or advisable in order to ensure compliance with such laws. C. Notwithstanding the provisions of Sections 8.6.A and 8.6.B hereof, no Tendering Party (i) where the Redemption would consist of less than all the Partnership Units held by Partners other than the General Partner, shall be entitled to elect or effect a Redemption to the extent that the aggregate Partnership Units of the Limited Partners would be reduced, as a result of the Redemption (or the acquisition of the Tendered Units by the General Partner pursuant to Section 8.6.B hereof), to less than one percent (1%) of all Partnership Units outstanding immediately prior to delivery of the Notice of Redemption and (ii) shall have any rights under this Agreement that would otherwise be prohibited under the Charter. To the extent that any attempted Redemption or acquisition of the Tendered Units by the General Partner pursuant to Section 8.6.B hereof would be in violation of this Section 8.6.C, it shall be null and void ab initio, and the Tendering Party shall not acquire any rights or economic interests in REIT Shares otherwise issuable by the General Partner under Section 8.6.B hereof. D. In the event that the General Partner declines or fails to exercise its purchase rights pursuant to Section 8.6.B hereof following receipt of a Notice of Redemption (a "DECLINATION"): (1) The General Partner shall give notice of such Declination to the Tendering Party on or before the close of business on the Cut-Off Date. The failure of the General Partner to give notice of such Declination by the close of business on the Cut-Off Date shall itself constitute a Declination. 36 42 (2) The Partnership may elect to raise funds for the payment of the Cash Amount either (a) by requiring that the General Partner contribute such funds from the proceeds of a registered public offering (a "PUBLIC OFFERING FUNDING") of a number of REIT Shares ("REGISTRABLE SHARES") equal to the REIT Shares Amount with respect to the Tendered Units or (b) from any other sources (including, but not limited to, the sale of any Property and the incurrence of additional Debt) available to the Partnership. (3) Promptly upon the General Partner's receipt of the Notice of Redemption and the General Partner giving notice of its Declination, the General Partner shall give notice (a "SINGLE FUNDING NOTICE") to all Qualifying Parties then holding a Partnership Interest (or an interest therein) and having Redemption rights pursuant to this Section 8.6 and require that all such Qualifying Parties elect whether or not to effect a Redemption of their Partnership Units to be funded through such Public Offering Funding. In the event that any such Qualifying Party elects to effect such a Redemption, it shall give notice thereof and of the number of Partnership Units to be made subject thereto in writing to the General Partner within ten (10) Business Days after receipt of the Single Funding Notice, and such Qualifying Party shall be treated as a Tendering Party for all purposes of this Section 8.6. In the event that a Qualifying Party does not so elect, it shall be deemed to have waived its right to effect a Redemption for the current Twelve-Month Period; provided, however, that the General Partner shall not be required to acquire Partnership Units pursuant to this Section 8.6.D more than twice within a Twelve-Month Period. Any proceeds from a Public Offering Funding that are in excess of the Cash Amount shall be for the sole benefit of the General Partner. The General Partner may, but shall not be required to, make a Capital Contribution of such amounts to the Partnership for an additional General Partner Interest. E. Notwithstanding the provisions of Section 8.6.B hereof, the General Partner shall not, under any circumstances, elect to acquire Tendered Units in exchange for the REIT Shares Amount if such exchange would be prohibited under the Charter. F. Notwithstanding anything herein to the contrary (but subject to Section 8.6.C hereof), with respect to any Redemption (or any tender of Partnership Units for Redemption if the Tendered Units are acquired by the General Partner pursuant to Section 8.6.B hereof) pursuant to this Section 8.6: (1) All Partnership Units acquired by the General Partner pursuant to Section 8.6.B hereof shall automatically, and without further action required, be converted into and deemed to be General Partner Interests comprised of the same number of Partnership Units. (2) Subject to the Ownership Limit, no Tendering Party may effect a Redemption for less than five hundred (500) Partnership Units or, if such Tendering Party holds (as a Limited Partner or, economically, as an Assignee) less than five hundred (500) Partnership Units, all of the Partnership Units held by such Tendering Party. (3) Each Tendering Party (a) may effect a Redemption only once in each Twelve-Month Period (unless the restriction contained in this Section 8.6.F(3)(a) is waived by the General Partner in its sole and absolute discretion) and (b) may not effect a Redemption during the period after the Partnership Record Date with respect to a distribution and before the record date established by the General Partner for a distribution to its shareholders of some or all of its portion of such Partnership distribution. (4) Notwithstanding anything herein to the contrary, with respect to any Redemption or acquisition of Tendered Units by the General Partner pursuant to Section 8.6.B hereof, in the event that the General Partner gives notice to all Limited Partners (but excluding any Assignees) then owning Partnership Interests (a "PRIMARY OFFERING NOTICE") that it desires to effect a primary 37 43 offering of its equity securities then, unless the General Partner otherwise consents, commencement of the actions denoted in Section 8.6.E hereof as to a Public Offering Funding with respect to any Notice of Redemption thereafter received, whether or not the Tendering Party is a Limited Partner, may be delayed until the earlier of (a) the completion of the primary offering or (b) ninety (90) days following the giving of the Primary Offering Notice. (5) Without the Consent of the General Partner (which may be given or withheld in its sole and absolute discretion), no Tendering Party may effect a Redemption within ninety (90) days following the closing of any prior Public Offering Funding. (6) The consummation of such Redemption (or an acquisition of Tendered Units by the General Partner pursuant to Section 8.6.B hereof, as the case may be) shall be subject to the expiration or termination of the applicable waiting period, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. (7) The Tendering Party shall continue to own (subject, in the case of an Assignee, to the provisions of Section 11.5 hereof) all Partnership Units subject to any Redemption, and be treated as a Limited Partner or an Assignee, as applicable, with respect such Partnership Units for all purposes of this Agreement, until such Partnership Units are either paid for by the Partnership pursuant to Section 8.6.A hereof or transferred to the General Partner and paid for, by the issuance of the REIT Shares, pursuant to Section 8.6.B hereof on the Specified Redemption Date. Until a Specified Redemption Date and an acquisition of the Tendered Units by the General Partner pursuant to Section 8.6.B hereof, the Tendering Party shall have no rights as a shareholder of the General Partner with respect to the REIT Shares issuable in connection with such acquisition. For purposes of determining compliance with the restrictions set forth in this Section 8.6.F, all Partnership Units beneficially owned by a Related Party of a Tendering Party shall be considered to be owned or held by such Tendering Party. G. In connection with an exercise of Redemption rights pursuant to this Section 8.6, the Tendering Party shall submit the following to the General Partner, in addition to the Notice of Redemption: (1) A written affidavit, dated the same date as, and accompanying, the Notice of Redemption, (a) disclosing the actual and constructive ownership, as determined for purposes of Code Sections 856(a)(6) and 856(h), of REIT Shares by (i) such Tendering Party and (ii) any Related Party and (b) representing that, after giving effect to the Redemption or an acquisition of the Tendered Units by the General Partner pursuant to Section 8.6.B hereof, neither the Tendering Party nor any Related Party will own REIT Shares in excess of the Ownership Limit; (2) A written representation that neither the Tendering Party nor any Related Party has any intention to acquire any additional REIT Shares prior to the closing of the Redemption or an acquisition of the Tendered Units by the General Partner pursuant to Section 8.6.B hereof on the Specified Redemption Date; and (3) An undertaking to certify, at and as a condition to the closing of (i) the Redemption or (ii) the acquisition of the Tendered Units by the General Partner pursuant to Section 8.6.B hereof on the Specified Redemption Date, that either (a) the actual and constructive ownership of REIT Shares by the Tendering Party and any Related Party remain unchanged from that disclosed in the affidavit required by Section 8.6.G(1) or (b) after giving effect to the Redemption or an acquisition of the Tendered Units by the General Partner pursuant to Section 8.6.B hereof, neither the Tendering Party nor any Related Party shall own REIT Shares in violation of the Ownership Limit. 38 44 SECTION 8.7 PARTNERSHIP RIGHT TO CALL LIMITED PARTNER INTERESTS Notwithstanding any other provision of this Agreement, on and after the date on which the aggregate Partnership Units of the Limited Partners are less than five thousand (5,000), the Partnership shall have the right, but not the obligation, from time to time and at any time to redeem any and all outstanding Limited Partner Interests by treating any Limited Partner as a Tendering Party who has delivered a Notice of Redemption pursuant to Section 8.6 hereof for the amount of Partnership Units to be specified by the General Partner, in its sole and absolute discretion, by notice to such Limited Partner that the Partnership has elected to exercise its rights under this Section 8.7. Such notice given by the General Partner to a Limited Partner pursuant to this Section 8.7 shall be treated as if it were a Notice of Redemption delivered to the General Partner by such Limited Partner. For purposes of this Section 8.7, (a) any Limited Partner (whether or not otherwise a Qualifying Party) may, in the General Partner's sole and absolute discretion, be treated as a Qualifying Party that is a Tendering Party and (b) the provisions of Sections 8.6.C(i), 8.6.F(2), 8.6.F(3) and 8.6.F(5) hereof shall not apply, but the remainder of Section 8.6 hereof shall apply with such adjustments as shall be necessary in the circumstances. SECTION 8.8 OTHER REDEMPTIONS Notwithstanding the provisions of Section 8.6 hereof, nothing in this Agreement shall preclude the redemption of a Limited Partner Interest or Partnership Units by the Partnership upon such terms and conditions as may be negotiated between the Limited Partner or Assignee holding such Limited Partner Interest or Partnership Units, on the one hand, and the General Partner, on the other hand, in their sole and absolute discretion. Such a redemption may include, without limitation, the payment of cash by the Partnership to the Limited Partner or Assignee, in a lump sum or in installments, or the distribution in kind of Partnership assets to such Limited Partner or Assignee (which assets may be encumbered), including assets to be designated by the Limited Partner or Assignee and acquired (with or without debt financing) by the Partnership. Upon any such redemption, the Partnership Units and Limited Partner Interest redeemed and the applicable Partner Schedule shall be cancelled and Exhibit A shall be amended as appropriate to reflect such redemption. In effecting any such redemption by negotiated agreement, none of the Partnership, the General Partner, the Limited Partner and the Assignee, as the case may be, shall incur any liability to any other Holder of Partnership Units or have any duty to offer the same or similar terms for redemption of any other Limited Partner Interest or Partnership Units. ARTICLE 9 BOOKS, RECORDS, ACCOUNTING AND REPORTS SECTION 9.1 RECORDS AND ACCOUNTING A. The General Partner shall keep or cause to be kept at the principal office of the Partnership those records and documents required to be maintained by the Act and other books and records deemed by the General Partner to be appropriate with respect to the Partnership's business, including, without limitation, all books and records necessary to provide to the Limited Partners any information, lists and copies of documents required to be provided pursuant to Section 8.5.A or Section 9.3 hereof. Any records maintained by or on behalf of the Partnership in the regular course of its business may be kept on, or be in the form of, punch cards, magnetic tape, photographs, micrographics or any other information storage device, provided that the records so maintained are convertible into clearly legible written form within a reasonable period of time. B. The books of the Partnership shall be maintained, for financial and tax reporting purposes, on an accrual basis in accordance with generally accepted accounting principles, or on such other basis as the General Partner determines to be necessary or appropriate. To the extent permitted by sound accounting practices and principles, the Partnership and the General Partner may operate with integrated or consolidated accounting records, operations and principles. 39 45 SECTION 9.2 FISCAL YEAR The Fiscal Year of the Partnership shall be the calendar year. SECTION 9.3 REPORTS A. As soon as practicable, but in no event later than one hundred five (105) days after the close of each Fiscal Year, the General Partner shall cause to be mailed to each Limited Partner, of record as of the close of the Fiscal Year, an annual report containing financial statements of the Partnership, or of the General Partner if such statements are prepared solely on a consolidated basis with the General Partner, for such Fiscal Year, presented in accordance with generally accepted accounting principles. Such statements of the Partnership need not be audited if such statements are consolidated with audited financial statements of the General Partner. B. As soon as practicable, but in no event later than one hundred five (105) days after the close of each calendar quarter (except the last calendar quarter of each year), the General Partner shall cause to be mailed to each Limited Partner, of record as of the last day of the calendar quarter, a report containing unaudited financial statements of the Partnership, or of the General Partner, if such statements are prepared solely on a consolidated basis with the General Partner, and such other information as may be required by applicable law or regulation or as the General Partner determines to be appropriate. ARTICLE 10 TAX MATTERS SECTION 10.1 PREPARATION OF TAX RETURNS The General Partner shall arrange for the preparation and timely filing of all returns with respect to Partnership income, gains, deductions, losses and other items required of the Partnership for federal and state income tax purposes and shall use all reasonable efforts to furnish, within ninety (90) days of the close of each taxable year, the tax information reasonably required by Limited Partners for federal and state income tax reporting purposes. The Limited Partners shall promptly provide the General Partner with such information relating to the Contributed Properties, including tax basis and other relevant information, as may be reasonably requested by the General Partner from time to time. SECTION 10.2 TAX ELECTIONS Except as otherwise provided herein, the General Partner shall, in its sole and absolute discretion, determine whether to make any available election pursuant to the Code, including, but not limited to, the election under Code Section 754 and the election to use the "recurring item" method of accounting provided under Code Section 461(h) with respect to property taxes imposed on the Partnership's Properties; provided, however, that, if the "recurring item" method of accounting is elected with respect to such property taxes, the Partnership shall pay the applicable property taxes prior to the date provided in Code Section 461(h) for purposes of determining economic performance. The General Partner shall have the right to seek to revoke any such election (including, without limitation, any election under Code Sections 461(h) and 754) upon the General Partner's determination in its sole and absolute discretion that such revocation is in the best interests of the Partners. SECTION 10.3 TAX MATTERS PARTNER A. The General Partner shall be the "tax matters partner" of the Partnership for federal income tax purposes. The tax matters partner shall receive no compensation for its services. All third-party costs and expenses incurred by the tax matters partner in performing its duties as such (including legal and accounting fees and expenses) shall be borne by the Partnership in addition to any reimbursement pursuant to Section 7.4 hereof. Nothing herein shall be construed to restrict the Partnership from engaging an accounting firm to assist the tax matters partner in discharging its duties hereunder, so long as the compensation paid by the Partnership for such 40 46 services is reasonable. At the request of any Limited Partner, the General Partner agrees to consult with such Limited Partner with respect to the preparation and filing of any returns and with respect to any subsequent audit or litigation relating to such returns; provided, however, that the filing of such returns shall be in the sole and absolute discretion of the General Partner. B. The tax matters partner is authorized, but not required: (1) to enter into any settlement with the IRS with respect to any administrative or judicial proceedings for the adjustment of Partnership items required to be taken into account by a Partner for income tax purposes (such administrative proceedings being referred to as a "tax audit" and such judicial proceedings being referred to as "judicial review"), and in the settlement agreement the tax matters partner may expressly state that such agreement shall bind all Partners, except that such settlement agreement shall not bind any Partner (i) who (within the time prescribed pursuant to the Code and Regulations) files a statement with the IRS providing that the tax matters partner shall not have the authority to enter into a settlement agreement on behalf of such Partner or (ii) who is a "notice partner" (as defined in Code Section 6231) or a member of a "notice group" (as defined in Code Section 6223(b)(2)); (2) in the event that a notice of a final administrative adjustment at the Partnership level of any item required to be taken into account by a Partner for tax purposes (a "final adjustment") is mailed to the tax matters partner, to seek judicial review of such final adjustment, including the filing of a petition for readjustment with the United States Tax Court or the United States Claims Court, or the filing of a complaint for refund with the District Court of the United States for the district in which the Partnership's principal place of business is located; (3) to intervene in any action brought by any other Partner for judicial review of a final adjustment; (4) to file a request for an administrative adjustment with the IRS at any time and, if any part of such request is not allowed by the IRS, to file an appropriate pleading (petition or complaint) for judicial review with respect to such request; (5) to enter into an agreement with the IRS to extend the period for assessing any tax that is attributable to any item required to be taken into account by a Partner for tax purposes, or an item affected by such item; and (6) to take any other action on behalf of the Partners in connection with any tax audit or judicial review proceeding to the extent permitted by applicable law or regulations. The taking of any action and the incurring of any expense by the tax matters partner in connection with any such proceeding, except to the extent required by law, is a matter in the sole and absolute discretion of the tax matters partner and the provisions relating to indemnification of the General Partner set forth in Section 7.7 hereof shall be fully applicable to the tax matters partner in its capacity as such. SECTION 10.4 WITHHOLDING Each Limited Partner hereby authorizes the Partnership to withhold from or pay on behalf of or with respect to such Limited Partner any amount of federal, state, local or foreign taxes that the General Partner determines that the Partnership is required to withhold or pay with respect to any amount distributable or allocable to such Limited Partner pursuant to this Agreement, including, without limitation, any taxes required to be withheld or paid by the Partnership pursuant to Code Section 1441, Code Section 1442, Code Section 1445 or Code Section 1446. Any amount paid on behalf of or with respect to a Limited Partner shall constitute a loan by the Partnership to such Limited Partner, which loan shall be repaid by such Limited Partner within fifteen (15) days after notice 41 47 from the General Partner that such payment must be made unless (i) the Partnership withholds such payment from a distribution that would otherwise be made to the Limited Partner or (ii) the General Partner determines, in its sole and absolute discretion, that such payment may be satisfied out of the Available Funds of the Partnership that would, but for such payment, be distributed to the Limited Partner. Each Limited Partner hereby unconditionally and irrevocably grants to the Partnership a security interest in such Limited Partner's Partnership Interest to secure such Limited Partner's obligation to pay to the Partnership any amounts required to be paid pursuant to this Section 10.4. In the event that a Limited Partner fails to pay any amounts owed to the Partnership pursuant to this Section 10.4 when due, the General Partner may, in its sole and absolute discretion, elect to make the payment to the Partnership on behalf of such defaulting Limited Partner, and in such event shall be deemed to have loaned such amount to such defaulting Limited Partner and shall succeed to all rights and remedies of the Partnership as against such defaulting Limited Partner (including, without limitation, the right to receive distributions). Any amounts payable by a Limited Partner hereunder shall bear interest at the base rate on corporate loans at large United States money center commercial banks, as published from time to time in the WALL STREET JOURNAL, plus four (4) percentage points (but not higher than the maximum lawful rate) from the date such amount is due (i.e., fifteen (15) days after demand) until such amount is paid in full. Each Limited Partner shall take such actions as the Partnership or the General Partner shall request in order to perfect or enforce the security interest created hereunder. ARTICLE 11 TRANSFERS AND WITHDRAWALS SECTION 11.1 TRANSFER A. No part of the interest of a Partner shall be subject to the claims of any creditor, to any spouse for alimony or support, or to legal process, and may not be voluntarily or involuntarily alienated or encumbered except as may be specifically provided for in this Agreement. B. No Partnership Interest shall be Transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article 11. Any Transfer or purported Transfer of a Partnership Interest not made in accordance with this Article 11 shall be null and void ab initio. SECTION 11.2 TRANSFER OF GENERAL PARTNER'S PARTNERSHIP INTEREST A. The General Partner may not Transfer any of its General Partner Interest or withdraw from the Partnership except as provided in Sections 11.2.B and 11.2.C hereof. B. The General Partner shall not withdraw from the Partnership and shall not Transfer all or any portion of its interest in the Partnership (whether by sale, disposition, statutory merger or consolidation, liquidation or otherwise) without the Consent of the Limited Partners, which Consent may be given or withheld in the sole and absolute discretion of the Limited Partners. Upon any Transfer of such a Partnership Interest pursuant to the Consent of the Limited Partners and otherwise in accordance with the provisions of this Section 11.2.B, the transferee shall become a successor General Partner for all purposes herein, and shall be vested with the powers and rights of the transferor General Partner, and shall be liable for all obligations and responsible for all duties of the General Partner, once such transferee has executed such instruments as may be necessary to effectuate such admission and to confirm the agreement of such transferee to be bound by all the terms and provisions of this Agreement with respect to the Partnership Interest so acquired. It is a condition to any Transfer otherwise permitted hereunder that the transferee assumes, by operation of law or express agreement, all of the obligations of the transferor General Partner under this Agreement with respect to such Transferred Partnership Interest, and such Transfer shall relieve the transferor General Partner of its obligations under this Agreement without the Consent of the Limited Partners. In the event that the General Partner withdraws from the Partnership, in violation of this Agreement or otherwise, or otherwise dissolves or terminates, or upon the bankruptcy of the General Partner, a "majority in interest" (as such phrase is used in Section 17-801(3) of the Act) of the remaining Partners may elect to continue the Partnership business by selecting a successor General Partner in accordance with the Act. 42 48 SECTION 11.3 LIMITED PARTNERS' RIGHTS TO TRANSFER A. GENERAL. Prior to the end of the first Twelve-Month Period, no Limited Partner shall Transfer all or any portion of its Partnership Interest to any transferee without the consent of the General Partner, which consent may be withheld in its sole and absolute discretion; provided, however, that any Limited Partner may, at any time, without the consent of the General Partner, (i) Transfer all or part of its Partnership Interest to any Designated Party, any Family Member, any Controlled Entity or any Affiliate, provided that the transferee is, in any such case, a Qualified Transferee, or (ii) pledge (a "PLEDGE") all or any portion of its Partnership Interest to a lending institution, that is not an Affiliate of such Limited Partner, as collateral or security for a bona fide loan or other extension of credit, and Transfer such pledged Partnership Interest to such lending institution in connection with the exercise of remedies under such loan or extension or credit (any Transfer or Pledge permitted by this proviso is hereinafter referred to as a "PERMITTED TRANSFER"). After such first Twelve-Month Period, each Limited Partner, and each transferee of Partnership Units or Assignee pursuant to a Permitted Transfer, shall have the right to Transfer all or any portion of its Partnership Interest to any Person, subject to the provisions of Section 11.6 hereof and to satisfaction of each of the following conditions: (1) GENERAL PARTNER RIGHT OF FIRST REFUSAL. The transferring Partner shall give written notice of the proposed Transfer to the General Partner, which notice shall state (i) the identity of the proposed transferee and (ii) the amount and type of consideration proposed to be received for the Transferred Partnership Units. The General Partner shall have ten (10) Business Days upon which to give the Transferring Partner notice of its election to acquire the Partnership Units on the proposed terms. If it so elects, it shall purchase the Partnership Units on such terms within ten (10) Business Days after giving notice of such election; provided, however, that in the event that the proposed terms involve a purchase for cash, the General Partner may at its election deliver in lieu of all or any portion of such cash a note payable to the Transferring Partner at a date as soon as reasonably practicable, but in no event later than one hundred eighty (180) days after such purchase, and bearing interest at an annual rate equal to the total dividends declared with respect to one (1) REIT Share for the four (4) preceding fiscal quarters of the General Partner, divided by the Value as of the closing of such purchase; provided, further, that such closing may be deferred to the extent necessary to effect compliance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, if applicable, and any other applicable requirements of law. If it does not so elect, the Transferring Partner may Transfer such Partnership Units to a third party, on terms no more favorable to the transferee than the proposed terms, subject to the other conditions of this Section 11.3. (2) QUALIFIED TRANSFEREE. Any Transfer of a Partnership Interest shall be made only to a single Qualified Transferee; provided, however, that, for such purposes, all Qualified Transferees that are Affiliates, or that comprise investment accounts or funds managed by a single Qualified Transferee and its Affiliates, shall be considered together to be a single Qualified Transferee; provided, further, that each Transfer meeting the minimum Transfer restriction of Section 11.3.A(3) hereof may be to a separate Qualified Transferee. (3) MINIMUM TRANSFER RESTRICTION. Any Transferring Partner must Transfer not less than the lesser of (i) the greater of five thousand (5,000) Partnership Units (or such lesser number as to which the General Partner has consented in writing) or one-third (1/3) of the number of Partnership Units owned by such Transferring Partner as of the Effective Date or (ii) all of the remaining Partnership Units owned by such Transferring Partner; provided, however, that, for purposes of determining compliance with the foregoing restriction, all Partnership Units owned by Affiliates of a Limited Partner shall be considered to be owned by such Limited Partner. (4) TRANSFEREE AGREEMENT TO EFFECT A REDEMPTION. Any proposed transferee shall deliver to the General Partner a written agreement reasonably satisfactory to the General Partner to the effect that the transferee will, within six (6) months after consummation of the Partnership 43 49 Units Transfer, tender its Partnership Units for Redemption in accordance with the terms of the Redemption rights provided in Section 8.6 hereof. (5) NO FURTHER TRANSFERS. The transferee (other than a Designated Party) shall not be permitted to effect any further Transfer of the Partnership Units, other than to the General Partner. (6) EXCEPTION FOR PERMITTED TRANSFERS. The conditions of Sections 11.3.A(1) through 11.3.A(5) hereof shall not apply in the case of a Permitted Transfer. It is a condition to any Transfer otherwise permitted hereunder (whether or not such Transfer is a Permitted Transfer or is effected during or after the first Twelve-Month Period) that the transferee assume by operation of law or express agreement all of the obligations of the transferor Limited Partner under this Agreement with respect to such Transferred Partnership Interest, and no such Transfer (other than pursuant to a statutory merger or consolidation wherein all obligations and liabilities of the transferor Partner are assumed by a successor corporation by operation of law) shall relieve the transferor Partner of its obligations under this Agreement without the approval of the General Partner, in its sole and absolute discretion. Notwithstanding the foregoing, any transferee of any Transferred Partnership Interest shall be subject to any and all ownership limitations (including, without limitation, the Ownership Limit) contained in the Charter that may limit or restrict such transferee's ability to exercise its Redemption rights, including, without limitation, the Ownership Limit. Any transferee, whether or not admitted as a Substituted Limited Partner, shall take subject to the obligations of the transferor hereunder. Unless admitted as a Substituted Limited Partner, no transferee, whether by a voluntary Transfer, by operation of law or otherwise, shall have any rights hereunder, other than the rights of an Assignee as provided in Section 11.5 hereof. B. INCAPACITY. If a Limited Partner is subject to Incapacity, the executor, administrator, trustee, committee, guardian, conservator or receiver of such Limited Partner's estate shall have all the rights of a Limited Partner, but not more rights than those enjoyed by other Limited Partners, for the purpose of settling or managing the estate, and such power as the Incapacitated Limited Partner possessed to Transfer all or any part of its interest in the Partnership. The Incapacity of a Limited Partner, in and of itself, shall not dissolve or terminate the Partnership. C. OPINION OF COUNSEL. In connection with any Transfer of a Limited Partner Interest, the General Partner shall have the right to receive an opinion of counsel reasonably satisfactory to it to the effect that the proposed Transfer may be effected without registration under the Securities Act and will not otherwise violate any federal or state securities laws or regulations applicable to the Partnership or the Partnership Interests Transferred. If, in the opinion of such counsel, such Transfer would require the filing of a registration statement under the Securities Act or would otherwise violate any federal or state securities laws or regulations applicable to the Partnership or the Partnership Units, the General Partner may prohibit any Transfer otherwise permitted under this Section 11.3 by a Limited Partner of Partnership Interests. D. ADVERSE TAX CONSEQUENCES. No Transfer by a Limited Partner of its Partnership Interests (including any Redemption, any other acquisition of Partnership Units by the General Partner or any acquisition of Partnership Units by the Partnership) may be made to any person if (i) in the opinion of legal counsel for the Partnership, it would result in the Partnership being treated as an association taxable as a corporation, or (ii) such Transfer is effectuated through an "established securities market" or a "secondary market (or the substantial equivalent thereof)" within the meaning of Code Section 7704. SECTION 11.4 SUBSTITUTED LIMITED PARTNERS A. No Limited Partner shall have the right to substitute a transferee (including any Designated Party or other transferees pursuant to Transfers permitted by Section 11.3 hereof) as a Limited Partner in its place. A transferee (including, but not limited to, any Designated Party) of the interest of a Limited Partner may be admitted as a Substituted Limited Partner only with the Consent of the General Partner, which Consent may be given or 44 50 withheld by the General Partner in its sole and absolute discretion. The failure or refusal by the General Partner to permit a transferee of any such interests to become a Substituted Limited Partner shall not give rise to any cause of action against the Partnership or the General Partner. Subject to the foregoing, an Assignee shall not be admitted as a Substituted Limited Partner until and unless it furnishes to the General Partner (i) evidence of acceptance, in form and substance satisfactory to the General Partner, of all the terms, conditions and applicable obligations of this Agreement, including, without limitation, the power of attorney granted in Section 2.4 hereof, (ii) a Partner Schedule executed by such Assignee and (iii) such other documents and instruments as may be required or advisable, in the sole and absolute discretion of the General Partner, to effect such Assignee's admission as a Substituted Limited Partner. B. A transferee who has been admitted as a Substituted Limited Partner in accordance with this Article 11 shall have all the rights and powers and be subject to all the restrictions and liabilities of a Limited Partner under this Agreement. C. Upon the admission of a Substituted Limited Partner, the General Partner shall amend Exhibit A to reflect the name and address of such Substituted Limited Partner and to eliminate, if necessary, the name and address of the predecessor of such Substituted Limited Partner. In addition, the Substituted Limited Partner and the General Partner shall execute a Partner Schedule with respect to such Substituted Limited Partner, which Partner Schedule shall supersede, to the extent necessary, the Partner Schedule for the predecessor of such Substituted Limited Partner. SECTION 11.5 ASSIGNEES If the General Partner, in its sole and absolute discretion, does not consent to the admission of any permitted transferee under Section 11.3 hereof as a Substituted Limited Partner, as described in Section 11.4 hereof, such transferee shall be considered an Assignee for purposes of this Agreement. An Assignee shall be entitled to all the rights of an assignee of a limited partnership interest under the Act, including the right to receive distributions from the Partnership and the share of Net Income, Net Losses and other items of income, gain, loss, deduction and credit of the Partnership attributable to the Partnership Units assigned to such transferee and the rights to Transfer the Partnership Units provided in this Article 11, but shall not be deemed to be a holder of Partnership Units for any other purpose under this Agreement (other than as expressly provided in Section 8.6 hereof with respect to a Qualifying Party that becomes a Tendering Party), and shall not be entitled to effect a Consent or vote with respect to such Partnership Units on any matter presented to the Limited Partners for approval (such right to Consent or vote, to the extent provided in this Agreement or under the Act, fully remaining with the transferor Limited Partner). In the event that any such transferee desires to make a further assignment of any such Partnership Units, such transferee shall be subject to all the provisions of this Article 11 to the same extent and in the same manner as any Limited Partner desiring to make an assignment of Partnership Units. SECTION 11.6 GENERAL PROVISIONS A. No Limited Partner may withdraw from the Partnership other than as a result of a permitted Transfer of all of such Limited Partner's Partnership Units in accordance with this Article 11, with respect to which the transferee becomes a Substituted Limited Partner, or pursuant to a Redemption (or acquisition by the General Partner) of all of its Partnership Units under Section 8.6 hereof. B. Any Limited Partner who shall Transfer all of its Partnership Units in a Transfer (i) permitted pursuant to this Article 11 where such transferee was admitted as a Substituted Limited Partner, (ii) pursuant to the exercise of its rights to effect a Redemption of all of its Partnership Units under Section 8.6 hereof or (iii) to the General Partner, whether or not pursuant to Section 8.6.B hereof, shall cease to be a Limited Partner. C. If any Partnership Unit is Transferred in compliance with the provisions of this Article 11, or is redeemed by the Partnership or acquired by the General Partner pursuant to Section 8.6 hereof, on any day other than the first day of a Fiscal Year, then Net Income, Net Losses, each item thereof and all other items of income, 45 51 gain, loss, deduction and credit attributable to such Partnership Unit for such Fiscal Year shall be allocated to the transferor Partner or the Tendering Party, as the case may be, and, in the case of a Transfer or assignment other than a Redemption, to the transferee Partner (including, without limitation, the General Partner in the case of an acquisition of Partnership Units pursuant to Section 8.6 hereof) or Assignee, by taking into account their varying interests during the Fiscal Year in accordance with Code Section 706(d), using the "daily proration" or "interim closing of the books" method or another permissible method selected by the General Partner. Solely for purposes of making such allocations, the General Partner, in its sole and absolute discretion, may determine that each of such items for the calendar month in which a Transfer occurs shall be allocated to the transferee Partner or Assignee and none of such items for the calendar month in which a Transfer or a Redemption occurs shall be allocated to the transferor Partner or the Tendering Party, as the case may be, if such Transfer occurs on or before the fifteenth (15th) day of the month; otherwise such items for such calendar month shall be allocated to the transferor. All distributions of Available Cash attributable to such Partnership Unit with respect to which the Partnership Record Date is before the date of such Transfer, assignment or Redemption shall be made to the transferor Partner or the Tendering Party, as the case may be, and, in the case of a Transfer other than a Redemption, all distributions of Available Cash thereafter attributable to such Partnership Unit shall be made to the transferee Partner or Assignee. D. In addition to any other restrictions on Transfer herein contained, in no event may any Transfer or assignment of a Partnership Interest by any Partner (including any Redemption, any acquisition of Partnership Units by the General Partner or any other acquisition of Partnership Units by the Partnership) be made: (a) to any person or entity who lacks the legal right, power or capacity to own a Partnership Interest; (b) in violation of applicable law; (c) of any component portion of a Partnership Interest, such as the Capital Account, or rights to distributions, separate and apart from all other components of a Partnership Interest; (d) in the event that such Transfer would cause the General Partner to cease to comply with the REIT Requirements; (e) if such Transfer would, in the opinion of counsel to the Partnership or the General Partner, cause a termination of the Partnership, in either case for federal or state income tax purposes (except as a result of the Redemption (or acquisition by the General Partner) of all Partnership Units held by all Limited Partners); (f) if such Transfer would, in the opinion of legal counsel to the Partnership, cause the Partnership either (i) to cease to be classified as a partnership or (ii) to be classified as a publicly traded partnership, in either case for federal income tax purposes (except as a result of the Redemption (or acquisition by the General Partner) of all Partnership Units held by all Limited Partners); (g) if such Transfer would cause the Partnership to become, with respect to any employee benefit plan subject to Title I of ERISA, a "party-in-interest" (as defined in ERISA Section 3(14)) or a "disqualified person" (as defined in Code Section 4975(c)); (h) if such Transfer would, in the opinion of legal counsel to the Partnership, cause any portion of the assets of the Partnership to constitute assets of any employee benefit plan pursuant to Department of Labor Regulations Section 2510.2-101; (i) if such Transfer requires the registration of such Partnership Interest pursuant to any applicable federal or state securities laws; 46 52 (j) if such Transfer would cause the Partnership to have more than five hundred (500) partners (including as partners those persons indirectly owning an interest in the Partnership through a partnership, limited liability company, subchapter S corporation or grantor trust); (k) if such Transfer causes the Partnership (as opposed to the General Partner) to become a reporting company under the Exchange Act; or (l) if such Transfer subjects the Partnership to regulation under the Investment Company Act of 1940, the Investment Advisors Act of 1940 or ERISA, each as amended. ARTICLE 12 ADMISSION OF PARTNERS SECTION 12.1 ADMISSION OF SUCCESSOR GENERAL PARTNER A successor to all of the General Partner's General Partner Interest pursuant to Section 11.2 hereof who is proposed to be admitted as a successor General Partner shall be admitted to the Partnership as the General Partner, effective immediately prior to such Transfer. Any such successor shall carry on the business of the Partnership without dissolution. In each case, the admission shall be subject to the successor General Partner executing and delivering to the Partnership an acceptance of all of the terms, conditions and applicable obligations of this Agreement and such other documents or instruments as may be required to effect the admission. SECTION 12.2 ADMISSION OF ADDITIONAL LIMITED PARTNERS A. After the admission to the Partnership of the initial Limited Partners on the date hereof, a Person (other than an existing Partner) who makes a Capital Contribution to the Partnership in accordance with this Agreement shall be admitted to the Partnership as an Additional Limited Partner only upon furnishing to the General Partner (i) evidence of acceptance, in form and substance satisfactory to the General Partner, of all of the terms, conditions and applicable of this Agreement, including, without limitation, the power of attorney granted in Section 2.4 hereof, (ii) a Partner Schedule executed by such Person and (iii) such other documents or instruments as may be required in the sole and absolute discretion of the General Partner in order to effect such Person's admission as an Additional Limited Partner. B. Notwithstanding anything to the contrary in this Section 12.2, no Person shall be admitted as an Additional Limited Partner without the consent of the General Partner, which consent may be given or withheld in the General Partner's sole and absolute discretion. The admission of any Person as an Additional Limited Partner shall become effective on the date upon which the name of such Person is recorded on the books and records of the Partnership, following the consent of the General Partner to such admission. C. If any Additional Limited Partner is admitted to the Partnership on any day other than the first day of a Fiscal Year, then Net Income, Net Losses, each item thereof and all other items of income, gain, loss, deduction and credit allocable among Partners and Assignees for such Fiscal Year shall be allocated among such Additional Limited Partner and all other Partners and Assignees by taking into account their varying interests during the Fiscal Year in accordance with Code Section 706(d), using the "interim closing of the books" method or another permissible method selected by the General Partner. Solely for purposes of making such allocations, each of such items for the calendar month in which an admission of any Additional Limited Partner occurs shall be allocated among all the Partners and Assignees including such Additional Limited Partner, in accordance with the principles described in Section 11.6.C hereof. All distributions of Available Cash with respect to which the Partnership Record Date is before the date of such admission shall be made solely to Partners and Assignees other than the Additional Limited Partner, and all distributions of Available Cash thereafter shall be made to all the Partners and Assignees including such Additional Limited Partner. 47 53 SECTION 12.3 AMENDMENT OF AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP For the admission to the Partnership of any Partner, the General Partner shall take all steps necessary and appropriate under the Act to amend the records of the Partnership and, if necessary, to prepare as soon as practical an amendment of this Agreement (including an amendment of Exhibit A) and, if required by law, shall prepare and file an amendment to the Certificate and may for this purpose exercise the power of attorney granted pursuant to Section 2.4 hereof. SECTION 12.4 ADMISSION OF INITIAL LIMITED PARTNERS The Persons listed on Exhibit A as limited partners of the Partnership shall be admitted to the Partnership as Limited Partners upon their execution and delivery of this Agreement. SECTION 12.5 LIMIT ON NUMBER OF PARTNERS No Person shall be admitted to the Partnership as a Substituted Limited Partner or an Additional Limited Partner if the effect of such admission would be to cause the Partnership to have more than five hundred (500) Partners, including as Partners for this purpose those Persons indirectly owning an interest in the Partnership through another partnership, a limited liability company, a subchapter S corporation or a grantor trust, or otherwise cause the Partnership to become a reporting company under the Exchange Act. ARTICLE 13 DISSOLUTION, LIQUIDATION AND TERMINATION SECTION 13.1 DISSOLUTION The Partnership shall not be dissolved by the admission of Substituted Limited Partners or Additional Limited Partners or by the admission of a successor General Partner in accordance with the terms of this Agreement. Upon the withdrawal of the General Partner, any successor General Partner shall continue the business of the Partnership without dissolution. However, the Partnership shall dissolve, and its affairs shall be wound up, upon the first to occur of any of the following (each a "LIQUIDATING EVENT"): A. the expiration of its term as provided in Section 2.5 hereof; B. an event of withdrawal, as defined in the Act (including, without limitation, bankruptcy), of the sole General Partner unless, within ninety (90) days after the withdrawal, a "majority in interest" (as such phrase is used in Section 17-801(3) of the Act) of the remaining Partners agree in writing, in their sole and absolute discretion, to continue the business of the Partnership and to the appointment, effective as of the date of withdrawal, of a successor General Partner; C. an election to dissolve the Partnership made by the General Partner, in its sole and absolute discretion, with or without the Consent of the Limited Partners; D. entry of a decree of judicial dissolution of the Partnership pursuant to the provisions of the Act; E. the occurrence of a Terminating Capital Transaction; or F. the Redemption (or acquisition by the General Partner) of all Partnership Units other than Partnership Units held by the General Partner. 48 54 SECTION 13.2 WINDING UP A. Upon the occurrence of a Liquidating Event, the Partnership shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets and satisfying the claims of its creditors and Partners. After the occurrence of a Liquidating Event, no Partner shall take any action that is inconsistent with, or not necessary to or appropriate for, the winding up of the Partnership's business and affairs. The General Partner (or, in the event that there is no remaining General Partner or the General Partner has dissolved, become bankrupt within the meaning of the Act or ceased to operate, any Person elected by a Majority in Interest of the Limited Partners (the General Partner or such other Person being referred to herein as the "LIQUIDATOR")) shall be responsible for overseeing the winding up and dissolution of the Partnership and shall take full account of the Partnership's liabilities and property, and the Partnership property shall be liquidated as promptly as is consistent with obtaining the fair value thereof, and the proceeds therefrom (which may, to the extent determined by the General Partner, include shares of stock in the General Partner) shall be applied and distributed in the following order: (1) First, to the satisfaction of all of the Partnership's debts and liabilities to creditors other than the Partners and their Assignees (whether by payment or the making of reasonable provision for payment thereof); (2) Second, to the satisfaction of all of the Partnership's debts and liabilities to the General Partner (whether by payment or the making of reasonable provision for payment thereof), including, but not limited to, amounts due as reimbursements under Section 7.4 hereof; (3) Third, to the satisfaction of all of the Partnership's debts and liabilities to the other Partners and any Assignees (whether by payment or the making of reasonable provision for payment thereof); and (4) The balance, if any, to the General Partner, the Limited Partners and any Assignees in accordance with and proportion to their positive Capital Account balances, after giving effect to all contributions, distributions and allocations for all periods. The General Partner shall not receive any additional compensation for any services performed pursuant to this Article 13. B. Notwithstanding the provisions of Section 13.2.A hereof that require liquidation of the assets of the Partnership, but subject to the order of priorities set forth therein, if prior to or upon dissolution of the Partnership the Liquidator determines that an immediate sale of part or all of the Partnership's assets would be impractical or would cause undue loss to the Partners, the Liquidator may, in its sole and absolute discretion, defer for a reasonable time the liquidation of any assets except those necessary to satisfy liabilities of the Partnership (including to those Partners as creditors) and/or distribute to the Partners, in lieu of cash, as tenants in common and in accordance with the provisions of Section 13.2.A hereof, undivided interests in such Partnership assets as the Liquidator deems not suitable for liquidation. Any such distributions in kind shall be made only if, in the good faith judgment of the Liquidator, such distributions in kind are in the best interest of the Partners, and shall be subject to such conditions relating to the disposition and management of such properties as the Liquidator deems reasonable and equitable and to any agreements governing the operation of such properties at such time. The Liquidator shall determine the fair market value of any property distributed in kind using such reasonable method of valuation as it may adopt. C. In the event that the Partnership is "liquidated" within the meaning of Regulations Section 1.704- 1(b)(2)(ii)(g), distributions shall be made pursuant to this Article 13 to the Partners and Assignees that have positive Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2) to the extent of, and in proportion to, positive Capital Account balances. If any Partner has a deficit balance in its Capital Account (after giving effect to all contributions, distributions and allocations for all taxable years, including the year during which such 49 55 liquidation occurs), such Partner shall have no obligation to make any contribution to the capital of the Partnership with respect to such deficit, and such deficit shall not be considered a debt owed to the Partnership or to any other Person for any purpose whatsoever. In the sole and absolute discretion of the General Partner or the Liquidator, a pro rata portion of the distributions that would otherwise be made to the Partners pursuant to this Article 13 may be withheld or escrowed to provide a reasonable reserve for Partnership liabilities (contingent or otherwise) and to reflect the unrealized portion of any installment obligations owed to the Partnership, provided that such withheld or escrowed amounts shall be distributed to the General Partner and Limited Partners in the manner and order of priority set forth in Section 13.2.A hereof as soon as practicable. SECTION 13.3 DEEMED DISTRIBUTION AND RECONTRIBUTION Notwithstanding any other provision of this Article 13, in the event that the Partnership is liquidated within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), but no Liquidating Event has occurred, the Partnership's Property shall not be liquidated, the Partnership's liabilities shall not be paid or discharged and the Partnership's affairs shall not be wound up. Instead, for federal income tax purposes the Partnership shall be deemed to have distributed the Property in kind to the Partners and the Assignees, who shall be deemed to have assumed and taken such Property subject to all Partnership liabilities, all in accordance with their respective Capital Accounts. Immediately thereafter, the Partners and the Assignees shall be deemed to have recontributed the Partnership Property in kind to the Partnership, which shall be deemed to have assumed and taken such Property subject to all such liabilities; provided, however, that nothing in this Section 13.4 shall be deemed to have constituted any Assignee as a Substituted Limited Partner without compliance with the provisions of Section 11.4 hereof. SECTION 13.4 RIGHTS OF LIMITED PARTNERS Except as otherwise provided in this Agreement, (a) each Limited Partner shall look solely to the assets of the Partnership for the return of its Capital Contribution, (b) no Limited Partner shall have the right or power to demand or receive property other than cash from the Partnership and (c) no Limited Partner shall have priority over any other Limited Partner as to the return of its Capital Contributions, distributions or allocations. SECTION 13.5 NOTICE OF DISSOLUTION In the event that a Liquidating Event occurs or an event occurs that would, but for an election or objection by one or more Partners pursuant to Section 13.1 hereof, result in a dissolution of the Partnership, the General Partner shall, within thirty (30) days thereafter, provide written notice thereof to each of the Partners and, in the General Partner's sole and absolute discretion or as required by the Act, to all other parties with whom the Partnership regularly conducts business (as determined in the sole and absolute discretion of the General Partner), and the General Partner may, or, if required by the Act, shall, publish notice thereof in a newspaper of general circulation in each place in which the Partnership regularly conduct business (as determined in the sole and absolute discretion of the General Partner). SECTION 13.6 CANCELLATION OF CERTIFICATE OF LIMITED PARTNERSHIP Upon the completion of the liquidation of the Partnership cash and property as provided in Section 13.2 hereof, the Partnership shall be terminated, a certificate of cancellation shall be filed with the State of Delaware, all qualifications of the Partnership as a foreign limited partnership or association in jurisdictions other than the State of Delaware shall be cancelled, and such other actions as may be necessary to terminate the Partnership shall be taken. SECTION 13.7 REASONABLE TIME FOR WINDING-UP A reasonable time shall be allowed for the orderly winding-up of the business and affairs of the Partnership and the liquidation of its assets pursuant to Section 13.2 hereof, in order to minimize any losses otherwise attendant 50 56 upon such winding-up, and the provisions of this Agreement shall remain in effect between the Partners during the period of liquidation. ARTICLE 14 PROCEDURES FOR ACTIONS AND CONSENTS OF PARTNERS; AMENDMENTS; MEETINGS SECTION 14.1 PROCEDURES FOR ACTIONS AND CONSENTS OF PARTNERS The actions requiring consent or approval of Limited Partners pursuant to this Agreement, including Section 7.3 hereof, or otherwise pursuant to applicable law, are subject to the procedures set forth in this Article 14. SECTION 14.2 AMENDMENTS Amendments to this Agreement may be proposed by the General Partner or by a Majority in Interest of the Limited Partners. Following such proposal, the General Partner shall submit any proposed amendment to the Limited Partners. The General Partner shall seek the written consent of the Limited Partners on the proposed amendment or shall call a meeting to vote thereon and to transact any other business that the General Partner may deem appropriate. For purposes of obtaining a written consent, the General Partner may require a response within a reasonable specified time, but not less than fifteen (15) days, and failure to respond in such time period shall constitute a consent that is consistent with the General Partner's recommendation with respect to the proposal; provided, however, that an action shall become effective at such time as requisite consents are received even if prior to such specified time. SECTION 14.3 MEETINGS OF THE PARTNERS A. Meetings of the Partners may be called by the General Partner and shall be called upon the receipt by the General Partner of a written request by a Majority in Interest of the Limited Partners. The call shall state the nature of the business to be transacted. Notice of any such meeting shall be given to all Partners not less than seven (7) days nor more than thirty (30) days prior to the date of such meeting. Partners may vote in person or by proxy at such meeting. Whenever the vote or Consent of Partners is permitted or required under this Agreement, such vote or Consent may be given at a meeting of Partners or may be given in accordance with the procedure prescribed in Section 14.3.B hereof. B. Any action required or permitted to be taken at a meeting of the Partners may be taken without a meeting if a written consent setting forth the action so taken is signed by Partners holding a majority of the Partnership Units (or such other percentage as is expressly required by this Agreement for the action in question). Such consent may be in one instrument or in several instruments, and shall have the same force and effect as a vote of Partners holding a majority of the Partnership Units (or such other percentage as is expressly required by this Agreement). Such consent shall be filed with the General Partner. An action so taken shall be deemed to have been taken at a meeting held on the effective date so certified. C. Each Limited Partner may authorize any Person or Persons to act for him by proxy on all matters in which a Limited Partner is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. Every proxy must be signed by the Limited Partner or its attorney-in-fact. No proxy shall be valid after the expiration of eleven (11) months from the date thereof unless otherwise provided in the proxy (or there is receipt of a proxy authorizing a later date). Every proxy shall be revocable at the pleasure of the Limited Partner executing it, such revocation to be effective upon the Partnership's receipt of written notice of such revocation from the Limited Partner executing such proxy. D. Each meeting of Partners shall be conducted by the General Partner or such other Person as the General Partner may appoint pursuant to such rules for the conduct of the meeting as the General Partner or such other Person deems appropriate in its sole and absolute discretion. Without limitation, meetings of Partners may 51 57 be conducted in the same manner as meetings of the General Partner's shareholders and may be held at the same time as, and as part of, the meetings of the General Partner's shareholders. ARTICLE 15 GENERAL PROVISIONS SECTION 15.1 ADDRESSES AND NOTICE Any notice, demand, request or report required or permitted to be given or made to a Partner or Assignee under this Agreement shall be in writing and shall be deemed given or made when delivered in person or when sent by first class United States mail or by other means of written communication (including by telecopy, facsimile, or commercial courier service) (i) in the case of a Partner, to such Partner at the address set forth in Exhibit A (or, if Exhibit A has not been amended to reflect the address of any such Partner, the Partner Schedule with respect to such Partner) or such other address of which the Partner shall notify the General Partner in writing and (ii) in the case of an Assignee, to the address of which such Assignee shall notify the General Partner in writing. SECTION 15.2 TITLES AND CAPTIONS All article or section titles or captions in this Agreement are for convenience only. They shall not be deemed part of this Agreement and in no way define, limit, extend or describe the scope or intent of any provisions hereof. Except as specifically provided otherwise, references to "Articles" or "Sections" are to Articles and Sections of this Agreement. SECTION 15.3 PRONOUNS AND PLURALS Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa. SECTION 15.4 FURTHER ACTION The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement. SECTION 15.5 BINDING EFFECT This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns. SECTION 15.6 WAIVER A. No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach or any other covenant, duty, agreement or condition. B. The restrictions, conditions and other limitations on the rights and benefits of the Limited Partners contained in this Agreement, and the representations, duties, covenants and other requirements of performance or notice by the Limited Partners, are for the benefit of the Partnership and, except for an obligation to pay money to the Partnership, may be waived or relinquished by the General Partner, in its sole and absolute discretion, on behalf of the Partnership in one or more instances from time to time and at any time; provided, however, that any such waiver or relinquishment may not made if it would have the effect of (i) creating liability for any other Limited Partner, (ii) causing the Partnership to cease to qualify as a limited partnership, (iii) reducing the amount of cash otherwise distributable to the Limited Partners, (iv) resulting in the classification of the Partnership as an association 52 58 or publicly traded partnership taxable as a corporation or (v) violating the Securities Act, the Exchange Act or any state "blue sky" or other securities laws; provided, further, that any waiver relating to compliance with the Ownership Limit or other restrictions in the Charter shall be made and shall be effective only as provided in the Charter. SECTION 15.7 COUNTERPARTS This Agreement may be executed in counterparts, all of which together shall constitute one agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart. Each party shall become bound by this Agreement immediately upon affixing its signature hereto or upon execution of a Partner Schedule. SECTION 15.8 APPLICABLE LAW This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflicts of law. In the event of a conflict between any provision of this Agreement and any non-mandatory provision of the Act, the provisions of this Agreement shall control and take precedence. SECTION 15.9 ENTIRE AGREEMENT This Agreement contains all of the understandings and agreements between and among the Partners with respect to the subject matter of this Agreement and the rights, interests and obligations of the Partners with respect to the Partnership. SECTION 15.10 INVALIDITY OF PROVISIONS If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby. SECTION 15.11 LIMITATION TO PRESERVE REIT STATUS Notwithstanding anything else in this Agreement, to the extent that the amount paid, credited, distributed or reimbursed by the Partnership to, for or with respect to any REIT Partner or its officers, directors, employees or agents, whether as a reimbursement, fee, expense or indemnity (a "REIT PAYMENT"), would constitute gross income to the REIT Partner for purposes of Code Section 856(c)(2) or Code Section 856(c)(3), then, notwithstanding any other provision of this Agreement, the amount of such REIT Payments, as selected by the General Partner in its discretion from among items of potential distribution, reimbursement, fees, expenses and indemnities, shall be reduced for any Fiscal Year so that the REIT Payments, as so reduced, to, for or with respect to such REIT Partner shall not exceed the lesser of: (a) an amount equal to the excess, if any, of (i) four and nine-tenths percent (4.9%) of the REIT Partner's total gross income (but excluding the amount of any REIT Payments) for the Fiscal Year that is described in subsections (A) through (H) of Code Section 856(c)(2) over (ii) the amount of gross income (within the meaning of Code Section 856(c)(2)) derived by the REIT Partner from sources other than those described in subsections (A) through (H) of Code Section 856(c)(2) (but not including the amount of any REIT Payments); or (b) an amount equal to the excess, if any, of (i) twenty-four percent (24%) of the REIT Partner's total gross income (but excluding the amount of any REIT Payments) for the Fiscal Year that is described in subsections (A) through (I) of Code Section 856(c)(3) over (ii) the amount of gross income (within the meaning of Code Section 856(c)(3)) derived by the REIT Partner from 53 59 sources other than those described in subsections (A) through (I) of Code Section 856(c)(3) (but not including the amount of any REIT Payments); provided, however, that REIT Payments in excess of the amounts set forth in clauses (a) and (b) above may be made if the General Partner, as a condition precedent, obtains an opinion of tax counsel that the receipt of such excess amounts shall not adversely affect the REIT Partner's ability to qualify as a REIT. To the extent that REIT Payments may not be made in a Fiscal Year as a consequence of the limitations set forth in this Section 15.11, such REIT Payments shall carry over and shall be treated as arising in the following Fiscal Year. The purpose of the limitations contained in this Section 15.11 is to prevent any REIT Partner from failing to qualify as a REIT under the Code by reason of such REIT Partner's share of items, including distributions, reimbursements, fees, expenses or indemnities, receivable directly or indirectly from the Partnership, and this Section 15.11 shall be interpreted and applied to effectuate such purpose. SECTION 15.12 NO PARTITION No Partner nor any successor-in-interest to a Partner shall have the right while this Agreement remains in effect to have any property of the Partnership partitioned, or to file a complaint or institute to any proceeding at law or in equity to have such property of the Partnership partitioned, and each Partner, on behalf of itself and its successors and assigns hereby waives any such right. It is the intention of the Partners that the rights of the parties hereto and their successors-in-interest to Partnership property, as among themselves, shall be governed by the terms of this Agreement, and that the rights of the Partners and their successors-in-interest shall be subject to the limitations and restrictions as set forth in this Agreement. SECTION 15.13 NO THIRD-PARTY RIGHTS CREATED HEREBY The provisions of this Agreement are solely for the purpose of defining the interests of the Partners, inter se; and no other person, firm or entity (i.e., a party who is not a signatory hereto or a permitted successor to such signatory hereto) shall have any right, power, title or interest by way of subrogation or otherwise, in and to the rights, powers, title and provisions of this Agreement. No creditor or other third party having dealings with the Partnership shall have the right to enforce the right or obligation of any Partner to make Capital Contributions or loans to the Partnership or to pursue any other right or remedy hereunder or at law or in equity. None of the rights or obligations of the Partners herein set forth to make Capital Contributions or loans to the Partnership shall be deemed an asset of the Partnership for any purpose by any creditor or other third party, nor may any such rights or obligations be sold, transferred or assigned by the Partnership or pledged or encumbered by the Partnership to secure any debt or other obligation of the Partnership or any of the Partners. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. GENERAL PARTNER: EXCEL REALTY TRUST, INC. By /s/ GARY SABIN ------------------------------- 54 60 INITIAL LIMITED PARTNER: ERT DEVELOPMENT CORPORATION By /S/ David A. Lund ------------------------------- 55 61 EXHIBIT A PARTNERS AND ADDRESSES GENERAL PARTNER Excel Realty Trust, Inc. Initial cash contribution: $99.00 16955 Via Del Campo, Suite 110 Initial Partnership Units: 99 San Diego, California 92127 LIMITED PARTNER ERT Development Corporation Initial cash contribution: $1.00 16955 Via Del Campo, Suite 110 San Diego, California 92127 62 EXHIBIT B EXAMPLES REGARDING ADJUSTMENT FACTOR For purposes of the following examples, it is assumed that (a) the Adjustment Factor in effect on June 30, 1995 is 1.0 and (b) on July 1, 1995 (the "Partnership Record Date" for purposes of these examples), prior to the events described in the examples, there are 100 REIT Shares issued and outstanding. Example 1 On the Partnership Record Date, the General Partner declares a dividend on its outstanding REIT Shares in REIT Shares. The amount of the dividend is one REIT Share paid in respect of each REIT Share owned. Pursuant to Paragraph (i) of the definition of "Adjustment Factor," the Adjustment Factor shall be adjusted on the Partnership Record Date, effective immediately after the stock dividend is declared, as follows: 200 1.0 * --- = 2.0 100 Accordingly, the Adjustment Factor after the stock dividend is declared is 2.0. Example 2 On the Partnership Record Date, the General Partner distributes options to purchase REIT Shares to all holders of its REIT Shares. The amount of the distribution is one option to acquire one REIT Share in respect of each REIT Share owned. The strike price is $4.00 a share. The Value of a REIT Share on the Partnership Record Date is $5.00 per share. Pursuant to Paragraph (ii) of the definition of "Adjustment Factor," the Adjustment Factor shall be adjusted on the Partnership Record Date, effective immediately after the options are distributed, as follows: (100 + 100) 1.0 * ------------------- = 1.1111 100 * $4.00 (100 + -----------) $5.00 Accordingly, the Adjustment Factor after the options are distributed is 1.1111. If the options expire or become no longer exercisable, then the retroactive adjustment specified in Paragraph (ii) of the definition of "Adjustment Factor" shall apply. Example 3 On the Partnership Record Date, the General Partner distributes assets to all holders of its REIT Shares. The amount of the distribution is one asset with a fair market value (as determined by the General Partner) of $1.00 in respect of each REIT Share owned. It is also assumed that the assets do not relate to assets received by the General Partner pursuant to a pro rata distribution by the Partnership. The Value of a REIT Share on the Partnership Record Date is $5.00 a share. Pursuant to Paragraph (iii) of the definition of "Adjustment Factor," the Adjustment Factor shall be adjusted on the Partnership Record Date, effective immediately after the assets are distributed, as follows: $5.00 1.0 * ------------- = 1.25 $5.00 - $1.00 Accordingly, the Adjustment Factor after the assets are distributed is 1.25. 63 EXHIBIT C NOTICE OF REDEMPTION To: Excel Realty Trust, Inc. 16955 Via Del Campo, Suite 110 San Diego, California 92127 The undersigned Limited Partner or Assignee hereby irrevocably tenders for Redemption __________ Partnership Units in Excel Realty Partners, L.P. in accordance with the terms of the Agreement of Limited Partnership of Excel Realty Partners, L.P., dated as of April 24, 1995, as amended (the "Agreement"), and the Redemption rights referred to therein. The undersigned Limited Partner or Assignee: (a) undertakes (i) to surrender such Partnership Units and any certificate therefor at the closing of the Redemption and (ii) to furnish to the General Partner, prior to the Specified Redemption Date, the documentation, instruments and information required under Section 8.6.G of the Agreement; (b) directs that the certified check representing the Cash Amount deliverable upon the closing of such Redemption be delivered to the address specified below; (c) represents, warrants, certifies and agrees that: (1) the undersigned Limited Partner or Assignee is a Qualifying Party, (2) the undersigned Limited Partner or Assignee has, and at the closing of the Redemption will have, good, marketable and unencumbered title to such Partnership Units, free and clear of the rights or interests of any other person or entity, (3) the undersigned Limited Partner or Assignee has, and at the closing of the Redemption will have, the full right, power and authority to tender and surrender such Partnership Units as provided herein, and (4) the undersigned Limited Partner or Assignee has obtained the consent or approval of all persons and entities, if any, having the right to consent to or approve such tender and surrender; and (d) acknowledges that he will continue to own such Partnership Units until and unless either (1) such Partnership Units are acquired by the General Partner pursuant to Section 8.6.B of the Agreement or (2) such Redemption transaction closes. All capitalized terms used herein and not otherwise defined shall have the same meaning ascribed to them respectively in the Agreement. Dated: ________________________ Name of Limited Partner or Assignee: __________________________________________ 64 (Signature of Limited Partner or Assignee) __________________________________________ (Street Address) __________________________________________ (City) (State) (Zip Code) __________________________________________ Signature Guaranteed by: __________________________________________ Issue Check Payable to: __________________________________________ Please insert social security or identifying number: __________________________________________ 65 EXHIBIT D FORM OF PARTNER SCHEDULE [initial or Additional Limited Partner version] PARTNER SCHEDULE EXCEL REALTY PARTNERS, L.P. THIS PARTNER SCHEDULE is executed by Excel Realty Trust, Inc., a Maryland corporation (the "General Partner"), and the party named below (the "New Partner") in respect of Excel Realty Partners, L.P., a Delaware limited partnership (the "Partnership"). 1. NAME, ADDRESS AND TAXPAYER IDENTIFICATION NUMBER OF NEW PARTNER _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ TIN:___________________________________________________________________ 2. CAPITAL CONTRIBUTIONS BY NEW PARTNER Cash contribution: $________________________ Contributed Properties:
- ------------------------------------------------------------------------------------------------------------------- CONTRIBUTED PROPERTY Gross Asset Value Indebtedness Assumed Net Asset Value or Taken Subject to - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------
3. PARTNERSHIP UNITS, PREFERRED RETURN PER UNIT, SPECIFIC ADJUSTMENT FACTOR AND SPECIFIC ADJUSTMENT LIMITATIONS Partnership Units issued to New Partner: _____________ Preferred Return Per Unit: $________ per quarter Specific Adjustment Factor: ____________ 66 Specific Adjustment Limitations: _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 4. ADMISSION OF NEW PARTNER The New Partner is admitted to the Partnership as an Additional Limited Partner. The General Partner hereby consents to such admission. 5. DESIGNATED PARTIES _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 6. AGREEMENT The New Partner acknowledges receipt of a copy of, and agrees to be bound by, the Agreement of Limited Partnership, as amended, for the Partnership. The New Partner specifically confirms (a) the representations and warranties contained in Section 3.4 of such Agreement of Limited Partnership, as amended, for the Partnership and (b) the grant of the power of attorney set forth in Section 2.4 of such Agreement. 7. ADDITIONAL TERMS AND CONDITIONS _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 67 IN WITNESS WHEREOF, the parties have executed this Partner Schedule as of the date indicated below. Dated: _________________, 199__ "GENERAL PARTNER": EXCEL REALTY TRUST, INC., as General Partner of EXCEL REALTY PARTNERS, L.P. By_____________________________________________ "NEW PARTNER": _______________________________________________ 68 [Substituted Limited Partner version] PARTNER SCHEDULE EXCEL REALTY PARTNERS, L.P. THIS PARTNER SCHEDULE is executed by Excel Realty Trust, Inc., a Maryland corporation (the "General Partner"), and the party named below (the "Substituted Partner") in respect of Excel Realty Partners, L.P., a Delaware limited partnership (the "Partnership"). 1. NAME, ADDRESS AND TAXPAYER IDENTIFICATION NUMBER OF SUBSTITUTED PARTNER _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ TIN:___________________________________________________________________ 2. CAPITAL CONTRIBUTIONS BY PREDECESSOR PARTNER The Substituted Partner has succeeded to the following Capital Contributions made to the Partnership by its predecessor: Name of Predecessor: ____________________________________________ Cash contribution: $________________________ Contributed Properties:
- ------------------------------------------------------------------------------------------------------------------- CONTRIBUTED PROPERTY Gross Asset Value Indebtedness Assumed Net Asset Value or Taken Subject to - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------
3. PARTNERSHIP UNITS, PREFERRED RETURN PER UNIT, SPECIFIC ADJUSTMENT FACTOR AND SPECIFIC ADJUSTMENT LIMITATIONS Partnership Units held by Substituted Partner: ____________ Preferred Return Per Unit: $_______ per quarter 69 Specific Adjustment Factor: ____________ Specific Adjustment Limitations: _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 4. ADMISSION OF SUBSTITUTED PARTNER The Substituted Partner is admitted to the Partnership as a Substituted Limited Partner. The General Partner hereby consents to such admission. 5. DESIGNATED PARTIES _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 6. AGREEMENT The Substituted Partner acknowledges receipt of a copy of, and agrees to be bound by, the Agreement of Limited Partnership, as amended, for the Partnership. The Substituted Partner specifically confirms (a) the representations and warranties contained in Section 3.4 of such Agreement of Limited Partnership, as amended, for the Partnership and (b) the grant of the power of attorney set forth in Section 2.4 of such Agreement. 7. ADDITIONAL TERMS AND CONDITIONS _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 70 IN WITNESS WHEREOF, the parties have executed this Partner Schedule as of the date indicated below. Dated: _________________, 199__ "GENERAL PARTNER": EXCEL REALTY TRUST, INC., as General Partner of EXCEL REALTY PARTNERS, L.P. By_____________________________________________ "SUBSTITUTED PARTNER": _______________________________________________ 71 EXHIBIT E FORM OF PARTNERSHIP UNIT CERTIFICATE 72 PARTNERSHIP UNIT CERTIFICATE THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO THE PARTNERSHIP AN OPINION OF COUNSEL SATISFACTORY TO THE PARTNERSHIP, IN FORM AND SUBSTANCE SATISFACTORY TO THE PARTNERSHIP, TO THE EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS. IN ADDITION, THE LIMITED PARTNERSHIP INTEREST EVIDENCED BY THIS CERTIFICATE MAY BE SOLD OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER SET FORTH IN THE AGREEMENT OF LIMITED PARTNERSHIP OF EXCEL REALTY PARTNERS, L.P., DATED APRIL 24, 1995, A COPY OF WHICH MAY BE OBTAINED FROM EXCEL REALTY TRUST, INC., THE GENERAL PARTNER, AT ITS PRINCIPAL EXECUTIVE OFFICE. Certificate No. ----------- EXCEL REALTY PARTNERS, L.P. FORMED UNDER THE LAWS OF THE STATE OF DELAWARE This certifies that John Doe is the owner of * * * One Thousand (1,000) * * * FULLY PAID PARTNERSHIP UNITS OF EXCEL REALTY PARTNERS, L.P., transferable on the books of the Partnership in person or by duly authorized attorney on the surrender of this Certificate properly endorsed. This Certificate and the Partnership Units represented hereby are issued and shall be held subject to all of the provisions of the Agreement of Limited Partnership, as the same may be amended and/or supplemented from time to time. IN WITNESS WHEREOF, the undersigned has signed this Certificate. Dated: By --------------------------------- 73 PARTNER SCHEDULE EXCEL REALTY PARTNERS, L.P. THIS PARTNER SCHEDULE is executed by Excel Realty Trust, Inc., a Maryland corporation (the "General Partner"), and the party named below (the "New Partner") in respect of Excel Realty Partners, L.P., a Delaware limited partnership (the "Partnership"). 1. NAME, ADDRESS AND TAXPAYER IDENTIFICATION NUMBER OF NEW PARTNER ERT Development Corporation 16955 Via Del Campo, Suite 110 San Diego, California 92127 TIN: pending 2. CAPITAL CONTRIBUTIONS BY NEW PARTNER Cash contribution: $1.00 Contributed Properties: None 3. PARTNERSHIP UNITS, PREFERRED RETURN PER UNIT, SPECIFIC ADJUSTMENT FACTOR AND SPECIFIC ADJUSTMENT LIMITATIONS Partnership Units issued to New Partner: One (1) Preferred Return Per Unit: None Specific Adjustment Factor: 1.0 Specific Adjustment Limitations: None 4. ADMISSION OF NEW PARTNER The New Partner is admitted to the Partnership as the initial Limited Partner. The General Partner hereby consents to such admission. 5. DESIGNATED PARTIES None. 6. AGREEMENT The New Partner acknowledges receipt of a copy of, and agrees to be bound by, the Agreement of Limited Partnership, as amended, for the Partnership. The New Partner specifically confirms (a) the representations and warranties contained in Section 3.4 of such Agreement of Limited Partnership, as amended, for the Partnership and (b) the grant of the power of attorney set forth in Section 2.4 of such Agreement. 74 7. ADDITIONAL TERMS AND CONDITIONS None. IN WITNESS WHEREOF, the parties have executed this Partner Schedule as of the date indicated below. Dated: April 24, 1995 "General Partner": EXCEL REALTY TRUST, INC., as General Partner of EXCEL REALTY PARTNERS, L.P. By GARY SABIN -------------------------------------------- "New Partner": ERT DEVELOPMENT CORPORATION By DAVID A. LUND -------------------------------------------- EX-10.33 3 CONTRIBUTION AGREEMENT 1 EXHIBIT 10.33 - -------------------------------------------------------------------------------- CONTRIBUTION AGREEMENT By and Between EACH OF THE PARTNERSHIPS IDENTIFIED ON SCHEDULE "1" ATTACHED HERETO and EXCEL REALTY PARTNERS, L.P. - -------------------------------------------------------------------------------- 2 CONTRIBUTION AGREEMENT IN CONSIDERATION of the covenants herein contained, each of the Transferors named in Schedule 1 attached hereto hereby agrees to contribute to the Partnership, and the Partnership hereby agrees to acquire, the Projects hereinafter described, upon the following terms and conditions. RECITALS A. Each of the Transferors is the fee owner of one of the retail shopping centers described in Schedule 1 attached hereto and incorporated herein by reference (individually, a "Project," and collectively, the "Projects"). B. The parties intend that the Transferors will contribute the Projects to the Partnership, in exchange for the issuance to the Transferors of units of limited partnership interest in the Partnership ("Units") and the payment of cash, all on the terms and subject to the conditions set forth herein. C. Each Transferor is entering into this Agreement only on its own behalf. The Partnership acknowledges and agrees that there is no joint and several liability of or among the Transferors, and that each Transferor warrants, represents, covenants, and agrees, as set forth below, only on its own behalf, and only with respect to the Project owned by such Transferor. The liability of each Transferor shall only be for such warranties, representations, covenants, agreements, and other matters set forth herein as relate to such Transferor and the Project owned by such Transferor, and the liability of each such Transferor hereunder shall not extend to the assets of any of the other Transferors. D. Schedule 2 attached hereto and incorporated herein by reference sets forth certain fundamental provisions and definitions for purposes of this Agreement. AGREEMENTS 1. Contribution of Properties. Subject to the terms and conditions contained in this Agreement, each Transferor agrees to contribute to the Partnership, and the Partnership agrees to acquire from the Transferors, all of the Transferors' right, title and interest in and to the Projects, each of which includes the following described property: 1.1 Each parcel of real property described on Schedule 1 (individually, a "Parcel" and collectively, the "Parcels"); 1.2 All easements, rights-of-way, appurtenances, and other rights and benefits belonging to each Parcel, and all public or private streets, roads, avenues, alleys, or passways, open or proposed, on or abutting each Parcel, and any award made to or to be made in lieu thereof, and any award for damage to any Parcel by reason of a change of grade in any street, alley, road, or avenue, as aforesaid (all of the foregoing being included within the term "Parcel"); 1.3 All of the buildings, structures, fixtures, facilities, installations, and other improvements of every kind and description now or hereafter in, on, over and under each Parcel, and all plumbing, gas, electrical, ventilating, lighting and other utility systems, ducts, hot water heaters, oil burners, domestic water systems, elevators, escalators, canopies, signs, air conditioning systems, carpeting, telephone systems, alarm systems and all other building systems and fixtures attached to or comprising a part of all such improvements (collectively, with respect to each Parcel, the "Improvements"); 3 1.4 Any and all leases, subleases, licenses, concessions, and other forms of agreement, however denominated, written or oral, granting the right of use or occupancy of any portion of the Improvements (each, a "Lease" and collectively, the "Leases"), to any retail tenant or other such party (a "Tenant"), and all renewals, modifications, amendments, guarantees, and other agreements affecting the same; 1.5 All equipment, furnishings, materials, inventory, supplies and other tangible personal property owned by the Transferors and placed or installed on or about any Parcel or the Improvements thereon and used as part of or in connection therewith (collectively, the "Personal Property"); and 1.6 All intangible personal property now or in the future owned by the Transferors and used in connection with the Projects and not otherwise described in the definition of Personal Property herein, including but not limited to any "Warranties and Guaranties," "Licenses and Permits," "Service Contracts," (in each case as defined herein), agreements or other contract rights, security deposits, prepaid rentals, service contracts, and maintenance agreements relating to the Projects (collectively, the "Intangible Property"). 2. Consideration. As consideration for Transferors' contribution of the Projects to the Partnership, the Partnership shall (a) issue to each Transferor Units of the Partnership, (b) pay cash, and (c) assume or prepay the Existing Indebtedness, in each case as set forth in Schedule 2 attached hereto. Notwithstanding the foregoing, the consideration for the contribution of the Palmetto Crossing Project in Hilton Head, SC, owned by English Hilton Head I Associates Limited Partnership, shall be the assumption or prepayment of the Existing Indebtedness with respect to such Project in an amount not to exceed $3,250,000. 3. Pre-Closing Activities. 3.1 At any time prior to the consummation of the transactions contemplated by this Agreement with respect to any Project (for each Project, the "Closing"), the Partnership and its employees, agents, and licensees shall have the right to enter on each Project for purposes of conducting soils, environmental and other tests and of inspecting the Project and its components, including, but not limited to, the condition of the Improvements and all components thereof and the condition of the Personal Property. The Partnership may, at its option, retain engineers or other consultants for the purposes of performing or assisting in such tests and inspections. The Transferors agree to cooperate reasonably with any such investigations, inspections, or tests. The Partnership shall promptly repair and restore each Project or any part or component thereof damaged by any inspection or test conducted by or at the direction of the Partnership, and shall indemnify, protect, defend and hold each Transferor harmless from any loss, cost, damage, expense or liability (including reasonable attorneys' fees) arising out of investigations or tests conducted by or at the direction of the Partnership under this Section 3.1. The Partnership's obligations under the preceding sentence shall survive any termination of this Agreement. 3.2 At any time prior to the Closing, the Partnership and its employees, agents, and licensees shall have the right to inspect and copy, during normal business hours, each Transferor's books and records with respect to ownership, construction and operation of the Projects. 3.3 As promptly as is reasonably possible, and in any event on or before the Document Delivery Date specified in Schedule 2, and subject to the provisions of paragraph 1.16 of Schedule 2, each Transferor shall, at its sole cost and expense, deliver to the Partnership the following documents and materials: 3.3.1 For each Project, a title insurance commitment (a "Commitment"), dated no earlier than the date of this Agreement, issued by Chicago Title Insurance Company, or such other title 2 4 insurance company as may be acceptable to the Partnership (the "Title Company") and accompanied by copies of all documents, instruments and other matters referred to therein as exceptions. Each Commitment shall contain the Title Company's commitment to delete its standard printed exceptions (including creditors' rights) upon issuance of the applicable Title Policy and, to the extent legally permitted, the Title Company's commitment to issue the Required Endorsements; 3.3.2 For each Project, a current survey (a "Survey") certified to the Partnership and Title Company, prepared by Bock & Clark National Surveyors Network located in Akron, Ohio or such other surveyor licensed by the state in which the Project is located and acceptable to the Partnership, which shall meet the requirements for an Urban Class Survey as defined in the Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys, as adopted in 1992 and otherwise satisfy the Partnership's standards; 3.3.3 For each Project, a current report of a search of applicable Uniform Commercial Code financing statement filings with respect to the Transferor and such Project; 3.3.4 For each Project, copies of the property tax bills and receipts for the past three (3) calendar years; 3.3.5 For each Project, copies of all service, maintenance, management, and other similar contracts to which the Transferor is a party, by which the Transferor is bound, or of which the Transferor has knowledge which pertain to the Projects, or any portion thereof (the "Service Contracts"); all certificates of occupancy, zoning, building, safety and health approvals and all other permits needed for or used in connection with the operation of the Improvements (the "Licenses and Permits"); all unexpired warranties and guaranties in effect with respect to a Project or any portion or component thereof (the "Warranties and Guaranties"); all soil, seismological, geological, and drainage reports; and all other contracts or documents in the Transferor's possession or control affecting or regarding the Project; 3.3.6 For each Project, copies of the plans and specifications for the Improvements, bearing appropriate certifications indicating that the plans and specifications have been approved by all Governmental Authorities having authority to grant such approval; 3.3.7 For each Project, all sales reports that any Tenant may have been required to submit to the Transferor pursuant to the applicable Lease for the prior three (3) years. 3.3.8 For each Project, copies of all Leases, a current rent roll certified by the Transferor as being true and correct showing the names of all tenants under the Leases with respect to that Project, the commencement and expiration dates of each such Lease, any renewal option in any such Lease, the monthly rents under such Leases, the amount of any rental concession or free rent for any period which has not expired and the date to which rents under such Leases have been paid, and, to the extent available, income statements and balance sheets of the Tenants for the previous three (3) years; 3.3.9 For each Project, all operating statements for the past three (3) calendar years; 3.3.10 For each Project, an inventory of the Personal Property, certified by the Transferor as being true and correct; 3 5 3.3.11 For each Project, copies of all utility bills and insurance claims for the past three (3) calendar years; 3.3.12 For each Project, an engineering and structural report from a licensed engineer acceptable to the Partnership. 3.3.13 For each Project, a current Phase I Environmental Audit meeting the requirements of American Society of Testing and Materials, "Standard Practice Environmental Site Assessments: Phase I Environmental Assessment Process (E 1527- 93)" (a "Phase I Audit") performed by Building Diagnostics Ltd.; 3.3.14 For each Project, copies of all loan documentation with respect to Existing Indebtedness, as described in Schedule 3 attached hereto; 3.3.15 For each Project, current certificates of insurance for all liability or property insurance currently in effect; and 3.3.16 For each Project, any other material documents or material information pertaining to the Project in the Transferor's possession. 3.3.17 For each Project, a zoning certificate in substantially the form of Exhibit "A" attached hereto. 3.4 At any time prior to the Closing, the Partnership and its representatives, agents and independent contractors shall have the right to (a) meet with all governmental agencies, and with other persons or entities with whom a Transferor or others have contractual arrangements, in connection with or relating to each Project, and (b) discuss with any such agencies, persons and entities the terms of this Agreement, the terms of any contractual arrangements between the Transferor and any such agency, person or entity, and the Partnership's proposed acquisition of the Project. 3.5 At all times prior to the Closing, each Transferor shall, with respect to each Project that has not previously been designated by the Partnership as an Excluded Project pursuant to Section 5: 3.5.1 Cause each Project to be maintained in full compliance with all applicable laws and regulations and in the ordinary and usual course of business, and perform, or cause to be performed, in a timely manner all of its or its affiliates' obligations under the Leases, the Service Contracts, the Licenses and Permits and other agreements affecting the Projects. In particular, each Transferor shall pay and fully discharge (or provide indemnity or undertaking permitting Title Company to insure against) all mechanic's or similar liens against the Projects; 3.5.2 Keep in full force and effect all existing insurance policies affecting the Projects or any portion thereof; 3.5.3 To the extent practicable, keep in effect, and renew when necessary at the Transferor's expense (with a proration to be made as of the Closing), all existing Licenses and Permits affecting the Projects; 4 6 3.5.4 Except as required pursuant to the terms and conditions of this Agreement, not to do anything, nor permit anything to be done, which would impair or modify the status of title as shown on the Commitments or the Surveys; 3.5.5 Operate and maintain, or cause to be operated and maintained, each Project in the same manner as heretofore operated and maintained, in a professional manner and in at least as good a condition as existed on the date of this Agreement, reasonable wear and tear excepted; 3.5.6 Not enter into, or permit to be entered into, any Lease or Service Contract or other contract which, following Closing, will be binding upon the Partnership or a Project without, in each instance, obtaining the prior written approval of the Partnership, which approval shall not be unreasonably withheld (and to deliver to the Partnership, upon execution thereof, copies of such new Leases and contracts). 4. Conditions Precedent. The Partnership's obligation to acquire the Projects pursuant to this Agreement is subject to the satisfaction or waiver of each of the following conditions precedent: 4.1 On or before the expiration of the Review Period specified in Schedule 2 attached hereto, the Partnership shall have approved the condition of title to each of the Projects, as described in the Commitments and the Surveys. The Partnership shall be entitled to object to any exception reported in a Commitment or a Survey, in its sole discretion, by a written notice delivered to the Transferor on or before the expiration of the Review Period. The Transferor shall have ten (10) days from the receipt of the Partnership's notice of objections either to procure the issuance of an endorsement to the appropriate Commitment removing such disapproved exceptions or, if acceptable to the Partnership, to provide affirmative title insurance protection for such exceptions satisfactory to the Partnership in the Partnership's sole discretion. The Transferor shall have no obligation to provide any such endorsement or affirmative title insurance protection. If the Transferor is unable or unwilling so to provide for the removal of such disapproved exceptions or to obtain affirmative title insurance protection for such disapproved exceptions, then the Partnership may either waive its objections or deliver to the Transferor a notice designating the affected Project as an Excluded Project pursuant to Section 5. The Closing shall be postponed, if necessary, by the number of days required to accommodate the procedures set forth in this Section. For purposes of this Agreement, liens encumbering a Project for the purpose of securing Existing Indebtedness identified on Schedule 3 attached hereto which the Partnership elects to assume at the Closing pursuant to Section 5.3 shall be deemed to be permitted exceptions (subject to the provisions of Sections 4.4 and 8.3), and all other monetary liens and encumbrances shall be deemed to be disapproved exceptions. 4.2 On or before the expiration of the Review Period, the Partnership shall have approved a Phase I Audit with respect to each Project, in the Partnership's sole discretion. The Partnership shall be entitled to object to any Phase I Audit by written notice delivered to the Transferor on or before the expiration of the Review Period. If the Partnership delivers a notice of objections with respect to a Phase I Audit, then the Transferor shall either (a) commit to cure all of the objections to the Partnership's satisfaction and, if requested by the Partnership in the notice of objections, deliver to the Partnership a Phase II Environmental Audit performed by EMG or another consultant approved by the Partnership (the "Phase II Audit") prior to the Closing, or (b) provisionally designate such Project as an Excluded Project. If the Transferor provisionally designates the Project as an Excluded Project, or if the Partnership disapproves the Transferor's cure or the Phase II Audit, then the Partnership may either waive its objections or deliver to the Transferor a notice designating the affected Project as an Excluded Project pursuant to Section 5. The Closing shall be postponed, if necessary, by the number of days required to accommodate the procedures set forth in this Section. 5 7 4.3 On or before the expiration of the Review Period, the Partnership shall have approved all of the characteristics and aspects of each Project which may affect its ownership, operation, usage, development, marketability and/or economic viability. If the Partnership disapproves any such aspect of a Project, then the Partnership may deliver to the Transferor a notice designating the affected Project as an Excluded Project pursuant to Section 5. Upon completion of its physical inspection of a Project pursuant to Section 3.1, the Partnership shall prepare a punchlist of deferred maintenance or other corrective measures the Partnership desires the Transferor to complete prior to the Closing. So long as the estimated cost of completing such work does not exceed $25,000, the Transferor shall complete such work, at its expense, prior to the Closing. If the estimated cost of such work exceeds $25,000, then the Transferor may elect either to complete such work, at its expense, prior to the Closing, or provisionally to designate such Project as an Excluded Project. If the Transferor elects provisionally to designate such Project as an Excluded Project, then the Partnership may revise its punchlist so that the estimated cost of such work is reduced to $25,000 or less, in which case such Project shall not be an Excluded Project, and Transferor shall complete the revised scope or work, at its expense, prior to the Closing. If the Partnership does not so revise its punchlist, then the Project shall be an Excluded Project. 4.4 Subject to the provisions of Section 5.3, on or before the expiration of the Review Period, the Partnership shall have approved the terms and conditions of all loan documents relating to Existing Indebtedness which the Partnership elects to assume. 4.5 On or before the expiration of the Review Period, the Partnership shall have approved the Leases and Service Contracts with respect to each Project, in the Partnership's sole discretion. The Partnership shall be entitled to object to any Service Contract by written notice delivered to the Transferor on or before the expiration of the Review Period. At the Closing, the Transferor shall have terminated those Service Contracts to which the Partnership has objected. 4.6 At the Closing, Transferor shall have obtained consents and estoppels satisfactory to the Partnership, as follows: 4.6.1 From all lenders holding Existing Indebtedness which the Partnership elects to assume; 4.6.2 From the anchor Tenant(s); 4.6.3 From Tenants leasing at least seventy five percent (75%) of the remainder of the leasable area of the Project that is then under lease; and 4.6.4 From the Transferor with respect to any Leases for which Tenant estoppels have not been obtained. 4.7 At the Closing, the Title Company shall have issued to the Partnership an owner's policy of title insurance (a "Title Policy") for each Project (other than the Excluded Projects, if any). Each Title Policy shall name the Partnership as insured, and shall be in an amount equal to the sum of the Transferor's Equity in the applicable Project plus the principal amount of any indebtedness with respect to such Project that is assumed at the Closing by the Partnership. Each Title Policy shall be an ALTA extended coverage owner's policy with all of the Title Company's standard exceptions (including creditors' rights) deleted, and shall insure the Partnership's fee title to the applicable Parcel and Improvements free and clear from all liens, easements, rights-of-way, and other encumbrances except only the exceptions approved by the Partnership in the manner provided in Section 4.1 hereof. Each Title Policy shall include the following American Land 6 8 Title Association endorsements (unless the same are not generally available in the jurisdiction where the Project is located) and such additional endorsements as are reasonably required by the Partnership: 4.7.1 Assurance against loss from violations of any Covenants, Conditions and Restrictions agreements or similar matters which encumber any portion of the Project; 4.7.2 Assurance that the Parcels described in the policy are contiguous parcels, if applicable; 4.7.3 Assurance that the Improvements do not encroach onto any easement; 4.7.4 Assurance that each Parcel abuts on and has access to a physically open street as identified in the endorsements; 4.7.5 Assurance that the insured Parcel is the same Parcel that is shown on the Survey; and 4.7.6 Assurance that any knowledge of the Transferor with respect to the status of title to the Project will not be imputed to the Partnership and will not affect the Policies. 4.8 Prior to the Closing with respect to a Project, and prior to the date on which any required consent to the sale or other transfer of all or substantially all of the assets of a Transferor is solicited from the partners of such Transferor, the general partner of such Transferor shall have obtained a written agreement, in form acceptable to the Partnership, from each partner of the Transferor who is not an "Accredited Investor," as defined in Rule 501 of the General Rules and Regulations promulgated under the Securities Act of 1933, as amended, whereby such partner(s) grant to such general partner an option to purchase, for cash, the interests of such partner(s) in the Transferor. Prior to or concurrently with the Closing with respect to the Project, the general partner will exercise such option(s) and acquire such interests for cash. 5. Designation of Excluded Projects; Existing Indebtedness. 5.1 Any Project designated by the Partnership or a Transferor as an "Excluded Project" in the manner provided in this Section 5 or in Sections 4.2 and 4.3 shall be excluded from the conveyance by the Transferors to the Partnership pursuant to this Agreement, and the amount of cash paid to and the number of Units issued to the Transferors by the Partnership shall be reduced accordingly. In addition, if a Project is designated as an Excluded Project pursuant to Section 4.2 and/or Section 4.3, above, then the Transferor shall pay to the Partnership the liquidated sum of $2,500 to reimburse the Partnership for due diligence expenses incurred with respect to such Excluded Project. 5.2 The Partnership may designate a Project as an Excluded Project, by delivering written notice of its election to do so to the applicable Transferor (a) at any time prior to the expiration of the Review Period, in the event that the Partnership reasonably disapproves any of the matters described in Sections 4.1 through 4.5, or (b) at any time prior to the Closing, in the event of any material adverse change in any of the matters described in Sections 4.1 through 4.5 following the expiration of the Review Period, or (c) at any time prior to the Closing, in the event any of the conditions precedent to the Partnership's obligation to acquire such Project have not been satisfied or waived on or before the Closing Deadline specified in Schedule 2 attached hereto. 7 9 5.3 On or before the expiration of the Review Period, the Partnership shall notify each Transferor whether the Partnership wishes to assume the Existing Indebtedness with respect to its Project at the Closing. In the event the Partnership wishes to assume the Existing Indebtedness, the parties shall cooperate to cause the holder of the Existing Indebtedness to consent to such assumption by the Partnership. If the holder of the Existing Indebtedness is unwilling to consent to such assumption, or imposes conditions to its consent that are unacceptable to the Partnership, then the Partnership may either designate the Project as an Excluded Project at any time prior to the Closing, or elect to prepay such Existing Indebtedness at the Closing. 5.4 Evans Towne Center, L.P., the Transferor that owns the Evans Towne Center Project in Augusta, Georgia, may designate such Project as an Excluded Project, in the exercise of its sole discretion. The parties acknowledge that until such time as such Transferor determines whether such Project will be an Excluded Project, all obligations of the parties to deliver documents and materials, conduct due diligence and otherwise proceed toward the Closing with respect to such Project shall be tolled. 6. Escrow; Delivery of Funds and Documents. 6.1 Each Closing shall be accomplished through an escrow (the "Escrow") established with the Escrow Agent identified in Schedule 2 attached hereto. Concurrently with the execution and delivery hereof, the Partnership and the Transferors shall open the Escrow by depositing a fully executed copy of this Agreement with Escrow Agent. The Partnership and the Transferors each shall execute and deliver such further escrow instructions or other instruments as may be reasonably requested by the other party or by Escrow Agent from time to time, so long as the same are consistent with this Agreement. If there is any inconsistency between Escrow Agent's general provisions and any of the provisions of this Agreement, the provisions of this Agreement shall control. Escrow Agent shall not be concerned, liable or responsible for any representations, warranties or indemnities as between the Partnership and the Transferors. For purposes of complying with Internal Revenue Code Section 6045(e), as amended effective January 1, 1991, Escrow Agent is hereby designated as the "person responsible" and the "reporting person" for purposes of filing any information returns with the Internal Revenue Service concerning this transaction, as may be required by law. 6.2 Prior to 3:00 p.m. on the last business day before the Closing Deadline specified in Schedule 2 attached hereto, each Transferor shall deliver to Escrow Agent each of the following, duly executed and acknowledged if required: 6.2.1 A general warranty grant deed on the Title Company's standard form conveying to the Partnership fee simple title to its Project (other than Projects, if any, which the Partnership has designated as Excluded Projects), subject only to the exceptions approved by the Partnership pursuant to Section 4.1 hereof (the "Deeds"); 6.2.2 An Assignment of Leases in the form of Exhibit "B" attached hereto for its Project (other than Projects, if any, which the Partnership has designated as Excluded Projects), assigning to the Partnership all Leases with respect to such Project; 6.2.3 A Bill of Sale in the form of Exhibit "C" attached hereto for its Project (other than Projects, if any, which the Partnership has designated as Excluded Projects), conveying to the Partnership all of the Transferor's right, title, and interest in and to all Personal Property and Intangible Property with respect to such Project; 8 10 6.2.4 An Assignment of Contracts in the form of Exhibit "D" attached hereto for its Project (other than Projects, if any, which the Partnership has designated as Excluded Projects), assigning to the Partnership all Service Contracts which the Partnership elects to assume; 6.2.5 An affidavit of the Transferor stating the Transferor's United States taxpayer identification number and certifying that the Transferor is not a foreign person as defined in Internal Revenue Code Section 1445, together with affidavits of the Transferor complying with any similar statutes enacted by the state in which its Project is located; 6.2.6 A "Partner Schedule," to be attached to the agreement of limited partnership of the Partnership in connection with the issuance of Units to the Transferor, in the form of Exhibit "E" attached hereto, executed by the Transferors; 6.2.7 Funds in the amount required pursuant to Section 8 hereof; and 6.2.8 All other documents affecting title to or possession of the Projects and necessary to transfer or assign the same to the Partnership. 6.3 Prior to 3:00 p.m. on the last business day before the Closing Date, the Partnership shall deliver to Escrow Agent each of the following, duly executed and acknowledged if required: 6.3.1 Subject to the provisions of Section 8.3, funds in an amount sufficient to repay the Existing Indebtedness which the Partnership does not elect to assume at the Closing pursuant to Section 5.3, or loan assumption documentation with respect to the Existing Indebtedness which the Partnership does elect to assume at the Closing pursuant to Section 5.3, as applicable; 6.3.2 Funds in an amount equal to the portion of the Transferor's Equity that is payable in cash, determined as provided in Schedule 2; 6.3.3 Funds in the amount required pursuant to Section 8 hereof; 6.3.4 Certificates evidencing the issuance to Transferor (or, if directed by a Transferor, and subject to the provisions hereof, to such Transferor's constituent partners)of the number of Units of the Partnership computed as provided in Schedule 2 attached hereto; and 6.3.5 The Partner Schedule, executed by the Partnership. 6.4 At the Closing, each Transferor shall deliver the following documents to the Partnership, outside of Escrow: 6.4.1 Certificates addressed to the Partnership updating through the Closing the representations and warranties set forth herein; 6.4.2 Certified authorizing resolutions of the Transferor approving this Agreement and the transactions contemplated hereby and authorizing execution and delivery of all documents required pursuant to this Agreement, together with such other documents as the Partnership may reasonably request concerning the Transferor's authority to complete the transactions and execute the documents and instruments contemplated hereby; 9 11 6.4.3 Such affidavit or affidavits as may be required by the Partnership in order to establish that any person or entity which may receive Units pursuant to this Agreement (i.e., as a result of a Transferor's distribution of such Units to its constituent partners, subject to the provisions hereof, at or followign the Closing) (i) is an "accredited investor" as defined in Rule 501 of the General Rules and Regulations promulgated under the Securities Act of 1933, as amended, and (ii) is receiving such Units for investment and not with a view to distribution; 6.4.4 All existing Guarantees and Warranties issued in connection with the construction, improvement, alteration or repair of the Improvements and in connection with the purchase or repair of any Personal Property; 6.4.5 The consents and estoppel letters from lenders described in Section 4.6 hereof; 6.4.6 Estoppels in substantially the form of Exhibit "F" attached hereto from the Tenants and, if necessary, Transferor, as described in Section 4.6 hereof; 6.4.7 All keys and entrance cards used on any part of the Projects; 6.4.8 All marketing materials, brochures and other written material used in connection with the marketing, leasing and/or operation of the Projects; 6.4.9 Originals of all Leases; 6.4.10 Notices executed by the Transferor to each Tenant and guarantor under the Leases notifying them of the transfers effected hereunder; 6.4.11 Rent rolls as of a date not more than two (2) days prior to the Closing certified by the Transferor as true and complete showing no material adverse changes from the rent rolls delivered pursuant to Section 3.3.8 hereof; 6.4.12 An opinion of the Transferor's legal counsel in form and substance acceptable to the Partnership opining (a) that all transactions contemplated hereby have been duly authorized, (b) that this Agreement and all documents contemplated hereby have been duly executed and delivered by the Transferor and are enforceable against the Transferor in accordance with their terms, (c) that the Transferor has been duly organized and formed and is in good standing in the state of its incorporation or situs, and (d) as to such other matters as the Partnership shall reasonably require; and 6.4.13 All original books and records maintained by the Transferor with respect to its Project. 7. Closing. 7.1 As to each Project, Escrow Agent shall close the Escrow on the Closing Deadline by (a) filing for record the Deeds and such other documents as may be necessary to procure the Title Policies, and (b) delivering funds and documents as set forth in Section 8, WHEN AND ONLY WHEN each of the following conditions has been satisfied: 10 12 7.1.1 All funds and documents required by Section 6 have been delivered to Escrow Agent; 7.1.2 Each of the conditions precedent set forth in Section 4 has been, or upon such Closing will be, satisfied or waived; and 7.1.3 Escrow Agent has procured the Title Policies; 7.1.4 Escrow Agent is prepared to comply with any additional closing instructions delivered by the Partnership or the Transferor that are not inconsistent with the provisions of this Agreement. 7.2 If all of the conditions set forth in Section 7.1 become satisfied at a date earlier than the Closing Deadline, then Escrow Agent shall close the Escrow at such earlier date. 7.3 If Escrow Agent cannot close the Escrow on or before the Closing Deadline, then it will, nevertheless, close the Escrow when all conditions have been satisfied or waived, notwithstanding that one or more of such conditions has not been timely performed, unless a notice of termination has already been delivered to Escrow Agent by a party that is not then in default under this Agreement. The right so to terminate the Escrow and this Agreement shall be optional, not mandatory. No delay in the giving of such notice shall affect the rights hereunder of the party giving the same. Notwithstanding the foregoing, the Escrow must in any event close or be terminated by the Escrow Termination Date specified in Schedule 2 attached hereto. 7.4 Escrow Agent shall have no liability or responsibility for determining whether or not a party giving a notice of termination is or is not in default hereunder. Within two working days after receipt of such notice from one party, Escrow Agent shall deliver a copy of such notice to the other party. Unless written objection to the termination of the Escrow is received by Escrow Agent within ten (10) days after Escrow Agent delivers such notice to the other party, (a) Escrow Agent shall forthwith terminate the Escrow and return all funds, documents and other items held by it to the party depositing same, except that Escrow Agent may retain such documents and other items usually retained by escrow agents in accordance with standard escrow termination procedures and practices, and (b) each party shall forthwith pay to Escrow Agent one-half of Escrow Agent's reasonable escrow termination charges. If written objection to the termination of the escrow is delivered to Escrow Agent within such 10-day period, then Escrow Agent is authorized to hold all funds, documents and other items delivered to it in connection with the escrow and may, in Escrow Agent's sole discretion, take no further action until otherwise directed, either by the parties' mutual written instructions or final order of a court of competent jurisdiction. 7.5 Neither (a) the exercise of the right of termination, (b) delay in the exercise of such right, nor (c) the return of funds, documents or other items, shall affect the right of the party giving a notice of termination to pursue legal remedies for the other party's breach of this Agreement (including without limitation damages for the payment of all or any portion of Escrow Agent's escrow termination charges). Nor shall (i) the giving of such notice, (ii) the failure to object to termination of the Escrow, or (iii) the return of funds, documents or other items affect the right of the other party to pursue other legal remedies for the breach of the party who gives such notice. 8. Prorations and Post-Closing Payments. 11 13 8.1 For each Project, rents, property taxes, assessments, tenant security deposits and other refundable tenant deposits, utilities, and other charges shall be prorated by the parties as of the Closing. Such prorations shall be made on the basis of a 365-day year, with the day of the Closing considered to be for the account of the Partnership, in accordance with the following provisions, and shall operate to increase or decrease the amount of cash and the number of Units to be paid or issued by the Partnership to the Transferors at the Closing: 8.1.1 For each Project, all rentals, receipts and other revenues which have been paid to the Transferor and which are allocable to the period from and after the Closing shall be credited to the Partnership. The Partnership shall be entitled to collect all rentals, receipts and other revenues from the Property which are delinquent as of the Closing or are due on or after the Closing. When collected by the Partnership, the Partnership shall remit to the Transferor any such delinquent rentals, receipts, and other revenues which relate to the period prior to the Closing within thirty (30) days after their collection, with any such collections to be applied first to the last accruing obligations of the payors. Percentage rents attributable to the entire calendar year or lease year, as applicable, in which the Closing occurs shall be reprorated (effective as of the Closing) at the end of such calendar year or lease year, as applicable, when all required sales reports have been submitted. 8.1.2 For each Project, all real property taxes for the year immediately preceding the year in which the Closing occurs which are payable in the year the Closing occurs, and for years prior thereto, shall be paid by the Transferor on or before the Closing. Real property taxes for the year in which the Closing occurs shall be prorated on the basis of the most recent assessment and levy. If the Transferor has appealed the amount of any real property taxes or other ad valorem taxes charged in connection with a Project, then the following procedures shall apply. The cost of any such appeal for any year prior to the year in which the Closing occurs shall be borne by the Transferor, and the Transferor shall receive any and all refunds or credits obtained. With respect to any appeal affecting taxes or assessments charged for the year in which the Closing occurs, the cost and benefit of such appeal shall be apportioned between the Partnership and the Transferor in percentages equal to their proportionate tax and assessment liability for the year in which the Closing occurs; provided, however, that the Partnership's liability for the cost of such appeal shall in no event exceed any refund or credit to which the Partnership is entitled. The Partnership shall cooperate with the Transferor, its attorneys and advisors, in processing any pending tax appeal, provided that such cooperation is at no expense to the Partnership. 8.1.3 For each Project, all installments of assessments, special assessments and other like charges now or hereafter imposed against the Project, or any part thereof, by reason of roadways, utility lines, streets, alleys or other improvements in existence or under construction as of the Closing, shall be prorated between the Transferor and the Partnership. All such installments of assessments, special assessments and other charges that are due and payable prior to the Closing shall be paid by the Transferor prior to the Closing (or a credit given to the Partnership therefor at Closing). All such installments of assessments, special assessments and other charges due and payable after Closing shall be prorated between the Transferor and the Partnership. 8.1.4 For each Project, prepaid water, sewer, and other utility charges shall be credited to the Transferor, and accrued water, sewer, and other utility charges shall be credited to the Partnership. In the event that the Transferor or its predecessor in title has delivered a deposit to any utility provider, the Transferor shall be entitled to obtain the return of such deposit and, if required, the Partnership shall deliver to such provider a replacement deposit. 12 14 8.1.5 For each Project, prepaid charges in connection with any Service Contracts that the Partnership elects to assume, or Licenses or Permits, shall be credited to the Transferor. Accrued charges in connection with such Service Contracts, or Licenses or Permits shall be credited to the Partnership. 8.1.6 For each Project, Tenant security deposits and other refundable tenant deposits under the Leases shall be credited to the Partnership. 8.2 If any of the prorations described in Section 8.1 cannot be calculated accurately as of the Closing, then the same shall be calculated as soon as possible thereafter, and if necessary the amount of cash and the number of Units paid or issued to the Transferor shall be adjusted accordingly. 8.3 The Transferor shall pay all prepayment charges, assumption fees or other similar charges arising in connection with the prepayment or assumption, as the case may be, of the Existing Indebtedness. 8.4 The Transferor shall pay (a) documentary transfer, deed, stamp or other similar taxes, in the amount Escrow Agent determines to be required by law, (b) the premiums for the Title Policies and any survey costs necessary to procure the same, (c) sales taxes, (d) one-half of Escrow Agent's escrow fee or escrow termination charge, (e) fees for beneficiaries' statements, and (f) usual seller's document drafting and recording charges. 8.5 Transferor shall pay and retain full responsibility for all expenses connected with or arising out of the negotiation, execution and delivery of the Leases executed prior to the Closing, including but not limited to brokers' commissions, leasing fees and the cost of all tenant improvements which are the landlord's obligations, remaining unpaid at the Closing. 8.6 The Partnership shall pay (a) one-half of Escrow Agent's escrow fee or escrow termination charge, and (b) usual buyer's document drafting and recording charges. 9. Distribution of Funds and Documents. 9.1 All cash received hereunder by Escrow Agent shall be, until the close of Escrow, kept on deposit with other escrow funds in Escrow Agent's general escrow account(s), in any state or national bank, and may be transferred to any other such general escrow account(s). 9.2 Any interest payable with respect to cash deposited with Escrow Agent shall be for the account of the party that deposited the cash. 9.3 All disbursements by Escrow Agent shall be made by wire transfer. 9.4 Subject to the provisions of Section 8.3, Escrow Agent shall, at the Closing, pay from funds deposited with Escrow Agent by the Partnership pursuant to Section 6.3.1, the Existing Indebtedness which the Partnership does not elect to assume at the Closing. 9.5 Escrow Agent shall cause the recorder's office to mail the Deeds (and each other document which is herein expressed to be, or by general usage is, recorded) after recordation, to the grantee, beneficiary or person (a) acquiring rights under said document, or (b) for whose benefit said document was acquired. 13 15 9.6 Escrow Agent shall, at the Closing, deliver by United States mail (or hold for personal pickup, if requested) each nonrecorded document received hereunder by Escrow Agent, to the payee or person (a) acquiring rights under said document, or (b) for whose benefit said document was acquired. 10. Representations, Warranties and Covenants of the Transferors. Each Transferor hereby represents, warrants and covenants the following to the Partnership, each of which is true and correct as of the date of this Agreement, and shall be true and correct as of the Closing. Each Transferor acknowledges that the execution of this Agreement by the Partnership has been made and the acquisition by the Partnership of the Projects will have been made in material reliance by the Partnership on such representations, warranties and covenants: 10.1 The Transferor is now, and as of the Closing will be (a) duly formed and validly existing under the laws of its state of formation; and (b) duly authorized, qualified, and licensed to do all things required of it under or in connection with this Agreement. 10.2 This Agreement and all agreements, instruments, and documents herein provided to be executed or to be caused to be executed by the Transferor are (or will be) duly executed by and binding upon the Transferor. 10.3 Except as is set forth in Schedule 4, the Transferor has received no notice of any litigation, investigation, condemnation or proceeding of any kind pending or threatened affecting any of the Projects or the ability of the Transferor to consummate the transaction contemplated by this Agreement. 10.4 All consents and approvals required of the constituent partners of the Transferor for the consummation of the transactions contemplated hereby have been obtained or will have been obtained as of the Closing. 10.5 To the best of its knowledge, there has not been used, installed, generated, produced, stored, or released on, under or about any of the Parcels, or transported to or from any of the Projects, or into any groundwater (other than sanitary sewer systems established for such purpose), any underground storage tanks, asbestos, PCBs, urea formaldehyde, oils, petroleum or by-products thereof or any other toxic or hazardous waste, material or substance, as those or any similar terms are now or in the future used or defined in any laws (herein "Hazardous Substance") (except for cleaning agents, photocopying chemicals and other substances used in the ordinary course of normal building and maintenance operations on the Projects). The Transferor has not released any other person or entity from any liability for any such environmental matters and no liens have been or are imposed on any of the Projects under any environmental laws. 10.6 The Transferor has received no notice or claim from any government authority or any other private party relating to a breach or violation of any laws or any permits or private covenants or restrictions relating to any Hazardous Substance or other adverse environmental or other defective condition respecting its Project or any ground water related thereto. To the best of its knowledge, there are no pending or threatened legal or administrative proceedings regarding its Project (including but not limited to any property damage, public or personal liability claims, condemnation proceedings, future public assessment or similar proceedings or charges, except as shown in Schedule 4), or any physical defects, infestation or other conditions, which would materially impair the use and operation of its Project in the manner permitted under the zoning currently applicable to its Project. To the best of its knowledge, the Improvements were built in accordance with the plans therefor, the Licenses and Permits and all applicable laws, and their use and operation now are and at the Closing will be in good operating condition (subject to normal wear and tear) and in full compliance with all applicable environmental, zoning and other laws. 14 16 10.7 The Transferor has not obligated itself to transfer, sell or offer for transfer or sale any portion of its Project to any party other than the Partnership. Except for the Existing Indebtedness identified in Schedule 3 attached hereto, the Transferor has not hypothecated or assigned any rents or income from any Project. 10.8 Subject to the rights of Tenants under the Leases, complete and unconditional possession of the Project shall be delivered to the Partnership as of the Closing, free from any liens, bonded indebtedness or other assessments for any water, sewer, traffic or other improvement district imposed by any private or governmental entity, or otherwise. 10.9 All information and items regarding its Project provided by the Transferor to the Partnership are, to the best of its knowledge, true, accurate and complete in all respects and are fairly presented in a manner that is not misleading. 10.10 The Transferor has no knowledge of the existence of any material documents relating to its Project that were not delivered or made available to the Partnership as provided herein. The Transferor is not in default under any documents referred to in the Commitments or under any material contracts comprising part of the Intangible Personal Property. 10.11 In accordance with Section 1445 of the Internal Revenue Code, the Transferor is not now, and at the Closing will not be, a "foreign person" (as defined therein). Accordingly, the Partnership need not withhold any federal tax at the Closing as a result of the transactions contemplated by this Agreement. 10.12 In respect of each of the Leases, except as provided in the rent roll for each of the Projects provided by the Transferor to the Partnership as provided herein, the following information is true and correct: (a) each of the Leases is in full force and effect according to the terms set forth therein and in the rent roll and has not been further modified, amended, extended or assigned by the Transferor, in writing or otherwise, and each Tenant under the Leases is legally required to pay all sums and perform all obligations set forth in the Leases, without further concessions, abatements, offsets, defenses or other basis for relief or adjustment; (b) all obligations of the Transferor, as landlord under the Leases, which have accrued prior to Closing will be performed and, to the Transferor's best knowledge, no Tenant has asserted or has any defense to, or any offsets, abatements, concessions, claims against, any rent payable by it after the date hereof, or any calculation of rent, or the performance of any other obligations under such Tenant's respective Lease; (c) except as is set forth in Schedule 5, to the Transferor's best knowledge, no Tenant is in default under or in arrears in the payment of any sum payable or in the performance of any obligation required of it under its Lease, including but not limited to all rent, taxes, assessments, repairs and maintenance charges, insurance premiums, utilities or other charges or expenses, and no Tenant has prepaid any rent or other charges; (d) to the Transferor's best knowledge, no Tenant is unable or unwilling to perform any or all of its material obligations under its Lease, whether for financial or legal reasons or otherwise; (e) to the Transferor's best knowledge, no guarantor or any prior tenant under any of the Leases has been released or discharged from any material obligation under or in connection with any of the Leases; (f) the Transferor has not applied and shall not apply any security deposit from a Tenant to rent or any other obligation due from any Tenant without the Partnership's prior written consent; (g) all work required to be done by the Transferor, as landlord under each such Lease, has been or by the Closing will be done or furnished unless otherwise agreed by the parties and no Tenant is entitled to any additional work during the term of its Lease; (h) the Leases are assignable by the Transferor, as landlord, without the necessity of consent of any third party; (i) neither the Leases nor the rents nor any other amounts payable thereunder have been assigned, pledged or encumbered by the Transferor except for such mortgages, pledges or other encumbrances agreed to become or remain in effect at Closing; and (j) except as is set forth in Schedule 4, the Transferor has not received from any 15 17 Tenant written notice of any presently pending dispute regarding the calculation or payment of rent, the terms of any Lease or any alleged default by the Transferor, as lessor, under such Lease, or of any bankruptcy, receivership, custodianship, reorganization, insolvency, assignment for benefit of creditors or other proceeding of a similar nature respecting any Tenant, any Lease or the Projects. 10.13 Upon consummation of the transfers hereunder, there will be no brokerage or leasing fees or commissions or other compensation due or payable to any person, firm, corporation, or other entity, with respect to or on account of any of the Leases and no such fees, commissions or other compensation shall, by reason of any existing agreement, become due during the terms of any of the Leases or with respect to any renewal or extension thereof or the leasing of additional space by any Tenant which are not subject to an arrangement for full payment and satisfaction by the Transferor as described. 10.14 None of the employees of the Transferor at its Project are employed pursuant to a written agreement and all employees may be terminated at will. The Transferor has not entered into any union contacts pertaining to employees at its Project nor is its Project subject to any union contract, nor is the Transferor aware of any efforts to organize any or all of the employees of the Transferor at its Project into a union or other collective bargaining arrangement. Unless otherwise directed by the Partnership, the services of all employees of the Transferor have been or will be terminated in connection with the Projects effective as of Closing, the Transferor agreeing and representing that the Partnership shall have no obligation whatsoever to any of the officers, agents or employees of the Transferor relating to any employment with respect to any Project or otherwise, and Transferor agrees to indemnify, defend and save the Partnership harmless from any liability or obligation arising under any claim to such employment. 10.15 The Transferor shall have paid for all work, labor and materials furnished to it in connection with its Project prior to Closing, and will indemnify and hold the Partnership harmless from any mechanic's or materialmen's liens, filed or otherwise claimed, in connection with any such work, labor and materials performed on or furnished in connection with its Project prior to Closing, and any and all legal and related expenses incurred by the Partnership by reason thereof. 10.16 All vehicle parking space requirements imposed by applicable laws relating to its Project are satisfied solely by on-site parking, without the necessity of any off-site parking arrangements. 10.17 It has received and reviewed the most current Prospectus of Excel Realty Trust, Inc., a Maryland corporation (the "REIT") and the Registration Statement, as amended, of which the Prospectus is a part, filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Act") and has had access to such additional financial and other information, including without limitation the REIT's most current Form 10-Q and Form 10-K, and has been afforded the opportunity to ask questions of representatives of the Partnership and the REIT, and to receive answers to those questions, as it has deemed necessary in connection with its acquisition of the Units being issued to such Transferor pursuant to this Agreement. 10.18 The Transferor acknowledges that the Units being acquired pursuant hereto are being acquired in a transaction not involving any public offering within the meaning of the Act and that the Units and Common Stock issuable by the REIT to acquire Units that may be tendered to the Partnership for redemption have not been registered under the Act and agrees not to offer, sell, transfer or otherwise dispose of the Units or such Common Stock in the absence of registration under the Act unless the Transferor delivers to the Partnership and the REIT an opinion of a lawyer reasonably satisfactory to the Partnership and the REIT, in form and substance satisfactory to the Partnership and the REIT, to the effect that the proposed sale, transfer or other disposition may be effected without registration under the Act and under 16 18 applicable state securities or blue sky laws. The Transferor acknowledges that the Units and any Common Stock issued upon acquisition of Units tendered for redemption will be in the form of physical certificates and that unless such Common Stock shall have been registered under the Securities Act of 1933 as amended, the certificates will bear a legend to the following effect: THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO THE COMPANY AN OPINION OF COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY, IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS. 10.19 The Transferor represents and warrants that (a) it has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of an acquisition of the Units and is able to bear the economic risk of a loss of an investment in the Units, and (b) it is not acquiring any Units with a view to the distribution of the Units or any present intention of offering or selling any of the Units in a transaction that would violate the Act or the securities laws of any State or any other applicable jurisdiction. 10.20 Notwithstanding anything to the contrary herein, the effect of any representations, warranties, covenants and agreements made by the Transferor in this Agreement shall not be diminished or deemed to be waived by any inspections, tests or investigations made by the Partnership or its agents. 10.21 The truth and correctness of all of the foregoing representations, warranties and covenants and the representations, warranties and covenants set forth in any documents delivered by the Transferors at Closing shall be a condition precedent to any obligation of the Partnership to purchase the Projects, which condition is intended solely for the benefit of the Partnership, and the Partnership shall have the right at its sole election to waive any such condition (if done in writing) and proceed with the purchase or, in the alternative, to terminate this Agreement. The Partnership's election to terminate this Agreement shall be without prejudice to any rights or remedies the Partnership may otherwise have under this Agreement, at law or in equity against any Transferor for any breach of this Agreement. 11. Representations and Warranties of the Partnership. The Partnership hereby represents and warrants the following to the Transferors, each of which is true and correct as of the date of this Agreement and shall be true and correct on the Closing. The Partnership acknowledges that the execution of this Agreement by the Transferors has been made, and the transfer by Transferor of the Projects will have been made, in material reliance by the Transferors on such representations and warranties: 11.1 The Partnership is now, and as of the Closing will be (a) duly formed and validly existing under the laws of its state of formation, and (b) duly authorized to do all things required of it under or in connection with this Agreement. 11.2 This Agreement and all agreements, instruments and documents herein provided to be executed or to be caused to be executed by the Partnership are (or will be) duly executed by and binding upon the Partnership. 17 19 11.3 Except as set forth in the Partnership Agreement of the Partnership, as amended, and subject to federal and state securities laws, none of the Units to be delivered to Transferor at Closing, when delivered to Transferor, will be subject to any lien, claim, encumbrance, preemption right or other claim of any third party. 11.4 All consents and approvals required of the constituent partners of the Partnership for the consummation of the transactions contemplated hereby have been obtained or will have been obtained as of the Closing. 12. Parties' Obligation to Close. Neither Transferor nor the Partnership shall be obligated to complete the transactions contemplated hereunder unless the other shall have performed in all material respects all covenants and obligations and complied in all material respects with all conditions required by this Agreement to be performed or complied with by it on or before the Closing Date. 13. Brokerage Commissions. Except for the brokers, if any, identified in Schedule 2, whose commissions shall be paid by the Transferors, each party hereto warrants and represents that it has not incurred any liability for the payment of any brokerage fee or commission in connection with the transaction contemplated herein, and agrees to protect, indemnify, and defend against the other party and hold the other party harmless from and against any damage, liability, loss, claim, or expense, including reasonable attorneys' fees, suffered by the other party as a result of a breach of the foregoing warranty. 14. Default and Remedies. Time is of the essence of this Agreement. If a Transferor is in default, then the Partnership may elect to treat this Agreement as terminated, or to treat this Agreement as being in full force and effect, and the Partnership shall have the right to an action for specific performance or damages, or both. The remedies set forth above shall be cumulative with and in addition to all other rights and remedies provided to the Partnership at law or in equity. 15. Obligations to Third Parties. The Partnership is not assuming any of the obligations or liabilities incurred by Transferor in the ownership, use, operation, service, or maintenance of the Property, except for obligations arising from and after Closing under (a) those Service Contracts which the Partnership has expressly elected to assume in writing, (b) the Leases and (c) any Existing Indebtedness which the Partnership elects to assume or subject to which the Partnership elects to take title as provided herein. The acceptance by the Partnership of the Leases and certain of the Service Contracts shall not create any obligations on the part of the Partnership to third parties which have or may have claims of any kind whatsoever against the Transferors with respect to the Projects. The Partnership does not assume or agree to discharge any such claims or liabilities which occurred prior to the Closing. No person not a party to this Agreement shall have any third-party-beneficiary or other rights hereunder. 16. Pre-Closing and Post-Closing Liabilities. The Partnership shall be liable for all liabilities and obligations relating to the Projects which arise from events and circumstances from and after the Closing, and shall indemnify, protect, defend with counsel reasonably satisfactory to the Transferor, and hold harmless, the Transferors and their affiliates from and against any and all such liabilities and obligations. The Transferors shall be liable for all liabilities and obligations relating to the Projects which arise from events and circumstances occurring or existing prior to the Closing, and shall indemnify, protect, defend with counsel reasonably satisfactory to the Partnership, and hold harmless, the Partnership and its affiliates from and against any and all such liabilities and obligations. Notwithstanding the foregoing, the Transferors shall not be liable for liabilities for which the Partnership received a proration credit hereunder (to the extent thereof). The provisions of this Section shall survive the Closing. 18 20 17. Casualty; Condemnation. If, prior to the Closing, any Project is destroyed, damaged, subjected to a threat of condemnation, or shall become the subject of any proceedings, judicial, administrative, or otherwise, with respect to a taking by eminent domain or condemnation, then the Transferor shall promptly notify the Partnership thereof. If the cost to repair the damage, or the value of the property to be condemned, as applicable, exceeds $50,000, then the Partnership, at its option, may elect to designate such Project as an Excluded Project. If under such circumstances the Partnership does not elect to designate such Project as an Excluded Project, or if the cost to repair the damage, or the value of the property to be condemned, as applicable, does not exceed $50,000, then at the Closing, the Transferor shall assign, transfer, and set over to the Partnership all of the right, title, and interest of the Transferor in and to any insurance proceeds resulting from any casualty or any awards that have been or may thereafter be made for any taking or condemnation. 18. Miscellaneous. 18.1 Notices. Any notice required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given (a) when delivered by hand, (b) on the date delivered by a courier service, or (c) on the third business day after mailing by registered or certified mail, postage prepaid, return receipt required, in any case addressed as set forth in Schedule 2. 18.2 Successors and Assigns. This Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. 18.3 Amendments and Termination. This Agreement may be amended, modified or terminated only by a written instrument executed by the Transferors and the Partnership. 18.4 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the state of California. 18.5 Merger of Prior Agreements. This Agreement supersedes all prior and contemporaneous agreements and understandings between the parties hereto relating to the subject matter hereof. The parties do not intend to confer any benefit on any person, firm, or corporation other than the parties to this Agreement, except as and to the extent otherwise expressly provided herein. 18.6 Attorney Fees. In the event any party hereto fails to perform any of its obligations under this Agreement or in the event a dispute arises concerning the meaning or interpretation of any provision of this Agreement, the defaulting party or the party not prevailing in such dispute, as the case may be, shall pay any and all reasonable costs and expenses incurred by the other party in enforcing or establishing its rights hereunder, including, without limitation, court costs and reasonable attorneys' fees. 18.7 Captions. The section titles or captions in this Agreement are for convenience only and shall not be deemed to be part of this Agreement. 18.8 Pronouns; Joint and Several Use of Certain Terms. All pronouns and any variations of pronouns shall be deemed to refer to the masculine, feminine, or neuter, singular or plural, as the identity of the parties may require. Whenever the terms referred to herein are singular, the same shall be deemed to mean the plural, as the context indicates, and vice versa. 18.9 Waivers. No right under this Agreement may be waived except by written instrument executed by the party waiving such right. No waiver of any breach of any provision contained in this 19 21 Agreement shall be deemed a waiver of any preceding or succeeding breach of that provision or of any other provision contained in this Agreement. No extension of time for performance or any obligations or acts shall be deemed an extension of the time for performance of any other obligations or acts. 18.10 Severability. If any term, covenant, condition, or provision of this Agreement or the application thereof to any person or circumstance shall, at any time or to any extent, be invalid or unenforceable, the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those to which it is held invalid or unenforceable, shall not be affected thereby, and each provision of this Agreement shall be valid and shall be enforced to the fullest extent permitted by law. 18.11 Counterparts. This Agreement may be executed in any number of identical counterparts. 18.12 Calculation of Time Periods. If any date herein set forth for the performance of any obligation by a Transferor or the Partnership or for the delivery of any instrument or notice herein provided should be a Saturday, Sunday, or legal holiday, such performance or delivery may be made on the next business day following such Saturday, Sunday, or legal holiday. As used herein, the term "legal holiday," means any state or federal holiday for which financial institutions or post offices are closed in the local jurisdiction in which the Property is located, for observance thereof. 18.13 Judicial Interpretation. Should any provision of this Agreement require judicial interpretation, it is agreed that a court interpreting or construing the same shall not apply a presumption that the terms hereof shall be more strictly construed against any party by reason of the rule of construction that a document is to be construed more strictly against the party who itself or through its agent prepared the same. 18.14 Survival. The representations and warranties of the parties set forth herein shall survive the Closing. 18.15 Schedules and Exhibits. The schedules and exhibits attached hereto are incorporated herein and made a part hereof by reference. To the extent any schedule attached hereto conflicts with any provision of this Agreement, the schedule shall control. 20 22 SCHEDULE "1" LIST OF THE PROJECTS PART I
GROSS CAPITALI- LEASABLE PROFORMA ZATION TRANSFEROR PROPERTY CITY/STATE AREA NOI RATE ---------- -------- ---------- ---- --- ---- Cartersville Crossing Associates, Ltd. Cartersville Crossing Cartersville, GA 163,319 928,413 0.1025 Bright-Meyers Tullahoma Associates, L.P. Commerce Central Tullahoma, TN 185,401 1,186,469 0.1025 Hughes-Flatwoods Associates, Ltd., L.P. Collegedale Center Collegedale, TN 65,384 522,527 0.1025 Evans Towne Center, L.P. Evans Towne Center Augusta, GA 75,255 674,765 0.1025 Bright-Meyers Milledgeville Associates, Five Forks Corners Atlanta, GA 85,999 820,670 0.1025 L.P. English Garden City Limited Partnership Garden Grove Shopping Center Garden City, SC 78,838 515,272 0.1025 Hughes-Campbellsville Associates, Limited Green River Plaza Campbellsville, KY 187,516 828,429 0.1025 Partnership and Bright Diversified Properties, L.P. Alford-Jasper, TN, Ltd. Kimbal Crossing Jasper, TN 139,455 640,449 0.1025 Alford-Dalton, Ltd. and Bright Diversified North Hills Plaza Dalton, GA 67,831 342,910 0.1025 Properties, L.P. Shelby Associates, Ltd., L.P. Red Food Shopping Center Shelbyville, TN 52,335 281,581 0.1025 Alford-Gadsden, L.P. and Bright Diversified Riverview Plaza Gadsden, AL 147,615 762,591 0.1025 Properties, L.P. St. Elmo Associates, L.P. St. Elmo Chattanooga, TN 70,884 535,801 0.1025 Bright-Meyers Winchester Associates, L.P. Winchester Shopping Center Winchester, TN 167,901 870,633 0.1025 Wisteria Associates, Ltd. and Bright Wisteria Village Snellville, GA 164,646 934,627 0.1025 Diversified Properties, L.P.
23 PART II
GROSS CAPITALI- LEASABLE PROFORMA ZATION TRANSFEROR PROPERTY CITY/STATE AREA NOI RATE ---------- -------- ---------- ---- --- ---- Charleston No. 1, L.P. . Bi Lo Center Charleston, SC 52,000 439,126 0.1025 Habersham Crossing Associates, L.P Habersham Crossing Cornelia, GA 129,510 625,816 0.1025 Somerset Associates Limited Partnership Cumberland Shopping Ctr. Somerset, KY 113,806 421,419 0.105 Farrar Place Limited Partnership Farrar Place Manchester, TN 39,220 196,429 0.105 Alford-Greensburg, Ltd. Greensburg Crossing Greensburg, IN 75,618 322,358 0.105 Hazel Path Partners, L.P. Hazelpath Shopping Center Hendersonville, TN 68,345 416,286 0.105 BPT Southeastern Centers II, Ltd. Monroe Plaza S.C. Monroe, GA 89,860 310,731 0.1075 Morristown Associates, Ltd. Morristown Morristown, TN 53,048 169,848 0.1075 Oceanway Plaza Associates, Ltd. Oceanway Shopping Center Jacksonville, FL 57,376 217,565 0.1075 Parkersburg-Kroger Associates Parkersburg Kroger Parkersburg, WV 61,185 337,779 0.1075 Powers Road Associates Powers Road S.C. Bristol, VA 51,085 276,300 0.1075 English Hilton Head I Associates Limited Palmetto Crossing Hilton Head, SC 40,920 289,378 N/A Partnership
24 SCHEDULE "2" FUNDAMENTAL PROVISIONS AND DEFINITIONS The following fundamental provisions and definitions form a part of and are incorporated by reference into the Contribution Agreement between Excel Realty Partners, L.P., a Delaware limited partnership, and each of the Transferors identified in Section 1.2, below, to which it is attached. In the event of any conflict between the terms and conditions of this Schedule and the terms and conditions of the balance of the Contribution Agreement to which it is attached, the terms and conditions of this Schedule shall control. 1. Fundamental Provisions and Definitions. 1.1 Date of this Agreement: April __, 1995. 1.2 Transferors: Each of the partnerships identified in Schedule "1." 1.3 The Partnership: Excel Realty Partners, L.P., a Delaware limited partnership. 1.4 Escrow Agent: Chicago Title Insurance Company. 1.5 Document Delivery Date: May 30, 1995. 1.6 Review Period: For each Project that is not identified on Schedule 6 attached hereto as a "Project Under Development," the period commencing on the date of this Agreement and ending 60 days after the delivery of the documents and materials described in Section 3.3 of the Contribution Agreement, but in no event ending later than July 30, 1995. For each Project that is identified on Schedule 6 attached hereto as a "Project Under Development," the period commencing on the date of this Agreement and ending 30 days after the date on which the construction of such Project has been completed, a certificate of occupancy (or local equivalent) has been issued, and the "Anchor Tenants" (defined as Tenants whose premises are 10,000 rentable square feet or more and who have at least ten (10) years remaining on the term of their Lease as of the Closing) have taken possession of its leased premises and commenced paying rent. 1.7 Closing Deadline: For each Project, 30 days following the expiration of the Review Period with respect to that Project. 1.8 Escrow Termination Date: For each Project, 90 days following the expiration of the Review Period with respect to that Project. 1.9 Address for Notices to the Transferors: c/o Mr. George Bright Fletcher Bright Company 1300 First Tennessee Building Chattanooga, Tennessee 37402 i 25 With a copy to: Miller & Martin 832 Georgia Avenue, Suite 1000 Chattanooga, Tennessee 37402 Attn: Jeffrey W. Guild, Esq. 1.10 Address for Notices to the Partnership: Excel Realty Partners, L.P. 16955 Via Del Campo San Diego, California 92127 Attn: Mr. Gary Sabin With a Copy to: Latham & Watkins 701 "B" Street, Suite 2100 San Diego, California 92101 Attn: Jon D. Demorest, Esq. 1.11 Date of REIT's Most Current Prospectus: August, 1993 1.12 Transferor's Equity: For each Project (other than the Palmetto Crossing Project in Hilton Head, SC owned by English Hilton Head I Associates Limited Partnership), the Transferor's Equity shall be computed as of the Closing in the manner set forth in this Section 1.12. Step 1: Compute the aggregate annual effective (i.e., adjusted for free or reduced rent and other tenant concessions that relate to periods following the date on which the tenant first begins to pay rent) gross annual income payable with respect to all Leases in effect with respect to such Project and pursuant to which the tenants have taken possession and commenced paying rent and who are not in default. Step 2: If the actual vacancy rate for the portion of such Project that is available for lease to Tenants who are not Anchor Tenants is less than five percent (5%) of the rentable area of such portion of the Project, then deduct from the amount computed in Step 1 a vacancy reserve in an amount equal to the difference between the actual vacancy rate and a five percent (5%) vacancy rate for such portion of the Project. Step 3: Subtract from the amount computed in Step 2 the annual operating expenses of such Project, based on the most recent year's actual operating expenses, maintenance costs, insurance costs and tax costs, adjusted for any known increases (or, in the case of Projects Under Development, based on a proforma mutually approved by the Partnership and the Transferor), reserves for replacement in an amount equal to $0.10 per gross leasable square foot times the aggregate gross leasable square footage of the Project, and management fees equal to 4% of gross rents (except in the case of Commerce Central, Tullahoma, TN and Winchester Shopping Center, Winchester, TN, as to which the management fees shall equal 2% of gross rents). Step 4: Divide the amount computed in Step 3 by the capitalization rate shown for that Project on Schedule 1 attached hereto. ii 26 Step 5: Subtract from the amount computed in Step 4 the outstanding balance (principal and accrued interest) of the Existing Indebtedness with respect to such Project as of the Closing (including the amount of any Existing Indebtedness prepaid at the Closing by the Partnership as provided herein). 1.13 Payment of Consideration: For each Project (other than the Palmetto Crossing Project in Hilton Head, SC owned by English Hilton Head I Associates Limited Partnership), in addition to the prepayment or assumption of the Existing Indebtedness, the Partnership will pay to the Transferor consideration consisting in part of cash and in part of Units, as follows: 1.13.1 For each Transferor, the Transferor's Equity shall be allocated between the general partner of the Transferor and the individual limited partners of the Transferor (other than limited partners who are not "Accredited Investors," whose interest in Transferor shall have been previously purchased by the general partner, as provided in Section 4.8 of the Contribution Agreement), in proportion to their respective ownership interests in the Transferor. Interests in the Transferor acquired by the general partner from individual limited partners who are not "Accredited Investors," as provided above, shall for purposes of this Section 1.13 and Section 1.14 below, be treated as ownership interests of the general partner. 1.13.2 An amount equal to the sum of (a) the amount of cash previously paid by the general partner to purchase the interests in the Transferor of the limited partners who are not "Accredited Investors," as provided in Section 4.8 of the Contribution Agreement, plus (b) ten percent (10%) of the portion of the Transferor's Equity allocated to the general partner, shall be paid in cash at the Closing, and the remaining portion of the Transferor's Equity allocated to the general partner shall be paid by the issuance of Units valued at $20.70 per Unit. 1.13.3 Of the portion of the Transferor's Equity allocated to the limited partners, fifty percent (50%) shall be paid in cash at the Closing, and the remaining fifty percent (50%) shall be paid by the issuance of Units valued at $21.50 per Unit. 1.14 Additional Consideration for Projects Under Development: For any Project that is identified on Schedule 6 attached hereto as a "Project Under Development," if within twelve (12) months following the Closing with respect to such Project any new Lease with respect to space in the Project (i) in excess of five percent (5%) of the gross leasable area of all space in the Project that (ii) was vacant as of the Closing, is procured, regardless of whether the Partnership or Transferor is the procuring cause for such new Lease, then the consideration payable by the Partnership for the Project shall be subject to adjustment as set forth in this Section 1.14. 1.14.1 On the first anniversary of the Closing for any such Project that was not at least 95% leased on the Closing, the Transferor's Equity in the Project shall be recomputed in the manner specified in Section 1.12, above. 1.14.2 Any increase in the Transferor's Equity as computed on the first anniversary of the Closing, as compared to the Transferor's Equity computed as of the Closing, shall, at the Partnership's option, either (a) be paid to the Transferor in cash within thirty (30) days, or (b) be paid by the Partnership's issuance to the Transferor within thirty (30) days of Units of the Partnership. If the Partnership elects so to issue Units, then the number of Units shall be determined by allocating the increase in the Transferor's Equity among the general partner and the limited partners of the Transferor, in proportion to their respective ownership interests in the Transferor as of the Closing. The portion of the increase in the Transferor's Equity allocated to the general partner shall be paid by the issuance of Units valued at $20.70 per Unit. The portion iii 27 of the increase in the Transferor's Equity allocated to the limited partners shall be paid by the issuance of Units valued at $21.50 per Unit. 1.14.3 The Transferor shall pay all expenses relating to the negotiation, execution and delivery of such new Leases, including but not limited to brokers' commissions, leasing fees and the cost of all tenant improvements which are the landlord's obligation. 1.15 Brokers: First Atlantic Realty (David Zisfien) 1.16 Inspection of Documents: Notwithstanding the provisions of Section 3.3 of the Contribution Agreement: 1.16.1 The following documents shall not be delivered to the Partnership, but instead shall be made available for inspection by the Partnership at the Transferor's offices: (a) Construction plans, drawings and specifications; (b) Property tax receipts; (c) Operating statements for each Project for the periods older than 12 months; (d) General ledger and journal; (e) Project correspondence files; (f) Tenant correspondence files; (g) Vendor files; (h) Maintenance contractor files; and (i) Certificates of Occupancy. 1.16.2 The Transferors shall deliver to the Partnership only such engineering and structural reports and Phase I Environmental Audits (referred to Sections 3.3.12 and 3.3.13 of the Contribution Agreement) as the Transferors presently have in their possession or control. The Partnership shall be free to procure engineering and structural reports and Phase I Audits with respect to any Project, at the Partnership's expense. 1.16.3 With respect to those Projects identified in Part II of Schedule 1, the Transferor shall not be required to deliver a Survey until fifteen (15) days following the Partnership's completion of its physical inspection of the Project pursuant to Section 3.1 of the Contribution Agreement and the determination, pursuant to Sections 4.2 and 4.3 of the Contribution Agreement, whether such Project will be designated as an Excluded Project because of deferred maintenance issues or environmental conditions. 1.16.4 The documents and materials described in Sections 3.3.5 and 3.3.6 of the Contribution Agreement shall be delivered to the Partnership only to the extent the same exist and are in the possession of the Transferor. 1.16.5 Each Transferor shall use diligent efforts to obtain, but shall not be required to obtain, a zoning certificate for its Project (described in Section 3.3.17 of the Contribution Agreement). 1.17 Construction Covenants. For each Project designated on Schedule 6 attached hereto as a "Project Under Development," the Transferor shall cause such Project to be constructed according to the provisions of this Section 1.17. iv 28 1.17.1 Each Transferor agrees to commence and complete the construction of the Project in a good and workmanlike manner, in accordance with plans and specifications approved by the Partnership and in compliance with all applicable laws, ordinances, rules and regulations. 1.17.2 The Partnership is expressly authorized at all reasonable times to enter the Project and inspect the improvements and work of construction. 1.17.3 The Transferor shall be solely responsible for all aspects of its business and conduct in connection with the Project and the design and construction thereof, including but not limited to the quality and suitability of the plans and specifications, their compliance with all governmental requirements, permits and title restrictions, the supervision of the work of construction, the qualifications, financial condition and performance of all architects, engineers, contractors, subcontractors, suppliers, consultants and property managers, the accuracy of all applications for payment, and the proper application of all disbursements. The Partnership is not obligated to supervise, inspect or inform the Transferor or any third party of any aspect of the construction of the Project or any other matter referred to above. Any inspection or review by the Partnership is to determine whether the Transferor is properly discharging its obligations to the Partnership and may not be relied upon by the Transferor or any third party. 1.18 Registration Rights. With respect to any unregistered common stock of Excel Realty Trust, Inc. ("Excel") issued upon redemption of Units of the Partnership, as provided in the partnership agreement of the Partnership, the applicable Transferor shall have the right to require Excel to register such common stock on the following terms and conditions: (a) Excel shall file a registration statement with respect to such stock within thirty (30) days following such exercise of the registration right or on such later date which Excel determines, in Excel's reasonable and good faith judgment, to be required by rulings, advice or interpretations of the Securities and Exchange Commission; (b) registration of such stock shall be at Excel's expense; (c) the Transferors must coordinate their exercise of registration rights such that all such stock to be registered in any calendar year can be registered pursuant to a single registration statement; (d) Excel shall take all reasonable steps necessary to seek to have the registration statement declared effective by the Securities and Exchange Commission, and (e) such Transferor's right to require registration of such stock shall be subject to such other commercially reasonable restrictions and limitations as are contained in a customary form of registration rights agreement to be executed by Excel and such Transferor at the time such stock is issued. v 29 SCHEDULE "3" EXISTING INDEBTEDNESS
Principal Amount After April, 1995 Project Lender Payment ------- ------ ------- 1 Cartersville Crossing Protective Life Ins. Co. $7,160,000.00 Cartersville, GA 2 Commerce Central SouthTrust Bank of Georgia, $9,300,000.00 Tullahoma, TN(1) N.A. 3 Collegedale Center First Tennessee Bank $4,500,000.00 Collegedale, TN(1) 4 Evans Towne Center Augusta, GA AmSouth Bank, N.A. $5,390,000 .5 Five Forks Corners Atlanta, GA(1) First Tennessee $6,893,000.00 6 Garden Grove Shopping Center Protective Life $ 235,318.00 Garden City, SC SouthTrust Bank of GA $4,624,285.00 7 Green River Plaza PNC Bank $7,554,521.60 Campbellsville, KY 8 Kimbal Crossing Protective Life $5,105,764.60 Jasper, TN 9 North Hills Plaza PNC Bank $2,448,750.00 Dalton, GA 10 Red Food Shopping Center Protective Life $1,720,734.45 Shelbyville, TN 11 Riverview Plaza Protective Life $5,848,053.98 Gadsden, AL 12 St. Elmo SouthTrust Bank of Georgia, $3,900,000.00 Chattanooga, TN(1) N.A. 13 Winchester Shopping SouthTrust Bank $8,050,000.00 Center of Georgia, N.A, Winchester, TN(1)
30 14 Wisteria Village Snellville, GA SouthTrust Bank $8,683,608.00 (2) 15 Bi Lo Center Charleston, SC(1) American National and $4,800,000.00 Trust Co. 16 Cumberland Shopping Ctr. Somerset, KY Protective Life $2,576,875.53 17 Farrar Place Manchester, TN First Tennessee Bank $1,878,583.54 18 Greensburg Crossing Protective Life $2,706,102.44 Greensburg, IN 19 Habersham Crossing Protective Life $5,315,919.00 Cornelia, GA 20 Hazelpath Shopping Center First Tennessee $3,695,995.95 Hendersonville, TN 21 Monroe Plaza, S.C. Protective Life $1,885,807.07 Monroe, GA 22 Morristown First Tennessee $1,356,794.74 Morristown, TN 23 Oceanway Shopping Center Jacksonville, FL Protective Life $1,278,755.67 24 Palmetto Crossing American National Bank and $ 750,000.00 Hilton Head, SC Trust Co. Providian/ National Home Life $2,500,000.00 25 Parkersburg Kroger First Tennessee Bank $ 191,472.41 Parkersburg, WV United National Bank $ 203,443.88 26 Powers Road, S.C. First Tennessee Bank $1,873,457.07 Bristol, VA
- ------------------- (1) - under construction (2) - after March 1995 payment 31 SCHEDULE "4" TRANSFEROR'S DISCLOSURES TO BE COMPLETED BY TRANSFEROR ON OR BEFORE APRIL 30, 1995. 32 SCHEDULE "5" TRANSFEROR'S LEASE-RELATED DISCLOSURES TO BE COMPLETED BY TRANSFEROR ON OR BEFORE APRIL 30, 1995. 33 SCHEDULE "6" PROJECTS UNDER DEVELOPMENT
Project Estimated Completion Date ------- ------------------------- 1. Commerce Central September 1995 Tullahoma, TN 2. Collegedale Center Fall 1996 Collegedale, TN 3. Five Forks Corners March 1996 Atlanta, GA 4. St. Elmo August 1995 Chattanooga, TN 5. Winchester Shopping Center September 1995 Winchester, TN 6. BiLo Center December 1995 Charleston, SC
34 Exhibit "A" to Contribution Agreement ZONING CERTIFICATE Date: To: Excel Realty Partners, L.P. Attn:___________________ 16955 Via Del Campo, Suite 110 San Diego, CA 92127 Re: (Insert subject property & address) Gentlemen: The undersigned hereby certifies with respect to the property referred to above as follows: 1. The zoning affecting the premises is _______ which allows for 2. The premises and its intended use as a (insert type of use or business) complies with the applicable zoning codes. 3. The premises comply with subdivision ordinances affecting it and can be conveyed without the filing of a plat or replat of the premises. 4. The applicable zoning requirements governing the premises regarding parking are as follows: parking laws, setback requirements and regulations. 5. There are no proposals for widening, closing, or realignment of the access to the site. 6. All appropriate and required permits, and licenses and approvals have been provided for its existing use. 7. The premises is not in a 100 year designated flood zone. 8. Additional comments or facts: _____________________________ Date:_________________________ Signature ----------------------------- ------------------------------ Print Name Agency or Department ----------------------------- Title 35 Exhibit "B" to Contribution Agreement RECORDING REQUESTED BY ) AND WHEN RECORDED MAIL TO: ) ) ) [FORM] ) ) ) - ------------------------------------------------------------------------------ Space above for Recorder's Use ASSIGNMENT OF LEASES This ASSIGNMENT OF LEASES ("Assignment") is made as of _________________, 1994, by _____________________, a ___________________ ("Assignor"), and Excel Realty Partners, L.P., a Delaware limited partnership ("Assignee"), in light of the following facts and circumstances: RECITALS A. Assignor and Assignee are the parties to a Contribution Agreement dated as of _________________ (the "Agreement"), pursuant to which Assignor has agreed to assign to Assignee the Leases (as defined below) relating to the real property described on Exhibit "A" attached hereto (the "Property"). B. Assignor wishes to assign to Assignee, and Assignee wishes to acquire from Assignor, all of the right, title and interest of Assignor in and to the Leases. AGREEMENT NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Assignor and Assignee agree as follows: Assignor hereby assigns, grants, transfers and conveys to Assignee all of Assignor's right, title, and interest in and to any and all leases, subleases, licenses and other forms of agreements granting the right to use or occupy any portion of the Property (the "Leases"), including without limitation the Leases described on Exhibit "B" attached hereto. Assignor hereby delegates to Assignee, its successors and assigns, all of the duties and obligations of Assignor under the Leases, except as specifically provided herein. Assignee hereby accepts the foregoing assignment and delegation and agrees to be bound by all of the terms, covenants and conditions of the Leases, except as specifically provided herein. Assignor shall indemnify, defend by counsel reasonably acceptable to Assignee, and hold harmless Assignee, its subsidiaries, affiliates, and assigns and their respective directors, officers, employees, shareholders, representatives and agents, from and against any loss, cost or liability arising under the Leases prior to the date hereof. Assignee shall indemnify, defend by counsel reasonably acceptable to Assignor, and hold harmless Assignor, its subsidiaries, affiliates, 36 and assigns and their respective directors, officers, employees, shareholders, representatives and agents, from and against any loss, cost or liability arising under the Leases on or after the date hereof. This Assignment shall inure to the benefit of and bind the successors and assigns of Assignor and Assignee. This Assignment shall be governed and construed in accordance with the laws of the state in which the Property is located. IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment as of the date first written above. ASSIGNOR -----------------------------------, a --------------------------------- By: -------------------------------, Name: ------------------------------- Title: ------------------------------- By: -------------------------------, Name: ------------------------------- Title: ------------------------------- ASSIGNEE EXCEL REALTY PARTNERS, L.P., a Delaware limited partnership By: EXCEL REALTY TRUST, INC., a Maryland corporation, its general partner By: -------------------------------, Name: ------------------------------- Title: ------------------------------- By: -------------------------------, Name: ------------------------------- Title: ------------------------------- 37 Exhibit "C" to Contribution Agreement BILL OF SALE [FORM] This BILL OF SALE is made as of ___________________, by ____________________________________, a ________________ ("Transferor"), in favor of Excel Realty Partners, L.P., a Delaware limited partnership ("the Partnership"), in light of the following facts and circumstances: RECITALS A. Transferor and the Partnership are the parties to a Contribution Agreement dated as of _________________, (the "Agreement"), pursuant to which Transferor has agreed to transfer to the Partnership the tangible and intangible personal property owned by Transferor and comprising, relating or otherwise attendant to the real property described on Exhibit "A" attached hereto (the "Property"). AGREEMENT NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Transferor and the Partnership agree as follows: Transferor does hereby transfer, assign and deliver to the Partnership, all of its right, title and interest in and to (i) all security deposits and other refundable tenant deposits relating to the Property; (ii) the tangible personal property located on the Property, including without limitation the tangible personal property described on Exhibit "B" attached hereto; and (iii) the contractual rights and other intangible personal property described on Exhibit "C" attached hereto (collectively, the "Transferred Assets"). Transferor hereby warrants to the Partnership that Transferor is the lawful owner of the Transferred Assets, that Transferor is conveying the same to the Partnership free and clear of all liens, encumbrances and claims of others, and that Transferor shall defend the Partnership's title thereto against all persons whomsoever in order to perfect the conveyance and transfer intended to be effected hereby. This Bill of Sale shall be governed and construed in accordance with the laws of the state in which the Property is located. 38 Exhibit "D" to Contribution Agreement ASSIGNMENT OF CONTRACTS For value received, the receipt and adequacy of which is hereby acknowledged, ___________________, a ______________________ ("Assignor") hereby assigns to Excel Realty Partners, L.P., a Delaware limited partnership ("Excel"), all of Assignor's right, title and interest in and to the contracts listed on Exhibit "A" attached hereto. By such assignment, Assignor delegates to Excel all of Assignor's duties and obligations under such contracts arising from and after the date hereof. By executing this assignment, Excel agrees to assume and perform all duties and obligations of Assignor under such contracts arising from and after the date hereof and to indemnify and hold Assignor harmless from any liability arising under such contracts with respect to events or conditions occurring following the date hereof. Assignor agrees to indemnify and hold Excel harmless from any liability arising under such contracts with respect to events or conditions occurring prior to the date hereof. Dated: ____________________, 19__. By: -------------------------------, Name: ------------------------------- Title: ------------------------------- By: -------------------------------, Name: ------------------------------- Title: ------------------------------- EXCEL REALTY PARTNERS, L.P. a Delaware limited partnership By: -------------------------------, Name: ------------------------------- Title: ------------------------------- By: -------------------------------, Name: ------------------------------- Title: ------------------------------- 39 EXHIBIT "E" PARTNER SCHEDULE 40 Exhibit "F" to Contribution Agreement FORM OF TENANT ESTOPPEL CERTIFICATE Excel Realty Partners, L.P. 16955 Via Del Campo San Diego, California 92127 Attn: ___________________ The undersigned, is the Tenant under that certain Lease dated ______________ and entered into between ____________________________ as Landlord and ______________________ as Tenant, hereinafter referred to as the "Lease," covering the premises, commonly known and designed as Exhibit "A" attached hereto and made a part hereof, hereinafter referred to as the "Premises," hereby confirms to Excel Realty Partners, L.P., a Delaware limited partnership, as Purchaser of the Premises, the following: A. That the Landlord is __________________________; B. That the Premises have been unconditionally accepted by the undersigned; C. That the date to which rent has been paid is ________________; D. That no default exists under the Lease on the part of either Landlord or Tenant, except as set forth below; E. That is has no defense to enforcement of the Lease in accordance with its terms, no right of setoff or counterclaim with respect to the obligations thereunder, except as set forth below: F. That the Lease constitutes the entire Rental Agreement and remains in full force and effect, unmodified and unchanged, except for modifications dated as set forth below; G. That the rental has not been paid more than one month in advance, and that the rental being paid is at the rate of $_______ (rounded) per month; H. That the Lease term is for ______ years and commenced on __________ and terminates on ____________; I. That the Lease contains the following renewal options: _______ year(s) each; J. The current balance of the security deposit under the lease is $_________; K. That it has no right of first refusal to purchase, or option to purchase the Premises. In the event Tenant has any such rights, Tenant hereby acknowledges and agrees that it has 2 41 waived said rights in their entirety to the extent said rights relate to the transaction which has required this Estoppel Certificate. Such right shall be retained by Tenant as they relate to any future transaction if provided for by the terms of the Lease. This Certificate is made with knowledge by the undersigned that reliance is being made upon this Certificate. Dated: ____________________ Tenant: --------------------- 3 42 TABLE OF CONTENTS
PAGE ---- Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1. Contribution of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. Issuance of Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3. Pre-Closing Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 4. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 5. Designation of Excluded Projects . . . . . . . . . . . . . . . . . . . . . . . . . . 6 6. Escrow; Delivery of Funds and Documents . . . . . . . . . . . . . . . . . . . . . . 7 7. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 8. Prorations and Post-Closing Payments . . . . . . . . . . . . . . . . . . . . . . . . 10 9. Distribution of Funds and Documents . . . . . . . . . . . . . . . . . . . . . . . . 12 10. Representations, Warranties and Covenants of Transferor . . . . . . . . . . . . . . 12 11. Representations and Warranties of the Partnership . . . . . . . . . . . . . . . . . 16 12. Parties' Obligation to Close . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 13. Brokerage Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 14. Default and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 15. Obligations to Third parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 16. Pre-Closing and Post-Closing Liabilities . . . . . . . . . . . . . . . . . . . . . . 17 17. Casualty; Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 18. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 18.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 18.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 18.3 Amendments and Termination . . . . . . . . . . . . . . . . . . . . . . . . . 18 18.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 18.5 Merger of Prior Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 18 18.6 Attorney Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 18.7 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 18.8 Pronouns; Joint and Several Use of Certain Terms . . . . . . . . . . . . . . 18 18.9 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 18.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 18.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 18.12 Calculation of Time Periods . . . . . . . . . . . . . . . . . . . . . . . . . 19 18.13 Judicial Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 18.14 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 18.15 Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 18.16 Schedules and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
i 43 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. THE PARTNERSHIP: EXCEL REALTY PARTNERS, L.P., a Delaware limited partnership By: EXCEL REALTY TRUST, INC., a Maryland corporation, its general partner By: -------------------------------, Name: ------------------------------- Title: ------------------------------- By: -------------------------------, Name: ------------------------------- Title: ------------------------------- TRANSFERORS: CARTERSVILLE CROSSING ASSOCIATES, LTD., a Georgia limited partnership By: RETAIL CENTERS/SOUTHEAST, LTD., a Georgia corporation, general partner By: -------------------------------, Name: ------------------------------- Title: ------------------------------- By: -------------------------------, Name: ------------------------------- Title: ------------------------------- By: ------------------------------- Fletcher Bright, general partner By: ------------------------------- W. Michael Caldwell, general partner 44 BRIGHT-MEYERS TULLAHOMA ASSOCIATES, L.P., a Tennessee limited partnership By: BRIGHT-MEYERS DEVELOPMENT CORPORATION, a Tennessee corporation, a general partner By: -------------------------------- Name: ------------------------------- Title: ------------------------------- By: -------------------------------- Name: ------------------------------- Title: ------------------------------- EVANS TOWNE CENTRE, L.P., a Tennessee limited partnership By: CALLAWAY LAND COMPANY, a Georgia corporation, general partner By: -------------------------------, Name: ------------------------------- Title: ------------------------------- By: -------------------------------, Name: ------------------------------- Title: ------------------------------- By: --------------------------------------- Fletcher Bright, general partner 45 BRIGHT-MEYERS MILLEDGEVILLE ASSOCIATES, L.P., a Tennessee limited partnership By: BRIGHT INTERESTS, INC., a Tennessee corporation, general partner By: -------------------------------, Name: ------------------------------- Title: ------------------------------- By: -------------------------------, Name: ------------------------------- Title: ------------------------------- By: ------------------------------------------ George Bright, general partner By: ------------------------------------------ William O. Meyers, general partner ENGLISH GARDEN CITY LIMITED PARTNERSHIP, a Tennessee limited partnership By: BRIGHT INTERESTS, L.P., a Tennessee limited partnership, general partner By: BRIGHT INTERESTS, INC., a Tennessee corporation, general partner By: -------------------------------, Name: ------------------------------- Title: ------------------------------- By: -------------------------------, Name: ------------------------------- Title: ------------------------------- By: ----------------------------------------- Mertland M. Hedges, III, general partner 46 HUGHES-CAMPBELLSVILLE ASSOCIATES LIMITED PARTNERSHIP, a Tennessee limited partnership, as tenant in common By: BRIGHT INTERESTS, L.P., a Tennessee limited partnership, general partner By: BRIGHT INTERESTS, INC., a Tennessee corporation, By: -------------------------------- Name: ------------------------------- Title: ------------------------------- By: -------------------------------- Name: ------------------------------- Title: ------------------------------- ALFORD-JASPER, TN, LTD., L.P., a Tennessee limited partnership By: ---------------------------------- BARRY ALFORD, general partner By: ---------------------------------- FLETCHER BRIGHT, general partner ALFORD-DALTON, LTD., a Tennessee limited partnership, as tenant in common By: ---------------------------------- BARRY ALFORD, general partner By: ---------------------------------- FLETCHER BRIGHT, general partner 47 SHELBY ASSOCIATES, LTD., L.P., a Tennessee limited partnership By: FLETCHER BRIGHT COMPANY, a Tennessee corporation, general partner By: -------------------------------- Name: ------------------------------- Title: ------------------------------- By: -------------------------------- Name: ------------------------------- Title: ------------------------------- By: ---------------------------------------- Fletcher Bright, general partner ALFORD-GADSDEN, L.P., a Tennessee limited partnership, as tenant in common By: ---------------------------------- BARRY ALFORD, general partner By: ---------------------------------- FLETCHER BRIGHT, general partner ST. ELMO ASSOCIATES, L.P., a Tennessee limited partnership By: BRIGHT INTERESTS, INC., a Tennessee corporation, general partner By: -------------------------------- Name: ------------------------------- Title: ------------------------------- By: -------------------------------- Name: ------------------------------- Title: ------------------------------- 48 WISTERIA ASSOCIATES, LTD., a Georgia limited partnership, as tenant in common By: ------------------------------------ DONALD A. BARKLEY, general partner By: ------------------------------------ FLETCHER BRIGHT, general partner SOMERSET ASSOCIATES LIMITED PARTNERSHIP, a Tennessee limited partnership By: FLETCHER BRIGHT COMPANY, a Tennessee corporation By: -------------------------------- Name: ------------------------------- Title: ------------------------------- By: -------------------------------- Name: ------------------------------- Title: ------------------------------- By: ---------------------------------------- John M. Martin, general partner By: ---------------------------------------- Fletcher Bright, general partner FARRAR PLACE LIMITED PARTNERSHIP, a Tennessee limited partnership By: S & E PARTNERS, INC., a Tennessee corporation, general partner By: -------------------------------- Name: ------------------------------- Title: ------------------------------- By: -------------------------------- Name: ------------------------------- Title: ------------------------------- 49 ALFORD-GREENSBURG, LTD., a Tennessee limited partnership By: ------------------------------------ BARRY ALFORD, general partner By: ------------------------------------ FLETCHER BRIGHT, general partner HABERSHAM CROSSING ASSOCIATES, L.P., a Georgia limited partnership By: ------------------------------------ FLETCHER BRIGHT, general partner By: ------------------------------------ W. MICHAEL CALDWELL, general partner HAZEL PATH PARTNERS, L.P., a Tennessee limited partnership By: S & E PARTNERS, INC., a Tennessee corporation, general partner By: -------------------------------- Name: ------------------------------- Title: ------------------------------- By: -------------------------------- Name: ------------------------------- Title: ------------------------------- 50 MORRISTOWN ASSOCIATES, LTD., a Tennessee partnership By: ------------------------------------ FLETCHER BRIGHT, general partner By: ------------------------------------ DONALD A. BARKLEY, general partner OCEANWAY PLAZA ASSOCIATES, LTD., a Tennessee limited partnership By: ------------------------------------ FLETCHER BRIGHT, general partner ENGLISH HILTON HEAD I ASSOCIATES LIMITED PARTNERSHIP, a Tennessee limited partnership By: ------------------------------------ FLETCHER BRIGHT, general partner PARKERSBURG-KROGER ASSOCIATES, a Tennessee limited partnership By: FLETCHER BRIGHT COMPANY, a Tennessee corporation, general partner By: -------------------------------- Name: ------------------------------- Title: ------------------------------- By: -------------------------------- Name: ------------------------------- Title: ------------------------------- 51 POWERS ROAD ASSOCIATES, a Virginia limited partnership By: ----------------------------------- FLETCHER BRIGHT, general partner By: ----------------------------------- DONALD A. BARKLEY, general partner HUGHES-FLATWOODS ASSOCIATES, LTD., L.P. a Tennessee limited partnership By: BRIGHT INTERESTS, L.P., a Tennessee limited partnership, general partner By: BRIGHT INTERESTS, INC., a Tennessee corporation, general partner By: -------------------------------- Name: ------------------------------- Title: ------------------------------- By: -------------------------------- Name: ------------------------------- Title: ------------------------------- 52 BPT SOUTHEASTERN CENTERS II, LTD. a Tennessee limited partnership By: BRIGHT, POAG AND THOMASON, INC., a Tennessee corporation, managing general partner By: -------------------------------- Name: ------------------------------- Title: ------------------------------- By: -------------------------------- Name: ------------------------------- Title: ------------------------------- By: ------------------------------------------- Fletcher Bright, general partner By: ------------------------------------------- G. Dan Poag, Jr., general partner By: ------------------------------------------- William H. Thomason, general partner BRIGHT-MEYERS WINCHESTER ASSOCIATES, L.P., a Tennessee limited partnership By: BRIGHT-MEYERS DEVELOPMENT CORPORATION, a Tennessee corporation, general partner By: -------------------------------- Name: ------------------------------- Title: ------------------------------- By: -------------------------------- Name: ------------------------------- Title: ------------------------------- 53 CHARLESTON NO. 1, L.P., a Tennessee limited partnership By: BRIGHT INTERESTS, INC., a Tennessee corporation, general partner By: -------------------------------- Name: ------------------------------- Title: ------------------------------- By: -------------------------------- Name: ------------------------------- Title: ------------------------------- BRIGHT DIVERSIFIED PROPERTIES, L.P., a Tennessee limited partnership, as tenant in common By: ------------------------------------- Fletcher Bright, general partner By: FLETCHER BRIGHT COMPANY, a Tennessee corporation, general partner By: -------------------------------- Its: -------------------------------- By: -------------------------------- Its: -------------------------------- 54 CONSENT OF ESCROW AGENT The undersigned hereby consents to its appointment as the "Escrow Agent" under the foregoing Agreement to Contribute Partnership Interests and Property and agrees to act in accordance therewith. Dated:__________________________________ CHICAGO TITLE INSURANCE COMPANY By: -------------------------------------------- Name: -------------------------------------------- Title: -------------------------------------------- EX-10.34 4 CREDIT AGREEMENT DATED DECEMBER 27, 1995 1 EXHIBIT 10.34 - -------------------------------------------------------------------------------- CREDIT AGREEMENT AMONG EXCEL REALTY TRUST, INC., AS BORROWER, AND THE FIRST NATIONAL BANK OF BOSTON, WELLS FARGO BANK, N.A., FIRST INTERSTATE BANK OF CALIFORNIA, DRESDNER BANK AG, NBD BANK, BHF-BANK AKTEINGESELLSCHAFT, SIGNET BANK, TOGETHER WITH THOSE ASSIGNEES BECOMING PARTIES HERETO PURSUANT TO SECTION 11.12, AS LENDERS, AND THE FIRST NATIONAL BANK OF BOSTON, AS AGENT Dated as of December 27, 1995 - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS . . . . . . . . . . . . 1 1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Computation of Time Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 1.3 Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 ARTICLE II LOANS . . . . . . . . . . . . . 26 2.1 Loan Advances and Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 2.2 Authorization to Obtain Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 2.3 Lenders' Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 2.4 Interest on the Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 2.5 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 2.6 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 2.7 Increased Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 2.8 Notice of Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 ARTICLE III BORROWING BASE PROPERTIES . . . . . . . . 39 3.1 Designation of Borrowing Base Properties . . . . . . . . . . . . . . . . . . . . . . 39 3.2 Termination of Designation as a Borrowing Base Property . . . . . . . . . . . . . . . 40 3.3 Rejection of Borrowing Base Properties . . . . . . . . . . . . . . . . . . . . . . . 41
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Page ---- CONDITIONS TO LOANS . . . . . . . . . . 41 4.1 Conditions to Initial Disbursement of Loans . . . . . . . . . . . . . . . . . . . . . 41 4.2 Conditions Precedent to All Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 43 ARTICLE V REPRESENTATIONS AND WARRANTIES . . . . . . . 44 5.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 ARTICLE VI REPORTING COVENANTS . . . . . . . . . . 51 6.1 Financial Statements and Other Financial and Operating Information . . . . . . . . . 51 6.2 Environmental Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 6.3 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 ARTICLE VII AFFIRMATIVE COVENANTS . . . . . . . . . 57 7.1 Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 7.2 Qualification, Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 7.3 Compliance with Laws, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 7.4 Payment of Taxes and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 7.5 Maintenance of Properties; Insurance . . . . . . . . . . . . . . . . . . . . . . . . 58 7.6 Inspection of Property; Books and Records; Discussions . . . . . . . . . . . . . . . 59 7.7 Maintenance of Permits, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
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Page ---- 7.8 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 7.9 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 7.10 Securities Law Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 7.11 Continued Status as a REIT; Prohibited Transactions . . . . . . . . . . . . . . . . . 60 7.12 NYSE Listed Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 7.13 Interest Rate Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 7.14 Ownership of Guarantor Partnerships . . . . . . . . . . . . . . . . . . . . . . . . . 60 ARTICLE VIII NEGATIVE COVENANTS . . . . . . . . . . 60 8.1 With Respect to all Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 8.2 Amendment of Constituent Documents . . . . . . . . . . . . . . . . . . . . . . . . . 62 8.3 Disposal of Guarantor Partnership Interests . . . . . . . . . . . . . . . . . . . . . 62 8.4 Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 8.5 Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 8.6 Restrictions on Transactions Affecting Leasing . . . . . . . . . . . . . . . . . . . 63 8.7 Additional Unsecured Bank Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 ARTICLE IX FINANCIAL COVENANTS . . . . . . . . . . 63 9.1 Borrowing Base Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 9.2 Borrowing Base Debt Service Coverage . . . . . . . . . . . . . . . . . . . . . . . . 63 9.3 Minimum Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 9.4 Borrower Debt to Fair Market Net Worth Ratio . . . . . . . . . . . . . . . . . . . . 64
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Page ---- 9.5 Maximum Recourse Borrower Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 9.6 Secured Debt to Total Assets Ratio . . . . . . . . . . . . . . . . . . . . . . . . . 64 9.7 EBIDA to Interest Expense Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 9.8 EBIDA to Fixed Charges Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 9.9 Unencumbered NOI to Unsecured Interest Expense Ratio . . . . . . . . . . . . . . . . 64 9.10 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 9.11 Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 9.12 Development Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 9.13 Borrower-Investment Partnership Debt to Borrower-Investment Partnership Net Worth . . 66 9.14 Tenant Concentration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 9.15 Investment Grade Rated Tenants . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 9.16 Aggregate Borrowing Base Requirements . . . . . . . . . . . . . . . . . . . . . . . . 66 9.17 Calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 ARTICLE X EVENTS OF DEFAULT; RIGHTS AND REMEDIES . . . . . 67 10.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 10.2 Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 10.3 Rescission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 ARTICLE XI AGENCY PROVISIONS . . . . . . . . . . 72 11.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
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Page ---- 11.2 Nature of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 11.3 Loan Disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 11.4 Distribution and Apportionment of Payments . . . . . . . . . . . . . . . . . . . . . 74 11.5 Rights, Exculpation, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 11.6 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 11.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 11.8 Agent Individually . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 11.9 Successor Agent; Resignation of Agent; Removal of Agent . . . . . . . . . . . . . . . 77 11.10 Consent and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 11.11 Agency Provisions Relating to Certain Enforcement Actions . . . . . . . . . . . . . . 80 11.12 Assignments and Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 11.13 Ratable Sharing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 11.14 Delivery of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 11.15 Notice of Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 ARTICLE XII MISCELLANEOUS . . . . . . . . . . . 85 12.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 12.2 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 12.3 Change in Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 12.4 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 12.5 Independence of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
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Page ---- 12.6 Notices and Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 12.7 Survival of Warranties, Indemnities and Agreements . . . . . . . . . . . . . . . . . 89 12.8 Failure or Indulgence Not Waiver; Remedies Cumulative . . . . . . . . . . . . . . . . 89 12.9 Payments Set Aside . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 12.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 12.11 Heading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 12.12 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 12.13 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 12.14 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 12.15 Consent to Jurisdiction and Service of Process; Waiver of Jury Trial . . . . . . . . 90 12.16 Counterparts; Effectiveness; Inconsistencies . . . . . . . . . . . . . . . . . . . . 91 12.17 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 12.18 Obligations Unsecured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 12.19 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
LIST OF EXHIBITS AND SCHEDULES Exhibits: A - Form of Assignment and Assumption B - Form of Borrowing Base Property Designation Certificate C - Form of Quarterly Operating Report D - Form of Compliance Certificate E - Form of Loan Notes F - Form of Notice of Borrowing G - Form of Fixed Rate Notice -vi- 8 Schedules: 1 - List of Borrowing Base Properties 1.1 - List of Portfolio Properties other than Borrowing Base Properties and Setting Forth Approved Values for Non-income Producing Properties 5.1.1 - Qualification to do Business 5.1.3 - Ownership of Subsidiaries and Partnerships 5.1.19 - Benefit Plans 5.1.23 - Environmental Matters -vii- 9 CREDIT AGREEMENT THIS CREDIT AGREEMENT is dated as of December 27, 1995 (as amended, supplemented or modified from time to time, the "Agreement") and is among EXCEL REALTY TRUST, INC., a Maryland corporation ("Borrower"), each of the Lenders, as hereinafter defined, and THE FIRST NATIONAL BANK OF BOSTON, a national banking association ("FNBB"), in its capacity as agent and as a Lender. RECITALS A. Pursuant to that certain Indenture dated as of March 1, 1994 Excel Mortgage Funding Corporation, a Delaware corporation and a wholly-owned subsidiary of Borrower ("EMFC") borrowed the proceeds of a certain Commercial Mortgage Pass-Through Certificates in the aggregate principal amount of $100,000,000 (the "REMIC"). B. Pursuant to that certain Loan Agreement dated as of December 29, 1994, among Borrower, as borrower, FNBB, as lender and as Agent, as amended, FNBB agreed to provide Borrower with a secured revolving loan facility on the terms and conditions set forth therein (the "Existing Revolver"). C. Borrower has requested that Lenders extend an unsecured revolving loan facility to Borrower, the proceeds of which will be used in accordance with the provisions of this Agreement (including that the proceeds of the initial Loan hereunder be applied, as necessary, to the payment of all accrued and unpaid obligations of EMFC under the REMIC and of Borrower under the Existing Revolver), and Lenders are willing to extend the requested facility on the terms and conditions set forth herein. NOW, THEREFORE, the parties hereto agree as follows: -1- 10 ARTICLE I DEFINITIONS 1.1 Certain Defined Terms. The following terms used in this Agreement shall have the following meanings (such meanings to be applicable, except to the extent otherwise indicated in a definition of a particular term, both to the singular and the plural forms of the terms defined): "Accommodation Obligations", as applied to any Person, means any Indebtedness or other contractual obligation or liability, contingent or otherwise, of another Person in respect of which that Person is liable, including, without limitation, any such Indebtedness, obligation or liability directly or indirectly guaranteed, endorsed (otherwise than for collection or deposit in the ordinary course of business), co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly liable, including in respect of any Partnership in which that Person is a general partner (excluding the Nonrecourse Indebtedness of such Partnership), Contractual Obligations (contingent or otherwise) arising through any agreement to purchase, repurchase or otherwise acquire such Indebtedness, obligation or liability or any security therefor, or to provide funds for the payment or discharge thereof (whether in the form of loans, advances, stock purchases, capital contributions or otherwise), or to maintain solvency, assets, level of income, or other financial condition, or to make payment other than for value received. "Accountants" means Coopers & Lybrand, any other "big six" accounting firm or another firm of certified public accountants of national standing selected by Borrower and acceptable to Agent. "Acquisition Price" means the aggregate purchase price for an asset including bona fide purchase money financing provided by the seller and all (or Borrower's Share of, as applicable) existing Indebtedness pertaining to such asset. "Adjusted Asset Value" means, as at any date of determination, the sum (without duplication of any item) of (i) book value determined in accordance with GAAP (except that deferred charges and prepaid fees shall be treated as intangible -2- 11 assets) of tangible assets other than real estate, and (ii) an amount equal to (A) (1) the Net Operating Income for the most recently ended Fiscal Quarter of Properties owned by Borrower or any of its Wholly-Owned Subsidiaries, plus (2) the Borrower's Share of the Net Operating Income for the most recently ended Fiscal Quarter of Properties owned by any Majority Partnership, plus (3) the Net Operating Income for the most recently ended Fiscal Quarter of any Property owned by an Investment Partnership which is subject to a Lien securing Indebtedness of such Investment Partnership which is included in Borrower Debt by virtue of Borrower's guarantee or other Accommodation Obligation relating thereto times (B) four (4), divided by (C) 0.10, and (iii) such value for non-income producing Properties as may be determined based on either (A) the sales price for such Property pursuant to a purchase and sale agreement approved by the Agent or (B) some other evidence of value satisfactory to the Agent and approved by the Requisite Lenders, including those values approved prior to the date hereof as set forth on Schedule 1.1. The Agent shall not unreasonably withhold approval of any purchase and sale agreement having a term of not more than six (6) months and requiring that the full purchase price be paid in cash at the closing thereunder. "Adjusted Base Rents" means the total rentals from the applicable Property or group of Properties which are denominated as base rent or minimum rent under the applicable leases which shall in any event exclude all percentage rent and reimbursements for operating expenses, taxes or insurance; and shall be based on actual rents presently being paid without any rent leveling adjustments. "Adjusted Borrower-Investment Partnership Value" means, as at any date of determination, the sum of (i) Adjusted Asset Value minus (ii) book value determined in accordance with GAAP of Borrower's Investments in Investment Partnerships (including notes receivable from Investment Partnerships) to the extent included in Adjusted Asset Value, plus (iii)(A) the Net Operating Income for the most recently ended Fiscal Quarter of Properties owned by Investment Partnerships, times (B) four (4) divided by (C) 0.10 plus (iv) cash and Cash Equivalents and other tangible assets (at book value determined in accordance with GAAP) owned by Investment Partnerships. -3- 12 "Affiliates" as applied to any Person, means any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means (i) the possession, directly or indirectly, of the power to vote ten percent (10%) or more of the Securities having voting power for the election of directors of such Person or otherwise to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise, or (ii) the ownership of (A) a general partnership interest or (B) a limited partnership interest or preferred stock (or other ownership interest) representing ten percent (10%) or more of the outstanding limited partnership interests, preferred stock or other ownership interests of such Person. "Agent" means FNBB in its capacity as agent for the Lenders under this Agreement, and shall include any successor Agent appointed pursuant hereto and shall be deemed to refer to FNBB or any such successor in its individual capacity as a Lender where the context so requires. "Aggregate Borrowing Base Requirements" means: (i) at least 85% of the Adjusted Base Rents from all of the Borrowing Base Properties are from Borrowing Base Properties being operated for Retail Uses provided that between the Closing Date and the date that the Borrower next receives Net Offering Proceeds Borrowing Base Properties being operated for Service Retail Uses may be counted in satisfying this requirement so long as during such period at least 80% of Adjusted Base Rents are from Borrowing Base Properties being operated for Retail Uses; (ii) at least 70% of the Adjusted Base Rents from the Borrowing Base Properties are paid pursuant to Leases the tenant's interest in which is currently held by National or Regional Tenants; (iii) at least 40% of the Adjusted Base Rents from the Borrowing Base Properties are paid pursuant to Leases the tenant's interest in which is currently held by an Investment Grade Rated Company or Leases which are fully guaranteed by an Investment Grade Rated Company, provided, however, that in the event that K-Mart Corporation ceases to be an Investment Grade Rated Company the foregoing 40% requirement shall be reduced to whatever percentage is actually being paid pursuant to such Leases after the exclusion of the Leases to K-Mart Corporation; (iv) the Adjusted -4- 13 Base Rents payable by any single tenant (including all Subsidiaries of such tenant or of a common parent company) shall not exceed 15% of the Adjusted Base Rents from all Borrowing Base Properties, provided, however, that (a) with respect to tenants which are Investment Grade Rated Companies (other than K-Mart Corporation) the foregoing limit shall be increased to 20%, (b) with respect to tenants which are Investment Grade Rated Companies rated A or higher, the foregoing limit shall be increased to 25% and (c) with respect to K-Mart Corporation and its Subsidiaries, the percentage shall not exceed the actual percentage on the Closing Date; and (v) the Adjusted Base Rents from all Borrowing Base Properties owned by any Guarantor which is not a Wholly-Owned Subsidiary shall not exceed ten percent (10%) of the Adjusted Base Rents from all Borrowing Base Properties. "Applicable Base Rate Margin" means, as of any date of determination: (i) 0.00%, if Borrower's senior long-term unsecured debt obligations are rated at least BBB/Baa2 by both Rating Agencies, (ii) 0.25%, if Borrower's senior long-term unsecured debt obligations are rated at least BBB-/Baa3 by both Rating Agencies but the condition set forth in clause (i) of this definition is not satisfied, or (iii) 0.50%, in any other case (including, without limitation, if Borrower's senior long-term unsecured debt obligations are not rated by either or both of the Rating Agencies). If one Rating Agency assigns a lower rating to Borrower's senior long-term unsecured debt obligations than does the other Rating Agency, the lower rating shall control for purposes of determining the Applicable Base Rate Margin. "Applicable LIBOR Rate Margin" means, as of any date of determination: (i) 1.40%, if Borrower's senior long-term unsecured debt obligations are rated at least BBB+ by both Rating Agencies, (ii) 1.50%, if Borrower's senior long-term unsecured debt obligations are rated at least BBB/Baa2 by both Rating Agencies but the condition set forth in clause (i) of this definition is not satisfied, (iii) 1.625%, if Borrower's senior long-term unsecured debt obligations are rated at least BBB-/Baa3 by both Rating Agencies but neither the condition set forth in clause (i) of this definition, nor the condition set forth in clause (ii) of this definition, is satisfied or (iv) 1.75%, in any other case (including, without limitation, if Borrower's senior long-term unsecured debt obligations are not rated by either or both of the Rating Agencies). If one Rating Agency -5- 14 assigns a lower rating to Borrower's senior long-term unsecured debt obligations than does the other Rating Agency, the lower rating shall control for purposes of determining the Applicable LIBOR Rate Margin. "Assignment and Assumption" means an Assignment and Assumption in the form of Exhibit A hereto (with blanks appropriately filled in) delivered to Agent in connection with each assignment of a Lender's interest under this Agreement pursuant to Section 11.12. "Base Rate" means, on any day, the higher of (i) the base rate of interest per annum established from time to time by FNBB at its principal office in Boston, Massachusetts, and designated as its "base rate" as in effect on such day, and (ii) the Federal Funds Rate in effect on such day plus one-half percent (0.5%) per annum. "Base Rate Loans" means those Loans bearing interest at the Base Rate. "Benefit Plan" means any employee pension benefit plan as defined in Section 3(2) of ERISA (other than a Multiemployer Plan) in respect of which a Person or an ERISA Affiliate is, or within the immediately preceding five (5) years was, an "employer" as defined in Section 3(5) of ERISA. "Borrower Construction Expenditures" means the total expenditures made through any given date for project costs of all construction projects on real estate owned by Borrower or any of its Subsidiaries which expenditures with respect to any project shall be counted until occupancy of substantially all of such project. "Borrower Debt" means (without duplication) all Indebtedness of Borrower or any Subsidiary of Borrower plus Borrower's Share of all Indebtedness of Majority Partnerships (without offset or reduction in respect of prepaid interest, restructuring fees or similar items) minus current liabilities (not to exceed $5,000,000) which are not past due. "Borrower-Investment Partnership Debt" means the sum of Borrower Debt (excluding the portion thereof consisting of Accommodation Obligations relating to Indebtedness of Investment -6- 15 Partnerships) plus all Indebtedness of Investment Partnerships other than notes payable to Borrower. "Borrower-Investment Partnership Net Worth" means Adjusted Borrower-Investment Partnership Value less Total Borrower-Investment Partnership Liabilities. "Borrower's Share" means, in the case of a Partnership, Borrower's percentage ownership interest in such Partnership. "Borrowing" means a borrowing under the Facility. "Borrowing Base Properties" means the Eligible Properties owned by Borrower or a Guarantor listed on Schedule 1, as such Schedule 1 may be amended from time to time to reflect the addition and deletion of Borrowing Base Properties pursuant to Article III. "Borrowing Base Property Designation Certificate" has the meaning given to such term in Section 3.1. "Borrowing Base Value" means, at any time, an amount equal to (A) the aggregate Net Operating Income of the Borrowing Base Properties for the most recently ended Fiscal Quarter, times (B) four (4) minus (C) the Replacement Reserve Amount for the Borrowing Base Properties, divided by (D) 0.10. "Business Day" means (i) with respect to any Borrowing, payment or rate determination of LIBOR Loans, a day, other than a Saturday or Sunday, on which Agent is open for business at its head office and on which dealings in Dollars are carried on in the London interbank market, and (ii) for all other purposes any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the Commonwealth of Massachusetts or the laws of the State of California, or is a day on which banking institutions located in Massachusetts are required or authorized by law or other governmental action to close. "Capital Leases", as applied to any Person, means any lease of any property (whether real, personal or mixed) by that Person as lessee which, in conformity with GAAP, is or should be -7- 16 accounted for as a capital lease on the balance sheet of that Person. "Cash Equivalents" means (i) marketable direct obligations issued or unconditionally guaranteed by the United States Government or issued by an agency thereof and backed by the full faith and credit of the United States, in each case maturing within one (1) year after the date of acquisition thereof; (ii) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within ninety (90) days after the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from any two of Standard & Poor's Corporation, Moody's Investors Services, Inc., Duff and Phelps, or Fitch Investors (or, if at any time no two of the foregoing shall be rating such obligations, then from such other nationally recognized rating services as may be acceptable to Agent) and not listed for possible down-grade in Credit Watch published by Standard & Poor's Corporation; (iii) commercial paper, other than commercial paper issued by Borrower or any of its Affiliates, maturing no more than ninety (90) days after the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 or P-1 from either Standard & Poor's Corporation or Moody's Investor's Service, Inc. (or, if at any time neither Standard & Poor's Corporation nor Moody's Investor's Service, Inc. shall be rating such obligations, then the highest rating from such other nationally recognized rating services as may be acceptable to Agent); and (iv) domestic and Eurodollar certificates of deposit or time deposits or bankers' acceptances maturing within ninety (90) days after the date of acquisition thereof, overnight securities repurchase agreements, or reverse repurchase agreements secured by any of the foregoing types of securities or debt instruments issued, in each case, by (A) any commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia or Canada having combined capital and surplus of not less than Two Hundred Fifty Million Dollars ($250,000,000) or (B) any Lender. "Closing Date" means the date on which this Agreement shall become effective in accordance with Section 12.16. "Co-Agent" means Wells Fargo Bank, N.A. and First Interstate Bank provided that if any Co-Agent shall enter into -8- 17 one or more assignments pursuant to Section 11.12 having the effect of reducing the amount of its Commitment to less than $20,000,000, it shall cease to be a Co-Agent. "Commission" means the Securities and Exchange Commission. "Commitment" means, with respect to any Lender, such Lender's Pro Rata Share of the Facility, which amount shall not exceed the principal amount set out under such Lender's name under the heading "Loan Commitment" on the signature pages attached to this Agreement or as set forth on an Assignment and Assumption executed by such Lender, as assignee. "Compliance Certificate" means a certificate in the form of Exhibit D delivered to Agent by Borrower pursuant to Section 2.1.2, Section 6.1.4 or any other provision of this Agreement and covering Borrower's compliance with the financial covenants contained in Article IX. "Confidential Information" has the meaning ascribed to such term in Section 6.3. "Contaminant" means any pollutant (as that term is defined in 42 U.S.C. 9601(33)) or toxic pollutant (as that term is defined in 33 U.S.C. 1362(13)), hazardous substance (as that term is defined in 42 U.S.C. 9601(14)), hazardous chemical (as that term is defined by 29 CFR Section 1910.1200(c)), toxic substance, hazardous waste (as that term is defined in 42 U.S.C. 6903(5)), radioactive material, special waste, petroleum (including crude oil or any petroleum-derived substance, waste, or breakdown or decomposition product thereof), any constituent of any such substance or waste, including, but not limited to, polychlorinated biphenyls and asbestos, or any other substance or waste deleterious to the environment the release, disposal or remediation of which is now or at any time becomes subject to regulation under any Environmental Law. "Contractual Obligation", as applied to any Person, means any provision of any Securities issued by that Person or any indenture, mortgage, deed of trust, lease, contract, undertaking, document or instrument to which that Person is a party or by which it or any of its properties is bound, or to which it or any of its properties is subject (including, without -9- 18 limitation, any restrictive covenant affecting such Person or any of its properties). "Court Order" means any judgment, writ, injunction, decree, rule or regulation of any court or Governmental Authority binding upon or applicable the Person in question. "Debt Service" means, for any period, Interest Expense for such period plus scheduled principal amortization (i.e., excluding any balloon payment due at maturity) for such period on all Borrower Debt. "December 31, 1994 Financials" has the meaning given to such term in Section 5.1.7. "Defaulting Lender" means any Lender which fails or refuses to perform its obligations under this Agreement within the time period specified for performance of such obligation or, if no time frame is specified, if such failure or refusal continues for a period of five (5) Business Days after notice from Agent. "Developer Affiliates" means EDV and any other Affiliate of Borrower engaged in the development of real estate or any entity in which EDV or any such developer Affiliate has an ownership interest. "Development Investments" means the aggregate of all Investments by Borrower or any Subsidiary of Borrower in (i) Developer Affiliates or (ii) any other Person (whether or not an Affiliate of Borrower) directly or indirectly engaged in the development of real estate or in the making of land acquisition or construction loans to other Persons engaged in the development of real estate. "Distributions" means the declaration or payment of any dividend or distribution of cash or Cash Equivalents to the shareholders of Borrower or to any limited partners of a Majority Partnership or any payments to any of the Executive Officers of Borrower other than employee compensation consistent with past practices. "DOL" means the United States Department of Labor and any successor department or agency. -10- 19 "Dollars" and "$" means the lawful money of the United States of America. "EBIDA" means, at any time, for the most recent Fiscal Quarter, (i) (A) the sum of the amounts for such period of (1) Net Income, (2) depreciation and amortization expense and other non-cash items deducted on the Financial Statements in determining such Net Income, and (3) interest expense deducted on the Financial Statements in determining Net Income, minus (B) the sum for such period of (1) the net income of any Person in which Borrower has an interest that is included in Net Income, except to the extent of the amount of cash payments actually paid to Borrower or any Subsidiary of Borrower by such Person during such period (whether such payments are in the form of dividends, fees, distributions or other payments excepting principal repayments of notes payable to Borrower), and (2) the income of any consolidated Subsidiary of Borrower, to the extent that the declaration or payment of dividends or other distributions by that Subsidiary of such income is not at the time permitted by operation of any Contractual Obligation or Requirement of Law applicable to such Subsidiary; (ii) minus gains (and plus losses) from extraordinary items or asset sales or write-ups or forgiveness of Indebtedness. "EDV" means ERT Development Corporation, a Delaware corporation in which Borrower owns 100% of the preferred stock. "Eligible Assignee" means (i) (A) (1) a commercial bank organized under the laws of the United States or any state thereof; (2) a savings and loan association or savings bank organized under the laws of the United States or any state thereof; or (3) a commercial bank organized under the laws of any other country or a political subdivision thereof, provided that (x) such bank is acting through a branch or agency located in the United States, or (y) such bank is organized under the laws of a country that is a member of the Organization for Economic Cooperation and Development or a political subdivision of such country; that (B) in each case, is (1) reasonably acceptable to Agent and Borrower, and (2) has total assets in excess of $10,000,000,000 and a rating on its (or its parent's) senior unsecured debt obligations of at least BBB by one of the Rating Agencies; or (ii) any Lender or Affiliate of any Lender; provided that no Affiliate of Borrower shall be an Eligible Assignee. -11- 20 "Eligible Property" means a Property owned by Borrower or a Guarantor which (1) is an Unencumbered Property, (2) has an Occupancy Rate of at least 85%, and (3) is free of all structural defects, title defects, environmental conditions or other adverse matters except as may be described on the Schedule of Exceptions to the most recent Borrowing Base Property Designation Certificate for such Property or described in any Officer's Certificate delivered pursuant to Section 6.1.6 which defects, conditions or matters individually or collectively could, in the judgment of the Agent, have a Material Adverse Effect on the Property. "EMFC" means Excel Mortgage Funding Corporation, a Delaware corporation. "Environmental Laws" has the meaning set forth in Section 5.1.23. "Environmental Lien" means a Lien in favor of any Governmental Authority for (i) any liability under Environmental Laws, or (ii) damages arising from, or costs incurred by such Governmental Authority in response to, a Release or threatened Release of a Contaminant into the environment. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute. "ERISA Affiliate" of any Person means any (i) corporation which is, becomes, or is deemed to be a member of the same controlled group of corporations (within the meaning of Section 414(b) of the Internal Revenue Code) as such Person, (ii) partnership, trade or business (whether or not incorporated) which is, becomes or is deemed to be under common control (within the meaning of Section 414(c) of the Internal Revenue Code) with such Person, (iii) other Person which is, becomes or is deemed to be a member of the same "affiliated service group" (as defined in Section 414(m) of the Internal Revenue Code) as such Person, or (iv) any other organization or arrangement described in Section 414(o) of the Internal Revenue Code which is, becomes or is deemed to be required to be aggregated pursuant to regulations issued under Section 414(o) of the Internal Revenue Code with such Person pursuant to Section 414(o) of the Internal Revenue Code. -12- 21 "Excluded Development Income" means such portion, if any, of Net Income during any Fiscal Quarter which arises from Borrower's ownership interest in Developer Affiliates or notes receivable from Developer Affiliates in excess of ten percent (10%) of EBIDA. "Executive Officers" mean Gary B. Sabin, Richard B. Muir, Graham R. Bullick, David A. Lund and Ronald H. Sabin. "Event of Default" means any of the occurrences set forth in Article X after the expiration of any applicable grace period expressly provided therein. "Facility" means the loan facility of One Hundred Fifty Million Dollars ($150,000,000) described in Section 2.1.1, subject, however, to Borrower's right to reduce the Facility, in one or more increments, to an amount not less than One Hundred Million Dollars ($100,000,000), in accordance with Section 2.6.1(b). "Fair Market Net Worth" means the Borrower's Adjusted Asset Value less Total Liabilities less any minority interests set forth in the Liabilities and Stockholders' Equity portion of Borrower's Financial Statements prepared in accordance with GAAP. "FDIC" means the Federal Deposit Insurance Corporation or any successor thereto. "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Agent from three Federal Funds brokers of recognized standing selected by Agent. "Federal Reserve Board" means the Board of Governors of the Federal Reserve System or any governmental authority succeeding to its functions. -13- 22 "Financial Statements" has the meaning given to such term in Section 6.1.2. "Fiscal Quarter" means each three-month period ending on March 31, June 30, September 30 and December 31. "Fiscal Year" means the fiscal year of Borrower which shall be the twelve (12) month period ending on the last day of December in each year. "Fixed Charges" means, for any period, the sum of (i) Debt Service for such period, (ii) the Replacement Reserve Amount for such period for all Portfolio Properties, and (iii) actual expenditures during such period for tenant finish improvements and leasing commissions with respect to all Portfolio Properties. "Fixed Rate Notice" means, with respect to a Libor Loan pursuant to Section 2.1.2, a notice substantially in the form of Exhibit G. "Fixed Rate Prepayment Fee" has the meaning given to such term in Section 2.4.8(c). "Foreign Properties" means all Properties which are not located within the boundaries of the United States. "Free Cash Flow" means, for any period, Funds From Operations for such period, minus scheduled payments of principal amortization (excluding balloon payments) on all Borrower Debt, minus Borrower's consolidated capital expenditures for such period, plus Net Offering Proceeds received during such period plus net cash proceeds received by Borrower during such period from the sale of Properties. "Funding Date" means, with respect to any Loan made after the Closing Date, the date of the funding of such Loan. "Funds From Operations" means, for any period, the Borrower's Funds From Operations determined in accordance with the definition approved by the National Association of Real Estate Investment Trusts. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting -14- 23 Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board, or in such other statements by such other entity as may be in general use by significant segments of the accounting profession, which are applicable to the circumstances as of the date of determination. "Governmental Authority" means any nation or government, any federal, state, local, municipal or other political subdivision thereof or any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guaranteed Construction Loans" means the maximum principal amount of the Indebtedness of any Person for which the Borrower or any Subsidiary of Borrower has guaranteed, co-made or otherwise become directly or contingently liable if any material portion of the proceeds of such Indebtedness is to be used to finance costs of construction, acquisition of land for development or other development costs. "Guarantor" means EMFC, EH Properties, L.P., Excel Realty - PA, Inc., Excel Realty Trust - ST, Inc., Excel Realty Trust - NC, Excel Realty - NE, Inc., and Excel Realty Trust - TX, L.P. which have executed a Guaranty of even date herewith and any other Wholly-Owned Subsidiary or Guarantor Partnership approved by the Requisite Lenders which may hereafter execute and deliver a Guaranty. "Guarantor Partnership" means EH Properties, L.P., a Delaware limited partnership, Excel Realty Trust - NC, a North Carolina general partnership, Excel Realty Trust - TX, L.P., a Texas limited partnership and any other Partnership approved by the Requisite Lenders in which the Borrower has at least a 90% ownership interest and in which the Borrower has complete control over the management, leasing, sale of or the granting of a Lien on the Borrowing Base Properties owned by such Partnership; in any such case, which (1) owns a Borrowing Base Property and (2) has executed and delivered a Guaranty. "Guaranty" means the Guaranty of even date herewith executed by the initial Guarantors and any Guaranty in substantially the same form which may be hereafter executed by a Guarantor in favor of Agent and the Lenders. -15- 24 "Indebtedness", as applied to any Person (and without duplication), means (i) all indebtedness, obligations or other liabilities of such Person for borrowed money, (ii) all indebtedness, obligations or other liabilities of such Person evidenced by Securities or other similar instruments, (iii) all reimbursement obligations and other liabilities of such Person with respect to letters of credit or banker's acceptances issued for such Person's account, (iv) all obligations of such Person to pay the deferred purchase price of Property or services, (v) all obligations in respect of Capital Leases of such Person, (vi) all Accommodation Obligations of such Person, (vii) all indebtedness, obligations or other liabilities of such Person or others secured by a Lien on any asset of such Person, whether or not such indebtedness, obligations or liabilities are assumed by, or are a personal liability of, such Person (including, without limitation, the principal amount of any assessment or similar indebtedness encumbering any property), (viii) all indebtedness, obligations or other liabilities (other than interest expense liability) in respect of Interest Rate Contracts and foreign currency exchange agreements, and (ix) ERISA obligations currently due and payable. "Interest Expense" means, for any period, total interest expense, accrued in accordance with GAAP plus the amortization of loan acquisition costs plus capitalized interest in respect of Borrower Debt. "Interest Period" means, relative to any LIBOR Loans comprising part of the same Borrowing, the period beginning on (and including) the date on which such LIBOR Loans are made as, or converted into, LIBOR Loans, and ending on (but excluding) the day which numerically corresponds to such date 1, 2, 3 or 6 months thereafter, in either case as Borrower may select in its relevant Notice of Borrowing pursuant to Section 2.1.2; provided, however, that: (a) if such Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next following Business Day; and (b) no Interest Period may end later than the then applicable Termination Date. -16- 25 "Interest Rate Contracts" means, collectively, interest rate swap, collar, cap or similar agreements providing interest rate protection. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended from time to time hereafter, and any successor statute. "Investment" means, as applied to any Person, any direct or indirect purchase or other acquisition by that Person of Securities, or of a beneficial interest in Securities, of any other Person, and any direct or indirect loan, advance (other than deposits with financial institutions available for withdrawal on demand, prepaid expenses, advances to employees and similar items made or incurred in the ordinary course of business), or capital contribution by such Person to any other Person. "Investment Grade Rated Company" means a corporation whose senior long-term unsecured debt obligations are rated at least BBB- by Standard & Poor's Corporation. "Investment Mortgages" mean notes receivable or other indebtedness secured by mortgages or other security interests directly or indirectly owned by Borrower or any Subsidiary of Borrower, including certificates of interest in real estate mortgage investment conduits. "Investment Partnership" means any Partnership whose financial results are not consolidated under GAAP in the Financial Statements including, without limitation, ERP. "IRS" means the Internal Revenue Service and any Person succeeding to the functions thereof. "Land" means unimproved real estate, including future phases of a partially completed project, owned by Borrower or any Subsidiary of Borrower for the purpose of future development of improvements. For purposes of the foregoing definition, "unimproved" shall mean Land on which the construction of building improvements has not commenced or has been discontinued for a continuous period longer than sixty (60) days prior to completion. -17- 26 "Lease" means a tenant lease of a Borrowing Base Property. "Lender Taxes" has the meaning given to such term in Section 2.4.7. "Lenders" means FNBB and any other bank, finance company, insurance or other financial institution which is or becomes a party to this Agreement by execution of a counterpart signature page hereto or an Assignment and Assumption, as assignee. With respect to matters requiring the consent to or approval of all Lenders at any given time, all then existing Defaulting Lenders will be disregarded and excluded, and, for voting purposes only, "all Lenders" shall be deemed to mean "all Lenders other than Defaulting Lenders". "Liabilities and Costs" means all claims, judgments, liabilities, obligations, responsibilities, losses, damages (including lost profits), punitive or treble damages, costs, disbursements and expenses (including, without limitation, reasonable attorneys, experts' and consulting fees and costs of investigation and feasibility studies), fines, penalties and monetary sanctions, interest, direct or indirect, known or unknown, absolute or contingent, past, present or future. "LIBOR" means, relative to any Interest Period for any LIBOR Loan included in any Borrowing, the per annum rate (reserve adjusted as hereinbelow provided) of interest quoted by Agent, rounded upwards, if necessary, to the nearest one-sixteenth of one percent (0.0625%) at which Dollar deposits in immediately available funds are offered by Agent to leading banks in the Eurodollar interbank market (based on Telerate quotes, page 3750, or such other page as contains the same information as presently on page 3750) two (2) Business Days prior to the beginning of such Interest Period, for delivery on the first day of such Interest Period for a period approximately equal to such Interest Period and in an amount equal or comparable to the LIBOR Loan to which such Interest Period relates. The foregoing rate of interest shall be reserve adjusted by dividing LIBOR by one (1.00) minus the LIBOR Reserve Percentage, with such quotient to be rounded upward to the nearest whole multiple of one-hundredth of one percent (0.01%). All references in this Agreement or other Loan Documents to LIBOR shall mean and include the aforesaid reserve adjustment. -18- 27 "LIBOR Loan" means a Loan bearing interest, at all times during an Interest Period applicable to such Loan, at a fixed rate of interest determined by reference to LIBOR. "LIBOR Office" means, relative to any Lender, the office of such Lender designated as such on the counterpart signature pages hereto or such other office of a Lender as designated from time to time by notice from such Lender to Agent, whether or not outside the United States, which shall be making or maintaining LIBOR Loans of such Lender. "LIBOR Reserve Percentage" means, relative to any Interest Period for LIBOR Loans made by any Lender, the reserve percentage (expressed as a decimal) equal to the actual aggregate reserve requirements (including all basic, emergency, supplemental, marginal and other reserves and taking into account any transactional adjustments or other scheduled changes in reserve requirements) announced within Agent as the reserve percentage applicable to Agent as specified under regulations issued from time to time by the Federal Reserve Board. The LIBOR Reserve Percentage shall be based on Regulation D of the Federal Reserve Board or other regulations from time to time in effect concerning reserves for "Eurocurrency Liabilities" from related institutions as though Agent were in a net borrowing position. "Lien" means any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, security interest, encumbrance (including, but not limited to, easements, rights-of-way, zoning restrictions and the like), lien (statutory or other), preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever, including without limitation any conditional sale or other title retention agreement, the interest of a lessor under a Capital Lease, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement or document having similar effect (other than a financing statement filed by a "true" lessor pursuant to Section 9408 of the Uniform Commercial Code) naming the owner of the asset to which such Lien relates as debtor, under the Uniform Commercial Code or other comparable law of any jurisdiction. "Loan Account" has the meaning given to such term in Section 2.3. -19- 28 "Loan Documents" means this Agreement, the Loan Notes, the Borrowing Base Property Designation Certificates, the Guaranties and all other agreements, instruments and documents (together with amendments and supplements thereto and replacements thereof) now or hereafter executed by Borrower or any Guarantor, which evidence or guaranty the Obligations. "Loan Notes" means the promissory notes evidencing the Loans in the aggregate original principal amount of One Hundred Fifty Million Dollars ($150,000,000) executed by Borrower in favor of Lenders, as they may be amended, supplemented, replaced or modified from time to time. The initial Loan Notes and any replacements thereof shall be substantially in the form of Exhibit E. "Loans" means the loans made pursuant to the Facility. "Majority Partnership" means any Partnership whose financial results are consolidated (including proportionate consolidation) under GAAP in the Financial Statements. "Material Adverse Effect" means, with respect to a Person or Property, a material adverse effect upon the condition (financial or otherwise), operations, performance or properties of such Person or Property. The phrase "has a Material Adverse Effect" or "will result in a Material Adverse Effect" or words substantially similar thereto shall in all cases be intended to mean "has resulted, or will or could reasonably be anticipated to result, in a Material Adverse Effect", and the phrase "has no (or does not have a) Material Adverse Effect" or "will not result in a Material Adverse Effect" or words substantially similar thereto shall in all cases be intended to mean "does not or will not or could not reasonably be anticipated to result in a Material Adverse Effect". "Maximum Loan Amount" means, at any time, the lesser of (i) an amount equal to the positive difference, if any, of (A) fifty percent (50%) of the Borrowing Base Value, less (B) the Unsecured Loan Balance excluding the outstanding principal of the Loans; (ii) an amount equal to the Maximum Unsecured Loan Balance less the Unsecured Loan Balance excluding the outstanding principal of the Loans; and (iii) the amount of the Facility from time to time, provided, however, that after any Event of Default -20- 29 has occurred and until the same shall have been remedied or waived pursuant to Section 12.4, the Maximum Loan Amount shall be zero. "Maximum Unsecured Loan Balance" means the maximum principal amount which would result in a Pro Forma Debt Service such that the Net Operating Income for the Borrowing Base Properties during the most recent Fiscal Quarter is equal to 160% of such Pro Forma Debt Service. "Multiemployer Plan" means an employee benefit plan defined in Section 4001(a)(3) of ERISA which is, or within the immediately preceding six (6) years was, contributed to by a Person or an ERISA Affiliate of such Person. "National or Regional Tenant" means a tenant which operates at least ten (10) stores in the same line of business as the store or stores operated by such tenant on the Borrowing Base Properties provided that if a tenant's parent corporation is a guarantor of the Lease, stores operated by such parent or by other Subsidiaries of such parent may be counted toward said 10 store requirement. "Net Income" means, for any period, the net earnings (or loss) of the Borrower, after Taxes and minority interests in consolidated Subsidiaries, calculated for such period on a consolidated basis in conformity with GAAP. "Net Offering Proceeds" means (i) all cash proceeds received by the Borrower as a result of the sale of common, preferred or other classes of stock in the Borrower (if and only to the extent reflected in stockholders' equity on the consolidated balance sheet of the Borrower prepared in accordance with GAAP) less customary costs and discounts of issuance paid by the Borrower. "Net Operating Income" means, with respect to any Property, the net operating income of such Property determined in accordance with GAAP, except that Net Operating Income shall not include security or other deposits, late fees, lease termination fees or other similar items, delinquent rent recoveries from former tenants, unless previously reflected in reserves, or any other items of a non-recurring nature. -21- 30 "Non Pro Rata Loan" means a Loan with respect to which fewer than all Lenders have funded their respective Pro Rata Shares of such Loans and the failure of the non-funding Lender or Lenders to fund its or their respective Pro Rata Shares of such Loan constitutes a breach of this Agreement. "Nonrecourse Indebtedness" means Indebtedness with respect to which recourse for payment is contractually limited to specific assets encumbered by a Lien securing such Indebtedness. "Notice of Borrowing" means, with respect to a proposed Borrowing pursuant to Section 2.1.2, a notice substantially in the form of Exhibit F. "Obligations" means, from time to time, all Indebtedness of Borrower owing to Agent, any Lender or any Person entitled to indemnification pursuant to Section 12.2, or any of their respective successors, transferees or assigns, of every type and description, whether or not evidenced by any note, guaranty or other instrument, arising under or in connection with this Agreement or any other Loan Document, whether or not for the payment of money, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising and however acquired. The term includes, without limitation, all interest, charges, expenses, fees, reasonable attorneys' fees and disbursements, reasonable fees and disbursements of expert witnesses and other consultants, and any other sum now or hereinafter chargeable to Borrower under or in connection with this Agreement or any other Loan Document. "Occupancy Rate" means, with respect to each of the Properties at any time, the ratio, as of such date, expressed as a percentage, of (i) the net rentable square footage of such Property occupied by tenants paying rent pursuant to binding leases as to which no monetary default has continued for more than ninety (90) days, to (ii) the aggregate net rentable square footage of such Property. With respect to the initial Borrowing Base Properties listed on Schedule 1, premises which are no longer open for business may continue to be counted as occupied until the tenant defaults under the applicable Lease. With respect to Properties designated as Borrowing Base Properties after the Closing Date only premises which are actually open for business on the date of the applicable Borrowing Base Property -22- 31 Designation Certificate shall be counted as occupied in connection with the determination pursuant to Section 3.1 as to whether the Property is an Eligible Property. Any premises in such Borrowing Base Properties designated after the Closing Date which are closed for business subsequent to such designation shall cease to be counted as occupied on the earlier to occur of a default by the tenant or the date which is one year after the date of closing unless such premises are reopened prior to such date. With respect to determining whether Properties are Opportunity Properties only premises which are actually open for business shall be counted as occupied. "Officer's Certificate" means a certificate signed by a specified officer of a Person certifying as to the matters set forth therein. "Opportunity Properties" means Properties which (i) are used for purposes other than Retail Uses or Service Retail Uses or (ii) have an Occupancy Rate of less than 50%. "Partnership" means any general or limited partnership, joint venture, limited liability company or limited liability partnership in which Borrower or any Subsidiary of Borrower has an ownership interest and which is not a Wholly- Owned Subsidiary. "Partnership Agreement" means, with respect to any Partnership, on a collective basis, its partnership agreement, its agreement of limited partnership agreement and certificate of limited partnership (if any), its operating or management agreement and articles or certificate of organization, bylaws or other organizational or governance document(s). "PBGC" means the Pension Benefit Guaranty Corporation or any Person succeeding to the functions thereof. "Permit" means any permit, approval, authorization, license, variance or permission required from a Governmental Authority under an applicable Requirement of Law. "Permitted Investments" means Investments in Land, Foreign Properties, Partnerships, Investment Mortgages and Repurchased Stock but only to the extent permitted in Section 9.11. -23- 32 "Permitted Liens" means: (a) Liens (other than Environmental Liens and any Lien imposed under ERISA) for taxes, assessments or charges of any Governmental Authority or claims not yet due; (b) Liens (other than any Lien imposed under ERISA) incurred or deposits made in the ordinary course of business (including without limitation surety bonds and appeal bonds) in connection with workers' compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, leases, contracts (other than for the repayment of Indebtedness), statutory obligations; (c) any laws, ordinances, easements, rights of way, restrictions, exemptions, reservations, conditions, limitations, covenants or other matters that, in the aggregate, do not (i) materially interfere with the occupation, use and enjoyment of the Property or other assets encumbered thereby, by the Person owning such Property or other assets, in the normal course of its business or (ii) materially impair the value of the Property subject thereto; and (d) Liens imposed by laws, such as mechanics' liens and other similar liens arising in the ordinary course of business which secure payment of obligations not more than thirty (30) days past due. "Person" means any natural person, employee, corporation, limited partnership, general partnership, joint stock company, limited liability company, joint venture, association, company, trust, bank, trust company, land trust, business trust or other organization, whether or not a legal entity, or any other non-governmental entity, or any Governmental Authority. "Plan" means an employee benefit plan defined in Section 3(3) of ERISA (other than a Multiemployer Plan) in respect of which Borrower or an ERISA Affiliate, as applicable, is an "employer" as defined in Section 3(5) of ERISA. -24- 33 "Portfolio Properties" means real property improved with one or more completed office, commercial or retail buildings that is owned directly or indirectly, in whole or in part, by Borrower, any Subsidiary of Borrower or any Investment Partnership, including the Borrowing Base Properties and the Properties listed on Schedule 1.1, as such schedule may be updated from time to time to reflect the acquisition or disposition of Portfolio Properties. "Prepayment Date" has the meaning given to such term in Section 2.4.8(c). "Pro Forma Debt Service" means, with respect to any given principal amount, an amount equal to the sum of three (3) monthly principal and interest payments under a 25-year mortgage style principal amortization schedule for such principal amount at an interest rate which shall be the higher of (i) the actual blended interest rate then in effect on the Facility or (ii) an interest rate equal to the then current ten (10) year U.S. Treasury bond yield plus two and one-quarter percent (2.25%) per annum. "Pro Rata Share" means, with respect to any Lender, a fraction (expressed as a percentage), the numerator of which shall be the amount of such Lender's Commitment and the denominator of which shall be the aggregate amount of all of the Lenders' Commitments. "Proceedings" means, collectively, all actions, suits and proceedings before, and investigations commenced or threatened by or before, any court or Governmental Authority with respect to a Person. "Property" means, as to any Person, all real or personal property (including, without limitation, buildings, facilities, structures, equipment and other assets, tangible or intangible) owned by such Person. "Quarterly Operating Report" has the meaning given to such term in Section 6.1.1. "Rating Agency" means each of two of (i) Standard & Poor's Corporation or (ii) Moody's Investors Services, Inc. or (iii) Duff and Phelps or (iv) Fitch Investors as the Borrower may -25- 34 designate from time to time by notice to Agent, provided that at least one Rating Agency must be either Standard & Poor's Corporation or Moody's Investors Services, Inc. "Recourse Borrower Debt" means Borrower Debt less the portion thereof which is Nonrecourse Indebtedness. "Regulations G, T, U and X" mean such Regulations of the Federal Reserve Board as in effect from time to time. "Release" means the release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment or into or out of any property, including the movement of Contaminants through or in the air, soil, surface water, groundwater or property. "Remedial Action" means any action required by applicable Environmental Laws to (i) clean up, remove, treat or in any other way address Contaminants in the indoor or outdoor environment; (ii) prevent the Release or threat of Release or minimize the further Release of Contaminants so they do not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment; or (iii) perform preremedial studies and investigations and post-remedial monitoring and care. "Replacement Reserve Amount" means, with respect to any Property or group of Properties, a normalized annual reserve for recurring capital expenditures which reserve shall initially be at the rate of $0.10 per year per square foot of gross leasable area of such Property or Properties. Commencing in 1997 such rate may be adjusted by the Agent, with the approval of the Requisite Lenders, based on the actual experienced rate of capital expenditures incurred by Borrower with respect to the applicable Properties during 1996 and prior years, but in no event shall such rate be adjusted to a rate higher than such initial rate. "Reportable Event" means any of the events described in Section 4043(b) of ERISA, other than an event for which the thirty (30) day notice requirement is waived by regulations. -26- 35 "Repurchased Stock" means any common or preferred stock issued by Borrower which has been repurchased by Borrower or any of its Subsidiaries or Investment Partnerships. "Requirements of Law" mean, as to any Person, the charter and by-laws, Partnership Agreement or other organizational or governing documents of such Person, and any law, rule or regulation, Permit, or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject, including without limitation, the Securities Act, the Securities Exchange Act, Regulations G, T, U and X, FIRREA and any certificate of occupancy, zoning ordinance, building, environmental or land use requirement or Permit or occupational safety or health law, rule or regulation. "Requisite Lenders" mean, collectively, Lenders whose Pro Rata Shares, in the aggregate, are at least sixty-six and two-thirds percent (66-2/3%), provided that, in determining such percentage at any given time, all then existing Defaulting Lenders will be disregarded and excluded and the Pro Rata Shares of Lenders shall be redetermined, for voting purposes only, to exclude the Pro Rata Shares of such Defaulting Lenders, and provided, further, that the Agent must always be among the Requisite Lenders except that after an Event of Default described in Section 10.1.1 decisions by the Requisite Lenders to accelerate and/or exercise remedies pursuant to Section 10.2.1 shall be made without regard to whether the Agent is among the Requisite Lenders. "Retail Uses" means stores engaged in the sale of products directly to consumers and shopping centers occupied primarily by such stores but which may also include Service Retail Uses, movie cinemas, banks and office uses of the type commonly located in shopping centers. "Secretary's Certificate" means a certificate of a Person's secretary, clerk or comparable officer with respect to organizational documents, authorization and incumbency. "Secured Borrower Debt" means all Borrower Debt that is secured by a Lien on any Property. -27- 36 "Securities" means any stock, shares, voting trust certificates, bonds, debentures, notes or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities", or any certificates of interest, shares, or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire any of the foregoing, but shall not include any evidence of the obligations, provided that Securities shall not include Cash Equivalents, Investment Mortgages or interests in Partnerships. "Securities Act" means the Securities Act of 1933, as amended to the date hereof and from time to time hereafter, and any successor statute. "Securities Exchange Act" means the Securities Exchange Act of 1934, as amended to the date hereof and from time to time hereafter, and any successor statute. "Senior Loans" has the meaning given to such term in Section 11.4.2. "Service Retail Properties" means Properties which are used primarily for Service Retail Uses. "Service Retail Uses" means restaurants, health clubs, child care facilities, automotive repair facilities, and other similar types of uses which Agent may agree to designate as Service Retail Uses. "Solvent" means, as to any Person at the time of determination, that such Person (i) owns property the value of which (both at fair valuation and at present fair saleable value) is greater than the amount required to pay all of such Person's liabilities (including contingent liabilities and debts); (ii) is able to pay all of its debts as such debts mature; and (iii) has capital sufficient to carry on its business and transactions and all business and transactions in which it is about to engage. "Subsidiary" of a Person means any corporation, Partnership, trust or other non-Partnership entity of which a majority of the stock (or equivalent ownership or controlling interest) having voting power to elect a majority of the Board of -28- 37 Directors (if a corporation) or to select the trustee or equivalent controlling interest, shall, at the time such reference becomes operative, be directly or indirectly owned or controlled by such Person. "Tangible Net Worth" means, at any time, the Borrower's stockholders' equity, as shown on its Financial Statements prepared in accordance with GAAP, minus intangible assets which shall include, for purposes of this definition, all deferred charges and prepaid fees. "Taxes" means all federal, state, local and foreign income and gross receipts taxes. "Termination Date" has the meaning given to such term in Section 2.1.4. "Termination Event" means (i) any Reportable Event, (ii) the withdrawal of a Person, or an ERISA Affiliate from a Benefit Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, (iii) the occurrence of an obligation arising under Section 4041 of ERISA of a Person or an ERISA Affiliate to provide affected parties with a written notice of an intent to terminate a Benefit Plan in a distress termination described in Section 4041(c) of ERISA, (iv) the institution by the PBGC of proceedings to terminate any Benefit Plan under Section 4042 of ERISA, (v) any event or condition which constitutes grounds under Section 4042 of ERISA for the appointment of a trustee to administer a Benefit Plan, (vi) the partial or complete withdrawal of such Person or any ERISA Affiliate from a Multiemployer Plan, or (vii) the adoption of an amendment by any Person or any ERISA Affiliate to terminate any Benefit Plan. "Termination of Designation" has the meaning given to such term in Section 3.2. "Total Assets" means Borrower's total assets as shown on its Financial Statements prepared in accordance with GAAP. "Total Borrower-Investment Partnership Liabilities" means the sum of the Total Liabilities of Borrower and the Total Liabilities of all Investment Partnerships, without duplication. -29- 38 "Total Liabilities" of any Person means (i) all Indebtedness of such Person, whether or not such Indebtedness would be included as a liability on the balance sheet of such Person in accordance with GAAP, plus (ii) all other liabilities of every nature and kind of such Person that would be included as liabilities on the balance sheet of such Person in accordance with GAAP, except that deferred rental income shall not be treated as a liability. "Unencumbered NOI" means, for any period, the aggregate Net Operating Income for such period of all Borrowing Base Properties. "Unencumbered Property" means real property (including ground leases) improved with one or more completed office, commercial or retail buildings, that is wholly-owned by Borrower, a Wholly-Owned Subsidiary or a Guarantor Partnership, provided that neither such real property, nor any interest in the Person owning such Property, is subject to any Lien (other than Permitted Liens) or to any agreement (other than this Agreement or any other Loan Document) that prohibits the creation of any Lien thereon as security for Indebtedness of the Person owning such real property. "Unmatured Event of Default" means an event which, with the giving of notice or the lapse of time, or both, would constitute an Event of Default. "Unsecured Interest Expense" means, for any period, (i) total Interest Expense for such period, less (ii) Interest Expense attributable to any Secured Borrower Debt for such period. "Unsecured Loan Balance" means the outstanding balance of all indebtedness, obligations or other liabilities for borrowed money of Borrower or any Subsidiary of Borrower which is not secured by a Lien on any Property including, without limitation, the Loans and any indebtedness evidenced by Securities, plus the amount, if any, by which Borrower's current liabilities less deferred rental income exceed $5,000,000. "Unused Amount" has the meaning given to such term in Section 2.5.1. -30- 39 "Unused Facility Fee" has the meaning given to such term in Section 2.5.1. "Wholly-Owned Subsidiary" means a Subsidiary which is 100% owned by Borrower. 1.2 Computation of Time Periods. 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 the words "to" and "until" each mean "to and including". Periods of days referred to in this Agreement shall be counted in calendar days unless Business Days are expressly prescribed. 1.3 Terms. 1.3.1 Any accounting terms used in this Agreement which are not specifically defined shall have the meanings customarily given them in accordance with GAAP. All references herein to Borrower, or any other Person, in connection with any financial or related covenant, representation or calculation, shall be understood to mean and refer to Borrower and such other Person on a consolidated basis in accordance with GAAP, unless otherwise specifically provided and subject in all events to any adjustments herein set forth. 1.3.2 Any time the phrase "to the best of Borrower's knowledge" or a phrase similar thereto is used herein, it means: "to the actual knowledge of the then executive or senior officers of Borrower, after reasonable inquiry of those agents, employees or contractors of the Borrower who could reasonably be anticipated to have knowledge with respect to the subject matter or circumstances in question and after review of those documents or instruments which could reasonably be anticipated to be relevant to the subject matter or circumstances in question." 1.3.3 In each case where the consent or approval of Agent, all Lenders and/or Requisite Lenders is required, or their non-obligatory action is requested by Borrower, such consent, approval or action shall be in the sole and absolute discretion of Agent and, as applicable, each Lender, unless otherwise specifically indicated. -31- 40 1.3.4 Any time the word "or" is used herein, unless the context otherwise clearly requires, it has the inclusive meaning represented by the phrase "and/or". The words "hereof", "herein", "hereby", "hereunder" and similar terms refer to this Agreement as a whole and not to any particular provision of this Agreement. Article, section, subsection, clause, exhibit and schedule references are to this Agreement unless otherwise specified. Any reference in this Agreement to this Agreement or to any other Loan Document includes any and all amendments, modifications, supplements, renewals or restatements thereto or thereof, as applicable. ARTICLE II LOANS 2.1 Loan Advances and Repayment. 2.1.1 Maximum Loan Amount. (a) Subject to the terms and conditions set forth in this Agreement, Lenders hereby agree to make Loans to Borrower from time to time during the period from the Closing Date to the Business Day next preceding the Termination Date, in an aggregate outstanding principal amount which shall not exceed the Maximum Loan Amount at any time. All Loans under this Agreement shall be made by Lenders simultaneously and proportionately to their respective Pro Rata Shares, it being understood that no Lender shall be responsible for any failure by any other Lender to perform its obligation to make a Loan hereunder and that the Commitment of any Lender shall not be increased or decreased as a result of the failure by any other Lender to perform its obligation to make a Loan. Loans may be voluntarily prepaid pursuant to Section 2.6.1 and, subject to the provisions of this Agreement, any amounts so prepaid may be reborrowed under this Section 2.1.1(a). The principal balance of the Loans shall be payable in full on the Termination Date. The Loans will be evidenced by the Loan Notes. (b) If at any time the outstanding principal balance of the Loans exceeds the Maximum Loan -32- 41 Amount, as a result of a reduction in the Borrowing Base Value, the incurrence of additional indebtedness which increases the Unsecured Loan Balance or for any other reason whatsoever, Borrower shall, not later than thirty (30) days following the date that Borrower receives notice or otherwise obtains knowledge of such occurrence, (i) reduce the Unsecured Loan Balance in such amounts and/or (ii) designate such additional Borrowing Base Property(-ies) under Section 3.1 as are necessary so that the outstanding principal balance of the Loans does not exceed the Maximum Loan Amount. Failure by Borrower to have complied with the foregoing in a timely manner shall constitute an Event of Default without further notice or grace period hereunder. No further Borrowings, or Termination of Designation with respect to any Borrowing Base Property, shall be permitted so long as such excess borrowing condition shall continue to exist. Nothing in this subparagraph (b) shall excuse Borrower's compliance with all terms, conditions, covenants and other obligations imposed upon it under the Loan Documents during the period of such excess borrowing, nor in any manner condition or impair Agent's or Lenders' rights thereunder in respect of any such breach thereof by Borrower. 2.1.2 Notice of Borrowing. (a) (i) Whenever Borrower desires to borrow under this Section 2.1, but in no event more than three (3) times during any one (1) calendar month, Borrower shall give Agent, at 115 Perimeter Center Place, N.E., Suite 500, Atlanta, GA 30346 Attn: Deborah Parker (Fax No. (770)390-8434, with a copy to 700 N. Pearl, Suite 1840, Dallas, TX 75201, Attn: Helen Delph (Fax No. (214)720-3836) or such other address as Agent shall designate, an original or facsimile Notice of Borrowing no later than 9:00 A.M. (Eastern time), not less than three (3) nor more than five (5) Business Days prior to the proposed Funding Date of each Loan. Each Notice of Borrowing shall be accompanied by a Compliance Certificate demonstrating on a pro forma basis compliance with the covenants set forth in Sections 9.1, 9.2, 9.4 and 9.13 after the advance of the requested Loan. Such pro forma Compliance Certificate shall take into account all borrowings and loan repayments, all Property acquisitions and sales, all additional Borrowing Base -33- 42 Property designations and all Terminations of Designation which may have occurred between the end of the last Fiscal Quarter and the proposed Funding Date. The Agent shall notify each Lender by telephone or facsimile with regard to each Notice of Borrowing not later than 11:00 A.M. (Eastern Time) on the second Business Day preceding the proposed Funding Date. (ii) Notwithstanding the foregoing or any other provision hereof to the contrary: a Notice of Borrowing may be given not less than two (2) Business Days prior to the proposed Funding Date of a Loan if the Borrowing shall be requested as a Base Rate Loan in which case the Agent shall provide such telephone or facsimile notice to each Lender not later than 11:00 A.M. (Eastern Time) on the Business Day preceding the proposed Funding Date. (iii) Each Notice of Borrowing shall specify (1) the Funding Date (which shall be a Business Day) in respect of the Loan, (2) the amount of the proposed Loan, provided that the aggregate amount of such proposed Loan shall equal One Million Dollars ($1,000,000) or integral multiples of One Hundred Thousand Dollars ($100,000) in excess thereof, (3) whether the Loan to be made thereunder will be a Base Rate Loan or a LIBOR Loan and, if a LIBOR Loan, the Interest Period, (4) to which account of Borrower the funds are to be directed, and (5) the proposed use of such Loan. Any Notice of Borrowing pursuant to this Section 2.1.2 shall be irrevocable. (b) Borrower may elect (i) to convert LIBOR Loans or any portion thereof into Base Rate Loans, (ii) to convert Base Rate Loans or any portion thereof to LIBOR Loans, or (iii) to continue any LIBOR Loans or any portion thereof for an additional Interest Period, provided, however, that the aggregate amount of the Loans being converted into or continued as LIBOR Loans shall equal One Million Dollars ($1,000,000) or an integral multiple of One Hundred Thousand Dollars ($100,000) in excess thereof. The applicable Interest Period for the continuation of any LIBOR Loan shall commence on the day on which the next preceding Interest Period expires. The conversion of a LIBOR Loan to a Base Rate Loan shall only occur on the last Business Day -34- 43 of the Interest Period relating to such LIBOR Loan; such conversion shall occur automatically in the absence of an election under clause (iii) above. Each election under clause (ii) or clause (iii) above shall be made by Borrower giving Agent an original or facsimile Notice of Borrowing no later than 9:00 A.M. (Eastern time), not less than three (3) nor more than five (5) Business Days prior to the date of a conversion to or continuation of a LIBOR Loan, specifying, in each case (1) the amount of the conversion or continuation, (2) the Interest Period therefor, and (3) the date of the conversion or continuation (which date shall be a Business Day). (c) Upon receipt of a Notice of Borrowing in proper form requesting LIBOR Loans under subparagraph (a) or (b) above, Agent shall determine the LIBOR applicable to the Interest Period for such LIBOR Loans, and shall, two (2) Business Days prior to the beginning of such Interest Period, give (by facsimile) a Fixed Rate Notice in respect thereof to Borrower and Lenders; provided, however, that failure to give such notice to Borrower shall not affect the validity of such rate. Each determination by Agent of the LIBOR shall be conclusive and binding upon the parties hereto in the absence of manifest error. 2.1.3 Making of Loans. Subject to Section 11.3, Agent shall make the proceeds of Loans available to Borrower on such Funding Date and shall disburse such funds in Dollars in immediately available funds to Borrower's commercial demand account at FNBB, or such other account specified in written wiring instructions furnished with the Notice of Borrowing acceptable to Agent. 2.1.4. Term. The outstanding balance of the Loans shall be payable in full on the earliest to occur of (i) the second anniversary of the Closing Date, (ii) the acceleration of the Loans pursuant to Section 10.2.1, or (iii) Borrower's written notice to Agent (pursuant to Section 2.6.1) of Borrower's election to prepay all accrued obligations and terminate all Commitments (the "Termination Date"). 2.2 Authorization to Obtain Loans. Borrower shall provide Agent with documentation satisfactory to Agent indicating -35- 44 the names of those employees of Borrower authorized by Borrower to sign Notices of Borrowing, and Agent and Lenders shall be entitled to rely on such documentation until notified in writing by Borrower of any change(s) of the persons so authorized. Agent shall be entitled to act on the instructions of anyone identifying himself or herself as one of the Persons authorized to execute a Notice of Borrowing, and Borrower shall be bound thereby in the same manner as if such Person were actually so authorized. Borrower agrees to indemnify, defend and hold Lenders and Agent harmless from and against any and all Liabilities and Costs which may arise or be created by the acceptance of instructions in any Notice of Borrowing, unless caused by the gross negligence of the Person to be indemnified. 2.3 Lenders' Accounting. Agent shall maintain a loan account (the "Loan Account") on its books in which shall be recorded (i) the names and addresses and the Commitments of Lenders, and principal amount of Loans owing to each Lender from time to time, and (ii) all advances and repayments of principal and payments of accrued interest under the Loans, as well as payments of the Unused Facility Fee, as provided in this Agreement. All entries in the Loan Account shall be made in accordance with Agent's customary accounting practices as in effect from time to time. 2.4 Interest on the Loans. 2.4.1 Base Rate Loans. Subject to Section 2.4.4, all Base Rate Loans shall bear interest on the average daily unpaid principal amount thereof from the date made until paid in full at a fluctuating rate per annum equal to the sum of the Base Rate plus the Applicable Base Rate Margin. Base Rate Loans shall be made in minimum amounts of One Million Dollars ($1,000,000) or an integral multiple of One Hundred Thousand ($100,000) in excess thereof. 2.4.2 LIBOR Loans. Subject to Sections 2.4.4 and 2.4.8, all LIBOR Loans shall bear interest on the unpaid principal amount thereof during the Interest Period applicable thereto at a rate per annum equal to the sum of LIBOR for such Interest Period plus the Applicable LIBOR Rate Margin. LIBOR Loans shall be in tranches of One Million Dollars ($1,000,000) or One Hundred Thousand Dollar ($100,000) increments in excess thereof. No more than six (6) LIBOR Loan tranches shall be -36- 45 outstanding at any one time. Notwithstanding anything to the contrary contained herein and subject to the Default Interest provisions contained in Section 2.4.4, if an Event of Default occurs and as a result thereof the Commitments are terminated, all LIBOR Loans will convert to Base Rate Loans upon the expiration of the applicable Interest Periods therefor or the date all Loans become due, whichever occurs first. 2.4.3 Interest Payments. Subject to Section 2.4.4, interest accrued on all Loans shall be payable by Borrower, in the manner provided in Section 2.6.2, in arrears on the first Business Day of the first calendar month following the Closing Date, the first Business Day of each succeeding calendar month thereafter, and on the Termination Date. 2.4.4 Default Interest. Notwithstanding the rates of interest specified in Sections 2.4.1 and 2.4.2 and the payment dates specified in Section 2.4.3, effective immediately upon the occurrence and during the continuance of any Event of Default, the principal balance of all Loans then outstanding and, to the extent permitted by applicable law, any interest payments on the Loans not paid when due shall bear interest payable upon demand at a rate which is five percent (5%) per annum in excess of the rate(s) of interest otherwise payable from time to time under this Agreement. All other amounts due Agent or Lenders (whether directly or for reimbursement) under this Agreement or any of the other Loan Documents if not paid when due, or if no time period is expressed, if not paid within ten (10) days after demand, shall bear interest from and after demand at the rate set forth in this Section 2.4.4. 2.4.5 Late Fee. Borrower acknowledges that late payment to Agent will cause Agent and Lenders to incur costs not contemplated by this Agreement. Such costs include, without limitation, processing and accounting charges. Therefore, if Borrower fails timely to pay any sum due and payable hereunder through the Termination Date, unless waived by Agent pursuant to Section 11.11.1, a late charge of four cents ($.04) for each dollar of any principal payment, interest or other charge due hereon and which is not paid within ten (10) days after such payment is due or five (5) Business Days after the statement of the amount due is provided to Borrower, whichever is later, shall be charged by Agent (for the benefit of Lenders) and paid by Borrower for the purpose of defraying the expense incident to -37- 46 handling such delinquent payment; provided, however, that no late charges shall be assessed with respect to any period during which Borrower is obligated to pay interest at the rate specified in Section 2.4.4, or in respect of any failure to pay all Obligations on the Termination Date. Borrower and Agent agree that this late charge represents a reasonable sum considering all of the circumstances existing on the date hereof and represents a fair and reasonable estimate of the costs that Agent and Lenders will incur by reason of late payment. Borrower and Agent further agree that proof of actual damages would be costly and inconvenient. Acceptance of any late charge shall not constitute a waiver of the default with respect to the overdue installment, and shall not prevent Agent from exercising any of the other rights available hereunder or any other Loan Document. Such late charge shall be paid without prejudice to any other rights of Agent. 2.4.6 Computation of Interest. Interest shall be computed on the basis of the actual number of days elapsed in the period during which interest or fees accrue and a year of three hundred sixty (360) days. In computing interest on any Loan, the date of the making of the Loan shall be included and the date of payment shall be excluded; provided, however, that if a Loan is repaid on the same day on which it is made, one (1) day's interest shall be paid on that Loan. Notwithstanding any provision in this Section 2.4, interest in respect of any Loan shall not exceed the maximum rate permitted by applicable law. Changes in the Applicable Base Rate Margin or the Applicable LIBOR Rate Margin shall take effect as of the date on which the condition set forth in the relevant clause of the definition of each such term is satisfied. 2.4.7 Changes; Legal Restrictions. In the event that after the Closing Date (i) the adoption of or any change in any law, treaty, rule, regulation, guideline or determination of a court or Governmental Authority or any change in the interpretation or application thereof by a court or Governmental Authority, or (ii) compliance by Agent or any Lender with any request or directive made or issued after the Closing Date (whether or not having the force of law and whether or not the failure to comply therewith would be unlawful) from any central bank or other Governmental Authority or quasi-governmental authority: -38- 47 (a) subjects Agent or any Lender to any tax, duty or other charge of any kind with respect to the Facility, this Agreement or any of the other Loan Documents or the Loans, or changes the basis of taxation of payments to Agent or such Lender of principal, fees, interest or any other amount payable hereunder, except for net income, gross receipts, gross profits or franchise taxes imposed by any jurisdiction and not specifically based upon loan transactions (all such non-excepted taxes, duties and other charges being hereinafter referred to as "Lender Taxes"); (b) imposes, modifies or holds applicable, in the determination of Agent or any Lender, any reserve, special deposit, compulsory loan, FDIC insurance, capital allocation or similar requirement (other than a requirement of the type described in Section 2.7) against assets held by, or deposits or other liabilities in or for the account of, advances or loans by, or other credit extended by, or any other acquisition of funds by, Agent or such Lender or any applicable lending office; or (c) imposes on Agent or any Lender any other condition (other than one described in Section 2.7) materially more burdensome in nature, extent or consequence than those in existence as of the Closing Date, and the result of any of the foregoing is to increase the cost to Agent or any Lender of making, renewing, maintaining or participating in the Loans or to reduce any amount receivable thereunder; then, in any such case, Borrower shall promptly pay to Agent or such Lender, as applicable, upon demand, such amount or amounts (based upon a reasonable allocation thereof by Agent or such Lender to the financing transactions contemplated by this Agreement and affected by this Section 2.4.7) as may be necessary to compensate Agent or such Lender for any such additional cost incurred or reduced amounts received; provided, however, that if the payment of such compensation may not be legally made whether by modification of the applicable interest rate or otherwise, then Lenders shall have no further obligation to make Loans that cause Agent or any Lender to incur such increased cost, and all affected Loans shall become immediately due and payable by Borrower. Agent or such Lender shall deliver to Borrower and in the case of a delivery by Lender, such Lender shall also deliver to Agent, a written statement of the claimed additional costs -39- 48 incurred or reduced amounts received and the basis therefor as soon as reasonably practicable after such Lender obtains knowledge thereof. If Agent or any Lender subsequently recovers any amount of Lender Taxes previously paid by Borrower pursuant to this Section 2.4.7, whether before or after termination of this Agreement, then, upon receipt of good funds with respect to such recovery, Agent or such Lender will refund such amount to Borrower if no Event of Default or Unmatured Event of Default then exists or, if an Event of Default or Unmatured Event of Default then exists, such amount will be credited to the Obligations in the manner determined by Agent or such Lender. 2.4.8 Certain Provisions Regarding LIBOR Loans. (a) LIBOR Lending Unlawful. If any Lender shall determine (which determination shall, upon notice thereof to Borrower and Agent, be conclusive and binding on the parties hereto) that the introduction of or any change in or in the interpretation of any law makes it unlawful, or any central bank or other Governmental Authority asserts that it is unlawful, for such Lender to make or maintain any Loan as a LIBOR Loan, (i) the obligations of such Lenders to make or maintain any Loans as LIBOR Loans shall, upon such determination, forthwith be suspended until such Lender shall notify Agent that the circumstances causing such suspension no longer exist, and (ii) if required by such law or assertion, the LIBOR Loans of such Lender shall automatically convert into Base Rate Loans. (b) Deposits Unavailable. If Agent shall have determined in good faith that adequate means do not exist for ascertaining the interest rate applicable hereunder to LIBOR Loans, then, upon notice from Agent to Borrower the obligations of all Lenders to make or maintain Loans as LIBOR Loans shall forthwith be suspended until Agent shall notify Borrower that the circumstances causing such suspension no longer exist. Agent will give such notice when it determines, in good faith, that such circumstances no longer exist; provided, however, that Agent shall not have any liability to any Person with respect to any delay in giving such notice. -40- 49 (c) Fixed Rate Prepayment Fee. Borrower acknowledges that prepayment or acceleration of a LIBOR Loan during an Interest Period shall result in Lenders incurring additional costs, expenses and/or liabilities and that it is extremely difficult and impractical to ascertain the extent of such costs, expenses and/or liabilities. (For all purposes of this subparagraph (c), any Loan not being made as a LIBOR Loan in accordance with the Notice of Borrowing therefor, as a result of Borrower's cancellation thereof, shall be treated as if such LIBOR Loan had been prepaid.) Therefore, on the date a LIBOR Loan is prepaid or the date all sums payable hereunder become due and payable, by acceleration or otherwise ("Prepayment Date"), Borrower will pay to Agent, for the account of each Lender, (in addition to all other sums then owing), an amount ("Fixed Rate Prepayment Fee") determined by the Agent in the following manner: (i) First, the Agent shall determine the amount by which (A) the total amount of interest which would have otherwise accrued hereunder on the principal so paid or not borrowed, during the period beginning on the Prepayment Date and ending on the last day of the Interest Period of the prepaid LIBOR Loan (the "Reemployment Period"), exceeds (B) the total amount of interest which would accrue, during the Reemployment Period, on any readily marketable bond or other obligation of the United States of America designated by the Agent in its sole discretion at or about the time of such payment, such bond or other obligation of the United States of America to be in an amount equal (as nearly as may be) to the amount of principal so paid or not borrowed and to have a maturity comparable to the Reemployment Period, and the interest to accrue thereon to take account of amortization of any discount from par or accretion of premium above par at which the same is selling at the time of designation. Each sum amount is hereafter referred to as an "Installment Amount". (ii) Second, each Installment Amount shall be treated as payable as of the last day of the Interest Period of the prepaid LIBOR Loan. -41- 50 (iii) Third, the Fixed Rate Prepayment Fee shall be the present value of the Installment Amount determined by discounting the amount thereof from the date on which such Installment Amount is to be treated as payable, at the same annual interest rate as that payable upon the bond or other obligation of the United States of America designated as aforesaid by the Agent. (d) Upon the written notice to Borrower from Agent, Borrower shall immediately pay to Agent, for the account of Lenders, the Fixed Rate Prepayment Fee. Such written notice (which shall include calculations in reasonable detail) shall, in the absence of manifest error, be conclusive and binding on the parties hereto. (e) Borrower understands, agrees and acknowledges the following: (i) no Lender has any obligation to purchase, sell and/or match funds in connection with the use of LIBOR as a basis for calculating the rate of interest on a LIBOR Loan or a Fixed Rate Price Adjustment; (ii) LIBOR is used merely as a reference in determining such rate; and (iii) Borrower has accepted LIBOR as a reasonable and fair basis for calculating such rate and a Fixed Rate Prepayment Fee. Borrower further agrees to pay the Fixed Rate Prepayment Fee and Lender Taxes, if any, whether or not a Lender elects to purchase, sell and/or match funds. 2.4.9 Withholding Tax Exemption. At least five (5) Business Days prior to the first day on which interest or fees are payable hereunder for the account of any Lender, each Lender that is not incorporated under the laws of the United States of America, or a state thereof, agrees that it will deliver to Agent and Borrower two (2) duly completed copies of United States Internal Revenue Service Form 1001 or Form 4224, certifying in either case that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes. Each Lender which so delivers a Form 1001 or Form 4224 further undertakes to deliver to Agent and Borrower two (2) additional copies of such form (or any applicable successor form) on or before the date that such form expires (currently, three (3) successive calendar years for Form 1001 and one (1) calendar year for Form 4224) or becomes -42- 51 obsolete or after the occurrence of any event requiring a change in the most recent forms so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by Agent or Borrower, in each case certifying that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender advises Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income taxes. If any Lender cannot deliver such form, then Borrower may withhold from such payments such amounts as are required by the Internal Revenue Code. 2.5 Fees. 2.5.1 Unused Facility Fee. From and after the Closing Date and until the Obligations are paid in full and this Agreement is terminated or, if sooner, the date the Commitments terminate, and subject to Section 11.4.2, Borrower shall pay to Agent, for the account of each Lender, a fee equal to the rate set forth below times an amount equal to (i) the average daily amount of the Facility (as affected by any reductions pursuant to Section 2.6.1(b)) minus (ii) the average daily principal balance of all Loans (said difference being the "Unused Amount"), as determined for each Fiscal Quarter. The aforesaid fee (the "Unused Facility Fee") shall accrue at the applicable rate set forth below: -43- 52
Average Daily Rate Per Annum Unused Amount During Applicable to Applicable Quarter Unused Amount -------------------- ------------- An amount equal to or greater than 50% of the average daily amount of the Facility 0.25% An amount less than 50% of the average daily amount of the Facility 0.125%
The Unused Facility Fee shall be payable, in the manner provided in Section 2.6.2, in arrears on the first Business Day in each Fiscal Quarter, beginning with the first Fiscal Quarter after the Closing Date, and on the date of payment in full of all obligations to Lenders pursuant to Section 2.1.4 with the Unused Facility Fee to be prorated to the date of such payment in such case. 2.5.2 Agency Fees. Borrower shall pay Agent such fees as are provided for in the agreement regarding fees between Agent and Borrower, as in existence from time to time. 2.5.3 Payment of Fees. The fees described in Section 4.1.11 and this Section 2.5 represent compensation for services rendered and to be rendered separate and apart from the lending of money or the provision of credit and do not constitute compensation for the use, detention or forbearance of money, and the obligation of Borrower to pay the fees described herein shall be in addition to, and not in lieu of, the obligation of Borrower to pay interest, other fees and expenses otherwise described in this Agreement. All fees shall be payable when due in immediately available funds and shall be non-refundable when paid. If Borrower fails to make any payment of fees or expenses specified or referred to in this Agreement due to Agent or Lenders, including without limitation those referred to in this Section 2.5, in Section 12.1, or otherwise under this Agreement or any separate fee agreement between Borrower and Agent or any Lender relating to this Agreement, when due, the amount due shall bear interest until paid at the Base Rate and, after ten (10) days at the rate specified in Section 2.4.4 (but not to exceed the maximum rate permitted by applicable law), and shall constitute part of the Obligations. The Unused Facility Fee and -44- 53 the fees referred to in Section 2.5.2 which are expressed as a per annum charge shall be calculated on the basis of the actual number of days elapsed in a three hundred sixty (360) day year. 2.6 Payments. 2.6.1 Voluntary Prepayments; Reduction in Facility. (a) Borrower may, upon not less than three (3) Business Days prior written notice to Agent not later than 12:00 Noon (Eastern time) on the date given, at any time and from time to time, prepay any Loans in whole or in part. Any such notice shall specify the date of prepayment and the principal amount of the prepayment. In the event of a prepayment of LIBOR Loans, other than in connection with the prepayment of all accrued Obligations and termination of all Commitments pursuant to a notice delivered under this Section 2.6.1(a) within fifteen (15) days after a demand by Agent or any Lender for payment or reimbursement pursuant to Section 2.7, Borrower shall concurrently pay any Fixed Rate Prepayment Fee payable in respect thereof. Agent shall provide to each Lender a confirming copy of such notice on the same Business Day such notice is received. (b) Reduction in Facility. Borrower shall have the right, at any time and from time to time, to reduce the Facility by up to $50,000,000 in the aggregate, in increments of $10,000,000 or integral multiples of $10,000,000. No reduction in the Facility may be reinstated. Each such reduction shall become effective on the date both of the following conditions have been satisfied: (i) Borrower shall have given written notice to Agent irrevocably and unconditionally reducing the Facility in an amount equal to $10,000,000 or an integral multiple of $10,000,000 not in excess of $50,000,000; and (ii) if the aggregate principal balance of all Loans then outstanding exceeds the Facility as -45- 54 so reduced, Borrower shall have made a voluntary prepayment of principal under the Loans in an amount sufficient to reduce the aggregate outstanding balance thereof to such reduced amount of the Facility or less, together with accrued and unpaid interest on the amount of such prepayment and any applicable Fixed Rate Prepayment Fee. Such prepayment shall be made in accordance with the provisions of Section 2.6.1(a). No such reduction of the Facility shall relieve Borrower of any obligation in respect of any fees paid or accrued prior to the date of such reduction. Upon the effectiveness of each such reduction, all references to the "Facility" shall be understood to mean and refer to a loan facility of an amount equal to $150,000,000 less the aggregate amount of the reductions in the Facility that have been so effected (including by reason of prior reductions, if any), and all references to the "Commitment" of each Lender shall be understood to mean and refer to such Lender's Pro Rata Share of the Facility, as so reduced. 2.6.2 Manner and Time of Payment. All payments of principal, interest and fees hereunder payable to Agent or the Lenders shall be made without condition or reservation of right and free of set-off or counterclaim, in Dollars and by wire transfer (pursuant to Agent's written wire transfer instructions) of immediately available funds, to Agent, for the account of each Lender, not later than 12:00 Noon (Eastern time) on the date due; and funds received by Agent after that time and date shall be deemed to have been paid on the next succeeding Business Day. 2.6.3 Payments on Non-Business Days. Whenever any payment to be made by Borrower hereunder shall be stated to be due on a day which is not a Business Day, payments shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest hereunder and of any of the fees specified in Section 2.5, as the case may be. 2.7 Increased Capital. If either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) compliance by Agent or any Lender with any guideline or request from any central bank or other Governmental -46- 55 Authority (whether or not having the force of law and whether or not the failure to comply therewith would be unlawful) made or issued after the Closing Date affects or would affect the amount of capital required or expected to be maintained by Agent or such Lender or any corporation controlling Agent or such Lender, and Agent or such Lender determines that the amount of such capital is increased by or based upon the existence of Agent's obligations hereunder or such Lender's Commitment, then, upon demand by Agent or such Lender, Borrower shall immediately pay to Agent or such Lender, from time to time as specified by Agent or such Lender, additional amounts sufficient to compensate Agent or such Lender in the light of such circumstances, to the extent that Agent or such Lender determines such increase in capital to be allocable to the existence of Agent's obligations hereunder or such Lender's Commitment. A certificate as to such amounts submitted to Borrower by Agent or such Lender shall, in the absence of manifest error, be conclusive and binding for all purposes. 2.8 Notice of Increased Costs. Each Lender agrees that, as promptly as reasonably practicable after it becomes aware of the occurrence of an event or the existence of a condition which would cause it to be affected by any of the events or conditions described in Section 2.4.7 or 2.4.8 or Section 2.7, it will notify Borrower, and provide a copy of such notice to Agent, of such event and the possible effects thereof, provided that the failure to provide such notice shall not affect Lender's rights to reimbursement provided for herein. ARTICLE III BORROWING BASE PROPERTIES 3.1 Designation of Borrowing Base Properties. On or before the Closing Date with respect to the properties listed on Schedule 1 as Borrowing Base Properties and at such future times as Borrower desires that an additional property become a Borrowing Base Property, Borrower shall deliver to Agent a Borrowing Base Property Designation Certificate in the form of Exhibit B hereto. Each Borrowing Base Property Designation Certificate relating to additional properties not listed on Schedule 1 shall be accompanied by the following: -47- 56 3.1.1 A current operating statement for such property audited or certified by Borrower as being true and correct in all material respects and prepared in accordance with GAAP and comparative operating statements for the current period and for the previous two (2) Fiscal Years; provided, however, that, if Borrower shall have owned such property for less than the period to be covered by such operating statements, then the audit and certification requirements shall extend only to the period of ownership by Borrower, and Borrower shall provide any available operating statements prepared by the former owner(s) for the remainder of the period required hereunder; 3.1.2 A current rent roll for such property in form satisfactory to Agent, and certified by Borrower to be true and correct; 3.1.3 The most recent "Phase I" environmental assessment (or summary thereof satisfactory to the Agent) of such property which shall be dated not more than one year prior to the date of the Borrowing Base Property Designation Certificate, and any additional environmental studies or assessments in Borrower's possession or control that have been performed with respect to such property; 3.1.4 A copy of the most recent owner's title insurance policy or commitment relating to such Property. 3.1.5 Copies of any engineering, mechanical, structural or maintenance studies performed with respect to such Property. 3.1.6 If the property is to be owned by a Partnership or Subsidiary that has not previously qualified as a Guarantor hereunder, copies of the Partnership Agreement of such Partnership and of such other information regarding such Partnership or Subsidiary as may be reasonably requested by Agent or any Lender; and 3.1.7 Such other documents and information as may be reasonably requested by Agent relating to the potential Borrowing Base Property. If, following review of such Certificate, documents and information, Agent is satisfied that (i) the proposed additional -48- 57 Property is an Eligible Property and (ii) such Property becoming a Borrowing Base Property will not cause the Borrowing Base Properties to fail to satisfy the Aggregate Borrowing Base Requirements and (iii) such Property becoming a Borrowing Base Property will not have the effect of increasing the percentage of Adjusted Base Rents from the Borrowing Base Properties paid pursuant to Leases to K-Mart Corporation or its Subsidiaries, Agent will promptly so notify Borrower, and upon execution and delivery of such items or documents as may be appropriate under the circumstances, such property shall become a Borrowing Base Property. If the proposed property fails to satisfy conditions (i), (ii) or (iii) above in one or more respects, such property may become a Borrowing Base Property upon acceptance by the Requisite Lenders. Agent shall distribute to each Lender a copy of each Borrowing Base Property Designation Certificate and shall provide a copy of the current operating statement, current rent roll and summary of the environmental assessment to each Lender which shall request the same. If any Lender shall request copies of any of the other documents or information submitted to the Agent or any additional documents or information as it may reasonably request relating to the potential Borrowing Base Property, Borrower shall provide the requested documents or information to such Lender or shall provide such Lender with access thereto at Borrower's offices. 3.2 Termination of Designation as a Borrowing Base Property. From time to time Borrower may request, upon not less than thirty (30) days' prior written notice to Agent (which shall promptly send a copy thereof to each other Lender), that a Borrowing Base Property cease to be designated as such, which termination of designation ("Termination of Designation") shall be consented to by Agent if all of the following conditions are satisfied as of the date of such Termination of Designation: 3.2.1 No Unmatured Event of Default or Event of Default has occurred and is continuing; and 3.2.2 Borrower shall have delivered to Agent a Compliance Certificate demonstrating on a pro forma basis, and Agent shall have determined, that the outstanding principal balance of the Loans will not exceed the Maximum Loan Amount and that the Borrowing Base Properties shall continue to satisfy the Aggregate Borrowing Base Requirements after giving effect to such Termination of Designation and any prepayment to be made and/or -49- 58 the acceptance of any property as an additional or replacement Borrowing Base Property to be given concurrently with such Termination of Designation. 3.3 Rejection of Borrowing Base Properties. If at any time Agent determines that any Borrowing Base Property is not an Eligible Property it may reject a Borrowing Base Property by notice to the Borrower which rejection notice shall have the same effect as a Termination of Designation consented to by Agent. ARTICLE IV CONDITIONS TO LOANS 4.1 Conditions to Initial Disbursement of Loans. The obligation of Lenders to make the initial disbursement of the Loans shall be subject to satisfaction of each of the following conditions precedent on or before the Closing Date: 4.1.1 Borrower and Guarantor Documents. Borrower and/or each Guarantor shall have executed and/or delivered to Agent each of the following, in form and substance acceptable to Agent and each other Lender: (a) this Agreement; (b) the Loan Notes; (c) a Guaranty from each Guarantor; (d) Borrowing Base Property Designation Certificates for each of the properties listed on Schedule 1; (e) Evidence of qualification and good standing of Borrower and each Guarantor in its state of organization; (f) Secretary's Certificate with respect to authorization, incumbency and organizational documents of Borrower, each Guarantor which is a -50- 59 corporation and each corporate general partner of each Guarantor Partnership. (g) General Partner's Certificate with respect to authorization and partnership agreement of each Guarantor Partnership. 4.1.2 Borrowing Base Property Documents. Agent shall have received all required information with respect to each Borrowing Base Property in form acceptable to Agent. 4.1.3 Compliance Certificate. Borrower shall have delivered to Agent a Compliance Certificate evidencing a sufficient Maximum Loan Amount to allow the Loans being requested and compliance with the financial covenants in Article IX. 4.1.4 Notice of Borrowing. Borrower shall have delivered to Agent a Notice of Borrowing, and, if applicable, Agent shall have delivered to Borrower a Fixed Rate Notice, in each case in compliance with Section 2.1.2. 4.1.5 Performance. Borrower and each Guarantor shall have performed in all material respects all agreements and covenants required by Agent to be performed by them on or before the Closing Date. 4.1.6 Solvency. Each of Borrower and each Guarantor shall be Solvent. 4.1.7 Material Adverse Changes. No change, as determined by Agent and Lenders, shall have occurred, during the period commencing September 30, 1995, and ending on the Closing Date, which has a Material Adverse Effect on Borrower or any Guarantor or the operating performance of any Borrowing Base Property. 4.1.8 Litigation Proceedings. There shall not have been instituted or threatened, during the period commencing September 30, 1995, and ending on the Closing Date, any litigation or proceeding in any court or Governmental Authority affecting or threatening to affect Borrower or any Guarantor -51- 60 which has a Material Adverse Effect, as reasonably determined by Agent. 4.1.9 Lien Discharges. Borrower shall have delivered to Agent satisfactory evidence that all Liens other than Permitted Liens (including, without limitation, the Liens securing the REMIC and the Existing Revolver) shall be discharged upon the initial disbursement of the Loans hereunder. 4.1.10 No Event of Default; Satisfaction of Financial Covenants. On the Closing Date and after giving effect to the initial disbursements of the Loans, no Event of Default or Unmatured Event of Default shall exist and all of the financial covenants contained in Article IX shall be satisfied. 4.1.11 Fees. Agent shall have received (i) certain fees in the amount separately agreed to between Agent and Borrower, and (ii) certain facility fees due to the Lenders in the amounts separately agreed to by the Lenders and all expenses of Agent incurred prior to such Closing Date in connection with this Agreement (including without limitation all attorneys' fees and costs) shall have been paid by Borrower. 4.1.12 Obligations Under Existing Facilities. Agent shall have received an amount (which may include proceeds of the initial Loan hereunder) equal to all unpaid obligations of Borrower under the Existing Revolver, together with instructions to apply such sum to the payment of such obligations in full and satisfactory evidence that the initial disbursement of the Loans hereunder shall result in the payment to the Trustee for the REMIC of an amount equal to all unpaid obligations of EMFC under the REMIC and that all documents required to terminate the REMIC have been appropriately executed and delivered. 4.1.13 Opinion of Counsel. Agent shall have received, on behalf of Agent and Lenders, favorable opinions of counsel for Borrower and each Guarantor dated as of the Closing Date, in form and substance satisfactory to Agent, Lenders and their respective counsel. 4.1.14 Consents and Approvals. All material licenses, permits, consents, regulatory approvals and corporate action necessary to enter into the financing transactions -52- 61 contemplated by this Agreement shall have been obtained by Borrower and each Guarantor. 4.1.15 Due Diligence. Lenders shall have completed such due diligence investigations as they deem necessary, and such review and investigations shall provide Lenders with results and information which, in each Lender's determination, are satisfactory to permit such Lender to enter into this Agreement and fund the Loans. 4.1.16 Representations and Warranties. All representations and warranties contained in this Agreement and the other Loan Documents shall be true and correct in all material respects. 4.2 Conditions Precedent to All Loans. The obligation of each Lender to make any Loan requested to be made by it, on any date, is subject to satisfaction of the following conditions precedent as of such date: 4.2.1 Documents. With respect to a request for a Loan, Agent shall have received, on or before the Funding Date and in accordance with the provisions of Section 2.1.2, an original and duly executed Notice of Borrowing. 4.2.2 Additional Matters. As of the Funding Date for any Loan and after giving effect to the Loans being requested: (a) Representations and Warranties. All of the representations and warranties contained in this Agreement and in any other Loan Document (other than representations and warranties which expressly speak only as of a different date and other than for changes permitted or contemplated by this Agreement) shall be true and correct in all material respects on and as of such Funding Date, as though made on and as of such date; (b) No Default. No Event of Default or Unmatured Event of Default shall have occurred and be continuing or would result from the making of the requested Loan, and all of the financial covenants contained in Article IX shall be satisfied; and -53- 62 (c) No Material Adverse Change. Since the Closing Date, no change shall have occurred which shall have a Material Adverse Effect on Borrower or any Guarantor, as determined by Agent, other than any such change the occurrence of which has been waived by Requisite Lenders in connection with any prior Borrowing. Each submission by Borrower to Agent of a Notice of Borrowing with respect to a Loan and the acceptance by Borrower of the proceeds of each such Loan made hereunder shall constitute a representation and warranty by Borrower as of the Funding Date in respect of such Loan that all the conditions contained in this Section 4.2.2 have been satisfied. ARTICLE V REPRESENTATIONS AND WARRANTIES 5.1 Representations and Warranties. In order to induce Lenders to make the Loans, Borrower hereby represents and warrants to Lenders as follows: 5.1.1 Organization; Corporate and Partnership Powers. Each of Borrower and each Guarantor (i) is a corporation or Partnership duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation, (ii) except as set forth on Schedule 5.1.1 is duly qualified to do business as a foreign corporation or Partnership and in good standing under the laws of each jurisdiction in which it owns or leases real property or in which the nature of its business requires it to be so qualified, and (iii) has all requisite power and authority to own and operate its property and assets and to conduct its business as presently conducted and as proposed to be conducted in connection with and following the consummation of the Loans contemplated by the Loan Documents. All of the capital stock of Borrower has been issued in compliance with all applicable Requirements of Law. 5.1.2 Authority. Each of Borrower and each Guarantor has the requisite power and authority to execute, deliver and perform each of the Loan Documents to which it is or will be a party. The execution, delivery and performance thereof, and the consummation of the transactions contemplated -54- 63 thereby, have been duly approved by the applicable Board of Directors or partners, and no other proceedings or authorizations on the part of Borrower or any Guarantor are necessary to consummate such transactions. Each of the Loan Documents to which Borrower or any Guarantor is a party has been duly executed and delivered and constitutes its legal, valid and binding obligation, enforceable in accordance with its terms, subject to bankruptcy, insolvency and other laws affecting creditors' rights generally. 5.1.3 Ownership of Subsidiaries and Partnerships. Schedule 5.1.3 sets forth the stockholders, general partners and limited partners (or other holders of ownership interests) of each Subsidiary or Partnership in which Borrower holds any direct or indirect interest and their respective ownership percentages and there are no other partnership (or other ownership) interests outstanding. Except as set forth or referred to in the Partnership Agreement of each Partnership, no partnership (or other ownership) interest (or any securities, instruments, warrants, option or purchase rights, conversion or exchange rights, calls, commitments or claims of any character convertible into or exercisable for such interests) of any such Person is subject to issuance under any security, instrument, warrant, option or purchase rights, conversion or exchange rights, call, commitment or claim of any right, title or interest therein or thereto. All of the stock or partnership (or other ownership) interests in each Subsidiary and Partnership have been issued in compliance with all applicable Requirements of Law. 5.1.4 No Conflict. The execution, delivery and performance by Borrower and each Guarantor of the Loan Documents to which it is or will be a party, and each of the transactions contemplated thereby, do not and will not (i) conflict with or violate its articles of incorporation, by-laws, Partnership Agreement or other organizational documents, as the case may be, or (ii) conflict with, result in a breach of or constitute (with or without notice or lapse of time or both) a default under any Requirement of Law, Contractual Obligation or Court Order of or binding upon Borrower or any Guarantor, or (iii) require termination of any Contractual Obligation, or (iv) result in or require the creation or imposition of any Lien whatsoever upon any of the properties or assets of Borrower or any Guarantor, other than Permitted Liens, or (v) require any approval of the -55- 64 stockholders of Borrower or any holders of any ownership interest in any Guarantor. 5.1.5 Consents and Authorizations. Borrower and each Guarantor has obtained all consents and authorizations required pursuant to its Contractual Obligations with any other Person, and shall have obtained all consents and authorizations of, and effected all notices to and filings with, any Governmental Authority, as may be necessary to allow Borrower to lawfully execute, deliver and perform its obligations under the Loan Documents to which it is a party. 5.1.6 Governmental Regulation. Neither Borrower nor any Guarantor is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, the Investment Company Act of 1940 or any other federal or state statute or regulation such that its ability to incur indebtedness is limited or its ability to consummate the transactions contemplated by the Loan Documents is materially impaired. 5.1.7 Prior Financials. The December 31, 1994 Consolidated Balance Sheet, Statement of Operations and Statement of Cash Flows of Borrower contained in Borrower's Form 10K (the "December 31, 1994 Financials") delivered to Agent prior to the date hereof were prepared in accordance with GAAP and fairly present the assets, liabilities and financial condition of Borrower on a consolidated basis, at such date and the results of its operations and its cash flows, on a consolidated basis, for the period then ended. 5.1.8 Financial Statements, Projections and Forecasts. Each of the Financial Statements to be delivered to Agent pursuant to Sections 6.1.2 and 6.1.3 (i) has been, or will be, as applicable, prepared in accordance with the books and records of Borrower on a consolidated basis, and (ii) either fairly present, or will fairly present, as applicable, the financial condition of Borrower on a consolidated basis, at the dates thereof (and, if applicable, subject to normal year-end adjustments) and the results of its operations and cash flows, on a consolidated basis, for the period then ended. Each of the projections and forecasts delivered to Agent prior to the date hereof and the financial projections and forecasts to be delivered to Agent pursuant to Section 6.1.5 (1) has been, or -56- 65 will be, as applicable, prepared by Borrower in light of the past business and performance of Borrower on a consolidated basis and (2) represent, or will represent, as of the date thereof, the reasonable good faith estimates of Borrower's financial personnel. 5.1.9 Prior Operating Statements. Each of the operating statements pertaining to each of the Borrowing Base Properties delivered to Agent prior to the date hereof was prepared in accordance with GAAP in effect on the date such operating statement of each Borrowing Base Property was prepared and fairly presents the results of operations of such Borrowing Base Property for the period then ended. 5.1.10 Quarterly Operating Reports and Projections. Each of the Quarterly Operating Reports to be delivered to Agent pursuant to Section 6.1.1 (i) has been or will be, as applicable, prepared in accordance with the books and records of the applicable Borrowing Base Property, and (ii) fairly presents or will fairly present, as applicable, the results of operations of such Borrowing Base Property for the period then ended. Each of the projections, financial plans and budgets delivered to Agent prior to the date hereof and the projections to be delivered to Agent pursuant to Section 6.1.5 (1) has been, or will be, as applicable, prepared for each Borrowing Base Property in light of the past business and performance of such Borrowing Base Property and (2) represents or will represent, as of the date thereof, the reasonable good faith estimates of Borrower's financial personnel. 5.1.11 Litigation; Adverse Effects. (a) There is no action, suit, proceeding, governmental investigation or arbitration, at law or in equity, or before or by any Governmental Authority, pending or, to the best of Borrower's knowledge, threatened against Borrower, any Affiliate of Borrower or any Portfolio Property (including any Borrowing Base Property), which (i) result in a Material Adverse Effect on Borrower, (ii) materially and adversely affect the ability of any party to any of the Loan Documents to perform its obligations thereunder, or (iii) materially and adversely affect the ability of Borrower to perform its obligations contemplated in the Loan Documents. -57- 66 (b) Neither Borrower nor any Guarantor is (i) in violation of any applicable law, which violation has a Material Adverse Effect on Borrower or on any Guarantor, or (ii) subject to or in default with respect to any Court Order. There are no material Proceedings pending or, to the best of Borrower's knowledge, threatened against Borrower, any Guarantor or any Portfolio Property, which, if adversely decided, would have a Material Adverse Effect on Borrower. 5.1.12 No Material Adverse Change. Since September 30, 1995, there has occurred no event which has a Material Adverse Effect on Borrower, and no material adverse change in Borrower's or any Guarantor's ability to perform its obligations under the Loan Documents to which it is a party or the transactions contemplated thereby. 5.1.13 Payment of Taxes. All tax returns and reports to be filed by Borrower and each Guarantor have been timely filed, and all taxes, assessments, fees and other governmental charges shown on such returns or otherwise payable by Borrower have been paid when due and payable (other than real property taxes, which may be paid prior to delinquency so long as no penalty or interest shall attach thereto), except such taxes, if any, as are reserved against in accordance with GAAP and are being contested in good faith by appropriate proceedings or such taxes, the failure to make payment of which when due and payable will not have, in the aggregate, a Material Adverse Effect on Borrower or any Guarantor. Borrower has no knowledge of any proposed tax assessment against Borrower that will have a Material Adverse Effect on Borrower or any Guarantor. 5.1.14 Material Adverse Agreements. Neither Borrower nor any Guarantor is a party to or subject to any Contractual Obligation or other restriction contained in its Charter, by-laws, Partnership Agreement or similar governing documents which has a Material Adverse Effect on Borrower or such Guarantor or the ability of the Borrower or such Guarantor to perform its obligations under the Loan Documents to which it is a party. 5.1.15 Performance. Neither Borrower nor any Guarantor is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions -58- 67 contained in any Contractual Obligation applicable to it, and no condition exists which, with the giving of notice or the lapse of time or both, would constitute a default under such Contractual Obligation in each case, except where the consequences, direct or indirect, of such default or defaults, if any, will not have a Material Adverse Effect on Borrower or such Guarantor. 5.1.16 Federal Reserve Regulations. No part of the proceeds of the Loan hereunder will be used to purchase or carry any "margin security" as defined in Regulation G or for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might constitute this transaction a "purpose credit" within the meaning of said Regulation G. Neither Borrower nor any Guarantor is engaged primarily in the business of extending credit for the purpose of purchasing or carrying out any "margin stock" as defined in Regulation U. No part of the proceeds of the Loan hereunder will be used for any purpose that violates, or which is inconsistent with, the provisions of Regulation X or any other regulation of the Federal Reserve Board. 5.1.17 Disclosure. The representations and warranties of Borrower and the Guarantors contained in the Loan Documents and all certificates, financial statements and other documents delivered to Agent in connection therewith, do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading. Borrower has given to Agent true, correct and complete copies of all organizational documents, Financial Statements and all other documents and instruments referred to in the Loan Documents as having been delivered to Agent. Borrower has not intentionally withheld any material fact from Agent in regard to any matter raised in the Loan Documents. Notwithstanding the foregoing, with respect to projections of Borrower's future performance such representations and warranties are made in good faith and to the best judgment of Borrower. 5.1.18 Requirements of Law. Borrower and each Guarantor are in compliance with all Requirements of Law (including without limitation the Securities Act and the Securities Exchange Act, and the applicable rules and regulations -59- 68 thereunder, state securities law and "Blue Sky" laws) applicable to it and its respective businesses, in each case, where the failure to so comply will have a Material Adverse Effect on any such Person. Borrower has made all filings with and obtained all consents of the Commission required under the Securities Act and the Securities Exchange Act in connection with the execution, delivery and performance by Borrower of the Loan Documents. 5.1.19 ERISA. Except as set forth on Schedule 5.1.19, neither Borrower nor any ERISA Affiliate thereof (including, for all purposes under this Section 5.1.19, each Guarantor) has in the past five (5) years maintained or contributed to or currently maintains or contributes to any Benefit Plan. No Investment Partnership has or is likely to incur any liability with respect to any Benefit Plan maintained or contributed to by such Investment Partnership or its ERISA Affiliates, which would have a Material Adverse Effect on Borrower. Neither Borrower nor any ERISA Affiliate thereof has during the past five (5) years maintained or contributed to or currently maintains or contributes to any employee welfare benefit plan within the meaning of Section 3(1) of ERISA which provides benefits to retirees. Neither Borrower nor any ERISA Affiliate thereof is now contributing nor has it ever contributed to or been obligated to contribute to any Multiemployer Plan, no employees or former employees of Borrower, or such ERISA Affiliate have been covered by any Multiemployer Plan in respect of their employment by Borrower, and no ERISA Affiliate of Borrower has or is likely to incur any withdrawal liability with respect to any Multiemployer Plan which would have a Material Adverse Effect on Borrower. 5.1.20 Status as a REIT. Borrower (i) is a real estate investment trust as defined in Section 856 of the Internal Revenue Code (or any successor provision thereto), (ii) has not revoked its election to be a real estate investment trust, (iii) has not engaged in any "prohibited transactions" as defined in Section 856(b)(6)(iii) of the Internal Revenue Code (or any successor provision thereto), and (iv) for its current "tax year" (as defined in the Internal Revenue Code) is and for all prior tax years subsequent to its election to be a real estate investment trust has been entitled to a dividends paid deduction which meets the requirements of Section 857 of the Internal Revenue Code. -60- 69 5.1.21 NYSE Listing. The common stock of Borrower is and will continue to be listed for trading and traded on either the New York Stock Exchange or the American Stock Exchange. 5.1.22 Patents, Trademarks, Permits, Etc. Borrower and each Guarantor own, are licensed or otherwise have the lawful right to use, or have all permits and other governmental approvals, patents, trademarks, trade names, copyrights, technology, know-how and processes used in or necessary for the conduct of each such Person's business as currently conducted, the absence of which would have a Material Adverse Effect upon such Person. The use of such permits and other governmental approvals, patents, trademarks, trade names, copyrights, technology, know-how and processes by each such Person does not infringe on the rights of any Person, subject to such claims and infringements as do not, in the aggregate, give rise to any liability on the part of any such Person which would have a Material Adverse Effect on any such Person. 5.1.23 Environmental Matters. Except as set forth on Schedule 5.1.23, to the best of Borrower's knowledge, (i) the operations of Borrower and each Guarantor comply in all material respects with all applicable local, state and federal environmental, health and safety Requirements of Law ("Environmental Laws"); (ii) none of Borrower's or Guarantor's present Property or operations are subject to any Remedial Action or other Liabilities and Costs arising from the Release or threatened Release of a Contaminant into the environment in violation of any Environmental Laws, which Remedial Action or other Liabilities and Costs would have a Material Adverse Effect on any such Person; (iii) neither Borrower nor any Guarantor has filed any notice under applicable Environmental Laws reporting a Release of a Contaminant into the environment in violation of any Environmental Laws, except as the same may have been heretofore remedied; (iv) there is not now on or in any Portfolio Property (except in compliance in all material respects with all applicable Environmental Laws): (A) any underground storage tanks, (B) any asbestos-containing material, or (C) any polychlorinated biphenyls (PCB's) used in hydraulic oils, electrical transformers or other equipment owned by such Person; and (v) neither Borrower nor any Guarantor has received any notice or claim to the effect that it is or may be liable to any -61- 70 Person as a result of the Release or threatened Release of a Contaminant into the environment. 5.1.24 Borrowing Base Properties. Each of the Properties listed on Schedule 1 qualifies as an Eligible Property. The Borrowing Base Properties collectively satisfy the Aggregate Borrowing Base Requirements. 5.1.25 Leases. Except as reflected on the most current rent rolls delivered to Agent, all Leases are in full force and effect and no default or event of default (or event or occurrence which upon with the passage of time or the giving of notice, or both, will constitute a default or event of default) exists or will exist thereunder as a result of the consummation of the transactions contemplated by the Loan Documents. 5.1.26 Solvency. Borrower and each Guarantor is and will be Solvent after giving effect to the disbursements of the Loans and the payment and accrual of all fees then payable. 5.1.27 Title to Assets; No Liens. Borrower and each of its Subsidiaries has good, indefeasible and merchantable title to all Properties owned or leased by it, including, without limitation, any Borrowing Base Properties, and each of the Borrowing Base Properties is free and clear of all Liens, except Permitted Liens. 5.1.28 Use of Proceeds. Borrower's use of the proceeds of the Loans are, and will continue to be, legal and proper uses (and to the extent necessary, duly authorized by Borrower's partners) and such uses are consistent with all applicable laws and statutes and Section 7.9. ARTICLE VI REPORTING COVENANTS Borrower covenants and agrees that, on and after the date hereof, until payment in full of all of the Obligations, the expiration of the Commitments and termination of this Agreement: 6.1 Financial Statements and Other Financial and Operating Information. Borrower shall maintain or cause to be -62- 71 maintained a system of accounting established and administered in accordance with sound business practices and consistent with past practice to permit preparation of quarterly and annual financial statements in conformity with GAAP, and each of the financial statements described below shall be prepared on a consolidated basis for Borrower from such system and records. Borrower shall deliver or cause to be delivered to Agent (with copies sufficient for each Lender): 6.1.1 Quarterly Operating Reports. As soon as practicable, and in any event within forty-five (45) days after the end of each Fiscal Quarter, operating statements in the form of Exhibit C or other form approved by Agent for each Borrowing Base Property dated as of the last day of such Fiscal Quarter (the "Quarterly Operating Reports"), in form and substance satisfactory to Agent, certified by Borrower's chief financial officer. 6.1.2 Quarterly Financial Statements Certified by CFO. As soon as practicable, and in any event within forty-five (45) days after the end of each Fiscal Quarter, consolidated balance sheets, statements of operations and statements of cash flow for Borrower ("Financial Statements"), which may, in the case of the first three Fiscal Quarters, be in the form provided to the Commission on Borrower's Form 10Q, and certified by Borrower's chief financial officer. 6.1.3 Annual Financial Statements. Within ninety (90) days after the close of each Fiscal Year, annual Financial Statements of Borrower, on a consolidated basis (in the form provided to the Commission on Borrower's Form 10K), audited and certified without qualification by the Accountants and accompanied by (i) a statement that, in the course of their audit (conducted in accordance with generally accepted auditing standards), the Accountants obtained no knowledge that an Event of Default or Unmatured Event of Default occurred, and (ii) a copy of a letter from the Accountants to Borrower acknowledging that (A) Borrower intends to deliver such Financial Statements and auditor's report to Lenders, (B) Lenders intend to rely thereon, and (C) Borrower intends for Lenders to so rely, in substantially the form delivered prior to the Closing Date. To the extent Agent desires additional details or supporting information with respect to Majority Partnerships, Investment Partnerships or individual Properties owned or leased by -63- 72 Borrower, any Subsidiary of Borrower or any Investment Partnership not contained in Borrower's Form 10K, Borrower shall promptly provide Agent with such details or supporting information as Agent requests which is reasonably available to Borrower. Without limiting the foregoing, within ninety (90) days after the end of each Fiscal Year, Borrower shall provide to Agent operating statements and a schedule setting forth the percentage of leasable area leased to tenants in occupancy, with footnotes indicating which leases are in default in rent payments by more than sixty (60) days (other than technical, nonmaterial disputes concerning percentage rentals due or annual common area or property tax billings) any other material provisions in respect of which the landlord has issued a notice of default, for each Property owned or leased by Borrower, any Subsidiary of Borrower or any Investment Partnership which is not a Borrowing Base Property. 6.1.4 Officer's Certificate of Borrower. (i) Together with each delivery of any Financial Statement pursuant to Sections 6.1.2 and 6.1.3, (A) an Officer's Certificate of Borrower, stating that the executive officer who is the signatory thereto (which officer shall be the chief executive officer, the chief operating officer or the chief financial officer of Borrower) has reviewed, or caused under his supervision to be reviewed, the terms of this Agreement and the other principal Loan Documents, and has made, or caused to be made under his supervision, a review in reasonable detail of the transactions and condition of Borrower and each Guarantor, during the accounting period covered by such Financial Statements, and that such review has not disclosed the existence during or at the end of such accounting period, and that the signers do not have knowledge of the existence as of the date of the Officer's Certificate, of any condition or event which constitutes an Event of Default or Unmatured Event of Default, or, if any such condition or event existed or exists, specifying the nature and period of existence thereof and what action has been taken, is being taken and is proposed to be taken with respect thereto; and (B) a Compliance Certificate demonstrating in reasonable detail (which detail shall include actual calculation and supporting information) compliance during and at the end of such accounting periods with the financial covenants contained in Article IX. 6.1.5 Cash Flow Projections. Within thirty (30) days after the end of each Fiscal Year, projections of Borrower, -64- 73 on a consolidated basis, detailing expected sources and uses of cash for the next Fiscal Year. Borrower shall also provide such additional supporting details as Agent may reasonably request. 6.1.6 Borrowing Base Compliance. Promptly upon Borrower obtaining knowledge of any condition or event which (i) causes the information set forth in any Borrowing Base Property Designation Certificate to be outdated or inaccurate, (ii) may cause any Borrowing Base Property to no longer be an Eligible Property, or (iii) causes the Borrowing Base Properties to no longer conform with the Aggregate Borrowing Base Requirements, an Officer's Certificate specifying the nature and period of existence of any such condition or event and specifying what action the Borrower proposes to take with respect thereto including designating an additional property to become a Borrowing Base Property or a Termination of Designation with respect to the non-complying property. 6.1.7 Knowledge of Event of Default. Promptly upon Borrower obtaining knowledge (i) of any condition or event which constitutes an Event of Default or Unmatured Event of Default, or becoming aware that any Lender has given notice or taken any other action with respect to a claimed Event of Default or Unmatured Event of Default or (ii) of any condition or event which has a Material Adverse Effect on Borrower or any Guarantor, an Officer's Certificate specifying the nature and period of existence of any such condition or event, or specifying the notice given or action taken by such Lender and the nature of such claimed Event of Default, Unmatured Event of Default, event or condition, and what action Borrower or the Guarantor has taken, is taking and proposes to take with respect thereto. 6.1.8 Litigation, Arbitration or Government Investigation. Promptly upon Borrower or any Guarantor obtaining knowledge of (i) the institution of, or threat of, any material action, suit, proceeding, governmental investigation or arbitration against or affecting Borrower or any Guarantor not previously disclosed in writing by Borrower to Agent pursuant to this Section 6.1.8, including any eminent domain or other condemnation proceedings affecting any Borrowing Base Property, or (ii) any material development in any action, suit, proceeding, governmental investigation or arbitration already disclosed, which, in either case, has a Material Adverse Effect on Borrower or any Guarantor, a notice thereof to Agent and such other -65- 74 information as may be reasonably available to it to enable Agent, Lenders and their counsel to evaluate such matters. 6.1.9 ERISA Termination Event. As soon as possible, and in any event within thirty (30) days after Borrower knows or has reason to know that a Termination Event has occurred, a written statement of the chief financial officer of Borrower describing such Termination Event and the action, if any, which Borrower or any ERISA Affiliate of any of them has taken, is taking or proposes to take, with respect thereto, and, when known, any action taken or threatened by the IRS, the DOL or the PBGC with respect thereto. 6.1.10 Prohibited ERISA Transaction. As soon as possible, and in any event within thirty (30) days, after Borrower, any Guarantor or any ERISA Affiliate of any of them knows or has reason to know that a prohibited transaction (defined in Section 406 of ERISA and Section 4975 of the Internal Revenue Code) has occurred, a statement of the chief financial officer of Borrower describing such transaction. 6.1.11 Benefit Plan Annual Report. Within ten (10) days after the filing thereof with the DOL, the IRS or the PBGC, copies of each annual report, including Schedule B thereto, filed with respect to each Benefit Plan of Borrower, any Guarantor or any ERISA Affiliate of any of them. 6.1.12 Benefit Plan Funding Waiver Request. Within thirty (30) days after the filing thereof with the IRS, a copy of each funding waiver request filed with respect to any Benefit Plan of Borrower or any ERISA Affiliate of Borrower and all communications received by Borrower or any ERISA Affiliate of Borrower with respect to such request. 6.1.13 Establishment of Benefit Plan and Increase in Contributions to the Benefit Plan. Not less than ten (10) days prior to the effective date thereof, a notice to Agent of the establishment of a Benefit Plan (or the incurrence of any obligation to contribute to a Multiemployer Plan) by Borrower, any Guarantor or any ERISA Affiliate of any of them. Within thirty (30) days after the first to occur of an amendment of any then existing Benefit Plan of Borrower, any Guarantor or any ERISA Affiliate of any of them which will result in an increase in the benefits under such Benefit Plan or a notification of any -66- 75 such increase, or the establishment of any new Benefit Plan by Borrower, any Guarantor or any ERISA Affiliate of any of them or the commencement of contributions to any Benefit Plan to which Borrower, any Guarantor or any ERISA Affiliate of any of them was not previously contributing, a copy of said amendment, notification or Benefit Plan. 6.1.14 Qualification of ERISA Plan. Promptly upon, and in any event within thirty (30) days after, receipt by Borrower, any Guarantor or any ERISA Affiliate of any of them of an unfavorable determination letter from the IRS regarding the qualification of a Plan under Section 401(a) of the Internal Revenue Code, a copy of said determination letter, if such disqualification would have a Material Adverse Effect on Borrower. 6.1.15 Multiemployer Plan Withdrawal Liability. Promptly upon, and in any event within thirty (30) days after receipt by Borrower, any Guarantor or any ERISA Affiliate of any of them of a notice from a Multiemployer Plan regarding the imposition of withdrawal liability, a copy of said notice. 6.1.16 Failure to Make Section 412 Payment. Promptly upon, and in any event within thirty (30) days after, Borrower, any Guarantor or any ERISA Affiliate of any of them fails to make a required installment under subsection (m) of Section 412 of the Internal Revenue Code or any other payment required under Section 412 of the Internal Revenue Code on or before the due date for such installment or payment, a notification of such failure, if such failure could result in either the imposition of a Lien under said Section 412 or otherwise have or could reasonably be anticipated to have a Material Adverse Effect on Borrower or any Guarantor. 6.1.17 Failure of Borrower to Qualify as Real Estate Investment Trust. Promptly upon, and in any event within forty-eight (48) hours after Borrower first has actual knowledge of (i) Borrower failing to continue to qualify as a real estate investment trust as defined in Section 856 of the Internal Revenue Code (or any successor provision thereof), (ii) any act by Borrower causing its election to be taxed as a real estate investment trust to be terminated, (iii) any act causing Borrower to be subject to the taxes imposed by Section 857(b)(6) of the Internal Revenue Code (or any successor provision thereto), or -67- 76 (iv) Borrower failing to be entitled to a dividends paid deduction which meets the requirements of Section 857 of the Internal Revenue Code, a notice of any such occurrence or circumstance. 6.1.18 Asset Acquisitions and Dispositions, Indebtedness, Etc. Without limiting Article VIII or any other restriction in the Loan Documents, not later than public disclosure of any material Investments (other than in Cash Equivalents), material acquisitions, dispositions, disposals, divestitures or similar transactions involving Property, the raising of additional equity or the incurring or repayment of material Indebtedness, by or with Borrower, any Partnership or any Subsidiary of Borrower, if the total amount of such transaction exceeds ten percent (10%) of Total Assets telephonic or facsimile notice thereof to Helen Delph or such other person(s) as Agent may designate from time to time, and, promptly upon consummation of such transaction, a Compliance Certificate demonstrating in reasonable detail (which detail shall include actual calculations) compliance, after giving effect to such proposed transaction(s), with the covenants contained in Article IX. 6.1.19 Other Information. Such other information, reports, contracts, schedules, lists, documents, agreements and instruments in the possession of Borrower or a Guarantor with respect to (i) the Borrowing Base Properties, (ii) any material change in Borrower's investment, finance or operating policies, or (iii) Borrower's or any Guarantor's business, condition (financial or otherwise), operations, performance, properties or prospects as Agent or any Lender may from time to time reasonably request, including, without limitation, annual information with respect to cash flow projections, budgets, operating statements (current year and immediately preceding year), rent rolls, lease expiration reports, leasing status reports, note payable summaries, equity funding requirements, contingent liability summaries, line of credit summaries, wrap note or note receivable summaries, schedules of outstanding letters of credit, summaries of cash and Cash Equivalents, projections of management and leasing fees and overhead budgets. Provided that Agent gives Borrower reasonable prior notice and an opportunity to participate, Borrower hereby authorizes Agent to communicate with the Accountants and authorizes the Accountants to disclose to Agent any and all financial statements and other information of -68- 77 any kind, including copies of any management letter or the substance of any oral information, that such accountants may have with respect to Borrower's or any Guarantor's condition (financial or otherwise), operations, properties, performance and prospects. At Agent's request, Borrower shall deliver a letter addressed to the Accountants instructing them to disclose such information in compliance with this Section 6.1.19. 6.1.20 Press Releases; SEC Filings and Financial Statements. Telephonic or telecopy notice to Agent concurrent with or prior to issuance of any material press release concerning Borrower and, as soon as practicable after filing with the Commission, all reports and notices, proxy statements, registration statements and prospectuses of Borrower. All materials sent or made available generally by Borrower to the holders of its publicly-held Securities or to a trustee under any indenture or filed with the Commission, including all periodic reports required to be filed with the commission, will be delivered to Agent and Lenders as soon as available. 6.1.21 Accountant Reports. Copies of all reports prepared by the Accountants and submitted to Borrower in connection with each annual, interim or special audit or review of the financial statements or practices of Borrower, including the comment letter submitted by the Accountants in connection with their annual audit. 6.2 Environmental Notices. Borrower shall notify Agent, in writing, as soon as practicable, and in any event within ten (10) days after Borrower's learning thereof, of any: (i) written notice or claim to the effect that Borrower or any Guarantor is or may be liable to any Person as a result of any material Release or threatened Release of any Contaminant into the environment; (ii) written notice that Borrower or any Guarantor is subject to investigation by any Governmental Authority evaluating whether any Remedial Action is needed to respond to the Release or threatened Release of any Contaminant into the environment; (iii) written notice that any Property is subject to an Environmental Lien; (iv) written notice of violation to Borrower or any Guarantor or awareness of a condition which might reasonably result in a notice of violation of any Environmental Laws by Borrower or any Guarantor; (v) commencement or written threat of any judicial or administrative proceeding alleging a violation of any Environmental Laws; (vi) written notice from a -69- 78 Governmental Authority of any changes to any existing Environmental Laws that will have a Material Adverse Effect on the operations of Borrower or any Guarantor ; or (vii) any proposed acquisition of stock, assets, real estate or leasing of property, or any other action by Borrower that, to the best of Borrower's knowledge, could subject Borrower or any Guarantor to environmental, health or safety Liabilities and Costs that will have a Material Adverse Effect on Borrower or any Guarantor. 6.3 Confidentiality. Confidential Information obtained by Agent or Lenders pursuant to this Agreement or in connection with the Facility shall not be disseminated by Agent or Lenders and shall not be disclosed to third parties except to regulators, taxing authorities and other governmental agencies having jurisdiction over Agent or such Lender or otherwise in response to Requirements of Law, to their respective auditors and legal counsel and in connection with regulatory, administrative and judicial proceedings as necessary or relevant including enforcement proceedings relating to the Loan Documents, and to any prospective assignee of or participant in a Lender's interest under this Agreement or any prospective purchaser of the assets or a controlling interest in any Lender, provided that such prospective assignee, participant or purchaser first agrees to be bound by the provisions of this Section 6.3. For purposes hereof, "Confidential Information" shall mean all nonpublic information obtained by Agent or Lenders, unless and until such information becomes publicly known, other than as a result of unauthorized disclosure by Agent or Lenders of such information. ARTICLE VII AFFIRMATIVE COVENANTS Borrower covenants and agrees that, on and after the date hereof, until payment in full of all of the Obligations, the expiration of the Commitments and termination of this Agreement: 7.1 Existence. Borrower and each Guarantor shall at all times maintain its existence and preserve and keep in full force and effect its rights and franchises. 7.2 Qualification, Name. Borrower and each Guarantor shall qualify and remain qualified to do business in each -70- 79 jurisdiction in which the nature of its business requires it to be so qualified. Borrower and each Guarantor will transact business solely in its own name, in the name of any fictional or doing business name as may be registered in the applicable jurisdiction, in the name of a Partnership or in the commonly known name of a Property it owns. 7.3 Compliance with Laws, Etc. Borrower and each Guarantor shall (i) comply with all Requirements of Law, and all restrictive covenants affecting it or its properties, performance, prospects, assets or operations, and (ii) obtain as needed all Permits necessary for its operations and maintain such in good standing. 7.4 Payment of Taxes and Claims. Borrower and each Guarantor shall pay (i) all taxes, assessments and other governmental charges imposed upon it or on any of its properties or assets or in respect of any of its franchises, business, income or property before any penalty or interest accrues thereon, and (ii) all claims (including, without limitation, claims for labor, services, materials and supplies) for sums which have become due and payable and which by law have or may become a Lien other than a judgment lien upon any of Borrower's properties or assets, prior to the time when any penalty or fine shall be incurred with respect thereto. 7.5 Maintenance of Properties; Insurance. Borrower and each Guarantor shall maintain, or caused to be maintained, in good repair, working order and condition, excepting ordinary wear and tear, all of its Properties and all of the Borrowing Base Properties and will make or cause to be made all appropriate repairs, renewals and replacements thereof. Borrower and each Guarantor shall maintain, or cause other to maintain for its benefit, commercially reasonable and appropriate amounts of property and "all risk" casualty and liability insurance, which insurance shall include in any event: (a) with respect to each Property: (i) property and casualty insurance (including coverage for flood and water damage for any Property located within an area designated as a special flood hazard area by FEMA) in an amount not less than the replacement costs of the improvements thereon, and (ii) loss of rental insurance -71- 80 income in an amount not less than one year's gross revenues of such Property; and (b) comprehensive general liability insurance in an amount not less than $20,000,000 per occurrence. At the request of Agent, Borrower shall provide, as to each Borrowing Base Property evidence of insurance, including certificates of insurance and binders. 7.6 Inspection of Property; Books and Records; Discussions. Borrower shall permit, and shall cause each Guarantor to permit, any authorized representative(s) designated by any Lender upon at least three (3) Business Days advance notice to visit and inspect any of its properties, to inspect financial and accounting records and leases, and to make copies (at such Lender's expense except as provided in Section 12.1) and take extracts therefrom, all at such times during normal business hours and as often as any Lender may reasonably request. In connection therewith, Borrower shall pay all expenses of the types described in Section 12.1. Borrower will keep proper books of record and account in which entries, in conformity with GAAP and as otherwise required by this Agreement and applicable Requirements of Law, shall be made of all dealings and transactions in relation to its businesses and activities and as otherwise required under Section 6.1. 7.7 Maintenance of Permits, Etc. Borrower and each Guarantor will maintain in full force and effect all Permits, franchises, patents, trademarks, trade names, copyrights, authorizations or other rights necessary for the operation of its business; and notify Agent in writing, promptly after learning thereof, of the suspension, cancellation, revocation or discontinuance of or of any pending or threatened action or proceeding seeking to suspend, cancel, revoke or discontinue any material Permit, patent, trademark, trade name, copyright, governmental approval, franchise authorization or right. 7.8 Conduct of Business. Except for Permitted Investments pursuant to Section 9.11 and Investments in cash and Cash Equivalents, Borrower shall make no Investments and shall engage only in the business of direct ownership, operation and development of commercial and retail Properties of the general -72- 81 type owned by Borrower as of the Closing Date in the United States, and any other business activities of Borrower will remain incidental thereto. 7.9 Use of Proceeds. Borrower shall use the proceeds of the Loans only for predevelopment costs, development costs, acquisitions, working capital, equity Investments and repayment of Indebtedness (including Indebtedness under the REMIC and the Existing Revolver), including required interest and/or principal payments thereon. 7.10 Securities Law Compliance. Borrower shall comply in all material respects with all rules and regulations of the Commission and file all reports required by the Commission relating to Borrower's publicly-held Securities. 7.11 Continued Status as a REIT; Prohibited Transactions. Borrower (i) will continue to be a real estate investment trust as defined in Section 856 of the Internal Revenue Code (or any successor provision thereto), (ii) will not revoke its election to be a real estate investment trust, (iii) will not engage in any "prohibited transactions" as defined in Section 856(b)(6)(iii) of the Internal Revenue Code (or any successor provision thereto), and (iv) will continue to be entitled to a dividend paid deduction meeting the requirements of Section 857 of the Internal Revenue Code. 7.12 NYSE Listed Company. The common stock of Borrower shall at all times be listed for trading and be traded on the New York Stock Exchange or the American Stock Exchange. 7.13 Interest Rate Contracts. Borrower shall maintain in effect Interest Rate Contracts which are satisfactory to the Agent. Initially, the Interest Rate Contracts will cover at least $50,000,000 (to be increased to be at least fifty percent (50%) of the Loans outstanding hereunder) and be at an all-in rate of not more than ten percent (10%) per annum. 7.14 Ownership of Guarantor Partnerships. Borrower will cause each Guarantor Partnership to be at least 90% owned, and continue to be at least 90% owned, by Borrower and Borrower shall have and continue to have complete control over the management, leasing, sale of and the creation of Liens on, the Borrowing Base Properties owned by such Guarantor Partnership. -73- 82 ARTICLE VIII NEGATIVE COVENANTS Borrower covenants and agrees that, on and after the date hereof, until payment in full of all of the Obligations, the expiration of the Commitments and termination of this Agreement: 8.1 With Respect to all Parties: Neither Borrower nor any Guarantor shall: 8.1.1 Liens. (i) Directly or indirectly create, incur, assume or permit to exist any Lien, except for Permitted Liens, on or with respect to all or any portion of (A) any Borrowing Base Property or (B) any interest in any Person that owns any Borrowing Base Property; (ii) directly or indirectly create, assume or permit to exist any agreement (other than the Loan Documents) prohibiting the creation of any Lien on any Borrowing Base Property, or any interest in any Person that owns any Borrowing Base Property, as security for Indebtedness of Borrower; or (iii) directly or indirectly create, incur, assume or permit to exist any Lien (other than Permitted Liens) with respect to any portion of its Properties; or increase the outstanding principal amount of any Secured Borrower Debt to the extent the creation of such Lien or the increase of such principal amount would result in a violation of Section 9.6. 8.1.2 Transfers of Borrowing Base Property. Transfer, directly or indirectly, all or any interest in any Borrowing Base Property. 8.1.3 Restrictions on Fundamental Changes. (a) Enter into any merger or consolidation or liquidate, wind-up or dissolve (or suffer any liquidation or dissolution); (b) Change its Fiscal Year; (c) Except for Permitted Investments, engage in any line of business other than as expressly permitted under Section 7.8; or -74- 83 (d) Create or acquire any Subsidiary or Partnership other than in the ordinary course of business without the prior written consent of the Agent which shall not be unreasonably withheld. Borrower shall promptly notify Agent after the creation or acquisition of any Subsidiary or Partnership. 8.1.4 ERISA. Permit any ERISA Affiliates to do any of the following to the extent that such act or failure to act would result in the aggregate, after taking into account any other such acts or failure to act, in a Material Adverse Effect on Borrower: (a) Engage, or knowingly permit an ERISA Affiliate to engage, in any prohibited transaction described in Section 406 of the ERISA or Section 4975 of the Internal Revenue Code which is not exempt under Section 407 or 408 of ERISA or Section 4975(d) of the Internal Revenue Code for which a class exemption is not available or a private exemption has not been previously obtained from the DOL; (b) Permit to exist any accumulated funding deficiency (as defined in Section 302 of ERISA and Section 412 of the Internal Revenue Code), whether or not waived; (c) Fail, or permit an ERISA Affiliate to fail, to pay timely required contributions or annual installments due with respect to any waived funding deficiency to any Plan if such failure could result in the imposition of a Lien or otherwise would have a Material Adverse Effect on Borrower; (d) Terminate, or permit an ERISA Affiliate to terminate, any Benefit Plan which would result in any liability of Borrower or an ERISA Affiliate under Title IV of ERISA; or (e) Fail, or permit any ERISA Affiliate to fail, to pay any required installment under section (m) of Section 412 of the Internal Revenue Code or any other payment required under Section 412 of the Internal Revenue Code on or before the due date for such installment or other payment, if such failure could result in the imposition of a -75- 84 Lien or otherwise would have a Material Adverse Effect on Borrower. 8.2 Amendment of Constituent Documents. Except for any such amendment that is required (i) under any Requirement of Law imposed by any Governmental Authority or (ii) in order to maintain compliance with Section 7.11: (1) no Guarantor Partnership shall amend its Partnership Agreement (including, without limitation, as to the admission of any new partner, directly or indirectly), and (2) neither Borrower nor any Guarantor shall amend its articles of incorporation or by-laws; in any such case, except with the prior written consent of the Agent. 8.3 Disposal of Guarantor Partnership Interests. Directly or indirectly convey, sell, transfer, assign, pledge or otherwise encumber or dispose of any of its partnership (or other ownership) interests in any Guarantor Partnership at any time when any Property owned by such Guarantor Partnership is a Borrowing Base Property. 8.4 Margin Regulations. No portion of the proceeds of any Loans shall be used in any manner which might cause the extension of credit or the application of such proceeds to violate Regulation G, U or X or any other regulation of the Federal Reserve Board or to violate the Securities Exchange Act or the Securities Act, in each case as in effect on the applicable Funding Date. 8.5 Management. Except with the prior approval of the Requisite Lenders, none of the Executive Officers shall cease to be active on a full time, continuous basis in the senior management of Borrower (the occurrence of an event described above, a "Discontinuity in Management"); provided that, upon a Discontinuity in Management, Borrower shall have up to one hundred twenty (120) days to obtain the approval of Requisite Lenders to additional executives, such that the remaining and new management executives, as a group, have substantial and sufficient knowledge, experience and capabilities in the management of a publicly-held company engaged in the operation of a multi-asset real estate business of the type engaged in by Borrower. In the event Borrower shall fail to obtain approval of Requisite Lenders as aforesaid within said 120-day period, then Borrower shall, at the election and upon the demand of Requisite -76- 85 Lenders, pay in full all Obligations under the Loan Documents not later than sixty (60) days after the end of such 120-day period, whereupon this Agreement and all Commitments hereunder shall be terminated. Upon the occurrence of a Discontinuity in Management, no further Borrowings shall be permitted until Borrower shall have obtained approval of Requisite Lenders under this Section 8.5. 8.6 Restrictions on Transactions Affecting Leasing. Neither Borrower, nor any owner of any of the Portfolio Properties shall enter into any lease, acquire any Property or consent to any assignment of a lease or any subletting if the result of such transaction would be to (i) increase the percentage of Adjusted Base Rents from all Portfolio Properties payable with respect to premises leased to or occupied by K-Mart Corporation or any of its Subsidiaries, (ii) increase the percentage of Adjusted Base Rates from all Borrowing Base Properties payable with respect to premises leased to or occupied by K-Mart Corporation or any of its Subsidiaries or (iii) cause a violation of Section 9.14 or (iv) cause the Borrowing Base Properties to fail to satisfy the Aggregate Borrowing Base Requirements. 8.7 Additional Unsecured Bank Debt. Neither Borrower nor any Affiliates of Borrower shall create, incur, assume or otherwise become liable for any unsecured line of credit or other unsecured loan from any bank or financial institution, other than the Facility. ARTICLE IX FINANCIAL COVENANTS Borrower covenants and agrees that, on and after the date of this Agreement and until payment in full of all the Obligations, the expiration of all Commitments and the termination of this Agreement: 9.1 Borrowing Base Value. The Unsecured Loan Balance shall not exceed 50% of the Borrowing Base Value. 9.2 Borrowing Base Debt Service Coverage. The ratio of the Net Operating Income for the most recently ended Fiscal Quarter of the Borrowing Base Properties to Pro Forma Debt -77- 86 Service for the Unsecured Loan Balance shall not be less than 1.60:1. 9.3 Minimum Tangible Net Worth. Borrower will maintain a Tangible Net Worth of not less than One Hundred Eighty-Five Million Dollars ($185,000,000) plus ninety percent (90%) of Net Offering Proceeds received by Borrower after the Closing Date. 9.4 Borrower Debt to Fair Market Net Worth Ratio. The ratio of Borrower Debt to Fair Market Net Worth shall not exceed (a) 1:1 during the period from the Closing Date until Borrower next receives Net Offering Proceeds; (b) 0.90:1 during the period from such receipt of Net Offering Proceeds until the date that Borrower becomes an Investment Grade Rated Company and (c) 1:1 after Borrower becomes an Investment Grade Rated Company. 9.5 Maximum Recourse Borrower Debt. Prior to the date that Borrower has become an Investment Grade Rated Company, Recourse Borrower Debt other than the Obligations shall not exceed 10% of Borrower Debt. 9.6 Secured Debt to Total Assets Ratio. After the date that Borrower has become an Investment Grade Rated Company, the ratio of Secured Borrower Debt to Total Assets shall not exceed 0.40:1. 9.7 EBIDA to Interest Expense Ratio. The ratio of EBIDA (less any Excluded Development Income) to Interest Expense shall not be less than 2.00:1. 9.8 EBIDA to Fixed Charges Ratio. The ratio of EBIDA (less any Excluded Development Income) to Fixed Charges shall not be less than 1.75:1. 9.9 Unencumbered NOI to Unsecured Interest Expense Ratio. The ratio of Unencumbered NOI to Unsecured Interest Expense shall not be less than 2.25:1. 9.10 Distributions. 9.10.1 Subject to Section 9.10.2, (i) aggregate Distributions during any Fiscal Quarter shall not exceed ninety-five percent (95%) of Funds From Operations for such Fiscal Quarter and (ii) aggregate distributions during any four -78- 87 consecutive Fiscal Quarters shall not exceed Free Cash Flow for such four consecutive Fiscal Quarters. 9.10.2 Aggregate Distributions during the continuance of any Event of Default shall not exceed the lesser of (i) the aggregate amount permitted to be made during the continuance thereof under Section 9.10.1, and (ii) the minimum amount that Borrower must distribute to its shareholders in order to maintain compliance with Section 7.11. If the Loans are not paid in full on the Termination Date no Distributions shall be made thereafter except to the extent expressly authorized in advance by Agent. 9.11 Permitted Investments. Notwithstanding the limitations set forth in Section 7.8, Borrower may make the following Permitted Investments, so long as (i) the aggregate amount of all Permitted Investments (excluding Investments in Opportunity Properties and Service Retail Properties) does not exceed, at any time, twenty percent (20%) of Total Assets, and (ii) the aggregate amount of each of the following categories of Permitted Investments does not exceed the specified percentage of Total Assets, in each case as of the date made:
Maximum Percentage Permitted Investment of Total Assets -------------------- --------------- Land: 5% Foreign Properties: 10% Repurchased Stock: 15% Mortgages and notes receivable 15% (including notes receivable from Affiliates) Affiliates other than 15% Wholly-Owned Subsidiaries Opportunity Properties: 10%
-79- 88 Total Opportunity Properties and 15% Service Retail Properties
For purposes of calculating compliance with the foregoing, the amount of each Investment will be deemed to be the original Acquisition Price thereof plus in the case of Investments in Partnerships or Subsidiaries, the amount of any subsequent loans or capital contributions to such entity. 9.12 Development Activities. The sum of (i) Borrower Construction Expenditures and (ii) Development Investments shall not exceed 10% of Total Assets. In addition, the total amount of Guaranteed Construction Loans shall not exceed Thirty Million Dollars ($30,000,000). Neither Borrower nor any Developer Affiliates will commence construction of any construction project or subordinate any land acquisition loan to construction financing for any construction project, or make a loan to finance any construction project, unless at least seventy percent (70%) of the gross leasable area of such project is subject to a fully executed lease under which (i) occupancy by the tenant thereunder is conditioned only upon completion of construction of the relevant improvements and (ii) such tenant is otherwise unconditionally committed to take occupancy upon completion of such construction. Neither Borrower nor any Developer Affiliates will commence construction of any construction project, make a loan to finance construction of any construction project or subordinate any land acquisition loan to construction financing for any construction project if the sum of Development Investments and Guaranteed Construction Loans relating to such project exceeds $20,000,000 unless the Requisite Lenders have approved such construction project prior to the start of construction. 9.13 Borrower-Investment Partnership Debt to Borrower-Investment Partnership Net Worth. On and after the date that the aggregate Acquisition Prices of assets owned by all Investment Partnerships exceeds fifteen percent (15%) of Total Assets, the ratio of Borrower-Investment Partnership Debt to Borrower-Investment Partnership Net Worth shall not exceed 1.15:1. 9.14 Tenant Concentration. The Adjusted Base Rents from any single tenant (including all Subsidiaries of such tenant or of a common parent company) shall not exceed fifteen percent (15%) of Adjusted Base Rents from all Portfolio Properties -80- 89 provided however that: (a) with respect to tenants which are Investment Grade Rated Companies (other than K-Mart Corporation) the foregoing limit shall be increased to twenty percent (20%), (b) with respect to tenants which are Investment Grade Rated Companies rated A or higher the foregoing limit shall be increased to twenty-five percent (25%); and (c) with respect to K-Mart Corporation and its Subsidiaries the foregoing limit shall be the actual percentage on the Closing Date. 9.15 Investment Grade Rated Tenants. At least fifty percent (50%) of Adjusted Base Rents from all Portfolio Properties shall be paid pursuant to leases, the tenant's interest in which is currently held by an Investment Grade Rated Company, or leases which are fully guaranteed by an Investment Grade Rated Company. 9.16 Aggregate Borrowing Base Requirements. The Borrowing Base Properties shall comply with the Aggregate Borrowing Base Requirements. 9.17 Calculation. Each of the foregoing ratios and financial requirements shall be calculated as of the last day of each Fiscal Quarter, but shall be satisfied at all times. Each of the foregoing ratios and financial requirements which is affected by an increase in the outstanding balance of the Loans or by a Termination of Designation shall also be recalculated as of the time of such event. For purposes of determining compliance with Sections 9.2, 9.7, 9.8 and 9.9, the period covered thereby shall be the immediately preceding Fiscal Quarter. ARTICLE X EVENTS OF DEFAULT; RIGHTS AND REMEDIES 10.1 Events of Default. Each of the following occurrences shall constitute an Event of Default under this Agreement: 10.1.1 Failure to Make Payments When Due. Borrower shall fail to pay (i) any amount due on the Termination Date, (ii) any principal when due, or (iii) any interest on any Loan, or any fee or other amount payable under any Loan Documents, within five (5) days after the same becomes due. -81- 90 10.1.2 Distributions. Borrower shall breach any covenant set forth in Section 7.11 or 9.10. 10.1.3 Breach of Borrowing Base Requirements. The Borrowing Base Properties shall fail to satisfy the Aggregate Borrowing Base Requirements and such failure shall continue for thirty (30) days. 10.1.4 Other Defaults. Borrower or any Guarantor shall fail duly and punctually to perform or observe any agreement, covenant or obligation binding on Borrower or any Guarantor under this Agreement or under any of the other Loan Documents (other than as described in any other provision of this Section 10.1), and with respect to agreements, covenants or obligations for which no time period for performance is otherwise provided, such failure shall continue for fifteen (15) days after Borrower or any Guarantor knew of such failure (or such lesser period of time as is mandated by applicable Requirements of Law); provided, however, if such failure is not capable of cure within such fifteen (15) day period, then if Borrower promptly undertakes action to cure such failure and thereafter diligently prosecutes such cure to completion within forty-five (45) days after Borrower or any Guarantor knew of such failure, then Borrower shall not be in default hereunder. 10.1.5 Breach of Representation or Warranty. Any representation or warranty made or deemed made by Borrower or any Guarantor to Agent or any Lender herein or in any of the other Loan Documents or in any statement, certificate or financial statements at any time given by Borrower pursuant to any of the Loan Documents shall be false or misleading in any material respect on the date as of which made. 10.1.6 Default as to Other Indebtedness. (i) Borrower, any Subsidiary of Borrower, any Majority Partnership or any Investment Partnership in which the Borrower or any Subsidiary of Borrower is a general partner except that Nonrecourse Indebtedness of such Investment Partnership shall be excluded for purposes of this Section shall have (A) failed to pay when due (beyond any applicable grace period), any amount in respect of any Indebtedness of such party other than the Obligations if the aggregate amount of such other Indebtedness is Five Million Dollars ($5,000,000) or more; or (B) otherwise defaulted (beyond any applicable grace period) under any -82- 91 Indebtedness of such party other than the Obligations if (1) the aggregate amount of such other Indebtedness is Five Million Dollars ($5,000,000) or more, and (2) the holder of such Indebtedness has accelerated such Indebtedness; or (ii) any such other Indebtedness shall have otherwise become payable, or be required to be purchased or redeemed, prior to its scheduled maturity; or (iii) the holder(s) of any Lien, in any amount, commence foreclosure of such Lien upon one or more Properties having an aggregate value in excess of Five Million Dollars ($5,000,000). 10.1.7 Involuntary Bankruptcy; Appointment of Receiver, Etc. (a) An involuntary case shall be commenced against Borrower, any Guarantor or any Partnership in which Borrower is a general partner (unless the Total Liabilities of such Partnership are less than $5,000,000) and the petition shall not be dismissed within sixty (60) days after commencement of the case, or a court having jurisdiction shall enter a decree or order for relief in respect of any such Person in an involuntary case, under any applicable bankruptcy, insolvency or other similar law now or hereinafter in effect; or any other similar relief shall be granted under any applicable federal, state or foreign law; or (b) A decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over Borrower, any Guarantor or any Partnership in which Borrower is a general partner, or over all or a substantial part of the property of any such Person, shall be entered; or an interim receiver, trustee or other custodian of any such Person or of all or a substantial part of the property of any such Person, shall be appointed or a warrant of attachment, execution or similar process against any substantial part of the property of any such Person, shall be issued and any such event shall not be stayed, vacated, dismissed, bonded or discharged within sixty (60) days of entry, appointment or issuance. -83- 92 10.1.8 Voluntary Bankruptcy; Appointment of Receiver, Etc. Borrower, any Guarantor or any Partnership in which Borrower is a general partner (unless the Total Liabilities of such Partnership are less than $5,000,000) shall have an order for relief entered with respect to it or commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or taking of possession by a receiver, trustee or other custodian for all or a substantial part of its property; any such Person shall make any assignment for the benefit of creditors or shall be unable or fail, or admit in writing its inability, to pay its debts as such debts become due; or the general partner (or Person(s) serving in a similar capacity) of Borrower, any Guarantor or any Partnership in which Borrower is a general partner or Borrower's Board of Directors (or any committee thereof) adopts any resolution or otherwise authorizes any action to approve any of the foregoing. 10.1.9 Judgments and Attachments. (i) Any money judgment (other than a money judgment covered by insurance but only if the insurer has admitted liability with respect to such money judgment), writ or warrant of attachment, or similar process involving in any case an amount in excess of One Million Dollars ($1,000,000) shall be entered or filed against Borrower, any Guarantor or any Partnership in which Borrower is a general partner or their respective assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of thirty (30) days, or (ii) any judgment or order of any court or administrative agency awarding material damages shall be entered against any such Person in any action under the Federal securities laws seeking rescission of the purchase or sale of, or for damages arising from the purchase or sale of, any Securities, such judgment or order shall have become final after exhaustion of all available appellate remedies and, in Agent's judgment, the payment of such judgment or order would have a Material Adverse Effect on such Person. 10.1.10 Dissolution. Any order, judgment or decree shall be entered against Borrower, any Guarantor or any Partnership in which Borrower is a general partner decreeing its involuntary dissolution or split up and such order shall remain undischarged and unstayed for a period in excess of thirty (30) -84- 93 days; or Borrower or any Guarantor Partnership shall otherwise dissolve or cease to exist. 10.1.11 Loan Documents; Failure of Subordination. If for any reason (i) any Loan Document shall cease to be in full force and effect, or (ii) any Obligation shall be subordinated in right of payment to any other liability of the Borrower. 10.1.12 ERISA Liabilities. Any Termination Event occurs which will or is reasonably likely to subject Borrower or any Guarantor or any ERISA Affiliate of any of them to a liability which Agent reasonably determines will have a Material Adverse Effect on Borrower or any Guarantor, or the plan administrator of any Benefit Plan applies for approval under Section 412(d) of the Internal Revenue Code for a waiver of the minimum funding standards of Section 412(a) of the Internal Revenue Code and Agent reasonably determines that the business hardship upon which the Section 412(d) waiver was based will or would reasonably be anticipated to subject Borrower or any Guarantor to a liability which Agent determines will have a Material Adverse Effect on Borrower or any Guarantor. 10.1.13 Environmental Liabilities. Borrower or any Guarantor becomes subject to any Liabilities and Costs which Agent reasonably deems to have a Material Adverse Effect on such Person arising out of or related to (i) the Release or threatened Release at any Property of any Contaminant into the environment, or any Remedial Action in response thereto, or (ii) otherwise any violation of any Environmental Laws. 10.1.14 Solvency; Material Adverse Change. Borrower or any Guarantor shall cease to be Solvent, or there shall have occurred any material adverse change in the business, operations, properties, assets or condition (financial or otherwise) of Borrower or any Guarantor. 10.1.15 Breach of Guaranty. Any Guarantor shall fail to duly and punctually perform or observe any agreement, covenant or obligation under its Guaranty. An Event of Default shall be deemed "continuing" until cured or waived in writing in accordance with Section 12.4. -85- 94 10.2 Rights and Remedies. 10.2.1 Acceleration, Etc. Upon the occurrence of any Event of Default described in the foregoing Section 10.1.7 or 10.1.8 with respect to Borrower or any Guarantor or any Partnership in which Borrower is a general partner, the Commitments shall automatically and immediately terminate and the unpaid principal amount of and any and all accrued interest on the Loans shall automatically become immediately due and payable, with all additional interest from time to time accrued thereon and without presentment, demand or protest or other requirements of any kind (including, without limitation, valuation and appraisement, diligence, presentment, notice of intent to demand or accelerate or notice of acceleration), all of which are hereby expressly waived by Borrower, and the obligations of Lenders to make any Loans hereunder shall thereupon terminate; and upon the occurrence and during the continuance of any other Event of Default, Agent shall, at the request, or may, with the consent of Requisite Lenders, by written notice to Borrower, (i) declare that the Commitments are terminated, whereupon the Commitments and the obligation of Lenders to make any Loan hereunder shall immediately terminate, and/or (ii) declare the unpaid principal amount of, any and all accrued and unpaid interest on the Loans and all of the other Obligations to be, and the same shall thereupon be, immediately due and payable with all additional interest from time to time accrued thereon and without presentment, demand, or protest or other requirements of any kind (including without limitation, valuation and appraisement, diligence, presentment, notice of intent to demand or accelerate and of acceleration), all of which are hereby expressly waived by Borrower. Without limiting Agent's authority hereunder, on or after the Termination Date, Agent shall, at the request, or may, with the consent, of Requisite Lenders exercise any or all rights and remedies under the Loan Documents or applicable law. Upon the occurrence of and during the continuance of an Event of Default, Agent shall be entitled to request and receive, by or through Borrower or appropriate legal process, any and all information concerning Borrower, any Guarantor or any property of any of them, which is reasonably available to or obtainable by Borrower. 10.2.2 Waiver of Demand. Demand, presentment, protest and notice of nonpayment are hereby waived by Borrower. -86- 95 Borrower also waives, to the extent permitted by law, the benefit of all exemption laws. 10.2.3 Waivers, Amendments and Remedies. No delay or omission of Agent or Lenders to exercise any right under any Loan Document shall impair such right or be construed to be a waiver of any Event of Default or an acquiescence therein, and any single or partial exercise of any such right shall not preclude other or further exercise thereof or the exercise of any other right, and no waiver, amendment or other variation of the terms, conditions or provisions of the Loan Documents whatsoever shall be valid unless in a writing signed by Agent after obtaining written approval thereof or the signature thereon of those Lenders required to approve such waiver, amendment or other variation, and then only to the extent in such writing specifically set forth. All remedies contained in the Loan Documents or by law afforded shall be cumulative and all shall be available to Agent and Lenders until the Obligations have been paid in full, the Commitments have expired or terminated and this Agreement has been terminated. 10.3 Rescission. If at any time after acceleration of the maturity of the Loans, Borrower shall pay all arrears of interest and all payments on account of principal of the Loans which shall have become due otherwise than by acceleration (with interest on principal and, to the extent permitted by law, on overdue interest, at the rates specified in this Agreement) and all Events of Default and Unmatured Events of Default (other than nonpayment of principal of and accrued interest on the Loans due and payable solely by virtue of acceleration) shall be remedied or waived pursuant to Section 12.4, then by written notice to Borrower, Requisite Lenders may elect, in their sole discretion, to rescind and annul the acceleration and its consequences; but such action shall not affect any subsequent Event of Default or Unmatured Event of Default or impair any right or remedy consequent thereon. The provisions of the preceding sentence are intended merely to bind Lenders to a decision which may be made at the election of Requisite Lenders; they are not intended to benefit Borrower and do not give Borrower the right to require Lenders to rescind or annul any acceleration hereunder, even if the conditions set forth herein are met. -87- 96 ARTICLE XI AGENCY PROVISIONS 11.1 Appointment. 11.1.1 Each Lender hereby (i) designates and appoints FNBB as Agent of such Lender under this Agreement and the Loan Documents, (ii) authorizes and directs Agent to enter into the Loan Documents other than this Agreement for the benefit of Lenders, and (iii) authorizes Agent to take such action on its behalf under the provisions of this Agreement and the Loan Documents and to exercise such powers as are set forth herein or therein, together with such other powers as are reasonably incidental thereto, subject to the limitations referred to in Sections 11.10.1 and 11.10.2 and any other limitations specifically set forth in this Agreement. Agent agrees to act as such on the express conditions contained in this Article XI. 11.1.2 The provisions of this Article XI are solely for the benefit of Agent and Lenders, and Borrower shall not have any rights to rely on or enforce any of the provisions hereof (other than as expressly set forth in Sections 11.3 and 11.9, provided, however, that the foregoing shall in no way limit Borrower's obligations under this Article XI. In performing its functions and duties under this Agreement, Agent shall act solely as Agent of Lenders and does not assume and shall not be deemed to have assumed any obligation toward or relationship of agency or trust with or for Borrower or any other Person. 11.2 Nature of Duties. Agent shall not have any duties or responsibilities except those expressly set forth in this Agreement or in the Loan Documents. Subject to the provisions of Sections 11.5 and 11.7, Agent shall administer the Loans in the same manner as it administers its own loans. Promptly following the effectiveness of this Agreement, Agent shall send to each Lender its originally executed Note and the executed original, to the extent the same are available in sufficient numbers, of each other Loan Document other than the Notes in favor of other Lenders. Agent shall not have by reason of this Agreement a fiduciary relationship in respect of any Lender. Nothing in this Agreement or any of the Loan Documents, expressed or implied, is intended or shall be construed to impose upon Agent any obligation in respect of this Agreement or any of the Loan -88- 97 Documents except as expressly set forth herein or therein. Each Lender shall make its own independent investigation of the financial condition and affairs of Borrower, each Guarantor and each Borrowing Base Property in connection with the making and the continuance of the Loans hereunder and shall make its own appraisal of the creditworthiness of Borrower and each Guarantor, and, except as specifically provided herein, Agent shall not have any duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the Closing Date or at any time or times thereafter. 11.3 Loan Disbursements. 11.3.1 Not later than 1:00 P.M. (Eastern time) on the next Business Day following receipt of a Notice of Borrowing, Agent shall send a copy thereof by facsimile to each other Lender and shall otherwise notify each Lender of the proposed Borrowing and the Funding Date. Agent shall also send a copy of the Compliance Certificate delivered with the Notice of Borrowing to each Lender which requests a copy of such Compliance Certificate. Each Lender shall make available to Agent (or the funding bank or entity designated by Agent), the amount of such Lender's Pro Rata Share of such Borrowing in immediately available funds not later than the times designated in Section 11.3.2. Unless Agent shall have been notified by any Lender prior to such time for funding in respect of any Borrowing that such Lender does not intend to make available to Agent such Lender's Pro Rata Share of such Borrowing, Agent may assume that such Lender has made such amount available to Agent. In any case where a Lender does not for any reason make available to Agent such Lender's Pro Rata Share of such Borrowing, Agent, in its sole discretion, may, but shall not be obligated to, fund to Borrower such Lender's Pro Rata Share of such Borrowing. If the amount so funded by Agent is not in fact made available to Agent by the responsible Lender, then Borrower agrees to repay to Agent such amount, together with interest thereon at the Base Rate for each day from the date such amount is made available to Borrower until the date such amount is repaid to Agent, not later than three (3) Business Days following Agent's demand to Borrower that such repayment be made. In addition, such Lender agrees to pay to Agent forthwith on demand such corresponding amount, together with interest thereon at the Federal Funds Rate. If such Lender shall pay to Agent such corresponding amount, such amount so paid shall constitute such -89- 98 Lender's Pro Rata Share of such Borrowing, and if both such Lender and Borrower shall have paid and repaid, respectively, such corresponding amount, Agent shall promptly return to Borrower such corresponding amount in same day funds; interest paid by Borrower in respect of such corresponding amount shall be prorated, as of the date of payment thereof by such Lender to Agent. In the event that Agent shall not have funded such Lender's Pro Rata Share under this Section 11.3.1, then Borrower shall not be obligated to accept a late funding of such Lender's Pro Rata Share if such funding is made more than two (2) Business Days following the applicable Funding Date. If Borrower declines to accept such delinquent funding, Agent shall promptly return to such Lender the amount of such funding. Nothing in this Section 11.3.1 shall alter the respective rights and obligations of the parties hereunder in respect of a Defaulting Lender or a Non-Pro Rata Loan. 11.3.2 Requests by Agent for funding by Lenders of Loans will be made by telecopy. Each Lender shall make the amount of its Loan available to Agent in Dollars and in immediately available funds, to such bank and account, as Agent may designate, not later than 1:30 P.M. (Eastern time) on the Funding Date designated in the Notice of Borrowing with respect to such Loan provided that to the extent the Agent is late in providing any Lender with notice the applicable time in advance of any Funding Date specified in Section 2.1.2(a), such Lender shall not be obligated to make such amount available to the Agent until said time on the Business Day which is the same number of Business Days after the Funding Date as Agent was late in providing such notice. 11.3.3 Nothing in this Section 11.3 shall be deemed to relieve any Lender of its obligation hereunder to make its Pro Rata Share of Loans on any Funding Date, nor shall any Lender be responsible for the failure of any other Lender to perform its obligations to make any Loan hereunder, and the Commitment of any Lender shall not be increased or decreased as a result of the failure by any other Lender to perform its obligation to make a Loan. 11.4 Distribution and Apportionment of Payments. 11.4.1 Subject to Section 11.4.2, payments actually received by Agent for the account of Lenders shall be -90- 99 paid to them promptly after receipt thereof by Agent, but in any event within two (2) Business Days, provided that Agent shall pay to Lenders interest thereon, at the lesser of (i) Federal Funds Rate and (ii) the rate of interest applicable to such Loans, from the Business Day following receipt of such funds by Agent until such funds are paid in immediately available funds to Lenders. Subject to Section 11.4.2, all payments of principal and interest in respect of outstanding Loans, all payments of the fees described in this Agreement, and all payments in respect of any other Obligations shall be allocated among such of Lenders as are entitled thereto, in proportion to their respective Pro Rata Shares or otherwise as provided herein. Agent shall promptly distribute, but in any event within two (2) Business Days, to each Lender at its primary address set forth on the appropriate signature page hereof or on the Assignment and Assumption, or at such other address as a Lender may request in writing, such funds as it may be entitled to receive, provided that Agent shall in any event not be bound to inquire into or determine the validity, scope or priority of any interest or entitlement of any Lender and may suspend all payments and seek appropriate relief (including, without limitation, instructions from Requisite Lenders or all Lenders, as applicable, or an action in the nature of interpleader) in the event of any doubt or dispute as to any apportionment or distribution contemplated hereby. The order of priority herein is set forth solely to determine the rights and priorities of Lenders as among themselves and may at any time or from time to time be changed by Lenders as they may elect, in writing in accordance with Section 12.4, without necessity of notice to or consent of or approval by Borrower or any other Person. All payments or other sums received by Agent for the account of Lenders shall not constitute property or assets of Agent and shall be held by Agent, solely in its capacity as agent for itself and the other Lenders, subject to the Loan Documents. 11.4.2 Notwithstanding any provision hereof to the contrary, until such time as a Defaulting Lender has funded its Pro Rata Share of a Loan which was previously a Non Pro Rata Loan, or all other Lenders have received payment in full (whether by repayment or prepayment) of the principal and interest due in respect of such Non Pro Rata Loan, all of the Obligations owing to such Defaulting Lender hereunder shall be subordinated in right of payment, as provided in the following sentence, to the prior payment in full of all principal, interest and fees in respect of all Non Pro Rata Loans in which the Defaulting Lender -91- 100 has not funded its Pro Rata Share (such principal, interest and fees being referred to as "Senior Loans"). All amounts paid by Borrower and otherwise due to be applied to the Obligations owing to the Defaulting Lender pursuant to the terms hereof shall be distributed by Agent to the other Lenders in accordance with their respective Pro Rata Shares (recalculated for purposes hereof to exclude the Defaulting Lender's Commitment), until all Senior Loans have been paid in full. This provision governs only the relationship among Agent, each Defaulting Lender, and the other Lenders; nothing hereunder shall limit the obligation of Borrower to repay all Loans in accordance with the terms of this Agreement. The provisions of this section shall apply and be effective regardless of whether an Event of Default occurs and is then continuing, and notwithstanding (i) any other provision of this Agreement to the contrary, (ii) any instruction of Borrower as to its desired application of payments or (iii) the suspension of such Defaulting Lender's right to vote on matters which are subject to the consent or approval of Requisite Lenders or all Lenders. No Unused Facility Fee shall accrue in favor of, or be payable to, such Defaulting Lender from the date of any failure to fund Loans or reimburse Agent for any Liabilities and Costs as herein provided until such failure has been cured, and Agent shall be entitled to (1) withhold or setoff, and to apply to the payment of the defaulted amount and any related interest, any amounts to be paid to such Defaulting Lender under this Agreement, and (2) bring an action or suit against such Defaulting Lender in a court of competent jurisdiction to recover the defaulted amount and any related interest. In addition, the Defaulting Lender shall indemnify, defend and hold Agent and each of the other Lenders harmless from and against any and all Liabilities and Costs, plus interest thereon at the Default Rate, which they may sustain or incur by reason of or as a direct consequence of the Defaulting Lender's failure or refusal to abide by its obligations under this Agreement. 11.5 Rights, Exculpation, Etc. Neither Agent, any Affiliate of Agent, nor any of their respective officers, directors, employees, agents, attorneys or consultants, shall be liable to any Lender for any action taken or omitted by them hereunder or under any of the Loan Documents, or in connection herewith or therewith, except that Agent shall be liable for its gross negligence or willful misconduct, or willful misconduct in the performance of its express obligations hereunder. In the absence of gross negligence or willful misconduct, Agent shall -92- 101 not be liable for any apportionment or distribution of payments made by it in good faith pursuant to Section 11.4, and if any such apportionment or distribution is subsequently determined to have been made in error the sole recourse of any Person to whom payment was due, but not made, shall be to recover from the recipients of such payments any payment in excess of the amount to which they are determined to have been entitled. Agent shall not be responsible to any Lender for any recitals, statements, representations or warranties herein or for the execution, effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Agreement or any of the other Loan Documents, or any of the transactions contemplated hereby and thereby; or for the financial condition of Borrower, any Guarantor or any of their Affiliates. Agent shall not be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement or any of the Loan Documents or the financial condition of Borrower, any Guarantor or any of their Affiliates, or the existence or possible existence of any Unmatured Event of Default or Event of Default. 11.6 Reliance. Agent shall be entitled to rely upon any written notices, statements, certificates, orders or other documents, telecopies or any telephone message believed by it in good faith to be genuine and correct and to have been signed, sent or made by the proper Person, and with respect to all matters pertaining to this Agreement or any of the Loan Documents and its duties hereunder or thereunder, upon advice of legal counsel (including counsel for Borrower), independent public accountant and other experts selected by it. 11.7 Indemnification. To the extent that Agent is not reimbursed and indemnified by Borrower, Lenders will reimburse, within ten (10) Business Days after notice from Agent, and indemnify and defend Agent for and against any and all Liabilities and Costs which may be imposed on, incurred by, or asserted against it in any way relating to or arising out of this Agreement or any of the other Loan Documents or any action taken or omitted by Agent or under this Agreement or any of the other Loan Documents, in proportion to each Lender's Pro Rata Share; provided that no Lender shall be liable for any portion of such Liabilities and Costs resulting from Agent's gross negligence or willful misconduct or in respect of normal administrative costs and expenses incurred by Agent (prior to any Event of Default or -93- 102 any Unmatured Event of Default) in connection with its performance of administrative duties under this Agreement and the other Loan Documents. The obligations of Lenders under this Section 11.7 shall survive the payment in full of all Obligations and the termination of this Agreement. In the event that after payment and distribution of any amount by Agent to Lenders, any Lender or third party, including Borrower, any creditor of Borrower or a trustee in bankruptcy, recovers from Agent any amount found to have been wrongfully paid to Agent or disbursed by Agent to Lenders, then Lenders, in proportion to their respective Pro Rata Shares, shall reimburse Agent for all such amounts. Notwithstanding the foregoing, Agent shall not be obligated to advance Liabilities and Costs and may require the deposit by each Lender of its Pro Rata Share of any material Liabilities and Costs anticipated by Agent before they are incurred or made payable. 11.8 Agent Individually. With respect to its Pro Rata Share of the Commitments hereunder and the Loans made by it, Agent shall have and may exercise the same rights and powers hereunder and is subject to the same obligations and liabilities as and to the extent set forth herein for any other Lender. The terms "Lenders", "Requisite Lenders" or any similar terms may include Agent in its individual capacity as a Lender or one of the Requisite Lenders. Agent and any Lender and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with Borrower or any of its Affiliates as if it were not acting as Agent or Lender pursuant hereto. 11.9 Successor Agent; Resignation of Agent; Removal of Agent. 11.9.1 Agent may resign from the performance of all its functions and duties hereunder at any time by giving at least thirty (30) Business Days, prior written notice to Lenders and Borrower, and shall automatically cease to be Agent hereunder in the event a petition in bankruptcy shall be filed by or against Agent or the Federal Deposit Insurance Corporation or any other Governmental Authority shall assume control of Agent or Agent's interests under the Facility. Further, Lenders whose aggregate Commitments constitute at least sixty-six and two-thirds percent (66-2/3%) of the Commitments of all Lenders excluding the Agent may remove Agent for cause at any time by -94- 103 giving at least thirty (30) Business Days' prior written notice to Agent, Borrower and all other Lenders. If Agent enters into one or more assignments pursuant to Section 11.12 having the effect of reducing its Commitment to less than $20,000,000 (which number shall be proportionately decreased to the extent Borrower has reduced the Facility pursuant to Section 2.6.1) then any Lender whose Commitment exceeds that of Agent may remove Agent by notice given within thirty (30) days after such Lender receives notice of the assignments which reduce the Agent's Commitment below such level. Such resignation or removal shall take effect upon the acceptance by a successor Agent of appointment pursuant to Section 11.9.2 or 11.9.3. 11.9.2 Upon any such notice of resignation by or removal of Agent, the Co-Agent with the largest Commitment shall become the successor Agent unless (i) such Co-Agent refuses to become Agent, or (ii) Lenders whose aggregate Commitments constitute at least 66-2/3% of the Commitments of all Lenders excluding such Co-Agent vote that such Co-Agent not become the successor Agent. If the Co-Agent with the largest Commitment does not become successor Agent pursuant to the preceding sentence then the Co-Agent with the next largest Commitment may become successor Agent subject to the same conditions. If both Co-Agents have the same Commitment amount and both are willing to become Agent, the successor Agent shall be chosen by a majority vote (based on aggregate Commitment amounts) of the Lenders other than such two Co-Agents. If no successor Agent is selected pursuant to the preceding provisions of this Section 11.9.2, Requisite Lenders shall appoint a successor Agent with the consent of Borrower, which consent shall not be unreasonably withheld or delayed and which consent shall not be required if there shall then exist any Event of Default. Any successor Agent must be a bank (i) the senior debt obligations of which (or such bank's parent's senior unsecured debt obligations) are rated not less than BBB by one of the Rating Agencies and (ii) which has total assets in excess of Ten Billion Dollars ($10,000,000,000). Such successor Agent shall separately confirm in writing with Borrower the fee to be paid to such Agent pursuant to Section 2.5.2. 11.9.3 If a successor Agent shall not have been so appointed within said thirty (30) Business Day period, the retiring or removed Agent, shall then appoint a successor Agent who shall meet the requirements described in Section 11.9.2 and -95- 104 who shall serve as Agent until such time, if any, as a successor Agent shall have been appointed as provided above. 11.10 Consent and Approvals. 11.10.1 Each of the following shall require the approval or consent of Requisite Lenders: (a) Approval of value for non-income producing Properties determined on a basis other than a purchase and sale agreement pursuant to the definition of Adjusted Asset Value (Section 1.1). (b) Approval of each new Guarantor or Guarantor Partnership (Section 1.1); (c) Approval of any change in the Replacement Reserve Amount (Section 1.1); (d) Approval of each new Borrowing Base Property which does not satisfy the conditions set forth in Section 3.1 (Section 3.1); (e) Approval of any material amendment of organizational documents (Section 8.2); (f) Approval of certain changes in the Executive Officers (Section 8.5); (g) Approval of certain construction projects (Section 9.12); (h) Acceleration following an Event of Default (Section 10.2.1) or rescission of such acceleration (Section 10.3); (i) Approval of the exercise of rights and remedies under the Loan Documents following an Event of Default ( Section 10.2.1); (j) Appointment of a successor Agent (Section 11.9); -96- 105 (k) Except as referred to in Section 11.10.2 or 11.11.1, approval of any amendment, modification or termination of this Agreement, or waiver of any provision herein (Section 12.4). 11.10.2 Each amendment, modification or waiver specifically enumerated in Section 12.4.1 shall require the consent of all Lenders and each amendment, modification or waiver specifically enumerated in Section 12.4.2 shall require the consent of the number of Lenders described therein. 11.10.3 In addition to the required consents or approvals referred to in Section 11.10.1, Agent may at any time request instructions from Requisite Lenders with respect to any actions or approvals which, by the terms of this Agreement or of any of the Loan Documents, Agent is permitted or required to take or to grant without instructions from any Lenders, and if such instructions are promptly requested, Agent shall be absolutely entitled to refrain from taking any action or to withhold any approval and shall not be under any liability whatsoever to any Person for refraining from taking any action or withholding any approval under any of the Loan Documents until it shall have received such instructions from Requisite Lenders. Without limiting the foregoing, no Lender shall have any right of action whatsoever against Agent as a result of Agent acting or refraining from acting under this Agreement or any of the other Loan Documents in accordance with the instructions of Requisite Lenders or, where applicable, all Lenders. Agent shall promptly notify each Lender at any time that the Requisite Lenders have instructed Agent to act or refrain from acting pursuant hereto. 11.10.4 Each Lender agrees that any action taken by Agent at the direction or with the consent of Requisite Lenders in accordance with the provisions of this Agreement or any Loan Document, and the exercise by Agent at the direction or with the consent of Requisite Lenders of the powers set forth herein or therein, together with such other powers as are reasonably incidental thereto, shall be authorized and binding upon all Lenders, except for actions specifically requiring the approval of all Lenders. All communications from Agent to Lenders requesting Lenders' determination, consent, approval or disapproval (i) shall be given in the form of a written notice to each Lender, (ii) shall be accompanied by a description of the matter or thing as to which such determination, approval, consent -97- 106 or disapproval is requested, or shall advise each Lender where such matter or thing may be inspected, or shall otherwise describe the matter or issue to be resolved, (iii) shall include, if reasonably requested by a Lender and to the extent not previously provided to such Lender, written materials and a summary of all oral information provided to Agent by Borrower in respect of the matter or issue to be resolved, and (iv) may include Agent's recommended course of action or determination in respect thereof. Each Lender shall reply promptly, but in any event within ten (10) Business Days (the "Lender Reply Period"). Unless a Lender shall give written notice to Agent that it objects to the recommendation or determination of Agent (together with a written explanation of the reasons behind such objection) within the Lender Reply Period, such Lender shall be deemed to have approved of or consented to such recommendation or determination. With respect to decisions requiring the approval of Requisite Lenders or all Lenders, Agent shall submit its recommendation or determination for approval of or consent to such recommendation or determination to all Lenders and upon receiving the required approval or consent shall follow the course of action or determination recommended to Lenders by Agent or such other course of action recommended by Requisite Lenders, and each non-responding Lender shall be deemed to have concurred with such recommended course of action. 11.11 Agency Provisions Relating to Certain Enforcement Actions. 11.11.1 Agent is hereby authorized on behalf of all Lenders, without the necessity of any notice to or further consent from any Lender, to waive the imposition of late fees provided for in Section 2.4.5 up to a maximum of four (4) times during the term of this Agreement, including any extensions. 11.11.2 Should Agent (i) employ counsel for advice or other representation (whether or not any suit has been or shall be filed) with respect to any of the Loan Documents, or (ii) commence any proceeding or in any way seek to enforce its rights or remedies under the Loan Documents, each Lender, upon demand therefor from time to time, shall contribute its share (based on its Pro Rata Share) of the reasonable costs and/or expenses of any such advice or other representation, enforcement or acquisition, including, but not limited to, fees of receivers, court costs and fees and expenses of attorneys to the extent not -98- 107 otherwise reimbursed by Borrower; provided that Agent shall not be entitled to reimbursement of its attorneys' fees and expenses incurred in connection with the resolution of disputes between Agent and other Lenders unless Agent shall be the prevailing party in any such dispute. Any loss of principal and interest resulting from any Event of Default shall be shared by Lenders in accordance with their respective Pro Rata Shares. 11.12 Assignments and Participations. 11.12.1 Each Lender may assign, to one or more Eligible Assignees, all or a portion of its rights and obligations under this Agreement (including without limitation all or a portion of its Commitment and the Loans owing to it) and other Loan Documents; provided, however, that (i) each such assignment shall be of a constant, and not a varying, percentage of the assigning Lender's rights and obligations under this Agreement and other Loan Documents, and the assignment shall cover the same percentage of such Lender's Commitment and Loans, (ii) unless Agent and Borrower otherwise consent, the aggregate amount of the Commitment of the assigning Lender being assigned pursuant to each such assignment (determined as of the date of the Assignment and Assumption with respect to such assignment) shall in no event be less than Ten Million Dollars ($10,000,000) and shall be an integral multiple of One Million Dollars ($1,000,000), (iii) after giving effect to such assignment, the aggregate amount of the Commitment retained by the assigning Lender shall in no event be less than Fifteen Million Dollars ($15,000,000), (iv) the parties to each such assignment shall execute and deliver to Agent, for its approval and acceptance, an Assignment and Assumption, and (v) Agent shall receive from the assignor a processing fee of Three Thousand Dollars ($3,000). Upon such execution, delivery, approval and acceptance, and upon the effective date specified in the applicable Assignment and Assumption, (X) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Assumption, have the rights and obligations of a Lender hereunder, and (Y) the assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Assumption, relinquish its rights and be released from its obligations under this Agreement. -99- 108 11.12.2 By executing and delivering an Assignment and Assumption, the assigning Lender thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Assumption, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any other Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other Loan Document or any other instrument or document furnished pursuant hereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of Borrower or any Guarantor or the performance or observance by Borrower or any Guarantor of any of their respective obligations under any Loan Document or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Article V or delivered pursuant to Article VI to the date of such assignment and such other Loan Documents and other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Assumption; (iv) such assignee will, independently and without reliance upon Agent, such assigning Lender or any other Lender 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 this Agreement; (v) such assignee appoints and authorizes Agent to take such action as Agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto; and (vi) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender. 11.12.3 Agent shall maintain, at its address referred to on the counterpart signature pages hereof, a copy of each Assignment and Assumption delivered to and accepted by it and shall record in the Loan Account the names and addresses of each Lender and the Commitment of, and principal amount of the Loans owing to, such Lender from time to time. Borrower, Agent and Lenders may treat each Person whose name is recorded in the -100- 109 Loan Account as a Lender hereunder for all purposes of this Agreement. 11.12.4 Upon its receipt of an Assignment and Assumption executed by an assigning Lender and an assignee, Agent shall, if such Assignment and Assumption has been properly completed and is in substantially the form of Exhibit A, (i) accept such Assignment and Assumption, (ii) record the information contained therein in the Loan Account, and (iii) give prompt notice thereof to Borrower. Upon request, Borrower will execute and deliver to Agent an appropriate replacement promissory note or replacement promissory notes in favor of each assignee (and assignor, if such assignor is retaining a portion of its Commitment and Loans) reflecting such assignee's (and assigner's) Pro Rata Share(s) of the Facility. Upon execution and delivery of such replacement promissory notes the original promissory note or notes evidencing all or a portion of the Commitments and Loans being assigned shall be cancelled and returned to Borrower. 11.12.5 Each Lender may sell participations to one or more banks or other entities in or to all or a portion of its rights and obligations under this Agreement (including without limitation all or a portion of its Commitment and the Loans owing to it) and other Loan Documents; provided, however, that (i) such Lender's obligations under this Agreement (including without limitation its Commitment to Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) Borrower, Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and with regard to any and all payments to be made under this Agreement, and (iv) the holder of any such participation shall not be entitled to voting rights under this Agreement except for voting rights with respect to (A) increases in the Facility; (B) extensions of the Termination Date; and (C) decreases in the interest rates described in this Agreement. No participant shall be entitled to vote on any matter until the Lender with which such participant is participating in the Facility and the Loans confirms such participant's status as a participant hereunder. 11.12.6 Borrower will use reasonable efforts to cooperate with Agent and Lenders in connection with the -101- 110 assignment of interests under this Agreement or the sale of participations herein. 11.12.7 Anything in this Agreement to the contrary notwithstanding, and without the need to comply with any of the formal or procedural requirements of this Agreement, including this Section 11.12, any Lender may at any time and from time to time pledge and assign all or any portion of its rights under all or any of the Loan Documents to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from its obligations thereunder. To facilitate any such pledge or assignment, Agent shall, at the request of such Lender, enter into a letter agreement with the Federal Reserve Bank in substantially the form of the exhibit to Appendix C to the Federal Reserve Bank of New York Operating circular No. 12. 11.12.8 Anything in this Agreement to the contrary notwithstanding, any Lender may assign all or any portion of its rights and obligations under this Agreement to another branch or Affiliate of such Lender, provided that (i) at the time of such assignment such Lender is not a Defaulting Lender, (ii) such Lender gives Agent and Borrower at least fifteen (15) days' prior written notice of any such assignment, (iii) the parties to each such assignment execute and deliver to Agent an Assignment and Assumption, and (iv) Agent receives from assignor a processing fee of Three Thousand Dollars ($3,000). 11.12.9 No assignee of any rights and obligations under this Agreement shall be permitted to subassign such rights and obligations. 11.12.10 No Lender shall be permitted to assign or sell all or any portion of its rights and obligations under this Agreement to Borrower or any Affiliate of Borrower. 11.13 Ratable Sharing. Subject to Sections 11.3 and 11.4, Lenders agree among themselves that (i) with respect to all amounts received by them which are applicable to the payment of the Obligations, equitable adjustment will be made so that, in effect, all such amounts will be shared among them ratably in accordance with their Pro Rata Shares, whether received by voluntary payment, by counterclaim or cross action or by the enforcement of any or all of the Obligations, (ii) if any of them shall by voluntary payment or by the exercise of any right of -102- 111 counterclaim or otherwise, receive payment of a proportion of the aggregate amount of the obligations held by it which is greater than its Pro Rata Share of the payments on account of the Obligations, the one receiving such excess payment shall purchase, without recourse or warranty, an undivided interest and participation (which it shall be deemed to have done simultaneously upon the receipt of such payment) in such Obligations owed to the others so that all such recoveries with respect to such Obligations shall be applied ratably in accordance with their Pro Rata Shares; provided, that if all or part of such excess payment received by the purchasing party is thereafter recovered from it, those purchases shall be rescinded and the purchase prices paid for such participations shall be returned to that party to the extent necessary to adjust for such recovery, but without interest except to the extent the purchasing party is required to pay interest in connection with such recovery. Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 11.13 may, to the fullest extent permitted by law, exercise all its rights of payment with respect to such participation as fully as if such Lender were the direct creditor of Borrower in the amount of such participation. 11.14 Delivery of Documents. Agent shall as soon as reasonably practicable distribute to each Lender at its primary address set forth on the appropriate counterpart signature page hereof, or at such other address as a Lender may request in writing, (i) all documents to which such Lender is a party or of which such Lender is a beneficiary set forth in Section 4.1, (ii) all documents of which Agent receives copies from Borrower pursuant to Sections 6.1 and 12.6, (iii) all other documents or information which Agent is required to send to Lenders pursuant to the terms of this Agreement; (iv) other information or documents received by Agent at the request of any Lender, and (v) all notices received by Agent pursuant to Section 6.2. In addition, within fifteen (15) Business Days after receipt of a request in writing from a Lender for written information or documents provided by or prepared by Borrower, Agent shall deliver such written information or documents to such requesting Lender if Agent has possession of such written information or documents in its capacity as Agent or as a Lender. 11.15 Notice of Events of Default. Agent shall not be deemed to have knowledge or notice of the occurrence of any -103- 112 Unmatured Event of Default or Event of Default (other than nonpayment of principal of or interest on the Loans) unless Agent has received notice in writing from a Lender or Borrower referring to this Agreement or the other Loan Documents, describing such event or condition and expressly stating that such notice is a notice of an Unmatured Event of Default or Event of Default. Should Agent receive such notice of the occurrence of an Unmatured Event of Default or Event of Default, or should Agent send Borrower a notice of Unmatured Event of Default or Event of Default, Agent shall promptly give notice thereof to each Lender. ARTICLE XII MISCELLANEOUS 12.1 Expenses. 12.1.1 Generally. Borrower agrees upon demand to pay, or reimburse Agent for, all of Agent's external audit and legal, expenses and for all other reasonable out-of-pocket costs and expenses of every type and nature (including, without limitation, the reasonable fees, expenses and disbursements of Agent's internal legal counsel and internal appraisers except that such appraiser expenses shall not exceed $5,000 per year without Borrower's prior consent) incurred by Agent at any time (whether prior to, on or after the date of this Agreement) in connection with (i) its own audit and investigation of Borrower and the Borrowing Base Properties; (ii) the negotiation, preparation and execution of this Agreement (including, without limitation, the satisfaction or attempted satisfaction of any of the conditions set forth in Article IV) and the other Loan Documents and the making of the Loans; (iii) the review and, if applicable, acceptance of additional Borrowing Base Properties, including reasonable attorneys' fees and costs incurred in connection therewith; (iv) administration of this Agreement, the other Loan Documents and the Loans, including, without limitation, consultation with attorneys in connection therewith; and (v) the protection, collection or enforcement of any of the Obligations. 12.1.2 After Event of Default. Borrower further agrees to pay, or reimburse Agent and Lenders, for all reasonable -104- 113 out-of-pocket costs and expenses, including without limitation reasonable attorneys' fees and disbursements incurred by Agent or Lenders after the occurrence of an Event of Default (i) in enforcing any Obligation or exercising or enforcing any other right or remedy available by reason of such Event of Default; (ii) in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a "work-out" or in any insolvency or bankruptcy proceeding; (iii) in commencing, defending or intervening in any litigation or in filing a petition, complaint, answer, motion or other pleadings in any legal proceeding relating to Borrower or any Guarantor and related to or arising out of the transactions contemplated hereby; or (iv) in taking any other action in or with respect to any suit or proceeding (whether in bankruptcy or otherwise). 12.2 Indemnity. Borrower further agrees to defend, protect, indemnify and hold harmless Agent, each and all of the Lenders, each of their respective Affiliates and participants and each of the respective officers, directors, employees, agents, attorneys and consultants (including, without limitation, those retained in connection with the satisfaction or attempted satisfaction of any of the conditions set forth in Article IV) of each of the foregoing (collectively called the "Indemnitees") from and against any and all Liabilities and Costs imposed on, incurred by, or asserted against such Indemnitees (whether based on any federal or state laws or other statutory regulations, including, without limitation, securities and commercial laws and regulations, under common law or in equity, and based upon contract or otherwise, including any Liabilities and Costs arising as a result of a "prohibited transaction" under ERISA to the extent arising from or in connection with the past, present or future operations of Borrower or any Guarantor or their respective predecessors in interest) in any manner relating to or arising out of this Agreement or the other Loan Documents, or any act, event or transaction related or attendant thereto, the making of and participation in the Loans and the management of the Loans, or the use or intended use of the proceeds of the Loans (collectively, the "Indemnified Matters"); provided, however, that Borrower shall have no obligation to an Indemnitee hereunder with respect to (i) matters for which such Indemnitee has been compensated pursuant to or for which an exemption is provided in Section 2.4.7 or any other provision of this Agreement, and (ii) Indemnified Matters to the extent caused by -105- 114 or resulting from the willful misconduct or gross negligence of that Indemnitee, as determined by a court of competent jurisdiction. To the extent that the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, Borrower shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all Indemnified Matters incurred by the Indemnitees. 12.3 Change in Accounting Principles. Except as otherwise provided herein, if any changes in accounting principles from those used in the preparation of the most recent financial statements delivered to Agent pursuant to the terms hereof are hereinafter required or permitted by the rules, regulations, pronouncements and opinions of the Financial Accounting Standards Board or the American Institute of Certified Public Accountants (or successors thereto or agencies with similar functions) and are adopted by Borrower or any Guarantor Partnership with the agreement of its independent certified public accountants and such changes result in a change in the method of calculation of any of the financial covenants, standards or terms found herein, the parties hereto agree to enter into negotiations in order to amend such provisions so as to equitably reflect such changes with the desired result that the criteria for evaluating the financial condition of Borrower shall be the same after such changes as if such changes had not been made; provided, however, that no change in GAAP that would affect the method of calculation of any of the financial covenants, standards or terms shall be given effect in such calculations until such provisions are amended pursuant to Section 12.4 to so reflect such change in accounting principles. 12.4 Amendments and Waivers. (i) No amendment or modification of any provision of this Agreement shall be effective without the written agreement of Requisite Lenders (after notice to all Lenders) and Borrower (except for amendments to Section 11.4.1 which do not require the consent of Borrower), and (ii) no termination or waiver of any provision of this Agreement, or consent to any departure by Borrower therefrom (except as expressly provided in Section 11.11.1 with respect to waivers of late fees), shall in any event be effective without the written concurrence of Requisite Lenders (after notice to all -106- 115 Lenders), which Requisite Lenders shall have the right to grant or withhold at their sole discretion, except that: 12.4.1 The following amendments, modifications or waivers shall require the consent of all Lenders: (a) increasing the Commitments or Lender's Commitments; (b) changing the principal amount or final maturity of the Loans except as provided in Section 2.1.4; (c) reducing the interest rates applicable to the Loans; (d) reducing the rates on which fees payable pursuant hereto are determined; (e) forgiving or delaying any amount payable or receivable under Article II (other than late fees); (f) changing the definition of "Requisite Lenders" or "Pro Rata Shares"; (g) changing any provision contained in this Section 12.4; (h) releasing any obligor under any Loan Document; or (i) consent to assignment by Borrower of all of its duties and Obligations hereunder pursuant to Section 12.14. 12.4.2 The following amendments, modifications or waivers shall require the consent of Lenders whose aggregate Commitments constitute at least eighty-five percent (85%) of the Commitments of all Lenders: (a) changing the ratios set forth in Sections 9.1, 9.2, 9.4 or 9.13. -107- 116 (b) changing the definitions of "Borrowing Base Value" or "Maximum Loan Amount". 12.4.3 No amendment, modification, termination or waiver of any provision of Article XI or any other provision referring to Agent shall be effective without the written concurrence of Agent, but only if such amendment, modification, termination or waiver alters the obligations or rights of Agent. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on Borrower in any case shall entitle Borrower to any other further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this Section 12.4 shall be binding on each assignee, transferee or recipient of Agent's or any Lender's Commitment under this Agreement or the Loans at the time outstanding. 12.5 Independence of Covenants. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitations of, another covenant shall not avoid the occurrence of an Event of Default or Unmatured Event of Default if such action is taken or condition exists, and if a particular action or condition is expressly permitted under any covenant, unless expressly limited to such covenant, the fact that it would not be permitted under the general provisions of another covenant shall not constitute an Event of Default or Unmatured Event of Default if such action is taken or condition exists. 12.6 Notices and Delivery. Unless otherwise specifically provided herein, any consent, notice or other communication herein required or permitted to be given shall be in writing and may be personally served, telecopied or sent by courier service or United States mail and shall be deemed to have been given when delivered in person or by courier service, upon receipt of a telecopy (or on the next Business Day if such telecopy is received on a non-Business Day or after 5:00 p.m. (at the office of the recipient) on a Business Day) or four (4) Business Days after deposit in the United States mail (registered or certified, with postage prepaid and properly addressed). Notices to Agent pursuant to Article II shall not be effective until received by -108- 117 Agent. For the purposes hereof, the addresses of the parties hereto (until notice of a change thereof is delivered as provided in this Section 12.6) shall be as set forth below each party's name on the signature pages hereof, or, as to each party, at such other address as may be designated by such party in a written notice to all of the other parties. All deliveries to be made to Agent for distribution to the Lenders shall be made to Agent at the addresses specified for notice on the signature page hereto and in addition, a sufficient number of copies of each such delivery shall be delivered to Agent for delivery to each Lender at the address specified for deliveries on the signature page hereto or such other address as may be designated by Agent in a written notice. 12.7 Survival of Warranties, Indemnities and Agreements. All agreements, representations, warranties and indemnities made or given herein shall survive the execution and delivery of this Agreement and the other Loan Documents and the making and repayment of the Loans hereunder and such indemnities shall survive termination hereof. 12.8 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or delay on the part of Agent or any Lender in the exercise of any power, right or privilege under any of the Loan Documents shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing under the Loan Documents are cumulative to and not exclusive of any rights or remedies otherwise available. 12.9 Payments Set Aside. To the extent that Borrower makes a payment or payments to Agent or the Lenders or Agent or the Lenders exercise their rights of setoff, and such payment or payments or the proceeds of such setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then to the extent of such recovery, the Obligation or part thereof originally intended to be satisfied, and all rights and remedies therefor, shall be revived and continued in full force and effect -109- 118 as if such payment had not been made or such setoff had not occurred. 12.10 Severability. In case any provision in or obligation under this Agreement or the other Loan Documents shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby, provided, however, that if the rates of interest or any other amount payable hereunder, or the collectibility thereof, are declared to be or become invalid, illegal or unenforceable, Lenders' obligations to make Loans shall not be enforceable. 12.11 Heading. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. 12.12 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS. 12.13 Limitation of Liability. To the extent permitted by applicable law, no claim may be made by Borrower, any Lender or any other Person against Agent or any Lender, or the affiliates, directors, officers, employees, attorneys or agents of any of them, for any special, indirect, consequential or punitive damages in respect of any claim for breach of contract or any other theory of liability arising out of or related to the transactions contemplated by this Agreement, or any act, omission or event occurring in connection therewith; and Borrower and each Lender hereby waive, release and agree not to sue upon any claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. 12.14 Successors and Assigns. This Agreement and the other Loan Documents shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and permitted assigns of Agent and Lenders. The terms and provisions of this Agreement shall inure to the benefit of any assignee or transferee of the Loans and the Commitments of Lenders under this Agreement, and in the event of such transfer or assignment, the rights and -110- 119 privileges herein conferred upon Agent and Lenders shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. Borrower's rights or any interest therein hereunder, and Borrower's duties and Obligations hereunder, shall not be assigned without the consent of all Lenders. 12.15 Consent to Jurisdiction and Service of Process; Waiver of Jury Trial. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST BORROWER WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE, AND ALL JUDICIAL PROCEEDINGS BROUGHT BY BORROWER WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE, BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION HAVING SITUS WITHIN THE COMMONWEALTH OF MASSACHUSETTS, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, BORROWER ACCEPTS, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY FINAL JUDGMENT RENDERED THEREBY FROM WHICH NO APPEAL HAS BEEN TAKEN OR IS AVAILABLE. BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ITS NOTICE ADDRESS SPECIFIED ON THE SIGNATURE PAGES HEREOF. BORROWER, AGENT AND LENDERS EACH IRREVOCABLY WAIVES (i) TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, AND (ii) ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. 12.16 Counterparts; Effectiveness; Inconsistencies. This Agreement and any amendments, waivers, consents or supplements may be executed in counterparts, each of which when so executed and delivered shall be deemed an original, but all such together shall constitute but one and the same instrument. This Agreement shall become effective when Borrower, the initial Lenders and Agent have duly executed and delivered execution pages of this Agreement to each other (delivery by Borrower to Lenders and by -111- 120 any Lender to Borrower and any other Lender being deemed to have been made by delivery to Agent). Agent shall send written confirmation of the Closing Date to Borrower and each other Lender promptly following the occurrence thereof. Effective as of the Closing Date, the commitments under the Existing Facility shall terminate, and all accrued and unpaid obligations of Borrower under the Existing Facility shall be due and payable in full. This Agreement and each of the other Loan Documents shall be construed to the extent reasonable to be consistent one with the other, but to the extent that the terms and conditions of this Agreement are actually and directly inconsistent with the terms and conditions of any other Loan Document, this Agreement shall govern. 12.17 Construction. The parties acknowledge that each party and its counsel have reviewed and revised this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments or exhibits hereto. 12.18 Obligations Unsecured. It is the intent of the parties that the Obligations, and the obligations of the Guarantors under their respective Guaranties, shall constitute unsecured obligations of Borrower and each Guarantor, respectively. Neither the restrictions and prohibitions set forth herein with respect to the creation, incurrence, assumption or existence of any Lien on any Property of Borrower or any other Person (including, without limitation, Borrowing Base Properties and interests in Persons owning any Borrowing Base Property), nor those set forth in any other Loan Document, are intended to create or constitute a Lien of any nature upon any Property of Borrower or any other Person, and no such restriction or prohibition shall be deemed to constitute any such Lien. This Section 12.18 shall not be deemed to prevent the Agent or any Lender from obtaining a Lien as security for the Obligations at any time hereafter pursuant to a mutual agreement among the parties hereto expressly providing for such Lien or during the continuance of any Event of Default. 12.19 Entire Agreement. This Agreement, taken together with all of the other Loan Documents and all certificates and other documents delivered by Borrower to Agent (including documents incorporating separate agreements relating to the -112- 121 payment of fees), embodies the entire agreement and supersede all prior agreements, written and oral, relating to the subject matter hereof. -113- 122 IN WITNESS WHEREOF, this Agreement has been duly executed on the date set forth above. BORROWER: EXCEL REALTY TRUST, INC., a Maryland corporation By ---------------------------------- Its ------------------------------- ADDRESS FOR NOTICE AND DELIVERY: 16955 Via Del Campo, Suite 110, San Diego, CA 92127 Attn: Gary B. Sabin, President Tel: (619)485-9400 Fax: (619)485-8530 -114- 123 AGENT/LENDER: THE FIRST NATIONAL BANK OF BOSTON By ---------------------------------- Its ------------------------------- ADDRESS FOR NOTICE AND DELIVERY: Address: 115 Perimeter Center Place N.E. Suite 500 Atlanta, GA 30346 Attn: William F. Hipp Telephone: (770)390-6521 Telecopy: (770)390-8434 With a copy to: 100 Federal Street Boston, Massachusetts 02110 Attn: Real Estate Division With a copy to: 700 N. Pearl Street Suite 1840 Dallas, TX 75201 Attn: Helen Delph, Vice President Telephone: (214)720-3836 Telecopy: (214)871-7328 Pro Rata Share: 17.78% Loan Commitment: $26,666,666.67 LIBOR OFFICE: Address: 115 Perimeter Center Place N.E. Suite 500 Atlanta, GA 30346 Attn: William F. Hipp Telephone: (770)390-6521 Telecopy: (770)390-8434 -115- 124 OTHER LENDERS: WELLS FARGO BANK, N.A. By ---------------------------------- Its ------------------------------- ADDRESS FOR NOTICE AND DELIVERY: Address: 2030 Main Street Suite 800 Irvine, CA 92714 Attn: Pat Murphy Telephone: (714)251-4359 Telecopy: (714)851-9815 Pro Rata Share: 17.78% Loan Commitment: $26,666,666.67 LIBOR OFFICE: Address: 2030 Main Street Suite 800 Irvine, CA 92714 Attn: Pat Murphy Telephone: (714)251-4359 Telecopy: (714)851-9815 -116- 125 FIRST INTERSTATE BANK OF CALIFORNIA By ---------------------------------- Its ------------------------------- ADDRESS FOR NOTICE AND DELIVERY: Address: 401 B Street Suite 304 San Diego, CA 92101 Telephone: (619)699-3056 Telecopy: (619)699-3105 Pro Rata share: 17.78% Loan Commitment: $26,666,666.67 LIBOR OFFICE: Address: 401 B Street Suite 304 San Diego, CA 92101 Telephone: (619)699-3056 Telecopy: (619)699-3105 -117- 126 DRESDNER BANK AG By ---------------------------------- Its ------------------------------- By ---------------------------------- Its ------------------------------- ADDRESS FOR NOTICE AND DELIVERY: Address: 725 South Figueroa Street Suite 3950 Los Angeles, CA 90017 Attn: Vitol B. Wiacek Telephone: (213)630-5422 Telecopy: (213)627-3819 Pro Rata share: 16.67% Loan Commitment: $25,000,000 LIBOR OFFICE: Address: 75 Wall Street New York, NY 10005 Attn: Robert Reddington Telephone: (212)429-2269 -118- 127 NBD BANK By ---------------------------------- Dennis C. Jacobs, Vice President ADDRESS FOR NOTICE AND DELIVERY: Address: NBD Bank 900 Tower Drive Suite 400 Troy, Michigan 48098 Attn: Dennis C. Jacobs Telephone: (810)828-6768 Telecopy: (810)828-6401 Pro Rata share: 13.33% Loan Commitment: $20,000,000 LIBOR OFFICE: Address: 900 Tower Drive, Suite 400 Troy, Michigan 48098 Attn: Dennis C. Jacobs Telephone: (810)828-6768 Telecopy: (810)828-6401 -119- 128 BHF-BANK AKTEINGESELLSCHAFT By ---------------------------------- Its ------------------------------- By ---------------------------------- Its ------------------------------- ADDRESS FOR NOTICE AND DELIVERY: Address: 590 Madison Avenue New York, NY 10022 Attn: Krina Griffin Telephone: (212)756-5581 Telecopy: (212)756-5536 Pro Rata share: 10% Loan Commitment: $15,000,000 LIBOR OFFICE: Address: BHF-Bank AG Grand Cayman Branch 590 Madison Avenue New York, NY 10022 Telephone: (212)756-5581 Telecopy: (212)756-5536 -120- 129 SIGNET BANK By ---------------------------------- Its ------------------------------- ADDRESS FOR NOTICE AND DELIVERY: Address: Signet Bank 7799 Leesburg Pike Falls Church, VA 22043 Attn: John A. Schissel Telephone: (703)714-5145 Telecopy: (703)506-0284 Pro Rata share: 6.67% Loan Commitment: $10,000,000 LIBOR OFFICE: Address: 7799 Leesburg Pike Falls Church, VA 22043 Attn: John A. Schissel Telephone: (703)714-5145 Telecopy: (703)506-0284 -121- EX-21.1 5 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21.1 SUBSIDIARIES OF THE REGISTRANT Excel Realty Trust - NC, A North Carolina general partnership NC Properties, #1, Inc. A Delaware Corporation NC Properties, #2, Inc. A Delaware Corporation Excel Realty Trust - TX A Texas Limited partnership TX Properties #1, Inc. A Delaware Corporation TX Properties #2, Inc. A Delaware Corporation Excel Realty - PA, Inc. A Delaware corporation Excel Realty - NE, Inc. A Nebraska corporation Excel Realty Trust - ST, Inc. A Delaware corporation Excel Mortgage Funding Corporation, a Delaware corporation Excel Credit Corporation, a Delaware corporation (a wholly-owned subsidiary of Excel Mortgage Funding Corporation) EX-23.1 6 CONSENT OF COOPERS AND LYBRAND L.L.P. 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in this Registration Statement of Excel Realty Trust, Inc. and subsidiaries on Form S-8 (File No. 33-84982) of our report dated February 5, 1996 on our audits of the consolidated financial statements and financial statement schedules of Excel Realty Trust, Inc. and subsidiaries as of December 31, 1995 and 1994, and for each of the three years in the period ended December 31, 1995, which report is included in this Annual Report on Form 10-K. Coopers & Lybrand L.L.P. San Diego, California March 7, 1996 EX-27.1 7 FINANCIAL DATA SCHEDULE
5 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 9,812,000 0 2,882,000 (726,000) 0 0 386,925,000 (14,909,000) 428,307,000 6,072,000 210,797,000 0 0 208,678,000 0 428,307,000 0 55,229,000 0 15,470,000 6,933,000 409,000 22,458,000 18,192,000 0 18,192,000 0 0 0 18,192,000 1.51 1.51
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