-----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, UAptURh7QXo8386fGHN6Uwig5RDkGObx6ch2l39Z9I/EQOyIvGL5rrCrAbv1y0kx tHvroAZiT9VuXo5bNucsPg== 0000950135-96-001555.txt : 19960401 0000950135-96-001555.hdr.sgml : 19960401 ACCESSION NUMBER: 0000950135-96-001555 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960329 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRADLEY REAL ESTATE INC CENTRAL INDEX KEY: 0000013777 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 046034603 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10328 FILM NUMBER: 96540834 BUSINESS ADDRESS: STREET 1: 250 BOYLSTON ST CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 6178674200 FORMER COMPANY: FORMER CONFORMED NAME: BRADLEY REAL ESTATE TRUST DATE OF NAME CHANGE: 19920703 10-K 1 BRADLEY REAL ESTATE, INC. 1 SECURITIES AND EXCHANGE COMMISSION Exhibit Index Washington, D.C. 20549 on Page FORM 10-K Annual Report Pursuant to Section 15(d) of the Securities Exchange Act of 1934 /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 1995 Commission File Number 1-10328 BRADLEY REAL ESTATE, INC. ------------------------- (Exact name of Registrant as specified in its charter) Maryland 04-6034603 -------- ---------- (State of Organization) (I.R.S. Employer Identification No.) 699 Boylston Street, Boston, Massachusetts 02116 ------------------------------------------ ----- (Address of Principal Executive Offices) (ZIP Code) Registrant's telephone number, including area code (617) 867-4200 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- Common Stock New York Stock Exchange Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) been subject to such filing requirements for the past 90 days. Yes /X/ , No / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Aggregate market value of 18,608,895 Shares of Common Stock believed to be held by non-affiliates of the registrant based upon the $14.875 closing price for such Shares on the New York Stock Exchange on March 21, 1996: $276,807,213. Approximate number of Shares outstanding as of March 21, 1996: 18,658,515 DOCUMENTS INCORPORATED BY REFERENCE Registrant expects to file no later than April 1, 1996 its definitive Proxy Statement for the 1996 Annual Meeting of Stockholders and hereby incorporates by reference portions of said Proxy Statement into Part III hereof. 2 PART I ------ ITEM 1. BUSINESS -------- Bradley Real Estate, Inc. (the "Company") is one of the nation's oldest continuously qualified real estate investment trusts ("REIT") under the Internal Revenue Code. The Company focuses on the ownership and operation of community shopping centers, primarily in the Midwestern and, to a lesser extent, the Northeastern regions of the United States. Bradley's objective is to enhance the operating performance and value of its portfolio through renovations, expansion and leasing strategies designed to meet the needs of an evolving retail marketplace. The Company also seeks to create value through the acquisition of properties which can benefit from the Company's expertise in shopping center management, renovation and expansion. At December 31, 1995, the Company owned 17 properties consisting of approximately 3.0 million square feet of rentable retail space. Originally organized in 1961 as a Massachusetts business trust under the name Bradley Real Estate Trust and externally advised by an outside advisor, in October 1994 the Company reorganized as a Maryland corporation and in January 1995 acquired the REIT advisory business of the external advisor. The acquisition resulted in the termination of an advisory arrangement extending through August 1999, and permitted the Company to become self-administered. In January 1995, the Company also brought in-house the property management and leasing operations of a significant number of its properties by hiring the management team previously employed by an independent firm that had managed the Company's Minnesota properties. On October 30, 1995, the Company entered into a merger agreement to acquire Tucker Properties Corporation ("Tucker"), a REIT whose properties also consist primarily of community shopping centers located in the Midwestern United States. The merger closed on March 15, 1996, and as a result, the Company presently owns 31 properties aggregating approximately 7.4 million square feet of rentable space in 11 states. During 1995, the Company focused its efforts towards three strategic objectives: to continue managing its existing properties to compete successfully in a challenging retail environment, to increase its equity base and to continue its growth through opportunistic acquisitions. Despite a competitive retail climate, the properties owned by the Company at December 31, 1995 were at a 93% occupancy rate. During 1995, the Company negotiated 234,000 square feet of new and renewed leases, representing 7.6% of the aggregate portfolio, of which 189,000 square feet were new leases. The most significant tenant additions during the year were two new anchor tenants, Barnes & Noble Superstore and HomePlace, at the expanded and modernized Har Mar Mall in Roseville, Minnesota. The Company also expanded Sun Ray Center in St. Paul, Minnesota, completing construction of 6,000 square feet of new space for two new tenants, Boston Market and Bruegger's Bagels. During 1995 and going forward, the Company continues to work on leasing and expansion at Burning Tree Plaza in Duluth, Minnesota, and filling a significant vacancy at Westview Center in Hanover Park, Illinois. The Company effected issuances of 182,500 shares in April 1995, the proceeds of which were applied to the cash portion of the purchase price of a small shopping center in 1 3 Santa Fe, New Mexico acquired from a family partnership controlled by William D. Sanders, and of 2,500,000 shares in July 1995 in an underwritten public offering whose proceeds were used to pay-down debt. The resulting reduction in the Company's percentage of debt to total market capitalization to less than 20% after the offering positioned the Company to consider further acquisitions of properties or portfolios of properties. During 1995, management of the Company considered several possible acquisitions of additional retail properties, although only the acquisition of the Santa Fe property was completed during the year, as management focused on the extensive investigation and planning activities and negotiations involved in the Tucker transaction that culminated with the execution of a merger agreement with Tucker on October 30, 1995. The Company believes that the acquisition of Tucker, which closed in March 1996, represents the purchase of a solid Midwest community shopping center portfolio at a favorable yield, adds to the Company's near-term earnings outlook and affords it greater opportunities to expand top-line growth through future acquisitions. Strategically, the acquisition increases the Company's operating efficiencies, substantially increases market capitalization and the number of the Company's outstanding shares, thereby enhancing share liquidity, and significantly diversifies the Company's property and tenant base. The acquisition does, however, also significantly increase the Company's percentage of debt to total market capitalization, to approximately 44%, and results in the acquisition of some properties with future tenancy and operating challenges that the Company believes are more than offset by the advantages of the transaction. The background, advantages, challenges and other considerations of the Tucker acquisition were set forth in detail in the Company's February 15, 1996 proxy statement for the special meeting of stockholders of the Company held on March 14, 1996 to consider the acquisition (the "Merger Proxy Statement"). Following approval by the stockholders of the Company at that meeting (and by the stockholders of Tucker at a separate meeting on the same day), the acquisition was completed on March 15, 1996, with the issuance by the Company of 7,428,202 shares of its common stock valued at $13.96 per share, in cancellation of all outstanding Tucker shares, payment of certain transaction costs and the assumption of all of Tucker's liabilities. Tucker held title to its properties through two partnerships; eight properties through Tucker Operating Limited Partnership ("TOP"), in which Tucker had a 95.9% general partnership interest, and six properties through Tucker Financing Partnership ("TFP"), a general partnership of which TOP owned 99% and a wholly-owned Tucker corporate subsidiary owned the remaining 1%. The properties owned by TFP secure a $100 million mortgage note due in September 2000 issued by TFP (the "Tucker REMIC Note"). Upon the acquisition of Tucker, the Company succeeded to Tucker's interest in TOP and the wholly-owned Tucker corporate subsidiary, and the name "Bradley" was substituted for "Tucker" in each subsidiary and partnership. A diagram of the resulting structure appears at page 31 of the Merger Proxy Statement. Concurrently with the Tucker acquisition, on March 15, 1996 the Company entered into a new $150 million unsecured revolving credit facility with The First National Bank of Boston. The line bears interest at the lower of the bank's base rate or 1.75% over LIBOR. The rates available under the line become more favorable in the event the Company meets certain loan to value tests or receives an investment grade unsecured debt rating. In addition to replacing outstanding borrowings under the Company's and Tucker's previously outstanding secured lines of credit, the facility is available for the acquisition, development, renovation and expansion of new and existing properties (including but not limited to capital 2 4 improvements, tenant improvements and leasing commissions), and for other working capital purposes. The new line of credit contains certain financial and operational covenants that, among other provisions, limit the amount of secured and unsecured indebtedness the Company may have outstanding at any time to a percentage of the Company's Consolidated Market Value as defined, and provides for the maintenance of certain financial tests including minimum net worth and debt service coverage requirements. The Company believes that such covenants will not adversely affect the Company's business or the operation of its properties. The Company continues to evaluate a number of additional acquisition opportunities, as management believes that conditions remain favorable for the acquisition of additional shopping center properties. Such acquisitions may be effected through exchanges for existing properties, exchanges for limited partnership interests in the newly acquired operating partnership or for newly issued shares of the Company's common stock, joint ventures and similar arrangements, as well as for cash under the line of credit or other funds which may be raised through private or public issuances of debt or equity depending upon market conditions and the Company's capital situation at the time. At December 31, 1995, the Company had 16 employees. Following the acquisition of Tucker, the Company presently has approximately 75 employees. Most of the new employees are property management personnel who will continue to manage the properties acquired from Tucker; no member of Tucker's former senior management is an employee of the Company. The Company's Properties - ------------------------ Management believes the Company's portfolio is made up primarily of well-established, strategically located shopping centers, in suburban communities near major metropolitan areas. The Company's shopping centers have good visibility and access from major traffic arteries. 3 5 The following table and notes describe the Company's properties as of December 31, 1995:
BASE LEASE RENTABLE PERCENT LEASED AT OPTION YEAR SQUARE DECEMBER 31 SQUARE EXPIRATION SHOPPING CENTERS ACQUIRED FEET 1995 1994 MAJOR TENANT(S) FEET DATE - ---------------------------------------------------------------------------------------------------------------------------- Har Mar Mall(2)(19) 1992 428,000 86% 90% HomePlace 53,000 2011/2026 Roseville, Minnesota Barnes & Noble 44,856 2010/2025 Marshalls 34,858 1998/2013 T.J.Maxx 25,025 1998/2008 General Cinema 22,252 2001/2021 General Cinema 19,950 2000/2010 Michaels Stores 17,907 2003/2018 - ---------------------------------------------------------------------------------------------------------------------------- Sun Ray Shopping Center(3) 1961 254,000 97% 97% J.C. Penney 40,451 1999/2009 St. Paul, Minnesota Marshalls 26,256 2005/2020 T.J. Maxx 23,955 2000/2005 Kowalski's 23,218 2000/2010 Michaels Stores 18,127 2004/2019 - ---------------------------------------------------------------------------------------------------------------------------- Terrace Mall(4) 1993 140,000 92% 90% Rainbow Foods 59,232 2013/2033 Robbinsdale, Minnesota North Memorial 32,000 1999/2004 - ---------------------------------------------------------------------------------------------------------------------------- Richfield Hub Shopping Center(5) 1988 138,000 97% 96% Marshalls 26,785 2003/2008 Richfield, Minnesota Michaels Stores 24,235 1999/2014 - ---------------------------------------------------------------------------------------------------------------------------- Westwind Plaza(6) 1994 88,000 96% 100% Northern Hydraulics 18,165 2002/2012 Minnetonka, Minnesota - ---------------------------------------------------------------------------------------------------------------------------- Burning Tree Plaza(7) 1993 110,000 100% 98% T.J. Maxx 30,000 2004/2019 Duluth, Minnesota Best Buy 28,000 1999/2014 Northwest Fabrics 17,682 1999/2004 - ---------------------------------------------------------------------------------------------------------------------------- Hub West Shopping Center(8) 1991 77,000 100% 100% Rainbow Foods 50,817 2012/2017 Richfield, Minnesota U.S. Swim & Fitness 26,185 2001/2003 - ---------------------------------------------------------------------------------------------------------------------------- White Bear Hills(9) 1993 67,000 100% 100% Gateway Foods 45,679 2011/2021 White Bear Lake, Minnesota - ---------------------------------------------------------------------------------------------------------------------------- Rivercrest Center(10)(19) 1994 429,000 100% 100% Omni Foods 87,937 2011/2031 Crestwood, Illinois Venture 79,903 2012/2032 Sears Roebuck and Co. 55,000 2001/2011 T.J. Maxx 34,425 2004/2019 PETsMART 31,639 2009/2030 Best Buy 25,000 2008/2023 Office Max 24,000 2007/2017 Hollywood Park 15,000 2000/2005 - ---------------------------------------------------------------------------------------------------------------------------- Westview Center(11)(19) 1993 326,000 78% 81% Cub Foods 67,163 2009/2029 Hanover Park, Illinois Marshalls 34,302 2004/2019 - ---------------------------------------------------------------------------------------------------------------------------- Crossroads Center(12) 1992 242,000 93% 99% K-Mart (ground lease) 96,268 2001/2020 Fairview Heights, Illinois T.J. Maxx 25,200 1998/2013 - ---------------------------------------------------------------------------------------------------------------------------- Grandview Plaza(13) 1971 314,000 98% 97% Home Quarters 84,611 2013/2033 Florissant, Missouri Schnucks 68,025 2011/2026 J.C. Penney 63,892 1996 Walgreens 15,984 2043 - ---------------------------------------------------------------------------------------------------------------------------- St. Francis Plaza(14) 1995 30,000 100% N/A Walgreens 14,950 2043 Santa Fe, New Mexico Wild Oats 14,850 2006/2066 - ---------------------------------------------------------------------------------------------------------------------------- Hood Commons(15) 1973 216,000 97% 98% Shaw's 58,258 2013/2033 Derry, New Hampshire Ames 50,000 2000/2005 Decelle 26,353 1999/2014 - ---------------------------------------------------------------------------------------------------------------------------- Augusta Plaza(16) 1971 152,000 89% 89% K-Mart 85,808 1997/2012 Augusta, Maine - ---------------------------------------------------------------------------------------------------------------------------- RETAIL/OFFICE BUILDING - ---------------------- 585 Boylston Street(17) 1961 22,000 98% 100% CVS Pharmacy 7,582 2001/2016 Boston, MA - ---------------------------------------------------------------------------------------------------------------------------- GROUND LEASE - ------------ 501-529 Nicollet Ave.(18) 1969 51,000 100% 100% Brookfield 51,000 2086 Minneapolis, MN - ----------------------------------------------------------------------------------------------------------------------------
4 6 (1) Major tenants are defined as tenants occupying 15,000 square feet or greater of the rentable square footage with the exception of 585 Boylston Street and St. Francis Plaza. In some cases, the named tenant occupies the premises as a sublessee. The Company views "anchor" tenants as a subset of the major tenants at each property, generally consisting of those tenants which also represent more than 15% of the property's rentable square footage. (2) At Har Mar, the lease to HomePlace provides current minimum annual rent of $584,592 upon rent commencement at the completion of tenant fit up which occurred in the first quarter of 1996. The lease to Barnes & Noble provides for current minimum annual rent of $641,628 upon rent commencement at the completion of tenant fit up which occurred in the third quarter of 1995. The lease to Marshalls provides for current minimum annual rent of $155,400. The lease to T. J. Maxx provides current minimum annual rent of $168,920. The 22,252 square foot lease to General Cinema provides current minimum annual rent of $201,000 and the 19,950 square foot lease to General Cinema provides current minimum annual rent of $17,100. The lease to Michaels Stores provides current minimum annual rent of $111,919. There are four tenants, occupying an aggregate of 11,606 square feet, which are tenants-at-will. In 1996 three leases for 4,906 square feet will expire. The Company expects that the majority of these leases will be renewed. (3) At Sun Ray, the lease to J.C. Penney expires in 1999, with the tenant having the option to terminate upon 12 months' notice, and provides current minimum annual rent of $146,812. The lease to Marshalls provides current minimum annual rent of $182,000. The lease to T.J. Maxx provides current minimum annual rent of $162,968. The lease to Kowalski's provides current minimum annual rent of $58,045. The lease to Michaels Stores provides current minimum annual rent of $109,728. There are four tenants, occupying an aggregate of 8,810 square feet, which are tenants-at-will. In 1996, six leases for 29,451 square feet will expire. The Company expects that the majority of these leases will be renewed. (4) At Terrace, the lease to Rainbow Foods provides current minimum annual rent of $444,240. North Memorial Medical Center's lease provides current minimum annual rent of $180,012. There are no leases expiring in 1996. (5) At Richfield Hub, the lease to Marshalls provides current minimum annual rent of $174,103. The lease to Michaels Stores provides current minimum annual rent of $121,175. There are six tenants, occupying an aggregate of 6,335 square feet, which are tenants-at-will. In 1996, four leases totaling 6,940 square feet will expire. The Company expects that the majority of these leases will be renewed. (6) At Westwind the lease to Northern Hydraulics provides current minimum annual rent of $109,898. In 1996, five leases for 12,200 square feet, will expire. The Company expects the majority of these leases to be renewed. (7) At Burning Tree, the T.J. Maxx lease provides $225,000 in current minimum annual rent. The lease to Best Buy provides $182,000 in current minimum annual rent. The lease to Northwest Fabrics provides current minimum annual rent of $88,410. There is one tenant, occupying 1,181 square feet, which is a tenant-at-will. In 1996, one lease for 5,935 square feet will expire. 5 7 (8) At Hub West, which is adjacent to Richfield Hub, the lease to Rainbow Foods provides current minimum annual rent of $464,976. The lease to U. S. Swim & Fitness provides current minimum annual rent of $325,117. None of the present lease agreements are scheduled to expire until 1999. (9) At White Bear Hills, the Gateway Foods lease provides current minimum annual rent of $239,815. In 1996, three leases for 3,626 square feet will expire. (10) At Rivercrest, the lease to Omni Foods provides current minimum annual rent of $678,873. The lease to Venture provides current minimum annual rent of $299,636. The lease to Sears Roebuck and Co. provides current minimum annual rent of $261,250. The lease to T.J. Maxx provides current minimum annual rent of $275,400. The lease to PETsMART provides current minimum annual rent of $256,593. The lease to Best Buy provides current minimum annual rent of $168,750. The lease to OfficeMax provides current minimum annual rent of $192,000. The lease to Hollywood Park provides current minimum annual rent of $131,698. One tenant occupying 6,390 square feet is a tenant-at-will. In 1996, four leases for 16,137 square feet will expire. The Company expects the majority of these leases will be renewed. (11) At Westview, the lease to Cub Foods provides current minimum annual rent of $513,125. The lease to Marshalls provides current minimum annual rent of $257,265. One tenant occupying 1,800 square feet is a tenant-at-will. In 1996, two leases for 3,400 square feet will expire. The Company does not expect these leases to be renewed. (12) At Crossroads Center, the lease to K-Mart is a ground lease that provides current minimum annual rent of $38,000. The lease to T.J. Maxx provides current minimum annual rent of $163,800. In 1996, two leases for 5,880 square feet will expire, one which the Company believes will be renewed. (13) At Grandview Plaza, the lease to Home Quarters Warehouse provides $676,888 in current minimum annual rent. The Schnucks lease provides current minimum annual rent of $509,903. The lease to J.C. Penney provides $365,487 in current minimum annual rent and expires in 1998; however the tenant has exercised its option to accelerate the expiration of the lease term to March 1996. The lease to Walgreens provides current minimum annual rent of $181,255. One tenant occupying 2,000 square feet is a tenant-at-will. In 1996, seven leases for 80,181 square feet will expire. The Company expects the majority of these leases will be renewed. (14) St. Francis Plaza was purchased in April 1995 for $5.2 million. The lease to Walgreens provides current minimum annual rent of $149,500. The lease to Wild Oats provides current minimum annual rent of $207,500. There are no leases expiring until 2006. (15) At Hood Commons, the lease to Shaw's provides current minimum annual rent of $466,064. The lease to Ames provides current minimum annual rent of $113,880. The lease to Decelle provides current minimum annual rent of $210,824. There are four tenants occupying an aggregate of 6,785 square feet, which are tenants-at-will. In 1996, five leases aggregating 8,647 square feet will expire. The Company expects the majority of these leases to be renewed. 6 8 (16) At Augusta Plaza, the lease to K-mart provides current minimum annual rent of $162,792. One tenant occupying 8,222 square feet is a tenant-at-will. In 1996, five leases for 12,080 square feet will expire. The Company expects the majority of these leases will be renewed. (17) At 585 Boylston Street, the lease to CVS Pharmacy provides current minimum annual rent of $434,000. (18) At 501-529 Nicollet Avenue, the unsubordinated ground lease of 51,000 square feet of land to Brookfield Development (California), Inc. is for a 99-year term that commenced in 1987. This lease provides for stepped minimum rents over its term, with the actual cash paid in each year through 1993 being $800,000, in 1994 being $950,000, in 1995 being $990,000 and thereafter increasing by $40,000 each year through 1998 and by $50,000 each year through 2003, following which minimum rent reverts to $1,100,000 annually for all subsequent years. Under the "leveling" method of averaging contractual minimum rent payments over the life of the lease, the minimum annual rent recognized as income by the Company for financial reporting purposes each year is $1,089,000. The ground tenant has constructed an approximately 670,000 square foot mixed-use retail and office tower, known as Dain Bosworth Plaza, on the site. Major tenants of the building include Neiman Marcus, Dain Bosworth and Marquette Bank. (19) Har Mar Mall, Westview Center, and Rivercrest each represented 10% or more of the historic book value of the Company's total assets at December 31, 1995 or accounted for 10% or more of the Company's gross revenues in 1995. The following tables set forth certain supplemental information with respect to these properties to the extent that such information is available to the Company: 7 9 a. Percentage occupied at December 31 for the last five years:
Har Mar Westview Rivercrest ------- -------- ---------- 1995 86% 74% 100% 1994 79% 81% 100% 1993 83% 95% * 1992 86% * * 1991 * * * * Information not available prior to acquisition by the Company
b. The average effective annual rentals per square foot for 1995, 1994, and 1993 were as follows:
Har Mar Westview Rivercrest 1995 $13.12 $14.65 $12.71 1994 $15.51 $17.50 $14.77 1993 $14.88 $15.88 * * Information not available prior to acquisition by the Company
c. Leases in effect at December 31, 1995 expiring over each of the next ten years, assuming no tenants exercise renewal options:
Har Mar Mall ------------ No. of Square Annual Leases Feet Minimum Rent ------ ----- ------------ 1996 3 4,906 $ 64,191 1997 8 35,881 258,096 1998 10 84,186 554,621 1999 4 19,935 188,456 2000 10 40,749 240,050 2001 5 29,248 321,228 2002 1 2,015 16,120 2003 4 21,840 193,700 2004 2 9,319 106,170 2005 2 4,516 85,912
8 10 Rivercrest Shopping Center --------------------------
No. of Square Annual Leases Feet Minimum Rent ------ ----- ------------ 1996 4 16,137 $169,407 1997 3 9,900 157,048 1998 3 4,497 76,262 1999 - - - 2000 2 16,977 192,682 2001 4 78,500 477,500 2002 3 11,952 147,258 2003 - - - 2004 2 37,398 328,289 2005 - - -
Westview Center --------------- No. of Square Annual Leases Feet Minimum Rent ------ ----- ------------ 1996 2 3,400 $ 56,200 1997 - - - 1998 4 13,371 217,080 1999 2 16,500 166,500 2000 6 32,422 402,980 2001 5 11,085 224,932 2002 - - - 2003 1 6,490 94,395 2004 1 34,302 274,416 2005 5 44,432 509,480
Annual minimum future rentals to be received under non-cancelable operating leases in effect at December 31, 1995 for the properties included in the portfolio at December 31, 1995 and the number of leases that will expire, the square feet covered by such leases and the current minimum annual rent under such expiring leases for the next ten years are as follows:
Leases Expiring ----------------------------------------- Year Ending Minimum Number Minimum December 31 Future Rents of Leases Square Feet Future Rents ----------- ------------ --------- ----------- ------------ 1996 $23,178,000 48 191,070 $1,733,443 1997 21,637,000 53 254,103 1,882,249 1998 19,595,000 36 181,320 1,611,322 1999 17,734,000 39 302,569 2,419,197 2000 15,950,000 44 266,467 2,034,196 2001 13,932,000 24 290,017 2,357,818 2002 12,618,000 9 43,834 424,894 2003 12,039,000 9 73,115 672,361 2004 11,010,000 11 146,410 1,303,010 2005 9,870,000 12 85,194 924,754
9 11 The following table and notes describe the properties acquired upon the acquisition of Tucker on March 15, 1996:
PERCENT BASE LEASE/ YEAR RENTABLE LEASED AT SQUARE OPTION SHOPPING CENTERS ACQUIRED(1) SQUARE FEET DEC. 31, 1995 MAJOR TENANTS (2) FEET EXPIRATION DATE ---------------- -------- ----------- ------------- ------------- ------ --------------- ILLINOIS Commons of Chicago Ridge 1988 286,000 76% T.J. Maxx 25,082 1998/2008 Chicago Ridge, Illinois Marshalls 27,000 1999/2014 Office Depot 27,680 2002/2012 Cineplex Odeon 25,000 2008/2018 Michaels Stores 17,550 1999/2004 - ------------------------------------------------------------------------------------------------------------------------ Chicago Ridge Annex 1995 42,000 53% Pep Boys 22,354 2015/2035 Chicago Ridge, Illinois - ------------------------------------------------------------------------------------------------------------------------ Commons of Crystal Lake* 1993 269,000(3) 98% Jewel/Osco 59,804 2007/2042 Crystal Lake, Illinois Handy Andy 68,800 2018 Venture 81,338 2006 (not owned) - ------------------------------------------------------------------------------------------------------------------------ Heritage Square* 1992 212,000 100% Montgomery Ward 111,016 2013/2033 Naperville, Illinois Circuit City 28,351 2009/2024 Stroud's 26,703 2003/2013 - ------------------------------------------------------------------------------------------------------------------------ Meadows Town Mall 1988 382,000 81% T.J. Maxx 24,000 1999/2009 Rolling Meadows, Illinois Waccamaw 108,000 1999/2009 Elek-Tek 32,000 2001/2011 Women's Club 20,478 1998/2008 - ------------------------------------------------------------------------------------------------------------------------ Sheridan Village* 1990 301,000 97% Bergner's Dept. 162,852 2006/2021 Peoria, Illinois Cohen Furniture 16,600 2007 - ------------------------------------------------------------------------------------------------------------------------ High Point Centre 1993 240,000 100% Cub Foods 62,000 2008/2033 Lombard, Illinois T.J. Maxx 25,200 1998/2013 Office Depot 36,416 2003/2013 Macfrugal's 17,040 2006/2016 - ------------------------------------------------------------------------------------------------------------------------ Rollins Crossing 1995 62,000(4) 100% Sears Hardware 21,083 2005/2020 Round Lake Beach, Illinois Super K-Mart 190,000 2033 (not owned) - ------------------------------------------------------------------------------------------------------------------------ INDIANA Speedway SuperCenter* 1993 530,000 98% Kohl's 75,000 1999/2019 Speedway, Indiana Kroger 59,515 2013/2043 Sears Roebuck & Co. 30,825 2004/2024 Old Navy 15,000 2005/2010 Kittles 25,320 2000/2010 PETsMART 21,781 2002/2012 Factory Card Outlet 16,675 2003/2013 Lindo Super Spa 16,589 2000/2010 - ------------------------------------------------------------------------------------------------------------------------ The Village 1993 355,000 97% J.C. Penney 60,600 1999/2004 Gary, Indiana Goldblatt's 55,000 2000/2005 McCrory's 24,500 1998/2003 Jacobsens 22,896 1996 Post-Tribune Publishing 19,246 1996 Indiana Employment 18,050 1996/2000 - ------------------------------------------------------------------------------------------------------------------------
10 12
PERCENT LEASED BASE LEASE/ YEAR RENTABLE AT SQUARE OPTION SHOPPING CENTERS ACQUIRED SQUARE FEET DEC. 31, 1995 MAJOR TENANTS(1) FEET EXPIRATION DATE ---------------- -------- ----------- ------------- ---------------- ------ --------------- Washington Lawndale Commons* 1992 333,000 99% Target 83,110 2005/2025 Evansville, Indiana Sears Homelife 34,527 2003/2018 Allied Sporting Goods 20,285 1997/2012 Kuester's 40,857 1996 Jo-Ann Fabrics 15,262 2003/2013 Books-A-Million 20,515 2002/2008 - ------------------------------------------------------------------------------------------------------------------------ TENNESSEE Williamson Square 1993 335,000 96% Wal-Mart 117,493 2008/2038 Franklin, Tennessee Kroger 63,986 2008/2038 Carmike Cinemas 29,000 2008 - ------------------------------------------------------------------------------------------------------------------------ WISCONSIN Mequon Pavilions 1994 212,000 98% Kohl's Food Emporium 45,697 2010/2050 Mequon, Wisconsin Furniture Clearance 19,900 1997 - ------------------------------------------------------------------------------------------------------------------------ KENTUCKY StonyBrook Center 1991 136,000 96% Kroger 79,625 2021/2046 Louisville, Kentucky - ------------------------------------------------------------------------------------------------------------------------ RETAIL/OFFICE BUILDINGS One North State* 1990 640,000 95% First Chicago 296,782 2003 Chicago, Illinois Arthur Andersen 126,533 2003/2013 (5) T.J. Maxx 77,675 2001/2011 Filene's Basement 50,000 2002/2012 Int'l Academy of Design 27,270 2003/2008 - ------------------------------------------------------------------------------------------------------------------------ * This property is included in the blanket mortgage securing the $100 million Tucker REMIC Note due in year 2000. (1) The year acquired is the year in which the property was acquired by Tucker or by a predecessor business that transferred the property to Tucker at the time of Tucker's initial public offering in 1993. (2) Major tenants are defined as tenants occupying 15,000 square feet or more of the rentable square feet. (3) The amount of rentable square feet at Commons of Crystal Lake does not include approximately 81,000 square feet which is owned by an insurance company and leased to Venture. (4) The amount of rentable square feet at Rollins Crossing does not include approximately 190,000 square feet which is owned by K-Mart Corp. (5) This tenant has the right exercisable on or before April 1, 1996 to terminate its lease effective as of April 1, 1998 upon payment of a $1.8 million cancellation fee. The tenant has indicated it will move out of the space prior to the expiration of the lease but has not yet advised the Company whether or not it will exercise its early termination rights.
11 13 Tenant Mix and Leases - --------------------- As evidenced by the foregoing tables of the Company and Tucker, the Company's tenant mix is diverse and well represented by supermarkets, drugstores and other consumer necessity or value-oriented retailers. Such tenants tend to be stable performers in both good and bad economic times. As of March 15, 1996, fourteen of the Company's shopping centers are anchored by supermarkets, most of which are leading grocery chains in their respective markets. No tenant included in the Company's portfolio of properties on December 31, 1995 accounted for 10% or more of the Company's rental income in 1995. Including the properties acquired from Tucker, no single tenant accounts for as much as 6% of pro forma base rental revenue and only two tenants account for more than 2.5% of such revenue. The terms of the Company's outstanding retail leases vary from tenancies at will to 50 years. Major tenant leases are typically for 10 to 25 years, with one or more extension options available to the lessee upon expiration of the initial lease. By contrast, smaller shop leases are typically negotiated for three to five year terms. The longer term of the major tenant leases serves to protect the Company against significant vacancies and to assure the presence of strong tenants who draw consumers to the Company's centers. The shorter term of the smaller shop leases allows the Company to adjust rental rates for non-major store space on a regular basis and upgrade the overall tenant mix. Leases to major tenants tend to provide lower minimum rents per square foot than smaller shop leases. At December 31, 1995, major tenant leases for properties included in the portfolio at December 31, 1995 provided an average annual minimum rent of $6.29 per square foot, compared with non-major tenant leases which provided an average annual minimum rent of $10.37. In general, the Company believes that minimum rental rates for anchor tenant leases entered into several years ago are below current market rates, while recent anchor tenant leases and most non-anchor leases provide for minimum rental rates that more closely reflect current market rates. The payment by tenants of minimum rents that are below current market rates is offset in part by payment of percentage rents. Risk Factors - ------------ General - ------- As in every business, there are risk factors that face the Company and its operations. Certain risk factors involve the nature of the Company's industry - real estate operations. Others are unique to the Company, some arising from or in connection with the Company's recent acquisition of Tucker (the "Merger"). By setting forth below some of the factors that could cause the actual results of the Company's operations or plans to differ materially from the Company's expectations as set forth in statements in this Report or elsewhere that may be considered to be "forward-looking statements," the Company seeks to avail itself of the "safe harbor" provided in the recently enacted Private Securities Litigation Reform Act. Substantial Debt Obligations and Term of Debt - --------------------------------------------- The Company's obligations for borrowed money immediately after giving effect to the Merger aggregate approximately $221 million as compared to $39.4 million at December 31, 1995. The ratio of debt to Total Market Capitalization of the Surviving Company is 12 14 approximately 44% as compared to 20% at December 31, 1995. This increase in the Company's leverage and its ratio of debt to Total Market Capitalization could increase the risk of default under its indebtedness. Failure to pay the debt obligations when due could result in the Company losing its interest in the properties collateralizing such obligations. The Company believes that the ratio of debt to Total Market Capitalization is an important factor to consider in evaluating a REIT's debt level because this ratio is one indicator of a company's ability to borrow funds. The Company believes that using the ratio of debt to book value of assets is not as reliable an indicator of a REIT's debt level because the book value of a REIT's assets indicates only the depreciated value of the REIT's property without consideration of the market value of such assets at a particular point in time. The use of the ratio of debt to Total Market Capitalization of a company is more variable than the book value because it is dependent on the current stock price of a company. Accordingly, there can be no assurance that the use of the ratio of debt to Total Market Capitalization in evaluating the Company's debt level will adequately protect it from being too highly leveraged. In particular, the maturity in September 2000 of the $100 million Tucker REMIC Note secured by various of the properties acquired from Tucker may increase the Company's risk of default on its indebtedness. Prior to the date hereof, the Company has been able to refinance debt when it has become due on terms which it believes to be commercially reasonable. There can be no assurance that the Company will continue to be able to repay or to refinance its indebtedness relating to the Tucker REMIC Note or any of its other indebtedness on commercially reasonable or any other terms. The Company's debt obligations subject to floating interest rates immediately after the Merger aggregate approximately $95.5 million at a weighted average interest rate of approximately 7.2% per annum as compared to $14.6 million at a weighted average interest rate of approximately 7.6% per annum for the Company at December 31, 1995. To the extent the Company's exposure to increases in interest rates is not eliminated through interest rate protection or cap agreements, such increases will adversely affect the Company's net income, funds from operations ("FFO") and cash available for distribution and may affect the amount of distributions it can make to its stockholders. The Company's new line of credit requires the Company to maintain interest rate protection, at a rate satisfactory to the lead lender, with respect to $100 million of indebtedness. The Company has entered into an interest rate protection agreement with The First National Bank of Boston (the "Bank"), with respect to $40 million of indebtedness, whereby the Bank will reimburse the Company the amount by which the then applicable three month LIBOR rate, exceeds the then applicable cap rate per the agreement (currently 9.25%). The Company intends to enter into an interest rate swap and/or cap agreement with the Bank with respect to the remaining $60 million required to be hedged, thereby fixing the interest rate on the amount subject to the swap agreement over the two year term of the line of credit agreement. There can be no assurance that these interest rate protection provisions will be effective. The foregoing risks associated with the debt obligations of the Company may adversely affect the market price of the Company's Common Stock and may inhibit the Company's ability to raise capital and issue equity in both the public and private markets. 13 15 Restrictions on Ability of the Company to Dispose of Properties - --------------------------------------------------------------- Pursuant to the terms of the Indenture ("Tucker REMIC Indenture") governing the Tucker REMIC Note, prior to October 1997 principal payments on the Tucker REMIC Note cannot be made and the properties collateralizing the Tucker REMIC Note cannot be sold. If the Company wishes either to prepay all or part of the $100 million principal of the Tucker REMIC Note or to sell any of the properties collateralizing the Tucker REMIC Note after such date, the Company will incur significant prepayment penalties. The prepayment of principal of the Tucker REMIC Note requires an additional payment of the greater of either (i) 1% of the amount of principal being prepaid or (ii) the product of (A) the difference between the outstanding principal balance of the Tucker REMIC Note before prepayment and the present value of all remaining interest and principal payments thereon and (B) the amount of principal being prepaid divided by the outstanding principal balance of the Tucker REMIC Note. After October 1997, in order to release any of the properties collateralizing the Tucker REMIC Note from the lien so that such properties may be sold, the Tucker REMIC Indenture requires that certain additional conditions be met, including that (i) the aggregate amount of principal repaid on the Tucker REMIC Note equal at least 125% of the amount of principal allocated to the property to be released and (ii) certain debt service coverage ratios continue to be satisfied. Pursuant to the terms of the amended partnership agreement relating to the operating partnership that holds title to several of the properties acquired from Tucker (the "Operating Partnership"), for a period of 24 months after the Merger, the Company, as the general partner of the Operating Partnership, may not elect to dissolve the Operating Partnership or sell all or substantially all of the assets of the Operating Partnership without the consent of a majority in interest of the limited partners, except in connection with a merger or other business combination of the Company. Thus the Company is restricted from disposing of all or substantially all of the properties held by the Operating Partnership. Real Estate Investment Considerations - ------------------------------------- Dependence on Midwestern Region and Retail Industry --------------------------------------------------- The substantial majority of the Company's properties are located in the Midwestern region of the United States and such properties consist predominantly of community shopping centers. The Company's performance therefore is linked to economic conditions in the Midwest and in the market for retail space generally. The market for retail space has been adversely affected by the ongoing consolidation in the retail sector, the adverse financial condition of certain large companies in this sector and the excess amount of retail space in certain markets. To the extent that these conditions impact the market rents for retail space, they could result in a reduction of net income, FFO and cash available for distribution and thus affect the amount of distributions the Company can make to its stockholders. In addition, the Company predominantly owns and operates retail shopping centers catering to retail tenants. To the extent that the investing public has a negative perception of the retail sector, the value of shares of common stock of the Company may be negatively impacted, thereby resulting in such shares trading at a discount below the inherent value of the assets of the Company as a whole. 14 16 Financial Condition and Bankruptcy of Tenants --------------------------------------------- Since substantially all of the Company's and Tucker's income has been, and substantially all of the Company's income will continue to be, derived from rental income from retail shopping centers, the Company's net income, FFO and cash available for distribution would be adversely affected if a significant number of tenants were unable to meet their obligations to the Company or if the Company were unable to lease on economically favorable terms a significant amount of space in its shopping centers. In addition, in the event of default by a tenant, the Company may experience delays and incur substantial costs in enforcing its rights as landlord. At any time, a tenant of the Company's properties may seek the protection of the bankruptcy laws, which could result in the rejection and termination of the tenant lease. Such an event could cause a reduction of net income, FFO and cash available for distribution and thus affect the amount of distributions the Company can make to its stockholders. No assurance can be given that any present tenant which has filed for bankruptcy protection will continue making payments under its lease or that any tenants will not file for bankruptcy protection in the future or, if any tenants file, that they will continue to make rental payments in a timely manner. In addition, a tenant may, from time to time, experience a downturn in its business, which may weaken its financial condition and result in a reduction or failure to make rental payments when due. If a lessee or sublessee defaults in its obligations to the Company, the Company may experience delays in enforcing its right as lessor or sublessor and may incur substantial costs and experience significant delays associated with protecting its investment, including costs incurred in renovating and releasing the property. Potential Negative Effect of One North State Property ----------------------------------------------------- On a pro forma combined basis, for the year ended December 31, 1995, more than 10% of the total revenue of the Company and Tucker was derived from rents and expense reimbursements from tenants of Tucker's One North State property, which is a "mixed use" property located in downtown Chicago. The total charges currently being paid by certain of this property's tenants may be in excess of current market rates. The leases of these tenants begin to expire in 2001. One office tenant, however, has the option exercisable on or before April 1, 1996 to terminate its lease, effective as of April 1, 1998, upon payment of a $1.8 million cancellation fee. This tenant has indicated that it will move out of this space prior to the expiration of its lease, but has not yet advised the Company whether or not it will exercise its early termination right. Pursuant to the terms of the Tucker REMIC Indenture, this termination fee is required to be paid into a reserve account which can be used, for among other things, to pay for tenant alterations, leasing commissions and other lease inducements directly related to this space. Any unused amount of this reserve account must be used to repay the principal amounts owed under the Tucker REMIC Note. The inability of the Company to lease such property, or a significant reduction in the amount of rent and expense reimbursements paid by the tenants of such property, could have an adverse impact on the operating results of the Company. Vacancies and Lease Renewals ---------------------------- The descriptions above of the properties owned by the Company at December 31, 1995 recite the number of leases expiring during 1996 and management's expectations as to 15 17 how many tenants are likely to renew their leases. Some lease expirations provide the Company with the opportunity to increase rentals or to hold the space available for a stronger long-term tenancy. In other cases, there may be no immediately foreseeable strong tenancy for space, and the space may remain vacant for a longer period than anticipated or may be able to be re-leased only at less favorable rents. In such situations, the Company may be subject to competitive and economic conditions over which it has no control. The Company's underwriting and negotiation of the terms of the Tucker acquisition took into consideration anticipated lease expirations and possible resulting vacancies at One North State and the other Tucker properties. There is, however, no assurances that the effects of possible vacancies or lease renewals at such properties, or at the Company's previously owned properties, may not reduce the rental income, net income, FFO and funds available for distribution below levels anticipated by the Company. Possible Environmental Liabilities - ---------------------------------- Under various federal, state and local laws, ordinances and regulations, an owner of real estate is liable for the costs of removal or remediation of certain hazardous or toxic substances on or in such property. 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 rent such property or to use such property as collateral in its borrowings. All of the Company's properties, including those acquired from Tucker, have been subjected to Phase I or similar environmental audits (which involve inspection without soil sampling or ground water analysis) by independent environmental consultants. Except as described below, these environmental audit reports have not revealed any potential significant environmental liability, nor is management aware of any environmental liability with respect to the properties that it believes would have a material adverse effect on the Company's business, assets or results of operations. No assurance can be given that existing environmental studies with respect to the properties reveal all environmental liabilities or that any prior owner of any such property did not create any material environmental condition not known to the Company. Phase II site assessments of the Commons of Chicago Ridge property acquired from Tucker have disclosed the presence of contaminants in fill material and soil at the property that could be associated with the property's former use as a landfill and as the former site of an asphalt plant and storage tanks for petroleum products (which storage tanks have been removed from the property), but not at such levels as would require reporting to environmental agencies. These Phase II site assessments also disclosed the presence in groundwater of contaminants similar to those detected in the soil samples. Environmental assessments of the property have also detected methane gas, probably associated with the former use of the property as landfill. A regular maintenance program was implemented by Tucker and is being continued by the Company to control the migration and effect of the methane gas. There can be no assurance that an environmental regulatory agency such as the Illinois Environmental Protection Agency will not in the future require further investigation to determine the source and vertical and horizontal extent of the contamination. If any such investigation is required and confirms the existence of contaminants at the levels disclosed in the Phase II site assessments, it is possible that the relevant agency could require the Company to take action to address the contamination, which action could range from ongoing monitoring to remediation of the contamination. Based on the information currently available, 16 18 management does not believe that the cost of responding to such contamination would be material to the Company. In connection with the execution of the merger agreement relating to the acquisition of Tucker, the Company and certain individuals who had previously provided a limited indemnity to Tucker for environmental liabilities at Commons of Chicago Ridge (the "Individuals") have agreed to share the cost of having an outside consultant conduct a new Phase II investigation of the soil and groundwater of the property and to prepare a report recommending what action the Company should take with respect to such matters. It is anticipated that this outside consultant will be engaged shortly. In the event that the Company decides to implement any of the recommendations of such consultant (the "Recommended Work"), the Individuals have agreed to pay fifty percent of the costs of the Recommended Work, with the Individuals' aggregate liability for the Recommended Work limited to a maximum of $200,000. The Individuals have also agreed to indemnify the Company and its subsidiaries and affiliates against all claims, losses, costs and expenses incurred by such parties arising out of any administrative, regulatory or judicial action, suit, investigation or proceeding in connection with any applicable environmental health or safety law regarding hazardous substances, materials, wastes or petroleum products, or any common law right of action regarding such substances, materials, wastes or products, whether brought by a governmental or regulatory authority by a third party, that is initiated on or before October 4, 2003 with respect to conditions or acts at the Commons of Chicago Ridge which existed prior to October 4, 1993. In connection with this indemnification obligation, the Company has agreed to keep the Individuals reasonably informed of various activities relating to the property and to consult with the Individuals with respect to any potential claims, settlements and remediation which could trigger the indemnification obligations of the Individuals. There is no assurance that the Individuals will be in a position to honor their indemnity obligations or that the liabilities may not exceed the limit of their indemnity obligations. Regardless of such indemnification, based on the information currently available, management of the Company does not believe that the environmental liabilities and expenses relating to the Commons of Chicago Ridge property would have a material effect on the liquidity, financial condition or operating results of the Company. Insurance - --------- The Company carries comprehensive general liability coverage and umbrella liability coverage on all of its properties with limits of liability which the Company deems adequate to insure against liability claims and provide for cost of defense. Similarly, the Company is insured against the risk of direct physical damage in amounts the Company estimates to be adequate to reimburse the Company on a replacement cost basis for costs incurred to repair or rebuild each property, including loss of rental income during the reconstruction period. Currently, the Company also insures the properties for loss caused by earthquake or flood in the aggregate amount of $10 million per occurrence. Because of the high cost of this type of insurance coverage and the wide fluctuations in price and availability, the Company has made the determination that the risk of loss due to earthquake and flood does not justify the cost to increase coverage limits any further under current market conditions. Should the availability and pricing of this coverage become more cost advantageous, management would re-evaluate its position. 17 19 Competition - ----------- All of the properties owned by the Company are located in developed areas. There are numerous other retail properties and real estate companies within the market area of each such property which compete with the Company for tenants and development and acquisition opportunities. The number of competitive retail properties and real estate companies in such areas could have a material effect on (i) the Company's ability to rent space at the properties and the amount of rents currently charged and (ii) development and acquisition opportunities. The Company competes for tenants and acquisitions with others who have greater resources than the Company. Adverse Consequence of Failure to Qualify as a REIT and Other Tax Risks - ----------------------------------------------------------------------- The Company believes that it (including its predecessor, Bradley Real Estate Trust) has operated in a manner that permits it to qualify as a REIT under the Code for each taxable year since its formation in 1961. Although management of the Company believes that the Company is organized and is operating in such a manner, no assurance can be given that the Company will be able to continue to operate in a manner so as to qualify or remain so qualified. Qualification as a REIT involves the application of highly technical and complex Code provisions for which there are only limited judicial or administrative interpretations and the determination of various factual matters and circumstances not entirely within the Company's control. For example, in order to qualify as a REIT, at least 95% of the Company's gross income in any year must be derived from qualifying sources and the Company must make distributions to stockholders aggregating annually at 95% of its REIT taxable income (excluding net capital gains). In addition, no assurance can be given that new legislation, new regulations, administrative interpretations or court decisions will not change the tax laws with respect to qualification as a REIT or the federal income tax consequences of such qualification. The Company, however, is not aware of any currently pending tax legislation that would adversely affect its ability to continue to operate as a REIT. If the Company fails to qualify as a REIT, it will be subject to federal income tax (including any applicable alternative minimum tax) on its taxable income at corporate rates. In addition, unless entitled to relief under certain statutory provisions, it will also be disqualified from treatment as a REIT for the four taxable years following the year during which qualification is lost. This treatment would reduce the net earnings of the Company available for investment or distribution to stockholders because of the additional tax liability for the year or years involved. In addition, distribution would no longer be required to be made. To the extent that distributions to stockholders would have been made in anticipation of the Company's qualifying as a REIT, the Company might be required to borrow funds or to liquidate certain of its investments to pay the applicable tax. The failure to qualify as a REIT would also constitute a default under certain debt obligations of the Company. Tucker represented to the Company that, since its formation, it also operated so as to qualify as a REIT under the Code up to the time of the Merger. If Tucker failed to qualify as a REIT in any year in which it elected so to qualify and consequently becomes liable to pay taxes as a regular non-REIT corporation, the liabilities of Tucker that the Company assumed in the Merger would include such tax liability. Moreover, if it were subsequently determined that Tucker had earnings and profits as determined for federal income tax purposes (notwithstanding the requirement in the Merger Agreement that Tucker distribute all earnings 18 20 and profits prior to the Merger and the Company management's belief that such distributions were in fact made) or if former stockholders of Tucker acquired 50% or more in value of the shares of the Company's Common Stock as a result of or following the Merger, Tucker's failure to qualify as a REIT could disqualify the Company as a REIT. The Company's acquisition of Tucker's general partner interest in the Operating Partnership and Tucker's indirect interests in certain subsidiary partnerships of the Operating Partnership involve special tax considerations, including the qualification of each such partnership as a "partnership" for federal income tax purposes, which also could impact the Company's ability to qualify as a REIT following the Merger. The Company believes that its operations and those of all such subsidiaries are such as not to result in the Company's failure to continue to meet all requirements for qualification as a REIT. However, there is no assurance that the Company has qualified or will qualify as a REIT for any year until the period of limitations has expired for a challenge to such qualification by the Internal Revenue Service. ITEM 2. PROPERTIES ---------- The properties of the Company are described under Item 1 and, with respect to properties owned at December 31, 1995, in Note 2 of the Notes to Financial Statements contained in this Report. ITEM 3. LEGAL PROCEEDINGS ----------------- Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS ----------------------------------------------- No matter was submitted to a vote of the Company's stockholders during the fourth quarter of 1995. On March 14, 1996, a Special Meeting of Stockholders of the Company approved the merger of Tucker Properties Corporation with and into the Company and the Agreement and Plan of Merger dated October 30, 1995, all as described in the Merger Proxy Statement, by the following vote: For 7,599,486 Against 365,927 Abstain 42,141 Broker non-votes 0 (Shares entitled to vote) 11,230,313 ITEM 4.A. EXECUTIVE OFFICERS OF THE REGISTRANT ------------------------------------ The Company's by-laws provide that the officers of the Company shall be a President, a Treasurer, a Secretary and such other officers as are elected or appointed by the Directors. Each officer holds office at the pleasure of the Directors. The Directors have determined that the following officers are executive officers of the Company within the meaning of Rule 3b-7 under the Securities Exchange Act: 19 21 President and Chief Executive Officer -. Thomas P. D'Arcy, age 36, has held this position since February 1996, having served as Executive Vice President since September 1995, Senior Vice President since 1992 and Vice President since 1989. Prior to joining the Company, Mr. D'Arcy was employed by R.M. Bradley & Co., Inc. as a member of its property management and real estate brokerage departments for over eight years. Executive Vice President - Richard L. Heuer, age 43, has held this position since late 1994. Prior to joining the Company, Mr. Heuer was employed by the Welsh Companies, the independent property management Company that was managing the Company's Minnesota properties. Executive Vice President - E. Paul Dunn, age 49, has held this position since March 1996. Prior to joining the Company, Mr. Dunn was Executive Vice President of the Welsh Companies in Minneapolis, Minnesota since 1983. Senior Vice President - Marianne Dunn, age 36, was named Senior Vice President of the Company in September 1995, having served as Vice President of Bradley since 1993 and as Investment Manager since 1990. Prior to joining the Company, Ms. Dunn was employed by a lending institution as an Assistant Treasurer in the Consumer Lending Department. Chief Financial Officer and Treasurer - Irving E. Lingo, Jr., age 44, has held this position with the Company since September 1995. Prior to joining the Company, Mr. Lingo served as Chief Financial Officer of Lingerfelt Industrial Properties, a division of The Liberty Property Trust. None of the Officers or Directors of the Company is related to any other Officer or Director of the Company. No description is required with respect to any of the foregoing persons of any type of event referred to in Item 401(f) of Regulation S-K. 20 22 PART II ------- ITEM 5. MARKET FOR THE REGISTRANT'S SHARES AND RELATED STOCKHOLDER ---------------------------------------------------------- MATTERS ------- The Company's Common Stock has traded on the NYSE (symbol "BTR") since October 18, 1994 and before that dated traded for many years on the American Stock Exchange. The share prices set forth below reflect a doubling of the actual sales prices on the American Stock Exchange through October 17, 1994, as a result of reverse stock split in October 1994, and the actual sales prices on the New York Stock Exchange commencing October 18, 1994. The ranges of high and low prices reported on such exchanges during 1994 and 1995 were:
Quarter Ended High Low Quarter Ended High Low - ------------- ---- --- ------------- ---- --- March 1994 $18 3/4 $16 3/4 March 1995 $16 3/4 $14 7/8 June 1994 19 1/4 16 3/4 June 1995 16 3/8 15 September 1994 17 3/4 14 1/2 September 1995 16 7/8 15 3/8 December 1994 15 3/4 13 5/8 December 1995 16 1/4 13 1/8
The closing sale price on the NYSE on March 21, 1996 was $14 7/8. At December 31, 1995 there were approximately 622 holders of record of the Company's shares. Dividends (adjusted for the one-for-two reverse stock split in 1994) have been paid by the Company during the past two full years as follows:
Payment Per Share Payment Per Share - ------- --------- ------- --------- March 31, 1994 $.32 March 31, 1995 $.33 June 30, 1994 .32 June 30, 1995 .33 September 30, 1994 .32 September 29, 1995 .33 December 30, 1994 .33 December 29, 1995 .33
The Company has determined that approximately 16% and 26% of the distributions paid in 1995 and 1994, respectively, were non-taxable returns of capital to shareholders. 21 23 ITEM 6. SELECTED FINANCIAL DATA -----------------------
YEARS ENDING DECEMBER 31, ------------------------------------------------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- (Thousands of dollars, except per share data) Rental income $ 36,405 $ 32,875 $ 22,875 $ 11,839 $ 10,352 Other income 167 112 594 308 202 Expenses 28,141 25,343 17,934 11,360 9,850 ------------------------------------------------------------- Income before gain on sale of property 8,431 7,644 5,535 787 704 Gain on sale of property - 983 - - - Net income $ 8,431 $ 8,627 $ 5,535 $ 787 $ 704 ============================================================= Total assets at end of year $ 180,545 $ 166,579 $ 127,931 $ 93,326 $ 50,345 ------------------------------------------------------------- Mortgage and bank loans payable at end of year $ 39,394 $ 66,748 $ 29,317 $ 44,085 $ 40,685 ------------------------------------------------------------- Per share: Net income $ 0.85 $ 1.05 $ 0.82 $ 0.40 $ 0.38 Distributions $ 1.32 $ 1.29 $ 1.22 $ 1.20 $ 1.20 Weighted average shares outstanding 9,863,767 8,191,831 6,715,813 1,972,054 1,898,284
22 24 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ------------------------------------------------------------------------------- GENERAL - ------- The Company is one of the nation's oldest continuously qualified real estate investment trusts ("REIT") under the Internal Revenue Code. The Company focuses on the ownership and operation of community shopping centers, primarily in the Midwestern and the Northeastern regions of the United States. Bradley's objective is to enhance the operating performance and value of its portfolio through renovations, expansion and leasing strategies designed to meet the needs of an evolving retail marketplace. The Company also seeks to create value through the acquisition of properties which can benefit from the Company's expertise in shopping center management, renovation and expansion. The Company's properties consisted of approximately 3.0 million square feet of rentable retail space at December 31, 1995. Originally organized in 1961 as a Massachusetts business trust under the name Bradley Real Estate Trust and externally advised by an outside advisor, in October 1994, the Company reorganized as a Maryland corporation and in January 1995 acquired the REIT advisory business of the external advisor. The acquisition resulted in the termination of an advisory arrangement extending through August 1999, and permitted the Company to become self-administered. In January 1995, the Company also brought in-house the property management and leasing operations of a significant number of its properties by hiring the management team previously employed by an independent firm that had managed the Company's Minnesota properties. On October 30, 1995, the Company entered into a merger agreement to acquire Tucker Properties Corporation ("Tucker"), a REIT whose properties also consist primarily of community shopping centers located in the Midwestern United States. The merger closed on March 15, 1996 and as a result, the Company presently owns 31 properties aggregating approximately 7.4 million square feet of rentable space in 11 states. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- During 1995, the Company spent approximately $11,466,000 on property acquisitions and capital improvements. Of that amount, approximately $5,300,000 was spent on property acquisitions, approximately $5,073,000 on tenant specific capital improvements and approximately $1,093,000 for other property improvements. At December 31, 1995, the Company had commitments of approximately $515,000 for tenant specific capital improvements. On January 31, 1995, the Company completed the acquisition of the real estate investment trust advisory business of its former advisor, thus enabling the Company to become self-administered. The acquisition was completed through the issuance of 325,000 shares of common stock to the owners of the former advisor. In April 1995, the Company acquired St. Francis Plaza, a 29,800 square foot community shopping center in Santa Fe, New Mexico for approximately $5,261,000. The purchase was financed by the assumption of $2,094,000 in debt and the cash proceeds from the issuance of 182,500 shares of common stock. The Company has used its secured bank line of credit to fund expenditures for property acquisitions and capital improvements. Interest under the line was at the lower of the lead bank's base rate or 1.875% over LIBOR. During 1995, the weighted average rate was 8.0%. Approximately $50,400,000 was available under the aggregate $65,000,000 line of credit at December 31, 1995. Effective March 15, 1996, the Company's line of credit was renegotiated in conjunction with the merger of the Company and Tucker, discussed below, to an aggregate $150,000,000. In December 1994, the Company filed a "shelf" registration statement with the Securities and Exchange Commission to register $125,000,000 of common stock, preferred stock, debt securities, warrants, rights, or units of the foregoing securities that the Company may issue through underwriters or in privately negotiated transactions from time to time. 23 25 In July 1995, the Company completed an offering under the shelf registration of 2,500,000 common shares at a price of $16 per share. Net proceeds from the offering were approximately $37,405,000 of which $32,600,000 was used to pay-down the line of credit, $4,712,000 was used to pay-off the non-recourse mortgages assumed in 1994 upon the purchase of Westwind Plaza, and the balance used for general business purposes. On March 15, 1996, the Company closed the merger acquisition of Tucker after approval by the stockholders of the two companies. The acquisition was completed through the issuance of 7,428,202 common shares of the Company valued at $13.96 per share in exchange for 100% of the outstanding shares of Tucker, the payment of certain transaction costs and the assumption of all of Tuckers' liabilities. The acquisition was structured as a tax-free transaction, and is being treated as a purchase for financial reporting purposes. The Company has succeeded to Tucker's interest in two partnerships which hold title to all of the former Tucker properties, and as a result now owns some of its 31 properties directly and the others through the two partnerships (now renamed Bradley Operating Limited Partnership and Bradley Financing Partnership). The Company has in excess of a 95% general partner interest in each partnership. In conjunction with the merger, on March 15, 1996, the Company entered into a new $150,000,000 unsecured revolving credit facility with The First National Bank of Boston. The line bears interest at the lower of the bank's base rate or 1.75% over LIBOR. The rates available under the line become more favorable in the event the Company meets certain loan-to-value tests or receives an investment grade unsecured debt rating. In addition to replacing outstanding borrowings under the Company's and Tucker's previously outstanding secured lines of credit, the facility is available for the acquisition, development, renovation and expansion of new and existing properties (including, but not limited to, capital improvements, tenant improvements and leasing commissions), and for other working capital purposes. The Company's new line of credit contains certain financial and operational covenants that, among other provisions, limit the amount of secured and unsecured indebtedness the Company may have outstanding at any time to a percentage of the Company's Consolidated Market Value as defined, and provide for the maintenance of certain financial tests including minimum net worth and debt service coverage requirements. The Company believes that such covenants will not adversely affect the Company's business or the operation of its properties. The Company has entered into an agreement with Brookfield Development, Inc., the current ground lessee, regarding the proposed sale by the Company of its interest in 501-529 Nicollet Avenue, Minneapolis, Minnesota. The sale price, subject to standard closing adjustments, is $12,900,000. If consummated, the sale would result in a gain for financial reporting purposes of approximately $9,182,000 and approximately $10,800,000 for federal income tax purposes. For federal income tax purposes, however, the Company intends to structure the transaction as a "like-kind" exchange. In that regard, the Company intends to identify Brookdale Square Shopping Center, a 185,000 square foot community shopping center located in Brooklyn, Minnesota ("Brookdale") as the replacement property in the exchange. The purchase price for Brookdale, subject to standard closing adjustments, is $8,750,000. To the extent that sales proceeds from 501-529 Nicollet Avenue exceed the purchase price of Brookdale, the Company intends to apply such excess to the line of credit. The Company expects to close these transactions by March 31, 1996. While the acquisition of Tucker results in the Company's assumption of substantial additional indebtedness, the Company anticipates that the additional revenues from the former Tucker properties will be sufficient to service such debt as well as to cover the operating expenses of such properties and to make distributions with respect to the additional shares of the Company issued to the former Tucker stockholders. $100,000,000 of Tucker mortgage debt assumed is represented by a REMIC note that matures September, 2000. The Company believes that the properties securing the REMIC note and other mortgage debt have sufficient current value to permit 24 26 the refinancing of such debt upon maturity, although there can be no assurance that property values or refinancing terms at the time of maturity will be favorable. In general, a goal of management is to receive an investment grade rating from one or more national rating agencies that will increase the Company's financial flexibility by permitting the Company to issue fixed-rate unsecured debt on favorable terms. The Company funds operating expenses and distributions primarily from operating cash flows, although the line of credit may also be used for these purposes. Net cash flows provided by operating activities increased to $12,733,000 during 1995, from $10,877,000 in 1994 and $6,532,000 in 1993. Distributions (treated as a charge to cash flows from financing activities in the Company's financial statements) were $13,098,000 in 1995, $10,568,000 in 1994 and $8,285,000 in 1993. Funds from operations ("FFO") increased $2,958,000 or 23% during 1995 from $12,790,000 in 1994 to $15,748,000 in 1995. FFO increased by $3,691,000 or 41% during 1994, from $9,099,000 in 1993. The Company generally considers FFO to be a relevant and meaningful supplemental measure of the performance of an equity REIT because it is predicated on a cash flow basis, as opposed to a measure predicated on generally accepted accounting principles which gives effect to non-cash items such as depreciation and amortization. FFO, as defined by the National Association of Real Estate Investment Trusts and as followed by the Company, represents net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from debt restructuring and sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect FFO on the same basis. Since the definition of FFO is a guideline, computation of FFO may vary from one REIT to another. FFO does not represent cash generated from operating activities in accordance with generally accepted accounting principles and should not be considered as an alternative to net income as an indicator of the Company's operating performance or as an alternative to cash flow as a measure of liquidity. In addition, FFO is not necessarily indicative of cash available to fund cash needs. The Company believes that improving its financial flexibility will position the Company for future growth, allowing it to take advantage of acquisition, renovation and expansion opportunities. The Company continues to evaluate prospective acquisitions of individual properties and entire portfolios. To fund potential acquisitions, the Company may issue securities under the multi-security "shelf" registration referred to above either to the public or in privately negotiated transactions. The Company may also acquire properties through the direct issuance of securities of the Company or, via its Operating Partnership, through the issuance of limited partnership units in the Operating Partnership. The Company also expects that it will make further tax-deferred "like-kind" exchanges of existing mature properties for properties with more growth potential. In addition, the Company may acquire partial interests in real estate assets through participation in joint venture transactions. Finally, the Company may borrow under its line of credit to provide the initial funds for acquisitions (and, potentially, renovations and expansions), with such borrowings being subsequently repaid from the proceeds of further equity or debt offerings, depending upon market conditions at the time. RESULTS OF OPERATIONS - --------------------- 1995 Compared to 1994 - --------------------- Rental income increased $3,530,000 or 11% from $32,875,000 in 1994 to $36,405,000 in 1995. Approximately $3,594,000 of this increase was due to the effect of the acquisitions of Westwind Plaza and Rivercrest Center in 1994 and St. Francis Plaza in 1995. These increases were partially offset by the effect of the sale of Spruce Tree Centre in late 1994. Rental income from Har Mar Mall increased approximately $598,000 while rental income from Burning Tree Plaza increased approximately $260,000 from the prior year. Income at Har Mar increased primarily due to the signing of leases with Barnes & Noble and HomePlace. The increase at Burning Tree is substantially attributed to the expansion of T.J. Maxx. 25 27 Other income increased $55,000 or 49% from $112,000 in 1994 to $167,000 in 1995. This increase was primarily due to an increase in interest income, resulting from the temporary investment of the July 1995 offering proceeds. Total expenses increased $2,798,000 or 11% from $25,343,000 in 1994 to $28,141,000 in 1995. Operations, maintenance and management expense increased $543,000 during 1995 (from $5,315,000 to $5,858,000), due primarily to an increase in operating expenses of $295,000 at Rivercrest, $285,000 at Har Mar Mall and $269,000 at Westview Center, partially offset by the sale of Spruce Tree Centre. Real estate tax expense increased $656,000 during 1995 (from $8,070,000 to $8,726,000); $375,000 of the increase was due to the change in properties in the Company's portfolio. The remaining increase of $281,000 was due to tax increases at all of the properties, most notably the Illinois properties, with the exception of Har Mar Mall, which had a $355,000 reduction in real estate taxes following negotiation of abatements. Mortgage and other interest expenses increased $181,000 during 1995, from $4,524,000 in 1994 to $4,705,000. Approximately $270,000 of this increase was due to mortgages on St. Francis Plaza and Westwind Plaza, partially offset by a decrease in interest expense on the line of credit ($63,000) due to a decrease in the average debt balance, and an increase in capitalized interest. The average interest rate on outstanding borrowings under the line of credit increased from 7.1% in 1994 to 8.0% in 1995. Depreciation and amortization expense increased from $5,146,000 in 1994 to $7,317,000 in 1995. Of this $2,171,000 increase, $1,193,000 was related to amortizing the cost of the purchase of the advisory business of the Company's former external advisor, consummated in January 1995; $300,000 of the increase was due to changes in the Company's real estate holdings; and the balance of the increase was due to real estate improvements. Administrative and general expenses decreased $753,000 in 1995, from $2,288,000 in 1994 to $1,535,000 in 1995. This decrease primarily reflects savings associated with the Company becoming self-administered following the purchase of the advisory business of the former advisor in January 1995. The acquisition of Westwind Plaza for approximately $7,500,000 was effected in a tax-deferred exchange following the sale of Spruce Tree Centre for $2,750,000, which resulted in a gain on sale of property of $983,000 recognized in 1994. The aggregate result for 1995 was a $196,000 or 2% decrease in net income from $8,627,000 ($1.05 per share) to $8,431,000 ($.85 per share). In 1994, income before the gain on sale of property was $7,644,000 ($.93 per share), compared with $8,431,000 in 1995, ($.85 per share). Per share amounts reflect weighted-average shares outstanding of 9,863,767 in 1995 and 8,191,831 in 1994, the increased number of shares primarily reflecting the 2,500,000 share public offering completed in July 1995. 1994 Compared to 1993 - --------------------- Rental income increased $10,000,000 or 44% from $22,875,000 in 1993 to $32,875,000 in 1994. The increase was primarily attributable to the acquisitions of Terrace Mall, in May 1993; Westview Center and Burning Tree Plaza, in July 1993; White Bear Hills, in December 1993; Rivercrest Center, in March 1994 and Westwind Plaza, in November 1994. These increases were partially offset by the effect of the sale of Spruce Tree Centre in November 1994. Other income decreased $482,000 or 81% from $594,000 in 1993 to $112,000 in 1994. During 1993, the Company had received (i) a $300,000 termination fee from a restaurant tenant at Har Mar Mall, (ii) approximately $58,000 in interest on funds raised in the December 1992 public offering of shares, and (iii) a $110,000 payment from the Company's directors and officers insurance carrier to cover legal fees incurred in a prior year lawsuit. Total expenses increased $7,409,000 or 41% from $17,934,000 in 1993 to $25,343,000 in 1994 due primarily to increases in the following expenses which were attributable to the addition of properties to the Company's portfolio referred to above: (i) operations, maintenance and management expenses increased $1,584,000 from $3,731,000 to $5,315,000, (ii) real estate taxes increased $2,298,000 from $5,772,000 to $8,070,000, and (iii) depreciation and amortization increased $1,582,000 from $3,564,000 to $5,146,000. Mortgage and other interest increased $1,577,000 or 54% from $2,947,000 in 1993 to $4,524,000 in 1994 primarily due to higher outstanding 26 28 borrowings and higher prevailing rates of interest paid under the revolving line of credit, offset by lower outstanding mortgage debt in 1994 as a result of an aggregate of $20,500,000 being paid during 1993 on the Hood Commons and Grandview construction loans, which loans carried an average rate in excess of that on the 1994 borrowings under the line of credit. Administrative and general expenses increased $368,000 or 19% from $1,920,000 in 1993 to $2,288,000 in 1994 reflecting both increased advisory fees to the then external advisor resulting from the expanded portfolio and increased costs for shareholder services resulting from public offerings in late-1992 and mid-1993. The acquisition of Westwind Plaza for approximately $7,500,000 was effected in a tax-deferred exchange following the sale of Spruce Tree Centre for $2,750,000, which resulted in a gain of approximately $983,000. The aggregate result for 1994 was a $3,092,000 or 56% increase in net income from $5,535,000 ($.82 per share) in 1993 to $8,627,000 ($1.05 per share) in 1994. Before the gain on sale of property, net income in 1994 would have been $7,644,000 ($.93 per share), an increase of 38%. Per share amounts reflect weighted-average shares outstanding of 6,715,813 for 1993 and 8,191,831 for 1994. Share and per share amounts have been adjusted for the one-for-two reverse stock split effected October 17, 1994. 27 29 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ------------------------------------------- See the Financial Statements and Schedule including the Index thereto, immediately following the signature page to this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ------------------------------------------------ ACCOUNTING AND FINANCIAL DISCLOSURE ----------------------------------- Not applicable. 28 30 PART III -------- Registrant plans to provide information required for ITEMS 10 through 13 in its definitive Proxy Statement for its 1996 Annual Meeting of Stockholders, which information is hereby incorporated by reference. PART IV ------- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K ---------------------------------------------------------------- (a) The following documents are filed as part of this report: (1) and (2) The Financial Statements and Schedules required by Item 8 are listed in the Index to Financial Statements and Schedules following the signatures to this report. (3) The following exhibits (listed according to the exhibit index set forth in the instructions to Item 601) of Regulation S-K, are a part of this report. Exhibit No. Description - ---------- ----------- 3.1 Articles of Amendment and Restatement of Bradley Real Estate, Inc., incorporated by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K dated October 17, 1994.* 3.2 Articles of Merger between Bradley Real Estate Trust and Bradley Real Estate, Inc., incorporated by reference to Exhibit 3.2 of the Company's Current Report on Form 8-K dated October 17, 1994.* 3.3 Articles of Merger between Tucker Properties Corporation and Bradley Real Estate, Inc.** 3.4 By-laws of Bradley Real Estate, Inc., incorporated by reference to Exhibit 3.3 of the Company's Current Report on Form 8-K dated October 17, 1994.* 4.1 Form of stock certificate for shares of Common Stock of Bradley Real Estate, Inc., incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K dated October 17, 1994.* 29 31 Exhibit No. Description - ---------- ----------- 10.1 Amended and Restated Agreement of Limited Partnership of Bradley Operating Limited Partnership in the form executed on March 15, 1996, incorporated by reference to Exhibit 10.1 of the Company's current report on Form 8-K dated November 3, 1995.* 10.2 Revolving Credit Agreement dated as of March 15, 1996 by and among the Company, Bradley Operating Limited Partnership and The First National Bank of Boston.** 10.3 Indenture dated as of June 1, 1994 between Tucker Financing Partnership (name changed March 15, 1996 to Bradley Financing Partnership) and Bankers Trust Company of California, N.A. relating to 7.30% Mortgage Notes due September 30, 2000.** 10.4 1993 Stock Option and Incentive Plan, as amended and restated on March 13, 1996, incorporated by reference to Appendix A to the Company's Proxy Statement for its 1996 Annual Meeting of Stockholders.* 21.1 Subsidiaries of the Company.** 23.1 Consent of KPMG Peat Marwick LLP (regarding Form S-3 and Form S-8 Registration Statements).** 27.1 Financial Data Schedule.** - ------------------ * Previously filed. ** Filed herewith. (b) REPORT ON FORM 8-K. The Company filed a Form 8-K report on November 3, 1995 reporting in Items 5 and 7 the execution of the Agreement and Plan of Merger dated October 30, 1995 with Tucker Properties Corporation. 30 32 SIGNATURES ---------- Pursuant to the requirements of section 13 of the Securities Exchange act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized this 25th day of March 1996. BRADLEY REAL ESTATE, INC. by: /s/ Thomas P. D'Arcy ------------------------------- Thomas P. D'Arcy, President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Thomas P. D'Arcy March 25, 1996 ---------------------------------------------------------------- Thomas P. D'Arcy, President, CEO and Director /s/ Irving E. Lingo, Jr. March 25, 1996 ---------------------------------------------------------------- Irving E. Lingo, Jr., Chief Financial Officer and Treasurer /s/ Stephen G. Kasnet March 25, 1996 ---------------------------------------------------------------- Stephen G. Kasnet, Director /s/ W. Nicholas Thorndike March 25, 1996 ---------------------------------------------------------------- W. Nicholas Thorndike, Director ---------------------------------------------------------------- William L. Brown, Director /s/ Paul G. Kirk, Jr. March 25, 1996 ---------------------------------------------------------------- Paul G. Kirk, Jr., Director /s/ John B. Hynes III March 25, 1996 ---------------------------------------------------------------- John B. Hynes III, Director /s/ Joseph E. Hakim March 25, 1996 ---------------------------------------------------------------- Joseph E. Hakim, Director ---------------------------------------------------------------- A. Robert Towbin, Director
31 33 INDEX TO FINANCIAL STATEMENTS AND SCHEDULES PAGE Report of Independent Auditors for the years ended F-2 December 31, 1995, 1994 and 1993 Financial Statements: Balance Sheets - December 31, 1995 and 1994 F-3 For the years ended December 31, 1995, 1994 and 1993: Statements of Income F-4 Statements of Cash Flows F-5 Statements of Changes in Stockholders' Equity F-6 Notes to Financial Statements F-7 Schedule: Schedule III - Real Estate and Accumulated Depreciation F-16 All other schedules have been omitted since they are not required, not applicable, or the information is included in the financial statements or notes thereto. F-1 34 INDEPENDENT AUDITORS' REPORT The Directors and Stockholders of Bradley Real Estate, Inc.: We have audited the accompanying balance sheets of Bradley Real Estate, Inc. (formerly Bradley Real Estate Trust) as of December 31, 1995 and 1994 and the related statements of income, changes in stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bradley Real Estate, Inc. as of December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1995, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Boston, Massachusetts February 19, 1996, except for note 10, which is as of March 15, 1996 F-2 35 BRADLEY REAL ESTATE, INC. --------------------------- B A L A N C E S H E E T S --------------------------- - -----------------------------------------------------------------------------------------------------------
DECEMBER 31, December 31, 1995 1994 - ----------------------------------------------------------------------------------------------------------- ASSETS Real estate investments - at cost ........................................... $189,405,000 $177,939,000 Accumulated depreciation and amortization ................................... 27,591,000 22,385,000 - ----------------------------------------------------------------------------------------------------------- Net real estate investments ................................................. 161,814,000 155,554,000 Other assets: Cash ...................................................................... 697,000 193,000 Rents and other receivables net of allowance for doubtful accounts of $711,000 in 1995 and $459,000 for 1994 ................................................... 8,671,000 5,776,000 Unamortized buyout of contract, net ....................................... 4,372,000 -- Deferred charges, net and other assets .................................... 4,991,000 5,056,000 - ----------------------------------------------------------------------------------------------------------- $180,545,000 $166,579,000 =========================================================================================================== LIABILITIES AND STOCKHOLDER'S EQUITY Mortgage loans .............................................................. $ 24,794,000 $ 27,748,000 Line of credit .............................................................. 14,600,000 39,000,000 Accounts payable and accrued expenses ....................................... 6,053,000 5,252,000 - ----------------------------------------------------------------------------------------------------------- 45,447,000 72,000,000 - ----------------------------------------------------------------------------------------------------------- Stockholders' equity: Shares of preferred stock, par value $.01 per share: Authorized 20,000,000 shares; Issued and outstanding, 0 shares at December 31, 1995 and 1994 ............................... -- -- Shares of common stock, par value $.01 per share: Authorized 80,000,000 shares; Issued and outstanding shares, 11,230,313 and 8,197,054 at December 31, 1995 and 1994, respectively . 112,000 82,000 Shares of excess stock, par value $.01 per share: Authorized 50,000,000 shares; Issued and outstanding, 0 shares at December 31, 1995 and 1994 ............................... -- -- Additional paid-in capital .................................................. 148,407,000 103,251,000 Distributions in excess of accumulated earnings ............................. (13,421,000) (8,754,000) - ----------------------------------------------------------------------------------------------------------- 135,098,000 94,579,000 - ----------------------------------------------------------------------------------------------------------- $180,545,000 $166,579,000 ===========================================================================================================
The accompanying notes are an integral part of the financial statements. F-3 36 BRADLEY REAL ESTATE, INC. --------------------------------------- S T A T E M E N T S O F I N C O M E ---------------------------------------
- -------------------------------------------------------------------------------------------- Years Ended December 31, 1995 1994 1993 - -------------------------------------------------------------------------------------------- Income: Rental income ................................ $36,405,000 $32,875,000 $22,875,000 Other income ................................. 167,000 112,000 594,000 - -------------------------------------------------------------------------------------------- 36,572,000 32,987,000 23,469,000 Expenses: Operations, maintenance and management ....... 5,858,000 5,315,000 3,731,000 Real estate taxes ............................ 8,726,000 8,070,000 5,772,000 Mortgage and other interest .................. 4,705,000 4,524,000 2,947,000 Depreciation and amortization ................ 7,317,000 5,146,000 3,564,000 Administrative and general ................... 1,535,000 2,288,000 1,920,000 - -------------------------------------------------------------------------------------------- 28,141,000 25,343,000 17,934,000 Income before gain on sale of property ......... 8,431,000 7,644,000 5,535,000 Gain on sale of property ....................... -- 983,000 -- - -------------------------------------------------------------------------------------------- Net income ..................................... $ 8,431,000 $ 8,627,000 $ 5,535,000 - -------------------------------------------------------------------------------------------- Net income per share ......................... $ 0.85 $ 1.05 $ 0.82 - -------------------------------------------------------------------------------------------- Weighted average shares outstanding ............ 9,863,767 8,191,831 6,715,813 - --------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. F-4 37 BRADLEY REAL ESTATE, INC. ----------------------------------------------- S T A T E M E N T S O F C A S H F L O W S -----------------------------------------------
- ---------------------------------------------------------------------------------------------------------------- Years Ended December 31, 1995 1994 1993 - ---------------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net income .................................................. $ 8,431,000 $ 8,627,000 $ 5,535,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ........................... 7,317,000 5,146,000 3,564,000 Gain on sale of property ................................ -- (983,000) -- Change in operating assets and liabilities: Increase in rents and other receivables ................. (2,895,000) (1,428,000) (2,572,000) Increase in accounts payable and accrued expenses ....... 362,000 2,822,000 935,000 Increase in deferred charges ............................ (482,000) (3,307,000) (930,000) - ---------------------------------------------------------------------------------------------------------------- Net cash flows provided by operating activities ....... 12,733,000 10,877,000 6,532,000 - ---------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Expenditures for real estate investments .................... (9,410,000) (36,253,000) (39,451,000) Proceeds from sales of property, net ........................ -- 2,600,000 -- Decrease in investing - related deferred charges ............ 106,000 -- -- Expenditures for purchase of advisory business .............. (649,000) -- -- - ---------------------------------------------------------------------------------------------------------------- Net cash flows used by investing activities ............... (9,953,000) (33,653,000) (39,451,000) - ---------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Borrowings under line of credit ............................. 15,300,000 38,700,000 6,100,000 Payments under line of credit ............................... (7,100,000) (5,800,000) -- Pay-down line of credit with offering proceeds .............. (32,600,000) -- -- Pay-off of Westwind mortgage loans with offering proceeds ... (4,712,000) -- -- Distributions paid .......................................... (13,098,000) (10,568,000) (8,285,000) Proceeds from public offerings, net ......................... 40,508,000 -- 51,158,000 Exercise of stock options ................................... 128,000 -- 68,000 Principal payments on mortgage loans ........................ (336,000) (449,000) (20,868,000) Reorganization costs ........................................ (617,000) -- -- Shares issued under dividend reinvestment plan .............. 251,000 136,000 64,000 - ---------------------------------------------------------------------------------------------------------------- Net cash (used by) provided by financing activities ......... (2,276,000) 22,019,000 28,237,000 - ---------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash ............................... 504,000 (757,000) (4,682,000) Cash Beginning of year ........................................... 193,000 950,000 5,632,000 - ---------------------------------------------------------------------------------------------------------------- End of year ................................................. $ 697,000 $ 193,000 $ 950,000 ================================================================================================================ Supplemental cash flow information: Income taxes paid ........................................... $ 106,000 $ 45,000 $ -- Interest paid, net of amount capitalized .................... $ 4,854,000 $ 4,218,000 $ 2,947,000
Supplemental schedule of non-cash investing and financing activities: In 1994, a property was purchased for $7,496,000 which included the Company's assumption of $4,980,000 in non-recourse mortgages. In 1995, the Company issued 325,000 shares of Common Stock having a value of $4,916,000 in connection with the acquisition of the REIT advisory business of its former advisor. In 1995, a property was purchased for $5,261,000 which included the Company's assumption of $2,094,000 in non-recourse mortgages. The accompanying notes are an integral part of the financial statements. F-5 38 BRADLEY REAL ESTATE, INC. - ---------------------------------------------------------------------------------- S T A T E M E N T O F C H A N G E S I N S T O C K H O L D E R S' E Q U I T Y - ----------------------------------------------------------------------------------
Retained Earnings (Distributions Additional in Excess of Shares Paid-In Accumulated at Par Value Capital Earnings) - ------------------------------------------------------------------------------------------------------- Balance at December 31, 1992 ......................... $ 9,797,000 $ 42,110,000 $ (4,063,000) Net income ......................................... - - 5,535,000 Cash distributions ($.61 per share) ................................. - - (8,285,000) Issuance of shares net of offering costs of $3,564,000 .............................. 6,557,000 44,601,000 - Exercise of share options .......................... 12,000 56,000 - Shares issued under dividend reinvestment plan ................................ 11,000 53,000 - - ------------------------------------------------------------------------------------------------------- Balance at December 31, 1993 ......................... 16,377,000 86,820,000 (6,813,000) Net income ......................................... - - 8,627,000 Cash distributions ($1.29 per share) ................................ - - (10,568,000) Shares issued under dividend reinvestment plan ................................ 15,000 121,000 - Reverse one-for-two stock split .................... (8,195,000) 8,195,000 - Change in par value from $1 to $.01 ................ (8,115,000) 8,115,000 - - ------------------------------------------------------------------------------------------------------- Balance at December 31, 1994 ......................... 82,000 103,251,000 (8,754,000) Net income ......................................... - - 8,431,000 Cash distributions ($1.32 per share) ................................ - - (13,098,000) Issuance of stock, net of offering costs of $2,595,000 .............................. 30,000 45,394,000 - Stock issued under dividend reinvestment plan - 251,000 - Exercise of stock options .......................... - 128,000 - Reorganization costs ............................... - (617,000) - - ------------------------------------------------------------------------------------------------------- Balance at December 31, 1995 ......................... $ 112,000 $148,407,000 $(13,421,000) =======================================================================================================
The accompanying notes are an integral part of the financial statements. F-6 39 BRADLEY REAL ESTATE, INC. ------------------------------------------------------ N O T E S T O F I N A N C I A L S T A T E M E N T S ------------------------------------------------------ - -------------------------------------------------------------------------------- ORGANIZATION Bradley Real Estate, Inc. (the "Company") was organized in 1961 as a Massachusetts business trust. In October 1994, the Company was reorganized into a Maryland corporation, at which time the Company changed its name to Bradley Real Estate, Inc., to reflect its new corporate structure. For both financial reporting and federal income tax purposes, Bradley Real Estate, Inc. is considered to be a continuation of the same entity as Bradley Real Estate Trust; and references to the Company include both the trust and the corporation. The Company's primary business is to own and operate commercial real estate properties, consisting of shopping centers and office/retail buildings located primarily in the midwest region of the United States. Substantially all of the Company's income consists of rental income from tenants under the terms of long-term operating leases. Retail leases usually include a provision for additional rent to be paid based on gross sales on the premises. Certain leases also include provisions for additional rent to recover allocable portions of operating costs and real estate taxes. From its inception through January 31, 1995, the Company retained the firm of R.M. Bradley & Co., Inc. (R.M. Bradley) to provide certain management services, to serve as advisor to the Company with respect to investments and other matters, and to provide office facilities and various personnel. In September 1994, shareholders of the Company voted to approve the acquisition of R.M. Bradley's real estate investment trust advisory business, thus enabling the Company to become self-administered. The acquisition, which has been accounted for using the purchase method of accounting, was completed through the issuance of 325,000 shares of common stock to the former advisor. The total purchase price, including related costs in excess of the fair value of the net identifiable assets acquired, was $5,565,000, which is being amortized over the 56 month remaining life of the contract at the time of the buy-out using the straight-line method. The unamortized balance at December 31, 1995 is $4,372,000. Effective January 1, 1995, the Company brought its Minnesota property management and leasing operations in-house as a further move to vertically integrate the Company's operations. This activity included the hiring of the eight member management team previously employed by the independent property management firm that was managing the Company's Minnesota properties. - -------------------------------------------------------------------------------- Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The financial statements are prepared on the accrual basis in accordance with generally accepted accounting principles. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Rents and Other Receivables Management has determined that all of the Company's leases with its various tenants are operating leases. Revenues for such leases are recognized using the straight-line method over the remaining term of the leases. Real Estate Investments Real estate investments are carried at cost less accumulated depreciation. The provision for depreciation and amortization has been calculated using the straight-line method based upon the following estimated useful lives of assets: ------------------------------------------------------ Buildings......................... 18 - 50 years Improvements and Alterations...... 2 - 39 years ------------------------------------------------------ Expenditures for maintenance, repairs and betterments that do not materially prolong the normal useful life of an asset are charged to operations as incurred and amounted to $874,000, $626,000, and $378,000, for 1995, 1994 and 1993, respectively. F-7 40 Additions and betterments that substantially extend the useful lives of the properties are capitalized. Upon sale or other disposition of assets, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss, if any, is reflected in income. Real estate investments include capitalized interest and other costs on significant construction in progress. Capitalized costs are included in the cost of the related asset and charged to operations through depreciation over the asset's estimated useful life. Interest capitalized amounted to $137,000, $89,000, and $58,000 in 1995, 1994 and 1993, respectively. Management reviews each property for impairment whenever events or changes in circumstances indicate that the carrying value of a property may not be recoverable. The review of recoverability is based on an estimate of undiscounted future cash flows expected to result from its use and eventual disposition. If impairment exists due to the inability to recover the carrying value of a property, an impairment loss is recorded to the extent that the carrying value of the property exceeds its estimated fair value. On March 31, 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("Statement No. 121"). This Statement provides guidance for recognition and measurement of impairment of long-lived assets, certain identifiable intangibles and goodwill related both to assets to be held and used and assets to be disposed of. Statement No. 121 is effective for financial statements issued for fiscal years beginning after December 15, 1995. Thus, for the Company, Statement No. 121 is effective for the 1996 financial statements. Management does not expect implementation of Statement No. 121 to have a material effect on the financial statements of the Company. Deferred Charges A majority of deferred charges consist of agency commissions incurred in leasing the Company's properties. Such charges are amortized under the straight-line method over the life of the related lease. In addition, deferred charges includes costs incurred in connection with securing long-term debt, including the costs of entering into interest rate protection agreements. Such costs are amortized over the term of the related agreement. Earnings Per Share Earnings per share are based on the weighted-average number of shares outstanding during each year exclusive of outstanding stock options, which do not materially affect earnings per share. Per share data and weighted-average shares outstanding have been restated on the accompanying financial statements to reflect a one-for-two reverse share split effected on October 17, 1994. NOTE 2 - REAL ESTATE INVESTMENTS The following is a summary of the Company's real estate investments that are held for lease at December 31, 1995 and 1994:
- ------------------------------------------------------------------------------------ DECEMBER 31, 1995 December 31, 1994 - ------------------------------------------------------------------------------------ Land ............................... $ 35,781,000 $ 34,215,000 Buildings .......................... 88,674,000 84,991,000 Improvements and alterations ....... 63,098,000 55,509,000 Construction in progress ........... 1,852,000 3,224,000 - ------------------------------------------------------------------------------------ $189,405,000 $177,939,000 - ------------------------------------------------------------------------------------ Accumulated depreciation and amortization ................. (27,591,000) (22,385,000) - ------------------------------------------------------------------------------------ $161,814,000 $155,554,000 ====================================================================================
The following table sets forth detail with respect to the individual properties owned by the Company at December 31, 1995. The aggregate cost of those properties for federal income tax purposes was approximately $159,134,000. F-8 41 NOTE 2 -- REAL ESTATE INVESTMENTS (continued) - ------------------------------------------------------------------------------------------------------------------------------
Mortgage & Bank loans at Initial cost December 31, 1995 (Note 3) to the Company - ------------------------------------------------------------------------------------------------------------------------------ Buildings and Rate Maturity Balance Land Improvements ------------------------------------------------------------------------- SHOPPING CENTERS Har Mar Mall ................................ - - - $ 6,551,000 $15,263,000 Roseville, Minnesota Sun Ray Shopping Center*** .................. 11.750% 1996 4,586,000 82,000 2,945,000 St. Paul, Minnesota ......................... 10.000% 1996 3,734,000 9.625% 1996 4,000,000 Terrace Mall ................................ - - - 630,000 1,706,000 Robbinsdale, Minnesota Richfield Hub Shopping Center ................. 9.875% 1998 5,431,000 3,000,000 5,390,000 Richfield, Minnesota Westwind Plaza ................................ - - - 1,949,000 5,547,000 Minnetonka, Minnesota Burning Tree Plaza ............................ - - - 609,000 3,744,000 Duluth, Minnesota Hub West Shopping Center ...................... 9.875% 1998 5,014,000 757,000 345,000 Richfield, Minnesota White Bear Hills .............................. - - - 750,000 3,762,000 White Bear Lake, Minnesota Rivercrest Shopping Center .................... * * * 7,349,000 17,147,000 Crestwood, Illinois Westview Center ............................... * * * 6,417,000 14,973,000 Hanover Park, Illinois Crossroads Center ............................. * * * 2,846,000 8,538,000 Fairview Heights, Illinois Grandview Plaza Shopping Center ............... * * * 414,000 2,205,000 St. Louis, Missouri Hood Commons .................................. * * * 361,000 1,685,000 Derry, New Hampshire Augusta Plaza Shopping Center ................. - - - 297,000 1,376,000 Augusta, Maine St. Francis Plaza ............................. 8.125% 2008 2,029,000 1,578,000 3,683,000 Santa Fe, New Mexico RETAIL/OFFICE BUILDING 585 Boylston Street ........................... - - - 77,000 18,000 Boston, Massachusetts GROUND LEASE 501-29 Nicollet Avenue ........................ Base* 1996 14,600,000 852,000 - Minneapolis, Minnesota or Land** LIBOR + 1.875 Total ........................................... $39,394,000 $34,519,000 $88,327,000 * Rivercrest, Westview, Crossroads, Grandview, Hood Commons and 501-29 Nicollet Avenue secure borrowings under the Company's line of credit aggregating $14,600,000 at December 31, 1995. Base is defined as the higher of the bank prime rate or the federal funds rate + .5%. At December 31, 1995 base was 8.5%, the bank's prime rate. (See Note 3). Effective January 30, 1995 the rate is Base or LIBOR + 1.875%. ** Land area upon which groundtenant has constructed a 670,000 square foot mixed-use retail and office tower. *** The mortgage loans secured by Sun Ray were paid-off on January 2, 1996. Note: The Sun Ray, Richfield Hub and Hub West loans are cross-collateralized. Note: Due to certain provisions in the line of credit agreement the Company may be subject to additional fees as determined by the bank.
F-9 42
- ------------------------------------------------------------------------------------------------------- Gross amount carried December 31, 1995 - ------------------------------------------------------------------------------------------------------- Capitalized Buildings Date Lives on which Subsequent and Accumulated Acquired Depreciation to Acquisition Land Improvements Total Depreciation by Company is Computed - ------------------------------------------------------------------------------------------------------- $ 7,867,000 $ 6,786,000 $ 22,895,000 $ 29,681,000 $ 1,886,000 1992 5 - 39 11,598,000 91,000 14,534,000 14,625,000 6,857,000 1961 3 - 33 2,351,000 630,000 4,057,000 4,687,000 330,000 1993 6 - 39 5,147,000 3,000,000 10,537,000 13,537,000 2,451,000 1988 2 - 39 5,000 1,949,000 5,552,000 7,501,000 166,000 1994 39 2,900,000 609,000 6,644,000 7,253,000 394,000 1993 5 - 39 4,165,000 757,000 4,510,000 5,267,000 540,000 1991 31.5 49,000 755,000 3,806,000 4,561,000 207,000 1993 39 1,694,000 7,349,000 18,841,000 26,190,000 931,000 1994 8 - 39 1,035,000 6,405,000 16,020,000 22,425,000 1,174,000 1993 4 - 39 326,000 2,878,000 8,832,000 11,710,000 863,000 1992 2 - 31.5 14,794,000 427,000 16,986,000 17,413,000 4,804,000 1971 2 - 33 10,292,000 366,000 11,972,000 12,338,000 4,080,000 1973 3 - 31.5 1,769,000 297,000 3,145,000 3,442,000 1,832,000 1971 3 - 31.5 -- 1,578,000 3,683,000 5,261,000 63,000 1995 39 1,592,000 77,000 1,610,000 1,687,000 1,013,000 1961 5 - 50 975,000 1,827,000 -- 1,827,000 -- 1969 -- $66,559,000 $35,781,000 153,624,000 $189,405,000 $27,591,000
F-10 43 - -------------------------------------------------------------------------------- NOTE 3 - MORTGAGE LOANS AND LINE OF CREDIT The book value of real estate pledged as collateral for loans was approximately $108,830,000 at December 31, 1995 (see Note 2). Scheduled principal payments on mortgage loans and the line of credit outstanding at December 31, 1995 are as follows:
- --------------------------------------------------------------------------------- 1996 ......................................................... $27,133,000 1997 ......................................................... 250,000 1998 ......................................................... 10,282,000 1999 ......................................................... 117,000 2000 ......................................................... 127,000 Thereafter ................................................... 1,485,000 - --------------------------------------------------------------------------------- $39,394,000 =================================================================================
The Company's revolving bank line of credit, in effect in 1994 and 1995, provides for borrowings of up to $65,000,000. The borrowings under this revolving line of credit are secured by a blanket mortgage on Nicollet Avenue, Hood Commons, Grandview Plaza, Crossroads Center, Westview Center and Rivercrest Center (see Note 2). The current interest rates available to the Company under the line of credit are (i) the higher of (x) the rate announced by the lead lender as its "base rate" or (y) one half of one percent (.5%) above the overnight federal funds effective rate published by the Board of Governors of the Federal Reserve System and (ii) the adjusted LIBOR rate (as defined therein) plus one and seven-eighths percent (1.875%). The weighted average effective borrowing rate during 1995 was 8.0%. Among other requirements, the facility provides for an annual commitment fee of .25% on the unused portion of the line of credit. As of December 31, 1995, the line of credit matures in December 1996. In order to reduce the Company's (and thus the lenders') exposure to the risks associated with floating rate debt, the line of credit requires that the Company maintain interest rate protection, at a rate satisfactory to the lead lender, with respect to at least $30 million of indebtedness. As required, the Company entered into an interest rate protection agreement in January 1994 with its lead lender for a premium of $30,000, which has the effect of mitigating increases in interest rates available under the line of credit with respect to the protected amount by reimbursing the Company the amount by which the then applicable three-month LIBOR Rate (as defined in the interest rate protection agreement) for the protected amount exceeds the then applicable cap rate (as described below) for the protected amount. The cap rate is 8.7% for the period January 30, 1995 through January 28, 1996 and 8.9% for the period January 29, 1996 through January 28, 1997. The interest rate protection agreement had no effect on the Company's interest expense in 1995 or 1994. The Company's line of credit contains certain covenants which, among other provisions, require lenders' consent regarding the incurrence of additional indebtedness, the signing of certain leases and the sale and purchase of assets by the Company. The covenants also provide for the maintenance of certain financial tests, including minimum net worth and debt service coverage requirements, and contain cross-default and cross-collateral provisions. The Company believes that such covenants will not adversely affect the Company's business or the operation of its properties. On January 2, 1996, the Company paid-off its mortgage loans of $12,320,000 secured by the Sun Ray Shopping Center investment with proceeds from the bank line of credit. F-11 44 - -------------------------------------------------------------------------------- NOTE 4 - RENTALS UNDER OPERATING LEASES Annual minimum future rentals to be received under non-cancelable operating leases in effect at December 31, 1995 are as follows:
- --------------------------------------------------------------------------------- 1996 ...................................................... $23,178,000 1997 ...................................................... 21,637,000 1998 ...................................................... 19,595,000 1999 ...................................................... 17,734,000 2000 ...................................................... 15,950,000 Later Years ............................................... 192,455,000 - --------------------------------------------------------------------------------- Total Minimum Future Rentals ................................... $290,549,000 =================================================================================
Total minimum future rentals do not include contingent rentals under certain leases based upon lessees' sales volume. Contingent rentals earned amounted to approximately $1,083,000, $1,121,000, and $772,000 in 1995, 1994 and 1993, respectively. Certain leases also require lessees to pay all or a portion of real estate taxes and oper ating costs, amounting to $10,774,000, $9,259,000 and $6,193,000 in 1995, 1994 and 1993, respectively. No tenant accounted for as much as 10% of rental income in 1995, 1994 or 1993. NOTE 5 - INCOME TAXES The Company has elected to be taxed as a real estate investment trust ("REIT") under the Internal Revenue Code (the "Code"). Under the Code, a qualifying REIT that distributes at least 95% of its ordinary taxable income to its stockholders is entitled to a tax deduction in the amount of the distribution. In addition, qualifying REITs a re permitted to deduct capital gain distributions in the determination of the tax on capital gains. The Company paid distributions to stockholders aggregating $13,098,000, $10,568,000 and $8,285,000 in 1995, 1994 and 1993, respectively. The Company has determined that for Federal income tax purposes approximately 84% of the distributions paid in 1995 were ordinary dividends and approximately 16% were a return of capital; approximately 74% of the distributions paid in 1994 were ordinary dividends and approximately 26% were a return of capital; and approximately 70% of the distributions paid in 1993 were ordinary dividends and approximately 30% were a return of capital. NOTE 6 - STOCKHOLDERS' EQUITY Per share information prior to October 17, 1994 has been adjusted to reflect the Company's one-for-two reverse stock split effected on October 17, 1994. In December 1992, the Company issued 3,000,000 shares at a public offering price of $14.75 per share. In January 1993, pursuant to the exercise of the underwriters' over-allotment option in connection with such public offering, the Company issued another 450,000 shares at the same public offering price. Net proceeds to the Company related to the January offering were $6,224,000 after additional offering costs of approximately $414,000. In July 1993, the Company issued 2,828,500 shares (including 78,500 shares issued pursuant to the underwriters' exercise of their over-allotment option) at a public offering price of $17 per share. Net proceeds to the Company were approximately $44,934,000 after offering costs of approximately $3,150,000. In December 1994, the Company filed a shelf registration with the Securities and Exchange Commission to register $125 million of common stock, preferred stock, debt securities, warrants, rights or units of the foregoing securities that the Company may issue through underwriters or in privately negotiated transactions for cash from time to time. In January 1995, the Company issued 325,000 shares of common stock in conjunction with the purchase of the REIT advisory business of its former advisor. In April 1995, the Company issued 182,500 shares of common stock at a price of $17 per share, which proceeds were applied to the acquisition of St. Francis Plaza. In July 1995, the Company completed a public share offering of 2,500,000 F-12 45 shares of common stock at a price of $16 per share. Net proceeds from the offering were approximately $37,405,000 (net of offering costs of approximately $2,595,000), of which $32,600,000 was used to pay-down the Company's bank line of credit and $4,712,000 was used to pay-off the non-recourse mortgages assumed in November 1994 in connection with the Westwind Plaza purchase. Under the Company's Dividend Reinvestment and Share Purchase Plan in effect since 1993, stockholders of record owning at least 100 shares may elect to reinvest cash dividends and make limited additional cash payments (minimum $100, maximum $2,500 per quarter) to purchase newly issued shares of the Company without brokerage fees or other transaction costs, at a 3% discount from market prices (as determined in the Plan). During 1995, 1994 and 1993, the Company issued 16,714, 8,530 and 5,550 shares, respectively, under this Plan. - -------------------------------------------------------------------------------- NOTE 7 - STOCK OPTION PLANS - -------------------------------------------------------------------------------- In 1985, the Company adopted an Incentive Stock Option Plan for officers and key employees under which options for 75,000 shares were granted. No further options may be granted under the 1985 plan, but options for 54,751 and 61,875 shares remain outstanding at December 31, 1995 and 1994, respectively. In 1993, the shareholders approved a new 1993 Stock Option Plan which authorizes options to be granted for up to 5% of the Company's shares outstanding. During 1995, 217,500 options were granted under this Plan. At December 31, 1995 and 1994, 240,500 and 29,500 options, respectively, remained outstanding under this Plan. A committee of the Board of Directors administers both Plans and is responsible for selecting persons eligible to be granted options and determining the number and purchase price of shares subject to option (which in the case of incentive options may not be less than the fair market value of shares at the date of grant), the duration of an option (which may not be more than ten years from date of grant) and the times when shares may be issued upon exercise of an option. A summary of option transactions during the periods covered by these financial statements is as follows:
- ----------------------------------------------------------------------------------- Exercise Prices Shares Per Share - ----------------------------------------------------------------------------------- Outstanding at December 31, 1992 .................... 52,875 $11.50 - $22.00 Granted ............................................. 44,500 $14.75 - $17.00 Exercised ........................................... (6,000) $11.50 - ----------------------------------------------------------------------------------- Outstanding at December 31, 1993 and 1994 ........... 91,375 $11.50 - $22.00 Granted ............................................. 217,500 $14.875 - $16.50 Expired ............................................. (4,624) $16.66 - $21.25 Exercised ........................................... (9,000) $11.50 - $14.875 - ----------------------------------------------------------------------------------- Outstanding at December 31, 1995 .................... 295,251 $11.50 - $22.00 ===================================================================================
All options outstanding at December 31, 1995 are fully vested and have a duration of ten years from the date of grant, subject to earlier termination in certain circumstances. - -------------------------------------------------------------------------------- NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments", requires the Company to make disclosure of the fair value information of all financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. The Company's financial instruments, other than debt and an interest rate protection agreement for the Company's line of credit, are generally short-term in nature and contain minimal credit risk. These instruments consist of cash, rents and other receivables, and accounts payable. The carrying amount of these assets and liabilities in the balance sheet are assumed to be at fair value. F-13 46 The Company's mortgage loans are at fixed rates, and when compared with borrowing rates currently available to the Company with similar terms and average maturities, approximate fair value. The Company's line of credit is at a variable rate, which results in a carrying value that approximates its fair value. It is not practicable to estimate the fair value of the interest rate protection agreement; however, the replacement cost of the interest rate cap is not material based on prevailing market rates. - -------------------------------------------------------------------------------- NOTE 9 - COMMITMENTS/SUBSEQUENT EVENTS At December 31, 1995, the Company had commitments of approximately $515,000 for tenant related capital improvements. Cash flow from operations and the Company's revolving bank line of credit are available to fund these improvements. The Company has entered into an agreement with Brookfield Development, Inc., the current ground lessee, regarding the proposed sale by the Company of its interest in 501-529 Nicollet Avenue, Minneapolis, Minnesota. The sale price, subject to standard closing adjustments, is $12,900,000. If consummated, the sale would result in a gain of approximately $9,182,000 for financial reporting purposes and $10,800,000 for federal income tax purposes. For federal income tax purposes, however, the Company intends to structure the transaction in part as a tax deferred "like-kind" exchange. In that regard, the Company intends to identify Brookdale Square Shopping Center, a 185,000 square foot community shopping center located in Brooklyn Center, Minnesota ("Brookdale"), as the replacement property in the exchange. The purchase price for Brookdale, subject to standard closing adjustments, is $8,750,000. Brookdale is currently owned by a major insurance Company whose asset disposition team has agreed upon the business terms which it will recommend to its corporate office. To the extent that the sales proceeds from 501-529 Nicollet Avenue exceed the purchase price of Brookdale, the Company intends to apply such excess to reduce its line of credit with the First National Bank of Boston. - -------------------------------------------------------------------------------- NOTE 10 - MERGER AGREEMENT On March 15, 1996, the Company closed the merger acquisition of Tucker Properties Corporation ("Tucker"), after approval of such merger by the stockholders of the two companies. The acquisition was completed through the issuance of 7,428,202 common shares of the Company valued at $13.96 per share, in exchange for 100% of the outstanding shares of Tucker, payment of certain transaction costs and the assumption of all of Tucker's liabilities. The Tucker shareholders received .686 of a share of Bradley for each outstanding Tucker share. The acquisition was structured as a tax-free transaction, and will be accounted for using the purchase method of accounting. Accordingly, the purchase price will be allocated to the assets purchased and the liabilities assumed based upon the fair values at the date of acquisition. Any difference between the purchase price and fair value of net assets acquired is not expected to be significant. As a result of the merger the Company owns 31 properties aggregating approximately 7.4 million square feet in eleven states. The following table sets forth certain summary unaudited pro forma balance sheet information for the Company as if the merger had occurred as of December 31, 1995.
- -------------------------------------------------------------------------------- Historical Pro Forma - -------------------------------------------------------------------------------- (Unaudited) Total assets .................................. $180,545,000 $491,156,000 Total debt .................................... $ 45,447,000 $247,966,000 Stockholders' equity .......................... $135,098,000 $238,796,000
F-14 47 The following table sets forth certain summary unaudited pro forma operating data for the year ended December 31, 1995 as if the merger, the July offering and the acquisition of St. Francis Plaza had been consummated on January 1, 1995, after giving effect to certain adjustments including a reduction in depreciation expense due to longer useful lives and estimated cost savings of the combined entity.
- --------------------------------------------------------------------------------- Historical Pro Forma - --------------------------------------------------------------------------------- (Unaudited) Total revenues ............................... $36,572,000 $87,922,000 Net income ................................... $ 8,431,000 $19,038,000 Net income per share ......................... $ 0.85 $ 1.02
The unaudited pro forma operating data are presented for comparative purposes only and are not necessarily indicative of what the actual results of operations would have been for the year ended December 31, 1995, nor does such data purport to represent the results to be achieved in future periods. In conjunction with the merger, on March 15, 1996 the Company entered into a new $150 million unsecured revolving credit facility with The First National Bank of Boston. The line bears interest at a rate equal to the lower of the bank's base rate or 1.75% over LIBOR. The rates available under the line become more favorable in the event the Company meets certain loan-to-value tests or receives an investment grade unsecured debt rating. In addition to replacing outstanding borrowings under the Company's and Tucker's previously outstanding secured lines of credit, the facility is available for the acquisition, development, renovation and expansion of new and existing properties (including, but not limited to, capital improvements, tenant improvements and leasing commissions), and other working capital purposes. The Company's new line of credit contains certain financial and operational covenants that, among other provisions, limit the amount of secured and unsecured indebtedness the Company may have outstanding at any time to a percentage of the Company's Consolidated Market Value as defined, and provide for the maintenance of certain financial tests including minimum net worth and debt service coverage requirements. NOTE 11 - SUPPLEMENTARY QUARTERLY DATA (UNAUDITED)
- ------------------------------------------------------------------------------------------- March 31, June 30, Sept. 30, Dec. 31, 1995 1995 1995 1995 - ------------------------------------------------------------------------------------------- (Thousands of dollars except per share data) Rental income ................................. $8,615 $8,686 $9,396 $9,708 Net income .................................... $1,835 $1,638 $2,357 $2,601 Net income per share .......................... $ .22 $ .19 $ .21 $ .23
- ------------------------------------------------------------------------------------------- March 31, June 30, Sept. 30, Dec. 31, 1994 1994 1994 1994 - ------------------------------------------------------------------------------------------- (Thousands of dollars except per share data) Rental income ................................ $7,455 $8,474 $8,538 $8,408 Net income ................................... $2,094 $1,994 $1,850 $2,689 Net income per share ......................... $ .25 $ .24 $ .23 $ .33
F-15 48 SCHEDULE III BRADLEY REAL ESTATE, INC. ------------------------- REAL ESTATE AND ACCUMULATED DEPRECIATION ----------------------------------------
Cost December 31, ---- ----------- 1995 1994 1993 ---- ---- ---- Balance, beginning of year $177,939,000 $138,189,000 $ 98,840,000 Improvements and other additions: 11,466,000 41,443,000 39,349,000 Sale of property - (1,683,000) - ------------ ------------ ------------ Balance, end of year $189,405,000 $177,939,000 $138,189,000 ============ ============ ============ Accumulated Depreciation ------------------------ Balance, beginning of year $ 22,385,000 $ 18,156,000 $ 15,090,000 Depreciation provided 5,206,000 4,330,000 3,066,000 Sale of property - (101,000) - ------------ ------------ ------------ Balance, end of year $ 27,591,000 $ 22,385,000 $ 18,156,000 ============ ============ ============
F-16 49 INDEX TO EXHIBITS Exhibit No. Description - ---------- ----------- 3.3 Articles of Merger between Tucker Properties Corporation and Bradley Real Estate, Inc. 10.2 Revolving Credit Agreement dated as of March 15, 1996 by and among the Company, Bradley Operating Limited Partnership and The First National Bank of Boston. 10.3 Indenture dated as of June 1, 1994 between Tucker Financing Partnership (name changed March 15, 1996 to Bradley Financing Partnership) and Bankers Trust Company of California, N.A. relating to 7.30% Mortgage Notes due September 30, 2000. 21.1 Subsidiaries of the Company. 23.1 Consent of KPMG Peat Marwick LLP (regarding Form S-3 and Form S-8 Registration Statements). 27.1 Financial Data Schedule. EX-3.3 2 ARTICLES OF MERGER BETWEEN TUCKER PROP. & BRADLEY 1 Exhibit 3.3 ----------- [State Department of Assessments and Taxation Approved for Record 3/15/96 at 9:49 a.m.] ARTICLES OF MERGER BETWEEN TUCKER PROPERTIES CORPORATION AND BRADLEY REAL ESTATE, INC. THIS IS TO CERTIFY THAT: FIRST: Bradley Real Estate, Inc. and Tucker Properties Corporation agree to merge in the manner hereinafter set forth. SECOND: Bradley Real Estate, Inc. is the corporation to survive the merger. THIRD: Both Bradley Real Estate, Inc. (the "Surviving Corporation") and Tucker Properties Corporation (the "Merging Corporation") are incorporated under the laws of the State of Maryland. FOURTH: The principal office of the Surviving Corporation in the State of Maryland is located in Baltimore City and the principal office of the Merging Corporation in the State of Maryland is located in Baltimore City. FIFTH: The Merging Corporation owns no interest in land in the State of Maryland. SIXTH: The charter of the Surviving Corporation will not be amended as a result of the merger. SEVENTH: The total number of shares of all classes of stock which each corporation party to these Articles has the authority to issue and the number of shares of each class are as follows: a) Surviving Corporation The total number of shares of all classes of stock which the Surviving Corporation has authority to issue is one hundred fifty million (150,000,000) shares, consisting of eighty million (80,000,000) shares of common stock, $.01 par value per share, twenty million (20,000,000) shares of preferred stock, $.01 par value per share, and fifty million (50,000,000) shares of excess stock, $.01 par value per share. The aggregate par value of all shares of all classes having a par value is one million five hundred thousand dollars ($1,500,000). 2 b) Merging Corporation The total number of shares of all classes of stock which the Merging Corporation has authority to issue is one hundred million (100,000,000) shares, consisting of ninety million (90,000,000) shares of common stock, $.001 par value per share, and ten million (10,000,000) shares of preferred stock, $.001 par value per share. The aggregate par value of all shares of all classes having a par value is one hundred thousand dollars ($100,000). EIGHTH: Upon the Effective Date (as defined in Article Eleventh), the Merging Corporation shall be merged into the Surviving Corporation; and, thereupon, the Surviving Corporation shall possess any and all purposes and powers of the Merging Corporation; and all leases, licenses, property, rights, privileges, and powers of whatever nature and description of the Merging Corporation shall be transferred to, vested in, and devolved upon the Surviving Corporation, without further act or deed, subject to all of the debts and obligations of the Merging Corporation. Each share of common stock, $.001 par value per share, of the Merging Corporation shall be converted into .686 share(s) of common stock, $.01 par value per share, of the Surviving Corporation on the Effective Date, without the necessity of any action on the part of the holder thereof, except that fractional shares will be treated as described below. No fractional shares of common stock, $.01 par value per share, of the Surviving Corporation will be issued in connection with the Merger. In lieu thereof, a holder of shares of common stock, $.001 par value per share, of the Merging Corporation otherwise entitled to a fractional share of common stock, $.01 par value per share, of the Surviving Corporation will be paid an amount in cash (without interest), rounded to the nearest cent, determined by multiplying $13.96 by the fraction of a share of common stock, $.01 par value per share, of the Surviving Corporation to which such holder would otherwise be entitled. From and after the Effective Date, each holder of a certificate or certificates which prior thereto represented outstanding shares of common stock, $.001 par value per share, of the Merging Corporation shall be entitled, upon surrender of the same, to receive in exchange therefor certificates representing the number of shares of common stock, $.01 par value per share, of the Surviving Corporation into which the shares theretofore represented by the certificate or certificates to surrendered shall have been converted as provided in the previous paragraph. Until so surrendered, each such outstanding certificate which prior to the Effective Date represented shares of common stock, $.001 par value per share, of the Merging Corporation, shall be deemed for all corporate purposes, to evidence the ownership of the number of shares of common stock, $.01 par value per share, of the Surviving Corporation into which such shares of common stock, $.001 par value per share, of the Merging Corporation shall have been so converted. However, until the certificates which prior to the Effective Date represented shares of common stock, $.001 par value, of the Merging Corporation have been surrendered, the holder thereof shall not be entitled to receive any dividend or other distribution, if any, payable to the Surviving Corporation's stockholders. 2 3 All dividends or other distributions, if any, will be accrued and paid, without interest, to the stockholder upon surrender of his certificate or certificates which represented share(s) of common stock, $.001 par value per share, of the Merging Corporation. NINTH: The terms and conditions of the transaction described in these Articles were duly advised, authorized and approved by the Merging Corporation in the manner and by the vote required by the laws of the State of Maryland and the charter of the Merging Corporation, as follows: a) At a meeting of the Board of Directors of the Merging Corporation held on October 29, 1995, the Board of Directors adopted a resolution declaring that the terms and conditions of the transaction described herein were advisable and directing that the proposed transaction be submitted for consideration by the stockholders of the Merging Corporation and such resolution is filed with the minutes of the proceedings of the Board of Directors. b) At a special meeting of stockholders of the Merging Corporation held on March 14, 1996, the stockholders adopted a resolution approving the terms and conditions of the transaction and of the Merger Agreement described herein as so proposed and such resolution is filed with the minutes of the proceeds of the stockholders. TENTH: The terms and conditions of the transaction described in these Articles were duly advised, authorized and approved by the Surviving Corporation, in the manner and by the vote required by the laws of the State of Maryland and the charter of the Surviving Corporation, as follows: a) At a special meeting of the Board of Directors of the Surviving Corporation held on October 20, 1995, the Board of Directors adopted a resolution declaring that the terms and conditions of the transaction described herein were advisable and directing that the proposed transaction be submitted for consideration by the stockholders of the Surviving Corporation and such resolution is filed with the minutes of the proceedings of the Board of Directors. b) At a special meeting of stockholders of the Surviving Corporation held on March 14, 1996, the stockholders adopted a resolution approving the terms and conditions of the transaction described herein as so proposed and such resolution is filed with the minutes of the proceeds of the stockholders. ELEVENTH: These Articles of Merger shall become effective upon filing with the State Department of Assessments and Taxation of Maryland (the "Effective Date"). TWELFTH: Each undersigned President acknowledges these Articles of Merger to be the corporate act of the respective corporate party on whose behalf he has signed, and further, 3 4 as to all matters or facts required to be verified under oath, each President acknowledges that to the best of his knowledge, information and belief, these matters and facts relating to the corporation on whose behalf he has signed are true in all material respects and that this statement is made under the penalties for perjury. IN WITNESS WHEREOF, these Articles of Merger have been duly executed by the parties hereto this 15th day of March, 1996. ATTEST: TUCKER PROPERTIES CORPORATION /s/ Richard H. Tucker By: /s/ Kenneth L. Tucker (SEAL) - --------------------- --------------------- Richard H. Tucker Kenneth L. Tucker Secretary President ATTEST: BRADLEY REAL ESTATE, INC. /s/ William B. King By: /s/ Thomas P. D'Arcy (SEAL) - --------------------- --------------------- William B. King Thomas P. D'Arcy Secretary President
4 EX-10.2 3 REVOLVING CREDIT AGREEMENT 1 EXHIBIT 10.2 REVOLVING CREDIT AGREEMENT This REVOLVING CREDIT AGREEMENT is made as of the 15th day of March, 1996, by and among BRADLEY REAL ESTATE, INC., a Maryland corporation and BRADLEY OPERATING LIMITED PARTNERSHIP, a Delaware limited partnership, each having its principal place of business at 699 Boylston Street, Boston, Massachusetts 02116, and certain Subsidiaries which become parties hereto (jointly and severally, the "Borrower"), and THE FIRST NATIONAL BANK OF BOSTON, a national banking association ("FNBB"), and the other lending institutions which become parties hereto (the "Banks"); and THE FIRST NATIONAL BANK OF BOSTON, as agent for itself and such other Banks. [Section] 1. DEFINITIONS AND RULES OF INTERPRETATION. [Section] 1.1 DEFINITIONS. The following terms shall have the meanings set forth in this ss.1 or elsewhere in the provisions of this Agreement referred to below: AGENT. The First National Bank of Boston or any permitted successor agent acting as agent for the Banks. AGENT'S HEAD OFFICE. The Agent's head office located at 100 Federal Street, Boston, Massachusetts 02110, or at such other location as the Agent may designate from time to time. AGENT'S SPECIAL COUNSEL. Bingham, Dana & Gould, or such other counsel as may be approved by the Agent. AGREEMENT. This Revolving Credit Agreement, including the SCHEDULES and EXHIBITS hereto, as any of the same may hereafter be modified, supplemented or amended from time to time. ANNUAL CAPITAL EXPENDITURE RESERVE. For any period, the amount set forth on EXHIBIT H with respect to such period. APPLICABLE MARGIN. The applicable margin over the then Eurodollar Rate or LIBOR Rate, as applicable to the Loan(s) in question, as set forth below used in calculating the interest rate applicable to Eurodollar Rate Loans and LIBOR Rate Loans, which shall vary from time to time in accordance with the Borrower's long term unsecured debt ratings (or, if applicable, Borrower's Indicative Rating). The Applicable Margin to be used in calculating the interest rate applicable to Eurodollar Rate or LIBOR Rate Loans shall vary from time to time in accordance with the Borrower's then applicable (x) Moody's debt rating or (y) S&P's debt rating, as the case may be, and the Applicable Margins shall be adjusted effective on the next Business Day following any change in Borrower's Moody's debt rating or S&P's debt rating, as the case may be for Loans arising thereafter. In the event that only one of Moody's or S&P has set Borrower's credit rating, then the Applicable Margin shall be based on such rating only. In the event that the Borrower has then current ratings from S&P and Moody's and neither of such ratings is lower than BBB- and Baa3, respectively, then the Applicable Margin shall be based upon the average of such ratings. In the event that the Borrower has then current ratings from S&P and Moody's, and one or both of such ratings is lower than BBB- or Baa3, as applicable, then the Applicable Margin shall be based upon the lower of such ratings. The applicable debt ratings and the Applicable Margins are set forth in the following table:
- -------------------------------------------------------------------------------- APPLICABLE APPLICABLE MARGIN MARGIN FOR LIBOR FOR EURODOLLAR RATE S&P RATING MOODY'S RATING RATE LOANS LOANS - --------------------------------------------------------------------------------
2 - -------------------------------------------------------------------------------- A OR HIGHER A2 OR HIGHER 1.250% 1.250% - -------------------------------------------------------------------------------- BBB+ TO A- BAA1 TO A3 1.375% 1.375% - -------------------------------------------------------------------------------- BBB- TO BBB BAA3 TO BAA2 1.500% 1.500% - -------------------------------------------------------------------------------- LESS THAN BBB- LESS THAN BAA3 1.750% 1.750% - --------------------------------------------------------------------------------
IF A RATING AGENCY DOWNGRADE OR DISCONTINUANCE RESULTS IN AN INCREASE IN THE APPLICABLE MARGIN FOR EURODOLLAR RATE LOANS OR THE APPLICABLE MARGIN FOR LIBOR RATE LOANS AND IF SUCH DOWNGRADE OR DISCONTINUANCE IS REVERSED AND THE AFFECTED APPLICABLE MARGIN IS RESTORED WITHIN NINETY (90) DAYS THEREAFTER TO THE APPLICABLE MARGIN IN EFFECT IMMEDIATELY PRIOR TO SUCH DOWNGRADE OR DISCONTINUANCE, THEN, AT BORROWER'S REQUEST, BORROWER SHALL RECEIVE A CREDIT AGAINST INTEREST NEXT DUE THE BANKS EQUAL TO INTEREST ACCRUED FROM TIME TO TIME DURING SUCH PERIOD OF DOWNGRADE OR DISCONTINUANCE ON THE LOANS AT THE DIFFERENTIAL BETWEEN SUCH APPLICABLE MARGINS. UNTIL SUCH TIME AS THE BORROWER OBTAINS LONG-TERM UNSECURED DEBT RATINGS (OR INDICATIVE RATING, AS APPLICABLE) FROM EITHER S&P OR MOODY'S, THE APPLICABLE MARGIN FOR EURODOLLAR RATE LOANS AND LIBOR RATE LOANS SHALL BE 1.75%; PROVIDED THAT IF DURING SUCH PERIOD PRIOR TO THE OBTAINING OF LONG-TERM UNSECURED DEBT RATINGS THE FINANCIAL STATEMENTS DELIVERED BY THE BORROWER PURSUANT TO [SECTION] 7.4 INDICATE THAT THE CONSOLIDATED OUTSTANDING INDEBTEDNESS AS AT THE END OF ANY FISCAL QUARTER OF THE BORROWER IS LESS THAN OR EQUAL TO 40% OF CONSOLIDATED MARKET VALUE AS AT THE END OF SUCH FISCAL QUARTER, THEN, EFFECTIVE FROM THE FIRST DAY AFTER RECEIPT OF SUCH FINANCIAL STATEMENTS UNTIL THE EARLIER OF THE DELIVERY OF THE NEXT FINANCIAL STATEMENTS PURSUANT TO [SECTION] 7.4 OR THE BORROWER'S OBTAINING SUCH LONG-TERM UNSECURED DEBT RATINGS, THE APPLICABLE MARGIN FOR EURODOLLAR RATE LOANS AND LIBOR RATE LOANS SHALL BE 1.625%. THE AGENT ACKNOWLEDGES THAT, AS OF THE CLOSING DATE, THE APPLICABLE MARGIN FOR EURODOLLAR RATE LOANS AND LIBOR RATE LOANS IS 1.75%. ASSETS UNDER DEVELOPMENT. AS OF ANY DATE OF DETERMINATION, THE TOTAL BOOK VALUE (AS DETERMINED BY GENERALLY ACCEPTED ACCOUNTING PRINCIPLES) OF LAND (AND ANY BUILDINGS TO THE EXTENT CONSTRUCTED THEREON) WHOLLY-OWNED BY THE BORROWER OR ITS SUBSIDIARIES WHICH IS CURRENTLY UNDER DEVELOPMENT. AS USED HEREIN, "CURRENTLY UNDER DEVELOPMENT" SHALL MEAN THAT THE BORROWER OR ITS SUBSIDIARIES IS ACTIVELY PURSUING CONSTRUCTION OF BUILDINGS, AND SUCH CONSTRUCTION IS PROCEEDING TO COMPLETION WITHOUT UNDUE DELAY FROM PERMIT DENIAL, CONSTRUCTION DELAYS OR OTHERWISE. ASSIGNMENT AND ACCEPTANCE. SEE [SECTION] 18.1. BALANCE SHEET DATE. SEPTEMBER 30, 1995. BANKS. FNBB AND THE OTHER LENDING INSTITUTIONS LISTED FROM TIME TO TIME ON SCHEDULE 1 HERETO WHO BECOME SIGNATORIES TO THIS AGREEMENT, ANY OTHER PERSON WHO IS AN ELIGIBLE ASSIGNEE AND BECOMES AN ASSIGNEE OF ANY RIGHTS OF A BANK PURSUANT TO [SECTION] 18 AND BECOMES A SIGNATORY TO THIS AGREEMENT OR ANY PERSON WHO ACQUIRES ALL OR SUBSTANTIALLY ALL OF THE STOCK OR ASSETS OF A BANK. BASE RATE. THE ANNUAL RATE OF INTEREST ANNOUNCED FROM TIME TO TIME BY FNBB AT THE AGENT'S HEAD OFFICE AS ITS "BASE RATE". 2 3 BASE RATE LOANS. THOSE LOANS BEARING INTEREST CALCULATED BY REFERENCE TO THE BASE RATE. BORROWER. AS DEFINED IN THE PREAMBLE HERETO. BUILDINGS. THE BUILDINGS, STRUCTURES AND OTHER IMPROVEMENTS NOW OR HEREAFTER LOCATED ON THE REAL ESTATE. BUSINESS DAY. ANY DAY ON WHICH ALL OF THE BANKS ARE OPEN FOR THE TRANSACTION OF BANKING BUSINESS AND, IN THE CASE OF EURODOLLAR RATE LOANS, ALSO A DAY WHICH IS A EURODOLLAR BUSINESS DAY, AND IN THE CASE OF LIBOR RATE LOANS, ALSO A DAY WHICH IS A LIBOR BUSINESS DAY. BUSINESS PLAN SUMMARY. A STATEMENT PREPARED AS OF THE DATE HEREOF BY THE BORROWER AND REASONABLY SATISFACTORY TO THE AGENT, SPECIFYING, AMONG OTHER THINGS, (I) THE INTENDED OPERATIONS AND TYPE OF REAL ESTATE INVESTMENT TRUST OF THE BORROWER, (II) THE SHORT AND LONG TERM GOALS OF THE BORROWER WITH RESPECT TO GROWTH AND INCOME AND (III) THE REAL ESTATE ASSET ACQUISITION STRATEGY OF THE BORROWER. A TRUE AND ACCURATE COPY OF THE BUSINESS PLAN SUMMARY IS ATTACHED AS SCHEDULE 1.1. BORROWER SHALL HAVE THE RIGHT TO UPDATE THE BUSINESS PLAN SUMMARY FROM TIME TO TIME WITH THE PRIOR CONSENT OF THE BANKS, WHICH WILL NOT BE UNREASONABLY WITHHELD SO LONG AS THE BASIC OPERATIONS OF, TYPE OF REAL ESTATE OWNED BY, AND TYPE OF REAL ESTATE INVESTMENT TRUST OF THE BORROWER DO NOT CHANGE. CAPITAL STOCK. ALL SHARES, INTERESTS, PARTICIPATIONS, OR OTHER EQUIVALENTS (HOWEVER DESIGNATED) OF CAPITAL STOCK OF A CORPORATION, ANY AND ALL EQUIVALENT LEGAL AND BENEFICIAL OWNERSHIP INTERESTS IN A PERSON WHICH IS NOT A CORPORATION AND ANY AND ALL WARRANTS OR OPTIONS TO PURCHASE ANY OF THE FOREGOING. CAPITALIZATION RATE. TEN AND ONE-HALF PERCENT (10.5%). CAPITALIZED LEASES. LEASES UNDER WHICH THE BORROWER IS THE LESSEE OR OBLIGOR, THE DISCOUNTED FUTURE RENTAL PAYMENT OBLIGATIONS UNDER WHICH ARE REQUIRED TO BE CAPITALIZED ON THE BALANCE SHEET OF THE BORROWER IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. CASH EQUIVALENTS. THOSE INVESTMENTS DESCRIBED IN [SECTION] 8.3(A), (B) AND (C) HEREOF. CERCLA. SEE [SECTION] 6.18. CLOSING DATE. THE FIRST DATE ON WHICH THE CONDITIONS SPECIFIED IN [SECTION] 10 HEREOF HAVE BEEN SATISFIED OR WAIVED IN WRITING BY THE BANKS. CODE. THE INTERNAL REVENUE CODE OF 1986, AS AMENDED AND IN EFFECT FROM TIME TO TIME. COMMITMENT. WITH RESPECT TO EACH BANK, THE AMOUNT SET FORTH FROM TIME TO TIME ON SCHEDULE 1.2 HERETO AS THE AMOUNT OF SUCH BANK'S 3 4 COMMITMENT TO MAKE LOANS TO, AND TO PARTICIPATE IN THE ISSUANCE, EXTENSION AND RENEWAL OF LETTERS OF CREDIT FOR THE ACCOUNT OF, THE BORROWER. COMMITMENT PERCENTAGE. WITH RESPECT TO EACH BANK, THE PERCENTAGE SET FORTH FROM TIME TO TIME ON SCHEDULE 1.2 HERETO AS SUCH BANK'S PERCENTAGE OF THE TOTAL COMMITMENT. COMPLIANCE CERTIFICATE. A STATEMENT IN THE FORM OF EXHIBIT C ATTACHED HERETO SIGNED BY THE PRINCIPAL FINANCIAL OR ACCOUNTING OFFICER OF BRADLEY REAL ESTATE, INC. SETTING FORTH IN REASONABLE DETAIL COMPUTATIONS EVIDENCING COMPLIANCE WITH THE COVENANTS CONTAINED IN [SECTION] 9.1 THROUGH 9.7 HEREOF, AND SUCH OTHER MATTERS REQUIRED BY THE TERMS OF THIS AGREEMENT. IN ADDITION, ANY COMPLIANCE CERTIFICATES SUBMITTED TO THE AGENT HEREUNDER SHALL GIVE EFFECT TO ANY TRANSACTIONS FOR WHICH A COMPLIANCE CERTIFICATE IS THEN CURRENTLY PENDING. CONSOLIDATED OR CONSOLIDATED. WITH REFERENCE TO ANY TERM DEFINED HEREIN, SHALL MEAN THE TERM AS APPLIED TO THE ACCOUNTS OF THE BORROWER AND ITS SUBSIDIARIES, CONSOLIDATED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. CONSOLIDATED CAPITALIZATION VALUE. AN AMOUNT EQUAL TO CONSOLIDATED CASH FLOW FOR THE MOST RECENT PERIOD OF TWO (2) CONSECUTIVE COMPLETED FISCAL QUARTERS MULTIPLIED BY 2, WITH THE PRODUCT BEING DIVIDED BY THE CAPITALIZATION RATE. CONSOLIDATED CASH FLOW. FOR ANY PERIOD, AN AMOUNT EQUAL TO THE SUM OF (a) FUNDS FROM OPERATIONS FOR SUCH PERIOD PLUS (b) CONSOLIDATED TOTAL INTEREST EXPENSE FOR SUCH PERIOD PLUS (c) GENERAL AND ADMINISTRATIVE EXPENSES FOR SUCH PERIOD. CONSOLIDATED DEBT SERVICE. FOR ANY PERIOD, (a) CONSOLIDATED TOTAL INTEREST EXPENSE FOR SUCH PERIOD PLUS (b) THE AGGREGATE AMOUNT OF SCHEDULED PRINCIPAL PAYMENTS OF INDEBTEDNESS (EXCLUDING OPTIONAL PREPAYMENTS AND SCHEDULED PRINCIPAL PAYMENTS IN RESPECT OF ANY INDEBTEDNESS WHICH IS NOT AMORTIZED THROUGH EQUAL PERIODIC INSTALLMENTS OF PRINCIPAL AND INTEREST OVER THE TERM OF SUCH INDEBTEDNESS, INCLUDING, WITHOUT LIMITATION, BALLOON PAYMENTS AT MATURITY) REQUIRED TO BE MADE DURING SUCH PERIOD BY THE BORROWER AND ANY OF ITS SUBSIDIARIES. CONSOLIDATED MARKET VALUE. AS OF ANY DATE, AN AMOUNT EQUAL TO THE SUM OF (a) THE CONSOLIDATED CAPITALIZATION VALUE AS OF SUCH DATE, PLUS (b) 100% OF THE VALUE OF UNRESTRICTED CASH AND CASH EQUIVALENTS (EXCLUDING, UNTIL FORFEITED OR OTHERWISE ENTITLED TO BE RETAINED BY BORROWER OR ITS SUBSIDIARIES, TENANT SECURITY AND OTHER RESTRICTED DEPOSITS), PLUS (c) 100% OF THE VALUE OF ASSETS UNDER DEVELOPMENT. CONSOLIDATED NET INCOME. THE CONSOLIDATED NET INCOME (BEFORE DEDUCTION FOR INCOME ALLOCATED TO MINORITY INTERESTS OF BRADLEY OPERATING LIMITED PARTNERSHIP) OF THE BORROWER AND ITS SUBSIDIARIES, AFTER DEDUCTION OF ALL EXPENSES, TAXES, AND OTHER PROPER CHARGES, DETERMINED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, AFTER ELIMINATING THEREFROM ALL EXTRAORDINARY NONRECURRING ITEMS OF INCOME. CONSOLIDATED NET OPERATING INCOME. WITH RESPECT TO ONE OR MORE REAL ESTATE ASSETS, AS APPLICABLE, CONSOLIDATED NET INCOME FOR SUCH REAL ESTATE ASSETS, BUT BEFORE PAYMENT OR PROVISION FOR INTEREST EXPENSE OR OTHER DEBT SERVICE CHARGES AND ANY NON-CASH CHARGES SUCH AS DEPRECIATION OR AMORTIZATION OF FINANCING COSTS RELATING TO SUCH REAL ESTATE ASSETS. 4 5 CONSOLIDATED NET WORTH. AS OF ANY DATE OF DETERMINATION, THE CONSOLIDATED MARKET VALUE MINUS CONSOLIDATED OUTSTANDING INDEBTEDNESS. CONSOLIDATED OUTSTANDING INDEBTEDNESS. AS OF ANY DATE OF DETERMINATION, ALL INDEBTEDNESS OF THE BORROWER AND ITS SUBSIDIARIES AS OF SUCH DATE DETERMINED ON A CONSOLIDATED BASIS IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. CONSOLIDATED SECURED INDEBTEDNESS. AS OF ANY DATE OF DETERMINATION, THE SUM OF THE FOLLOWING INDEBTEDNESS, WITHOUT DUPLICATION: (a) THE AGGREGATE PRINCIPAL AMOUNT OF ALL INDEBTEDNESS OF THE BORROWER AND ITS SUBSIDIARIES OUTSTANDING AT SUCH DATE SECURED BY A LIEN ON PROPERTIES OF THE BORROWER OR ITS SUBSIDIARIES, WITHOUT REGARD TO RECOURSE, PLUS (b) THE AGGREGATE PRINCIPAL AMOUNT OF ALL UNSECURED INDEBTEDNESS OF THE SUBSIDIARIES (OTHER THAN BRADLEY OPERATING LIMITED PARTNERSHIP) OF THE BORROWER OVER $5,000,000. CONSOLIDATED TOTAL INTEREST EXPENSE. FOR ANY PERIOD, THE AGGREGATE AMOUNT OF INTEREST REQUIRED TO BE PAID OR ACCRUED BY THE BORROWER AND ITS SUBSIDIARIES DURING SUCH PERIOD ON ALL INDEBTEDNESS OF THE BORROWER AND ITS SUBSIDIARIES OUTSTANDING DURING ALL OR ANY PART OF SUCH PERIOD, WHETHER SUCH INTEREST WAS OR IS REQUIRED TO BE REFLECTED AS AN ITEM OF EXPENSE OR CAPITALIZED, INCLUDING PAYMENTS CONSISTING OF INTEREST IN RESPECT OF CAPITALIZED LEASES AND INCLUDING COMMITMENT FEES, AGENCY FEES, FACILITY FEES, BALANCE DEFICIENCY FEES AND SIMILAR FEES OR EXPENSES IN CONNECTION WITH THE BORROWING OF MONEY. CONSOLIDATED UNENCUMBERED ASSET CASH FLOW. CONSOLIDATED NET OPERATING INCOME FOR EACH UNENCUMBERED ASSET MINUS THE ANNUAL CAPITAL EXPENDITURE RESERVE FOR SUCH UNENCUMBERED ASSET. CONSOLIDATED UNSECURED DEBT SERVICE CHARGES. FOR ANY PERIOD, AN AMOUNT DETERMINED BY THE AGENT BASED ON A TWENTY-FIVE (25) YEAR MORTGAGE STYLE AMORTIZATION SCHEDULE, CALCULATED ON THE AVERAGE AMOUNT OF CONSOLIDATED UNSECURED INDEBTEDNESS OUTSTANDING DURING SUCH PERIOD AT AN INTEREST RATE EQUAL TO THE GREATER OF (i) THE ACTUAL INTEREST RATE IN EFFECT AT THE END OF SUCH FISCAL PERIOD FOR EACH ITEM OF CONSOLIDATED UNSECURED INDEBTEDNESS AND (ii) AN INTEREST RATE EQUAL TO THE THEN CURRENT TEN YEAR U.S. TREASURY BILL YIELD PLUS TWO PERCENT (2.0%). CONSOLIDATED UNSECURED INDEBTEDNESS. AS OF ANY DATE OF DETERMINATION, THE AGGREGATE PRINCIPAL AMOUNT OF ALL UNSECURED INDEBTEDNESS OF THE BORROWER AND ITS SUBSIDIARIES OUTSTANDING AT SUCH DATE, INCLUDING WITHOUT LIMITATION ALL THE OBLIGATIONS UNDER THIS AGREEMENT AS OF SUCH DATE, DETERMINED ON A CONSOLIDATED BASIS IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. CONVERSION REQUEST. A NOTICE GIVEN BY THE BORROWER TO THE AGENT OF ITS ELECTION TO CONVERT OR CONTINUE A LOAN IN ACCORDANCE WITH [SECTION] 2.6. DEFAULT. AN EVENT OR ACT WHICH WITH THE GIVING OF NOTICE AND/OR THE LAPSE OF TIME, WOULD BECOME AN EVENT OF DEFAULT. NOTWITHSTANDING THE FOREGOING, ANY EVENT OR ACT WHICH CONSTITUTES A NON-MATERIAL BREACH SHALL NOT BE A DEFAULT. DISTRIBUTION. THE DECLARATION OR PAYMENT OF ANY DISTRIBUTION OF CASH OR CASH EQUIVALENTS TO THE BENEFICIARIES OR SHAREHOLDERS OF THE BORROWER IN RESPECT OF ANY SHARES OF BENEFICIAL INTEREST OF THE BORROWER, OTHER THAN DISTRIBUTIONS PAYABLE SOLELY IN EQUITY SECURITIES OF THE BORROWER; THE PURCHASE, REDEMPTION, EXCHANGE OR OTHER RETIREMENT OF ANY SHARES OF BENEFICIAL 5 6 INTEREST OF THE BORROWER, DIRECTLY OR INDIRECTLY THROUGH A SUBSIDIARY OF THE BORROWER OR OTHERWISE; THE RETURN OF CAPITAL BY THE BORROWER TO ITS SHAREHOLDERS AS SUCH; OR ANY OTHER DISTRIBUTION ON OR IN RESPECT OF ANY SHARES OF BENEFICIAL INTEREST OF THE BORROWER. DOLLARS OR $. DOLLARS IN LAWFUL CURRENCY OF THE UNITED STATES OF AMERICA. DOMESTIC LENDING OFFICE. INITIALLY, THE OFFICE OF EACH BANK DESIGNATED AS SUCH IN SCHEDULE 1.3 HERETO; THEREAFTER, SUCH OTHER OFFICE OF SUCH BANK, IF ANY, LOCATED WITHIN THE UNITED STATES THAT WILL BE MAKING OR MAINTAINING BASE RATE LOANS. DRAWDOWN DATE. THE DATE ON WHICH ANY LOAN IS MADE OR IS TO BE MADE, AND THE DATE ON WHICH ANY LOAN IS CONVERTED OR CONTINUED IN ACCORDANCE WITH [SECTION] 2.6. EFFECTIVE DATE. THE DATE UPON WHICH THIS AGREEMENT SHALL BECOME EFFECTIVE PURSUANT TO [SECTION] 10. ELIGIBLE ASSIGNEE. ANY OF (a) A COMMERCIAL BANK ORGANIZED UNDER THE LAWS OF THE UNITED STATES, OR ANY STATE THEREOF OR THE DISTRICT OF COLUMBIA, AND HAVING TOTAL ASSETS IN EXCESS OF $5,000,000,000; AND (b) A COMMERCIAL BANK ORGANIZED UNDER THE LAWS OF ANY OTHER COUNTRY WHICH IS A MEMBER OF THE ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT (THE "OECD"), OR A POLITICAL SUBDIVISION OF ANY SUCH COUNTRY, AND HAVING TOTAL ASSETS IN EXCESS OF $5,000,000,000, PROVIDED THAT SUCH BANK IS ACTING THROUGH A BRANCH OR AGENCY LOCATED IN THE COUNTRY IN WHICH IT IS ORGANIZED OR ANOTHER COUNTRY WHICH IS ALSO A MEMBER OF THE OECD. EMPLOYEE BENEFIT PLAN. ANY EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF [SECTION] 3(3) OF ERISA MAINTAINED OR CONTRIBUTED TO BY THE BORROWER OR ANY ERISA AFFILIATE, OTHER THAN A MULTIEMPLOYER PLAN. ENVIRONMENTAL LAWS. SEE [SECTION] 6.18(a). ERISA. THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED AND IN EFFECT FROM TIME TO TIME. ERISA AFFILIATE. ANY PERSON WHICH IS TREATED AS A SINGLE EMPLOYER WITH THE BORROWER UNDER [SECTION] 414 OF THE CODE. ERISA REPORTABLE EVENT. A REPORTABLE EVENT WITH RESPECT TO A GUARANTEED PENSION PLAN WITHIN THE MEANING OF [SECTION] 4043 OF ERISA AND THE REGULATIONS PROMULGATED THEREUNDER AS TO WHICH THE REQUIREMENT OF NOTICE HAS NOT BEEN WAIVED. EUROCURRENCY RESERVE RATE. FOR ANY DAY WITH RESPECT TO A EURODOLLAR RATE LOAN OR LIBOR RATE LOAN, THE MAXIMUM RATE (EXPRESSED AS A DECIMAL) AT WHICH ANY BANK SUBJECT THERETO WOULD BE REQUIRED TO MAINTAIN RESERVES UNDER REGULATION D OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM (OR ANY SUCCESSOR OR SIMILAR REGULATIONS RELATING TO SUCH RESERVE REQUIREMENTS) AGAINST "EUROCURRENCY LIABILITIES" (AS THAT TERM IS USED IN REGULATION D), IF SUCH LIABILITIES WERE OUTSTANDING. THE EUROCURRENCY RESERVE RATE SHALL BE ADJUSTED AUTOMATICALLY ON AND AS OF THE EFFECTIVE DATE OF ANY CHANGE IN THE EUROCURRENCY RESERVE RATE. 6 7 EURODOLLAR BUSINESS DAY. ANY DAY ON WHICH COMMERCIAL BANKS ARE OPEN FOR INTERNATIONAL BUSINESS (INCLUDING DEALINGS IN DOLLAR DEPOSITS) IN LONDON OR SUCH OTHER EURODOLLAR INTERBANK MARKET AS MAY BE SELECTED BY THE AGENT IN ITS SOLE DISCRETION ACTING IN GOOD FAITH. 7 8 EURODOLLAR LENDING OFFICE. INITIALLY, THE OFFICE OF EACH BANK DESIGNATED AS SUCH IN SCHEDULE 1.3 HERETO; THEREAFTER, SUCH OTHER OFFICE OF SUCH BANK, IF ANY, THAT SHALL BE MAKING OR MAINTAINING EURODOLLAR RATE LOANS. EURODOLLAR RATE. FOR ANY INTEREST PERIOD WITH RESPECT TO A EURODOLLAR RATE LOAN, THE RATE PER ANNUM EQUAL TO THE QUOTIENT (ROUNDED UPWARDS TO THE NEAREST 1/16 OF ONE PERCENT) OF (a) THE RATE AT WHICH THE AGENT IS OFFERED DOLLAR DEPOSITS TWO EURODOLLAR BUSINESS DAYS PRIOR TO THE BEGINNING OF SUCH INTEREST PERIOD IN AN INTERBANK EURODOLLAR MARKET WHERE THE EURODOLLAR AND FOREIGN CURRENCY AND EXCHANGE OPERATIONS OF THE AGENT ARE CUSTOMARILY CONDUCTED FOR DELIVERY ON THE FIRST DAY OF SUCH INTEREST PERIOD FOR THE NUMBER OF DAYS COMPRISED THEREIN AND IN AN AMOUNT COMPARABLE TO THE AMOUNT OF THE EURODOLLAR RATE LOAN TO WHICH SUCH INTEREST PERIOD APPLIES, DIVIDED BY (b) A NUMBER EQUAL TO 1.00 MINUS THE EUROCURRENCY RESERVE RATE. EURODOLLAR RATE LOANS. LOANS BEARING INTEREST CALCULATED BY REFERENCE TO THE EURODOLLAR RATE. EVENT OF DEFAULT. SEE [SECTION] 12.1. FNBB. SEE PREAMBLE. FRONTING BANK MEANS ANY BANK WHICH IS DESIGNATED BY BORROWER IN ITS LOAN REQUEST AS THE BANK WHICH SHALL ISSUE THE LETTER OF CREDIT WITH RESPECT TO SUCH LOAN REQUEST; PROVIDED, THAT THE FRONTING BANK SHALL BE FNBB UNLESS ANOTHER BANK HAS A HIGHER (I.E. MORE FAVORABLE) S&P OR MOODY'S CREDIT RATING. FUNDS FROM OPERATIONS. FOR ANY PERIOD COMMENCING ON OR AFTER JULY 1, 1996, CONSOLIDATED NET INCOME FOR SUCH PERIOD (BEFORE DEDUCTION FOR INCOME ALLOCATED TO MINORITY INTERESTS OF BRADLEY OPERATING LIMITED PARTNERSHIP, DEPRECIATION, AMORTIZATION, EQUITY GAINS (LOSSES) FROM EACH UNCONSOLIDATED JOINT VENTURE INCLUDED THEREIN AND OTHER NON- CASH CHARGES EXCLUDING ANY AMORTIZATION OF DEFERRED FINANCE COSTS), LESS GAINS (LOSSES) ON SALES OF PROPERTY, NON- RECURRING CHARGES AND EXTRAORDINARY ITEMS, PLUS THE PROPORTIONATE SHARE OF FUNDS FROM OPERATIONS OF EACH UNCONSOLIDATED JOINT VENTURE THAT IS RECEIVED BY THE BORROWER OR ANY SUBSIDIARY FOR SUCH PERIOD, ALL DETERMINED ON A CONSISTENT BASIS. NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, FUNDS FROM OPERATIONS FOR EACH OF THE QUARTERS ENDING DECEMBER 31, 1995, MARCH 31, 1996, AND JUNE 30, 1996 RESPECTIVELY, SHALL BE DETERMINED AS SET FORTH IN THE REGISTRATION STATEMENT AND SHALL EQUAL THE QUOTIENT OF (i) THE SUM OF FUNDS FROM OPERATIONS FOR THE THREE FISCAL QUARTERS OF 1995 SHOWN ON THE PRO FORMA CONSOLIDATED INCOME STATEMENT INCLUDED ON THE REGISTRATION STATEMENT DIVIDED BY (ii) 3. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES OR GAAP. PRINCIPLES THAT ARE (a) CONSISTENT WITH THE PRINCIPLES PROMULGATED OR ADOPTED BY THE FINANCIAL ACCOUNTING STANDARDS BOARD AND ITS PREDECESSORS, AS IN EFFECT FROM TIME TO TIME AND (b) CONSISTENTLY APPLIED WITH PAST FINANCIAL STATEMENTS OF THE BORROWER ADOPTING THE SAME PRINCIPLES; PROVIDED THAT A CERTIFIED PUBLIC ACCOUNTANT WOULD, INSOFAR AS THE USE OF SUCH ACCOUNTING PRINCIPLES IS PERTINENT, BE IN A POSITION TO DELIVER AN UNQUALIFIED OPINION (OTHER THAN A QUALIFICATION REGARDING CHANGES IN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES) AS TO FINANCIAL STATEMENTS IN WHICH SUCH PRINCIPLES HAVE BEEN PROPERLY APPLIED. GUARANTEED PENSION PLAN. ANY EMPLOYEE PENSION BENEFIT PLAN WITHIN THE MEANING OF [SECTION] 3(2) OF ERISA MAINTAINED OR CONTRIBUTED TO BY THE BORROWER OR ANY ERISA AFFILIATE THE BENEFITS OF WHICH ARE GUARANTEED ON TERMINATION IN FULL OR IN PART BY THE PBGC PURSUANT TO TITLE IV OF ERISA, OTHER THAN A MULTIEMPLOYER PLAN. 8 9 HAZARDOUS SUBSTANCES. SEE [SECTION] 6.18(B). INDEBTEDNESS. ALL OF THE FOLLOWING OBLIGATIONS WITHOUT DUPLICATION: (a) THE OBLIGATIONS TO THE EXTENT OUTSTANDING FROM TIME TO TIME, (b) ALL DEBT AND SIMILAR MONETARY OBLIGATIONS FOR BORROWED MONEY, WHETHER DIRECT OR INDIRECT; (c) ALL OTHER LIABILITIES FOR BORROWED MONEY SECURED BY ANY LIEN EXISTING ON PROPERTY OWNED OR ACQUIRED SUBJECT THERETO, WHETHER OR NOT THE LIABILITY SECURED THEREBY SHALL HAVE BEEN ASSUMED; (d) REIMBURSEMENT OBLIGATIONS FOR LETTERS OF CREDIT, AND (e) ALL GUARANTEES, ENDORSEMENTS AND OTHER CONTINGENT OBLIGATIONS FOR BORROWED MONEY WHETHER DIRECT OR INDIRECT IN RESPECT OF INDEBTEDNESS OR OBLIGATIONS OF OTHERS. INDICATIVE RATING. AN UNISSUED LONG-TERM UNSECURED DEBT RATING PROVIDED TO THE BORROWER IN WRITING BY EITHER MOODY'S OR S&P WHICH RATING IS NO OLDER THAN TWO FISCAL QUARTERS. INTEREST PAYMENT DATE. (i) AS TO ANY BASE RATE LOAN, THE LAST DAY OF THE CALENDAR MONTH WHICH INCLUDES THE DRAWDOWN DATE THEREOF; AND (ii) AS TO ANY EURODOLLAR RATE LOAN OR LIBOR RATE LOAN IN RESPECT OF WHICH THE INTEREST PERIOD IS (a) 3 MONTHS OR LESS, THE LAST DAY OF SUCH INTEREST PERIOD AND (b) MORE THAN 3 MONTHS, THE DATE THAT IS 3 MONTHS FROM THE FIRST DAY OF SUCH INTEREST PERIOD AND, IN ADDITION, THE LAST DAY OF SUCH INTEREST PERIOD. INTEREST PERIOD. WITH RESPECT TO EACH LOAN, BUT WITHOUT DUPLICATION OF ANY OTHER INTEREST PERIOD, (a) INITIALLY, THE PERIOD COMMENCING ON THE DRAWDOWN DATE OF SUCH LOAN AND ENDING ON THE LAST DAY OF ONE OF THE PERIODS SET FORTH IN THE SUCCEEDING SUBCLAUSES, AS SELECTED BY THE BORROWER IN A LOAN REQUEST (i) FOR ANY BASE RATE LOAN, THE LAST DAY OF THE CALENDAR MONTH IN WHICH THE DRAWDOWN DATE OCCURS; (ii) FOR ANY EURODOLLAR RATE LOAN, 1, 2, 3, 6 OR 12 MONTHS; AND (iii) FOR ANY LIBOR RATE LOAN, 1, 2, 3, 6 OR 12 MONTHS AND (b) THEREAFTER, EACH PERIOD COMMENCING ON THE LAST DAY OF THE NEXT PRECEDING INTEREST PERIOD APPLICABLE TO SUCH LOAN AND ENDING ON THE LAST DAY OF ONE OF THE PERIODS SET FORTH ABOVE, AS SELECTED BY THE BORROWER IN A CONVERSION REQUEST OR OTHERWISE DEEMED SELECTED BY BORROWER; PROVIDED THAT ALL OF THE FOREGOING PROVISIONS RELATING TO INTEREST PERIODS ARE SUBJECT TO THE FOLLOWING: (A) IF ANY INTEREST PERIOD WITH RESPECT TO A EURODOLLAR RATE LOAN WOULD OTHERWISE END ON A DAY THAT IS NOT A EURODOLLAR BUSINESS DAY, THAT INTEREST PERIOD SHALL BE EXTENDED TO THE NEXT SUCCEEDING EURODOLLAR BUSINESS DAY UNLESS THE RESULT OF SUCH EXTENSION WOULD BE TO CARRY SUCH INTEREST PERIOD INTO ANOTHER CALENDAR MONTH, IN WHICH EVENT SUCH INTEREST PERIOD SHALL END ON THE IMMEDIATELY PRECEDING EURODOLLAR BUSINESS DAY; (B) IF ANY INTEREST PERIOD WITH RESPECT TO A LIBOR RATE LOAN WOULD OTHERWISE END ON A DAY THAT IS NOT A LIBOR BUSINESS DAY, THAT INTEREST PERIOD SHALL BE EXTENDED TO THE NEXT SUCCEEDING LIBOR BUSINESS DAY UNLESS THE RESULT OF SUCH EXTENSION WOULD BE TO CARRY SUCH INTEREST PERIOD INTO ANOTHER CALENDAR MONTH, IN WHICH EVENT SUCH INTEREST PERIOD SHALL END ON THE IMMEDIATELY PRECEDING LIBOR BUSINESS DAY; (C) IF ANY INTEREST PERIOD WITH RESPECT TO A BASE RATE LOAN WOULD END ON A DAY THAT IS NOT A BUSINESS DAY, THAT INTEREST PERIOD SHALL END ON THE NEXT SUCCEEDING BUSINESS DAY; (D) IF THE BORROWER SHALL FAIL TO GIVE NOTICE AS PROVIDED IN [SECTION] 2.6, THE BORROWER SHALL BE DEEMED TO HAVE REQUESTED A CONVERSION OF THE AFFECTED EURODOLLAR RATE LOAN OR LIBOR RATE LOAN TO A BASE RATE LOAN ON THE LAST DAY OF THE THEN CURRENT INTEREST PERIOD WITH RESPECT THERETO; (E) ANY INTEREST PERIOD RELATING TO ANY EURODOLLAR RATE LOAN THAT BEGINS ON THE LAST EURODOLLAR BUSINESS DAY OF A CALENDAR MONTH (OR ON A DAY FOR WHICH THERE IS NO NUMERICALLY CORRESPONDING DAY IN THE 9 10 CALENDAR MONTH AT THE END OF SUCH INTEREST PERIOD) SHALL END ON THE LAST EURODOLLAR BUSINESS DAY OF A CALENDAR MONTH; AND 10 11 (F) ANY INTEREST PERIOD RELATING TO ANY LIBOR RATE LOAN THAT BEGINS ON THE LAST LIBOR BUSINESS DAY OF A CALENDAR MONTH (OR ON A DAY FOR WHICH THERE IS NO NUMERICALLY CORRESPONDING DAY IN THE CALENDAR MONTH AT THE END OF SUCH INTEREST PERIOD) SHALL END ON THE LAST LIBOR BUSINESS DAY OF A CALENDAR MONTH; AND (G) ANY INTEREST PERIOD RELATING TO ANY EURODOLLAR RATE LOAN OR LIBOR RATE LOAN THAT WOULD OTHERWISE EXTEND BEYOND THE MATURITY DATE SHALL END ON THE MATURITY DATE. INVESTMENTS. ALL EXPENDITURES MADE AND ALL LIABILITIES INCURRED (CONTINGENTLY OR OTHERWISE) FOR THE ACQUISITION OF CAPITAL STOCK OR TOTAL INDEBTEDNESS OF, OR FOR LOANS, ADVANCES, CAPITAL CONTRIBUTIONS OR TRANSFERS OF PROPERTY TO, OR IN RESPECT OF ANY GUARANTIES (OR OTHER COMMITMENTS AS DESCRIBED UNDER TOTAL INDEBTEDNESS), OR OBLIGATIONS OF, ANY PERSON. IN DETERMINING THE AGGREGATE AMOUNT OF INVESTMENTS OUTSTANDING AT ANY PARTICULAR TIME: (a) THE AMOUNT OF ANY INVESTMENT REPRESENTED BY A GUARANTY SHALL BE TAKEN AT NOT LESS THAN THE PRINCIPAL AMOUNT OF THE OBLIGATIONS GUARANTEED AND STILL OUTSTANDING; (b) THERE SHALL BE INCLUDED AS AN INVESTMENT ALL INTEREST ACCRUED WITH RESPECT TO TOTAL INDEBTEDNESS CONSTITUTING AN INVESTMENT UNLESS AND UNTIL SUCH INTEREST IS PAID; (c) THERE SHALL BE DEDUCTED IN RESPECT OF EACH SUCH INVESTMENT ANY AMOUNT RECEIVED AS A RETURN OF CAPITAL (BUT ONLY BY REPURCHASE, REDEMPTION, RETIREMENT, REPAYMENT, LIQUIDATING DIVIDEND OR LIQUIDATING DISTRIBUTION); (d) THERE SHALL NOT BE DEDUCTED IN RESPECT OF ANY INVESTMENT ANY AMOUNTS RECEIVED AS EARNINGS ON SUCH INVESTMENT, WHETHER AS DIVIDENDS, INTEREST OR OTHERWISE, EXCEPT THAT ACCRUED INTEREST INCLUDED AS PROVIDED IN THE FOREGOING CLAUSE (b) MAY BE DEDUCTED WHEN PAID; AND (e) THERE SHALL NOT BE DEDUCTED FROM THE AGGREGATE AMOUNT OF INVESTMENTS ANY DECREASE IN THE VALUE THEREOF. LEASES. LEASES, LICENSES AND AGREEMENTS WHETHER WRITTEN OR ORAL, RELATING TO THE USE OR OCCUPATION OF SPACE IN OR ON THE BUILDINGS OR ON THE REAL ESTATE BY PERSONS OTHER THAN BORROWER. LETTER OF CREDIT. SEE [SECTION] 2A.1.1. LETTER OF CREDIT APPLICATION. SEE [SECTION] 2A.1.1. LETTER OF CREDIT PARTICIPATION. SEE [SECTION] 2A.1.4. 11 12 LIBOR BUSINESS DAY. ANY DAY ON WHICH COMMERCIAL BANKS ARE OPEN FOR INTERNATIONAL BUSINESS (INCLUDING DEALINGS IN DOLLAR DEPOSITS) IN LONDON OR SUCH OTHER EURODOLLAR INTERBANK MARKET AS MAY BE SELECTED BY THE AGENT IN ITS SOLE DISCRETION ACTING IN GOOD FAITH. LIBOR LENDING OFFICE. INITIALLY, THE OFFICE OF EACH BANK DESIGNATED AS SUCH IN SCHEDULE 1.3 HERETO; THEREAFTER, SUCH OTHER OFFICE OF SUCH BANK, IF ANY, THAT SHALL BE MAKING OR MAINTAINING LIBOR RATE LOANS. LIBOR RATE. FOR ANY INTEREST PERIOD WITH RESPECT TO A LIBOR RATE LOAN, THE RATE OF INTEREST EQUAL TO (i) THE RATE DETERMINED BY THE AGENT AT WHICH DOLLAR DEPOSITS FOR SUCH INTEREST PERIOD ARE OFFERED BASED ON INFORMATION PRESENTED ON TELERATE PAGE 3750 AS OF 11:00 A.M. LONDON TIME ON THE SECOND LIBOR BUSINESS DAY PRIOR TO THE FIRST DAY OF SUCH INTEREST PERIOD, DIVIDED BY (ii) A NUMBER EQUAL TO 1.00 MINUS THE EUROCURRENCY RESERVE RATE, IF APPLICABLE. LIBOR RATE LOANS. LOANS BEARING INTEREST CALCULATED BY REFERENCE TO THE LIBOR RATE. LIEN. ANY LIEN, ENCUMBRANCE, MORTGAGE, PLEDGE, CHARGE, RESTRICTION, PREFERENCE, PRIORITY OR OTHER SECURITY INTEREST OF ANY KIND OR NATURE (INCLUDING THE PROHIBITION OR RESTRICTION ON ANY SECURITY INTEREST), INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE TRANSFER OF ASSETS FOR THE PURPOSE OF SUBJECTING THE SAME TO THE PAYMENT OF TOTAL INDEBTEDNESS OR PERFORMANCE OF ANY OTHER OBLIGATION IN PRIORITY TO PAYMENT OF ITS GENERAL CREDITORS, OR ANY CONDITIONAL SALE OR OTHER TITLE RETENTION OR PURCHASE MONEY SECURITY AGREEMENT, DEVICE OR ARRANGEMENT. LOAN DOCUMENTS. THIS AGREEMENT, THE NOTES, THE LETTER OF CREDIT APPLICATIONS, THE LETTERS OF CREDIT, AND ANY AND ALL OTHER AGREEMENTS, DOCUMENTS AND INSTRUMENTS EXECUTED AND DELIVERED BY BORROWER AND NOW OR HEREAFTER EVIDENCING OR OTHERWISE RELATING TO THE LOANS. LOAN REQUEST. SEE [SECTION] 2.5. LOANS. LOANS MADE OR TO BE MADE BY THE BANKS TO THE BORROWER PURSUANT TO [SECTION] 2. MAJORITY BANKS. AS OF ANY DATE, THE BANKS HOLDING AT LEAST FIFTY-ONE PERCENT (51%) OF THE OUTSTANDING PRINCIPAL AMOUNT OF THE NOTES ON SUCH DATE; AND IF NO SUCH PRINCIPAL IS OUTSTANDING, THE BANKS WHOSE AGGREGATE COMMITMENTS CONSTITUTE AT LEAST FIFTY-ONE PERCENT (51%) OF THE TOTAL COMMITMENT. MATURITY DATE. MARCH 15, 1998, OR SUCH OTHER DATE ON WHICH THE LOANS SHALL BECOME DUE AND PAYABLE PURSUANT TO THE TERMS HEREOF; PROVIDED THAT THE BORROWER MAY, AT ITS OPTION, EXTEND THE MATURITY DATE FROM MARCH 15, 1998 (THE "ORIGINAL MATURITY DATE") TO MARCH 15, 1999 IF: (a) THE BORROWER SUBMITS A WRITTEN REQUEST FOR SUCH EXTENSION TO THE AGENT AT LEAST NINETY (90) DAYS PRIOR TO THE ORIGINAL MATURITY DATE TOGETHER WITH AN EXTENSION FEE EQUAL TO ONE-QUARTER OF ONE PERCENT (1/4%) OF THE TOTAL COMMITMENT, (b) NO DEFAULT OR EVENT OF DEFAULT EXISTS AS OF THE ORIGINAL MATURITY DATE, AS EVIDENCED BY A CERTIFICATE FROM THE PRINCIPAL FINANCIAL OR ACCOUNTING OFFICER OF THE BORROWER DELIVERED AT LEAST FIVE (5) DAYS PRIOR TO THE ORIGINAL MATURITY DATE AND (c) THE BORROWER SHALL HAVE (x) A SENIOR UNSECURED DEBT RATING (OR INDICATIVE RATING) OF AT LEAST BAA3 FROM MOODY'S OR A SENIOR UNSECURED DEBT RATING (OR INDICATIVE RATING) OF AT LEAST BBB- FROM S&P, EACH AS OF THE ORIGINAL MATURITY DATE, OR (xx) A SENIOR UNSECURED DEBT RATING (OR INDICATIVE RATING) OF AT LEAST BAA3 FROM MOODY'S AND A SENIOR UNSECURED DEBT RATING (OR INDICATIVE RATING) OF AT LEAST BBB- FROM S&P IF THE BORROWER SHALL HAVE A RATING FROM BOTH SUCH AGENCIES. MAXIMUM DRAWING AMOUNT. THE MAXIMUM AGGREGATE AMOUNT THAT THE BENEFICIARIES MAY AT ANY TIME DRAW UNDER OUTSTANDING LETTERS OF CREDIT, AS SUCH AGGREGATE AMOUNT MAY BE REDUCED FROM TIME TO TIME PURSUANT TO THE TERMS OF THE LETTERS OF CREDIT. 12 13 MOODY'S. MOODY'S INVESTORS' SERVICE, INC. AND ITS SUCCESSORS. MULTIEMPLOYER PLAN. ANY MULTIEMPLOYER PLAN WITHIN THE MEANING OF [SECTION] 3(37) OF ERISA MAINTAINED OR CONTRIBUTED TO BY THE BORROWER OR ANY ERISA AFFILIATE. NON-MATERIAL BREACH. A BREACH OF A REPRESENTATION OR WARRANTY OR AN AFFIRMATIVE COVENANT SET FORTH IN [SECTION] 6 OR [SECTION] 7 OF THIS AGREEMENT WHICH DOES NOT (a) MATERIALLY ADVERSELY AFFECT THE BUSINESS, PROPERTIES OR FINANCIAL CONDITION OF THE BORROWER AND ITS SUBSIDIARIES TAKEN AS A WHOLE, OR (b) MATERIALLY IMPAIR THE ABILITY OF THE BORROWER AND ITS SUBSIDIARIES, TAKEN AS A WHOLE, TO FULFILL THE MATERIAL OBLIGATIONS TO THE BANKS UNDER THE LOANS (INCLUDING WITHOUT LIMITATION THE REPAYMENT OF ALL AMOUNTS OUTSTANDING ON THE LOANS, TOGETHER WITH INTEREST AND CHARGES THEREON WHEN DUE). NOTWITHSTANDING THE FOREGOING, (i) IN THE EVENT OF A NON-MATERIAL BREACH WITH RESPECT TO A REAL ESTATE ASSET WHICH IS OTHERWISE AN UNENCUMBERED ASSET, SUCH REAL ESTATE ASSET SHALL NOT BE INCLUDED AS AN UNENCUMBERED ASSET FOR PURPOSES OF CALCULATING FINANCIAL COVENANT COMPLIANCE PURSUANT TO [SECTION] 9 OF THIS AGREEMENT FOR SO LONG AS SUCH BREACH SHALL EXIST; (ii) IN THE EVENT OF A NON-MATERIAL BREACH WITH RESPECT TO A REAL ESTATE ASSET OF A SUBSIDIARY WHICH HAS A MATERIAL ADVERSE EFFECT ON SUCH SUBSIDIARY BUT DOES NOT HAVE A MATERIAL ADVERSE EFFECT ON THE OTHER REAL ESTATE ASSETS OF SUCH SUBSIDIARY, ONLY THE AFFECTED REAL ESTATE ASSET SHALL NOT BE INCLUDED FOR PURPOSES OF CALCULATING FINANCIAL COVENANT COMPLIANCE PURSUANT TO SS.9 OF THIS AGREEMENT FOR SO LONG AS SUCH BREACH SHALL EXIST; AND (iii) IN THE EVENT OF A NON-MATERIAL BREACH WITH RESPECT TO A SUBSIDIARY OR A REAL ESTATE ASSET OF A SUBSIDIARY WHICH HAS A MATERIAL ADVERSE EFFECT ON SUCH SUBSIDIARY AND HAS A MATERIAL ADVERSE EFFECT ON REAL ESTATE ASSETS OF SUCH SUBSIDIARY, ALL OF THE REAL ESTATE ASSETS OF SUCH SUBSIDIARY SHALL NOT BE INCLUDED FOR PURPOSES OF CALCULATING FINANCIAL COVENANT COMPLIANCE PURSUANT TO [SECTION] 9 OF THIS AGREEMENT FOR SO LONG AS SUCH BREACH SHALL EXIST. NOTES. SEE [SECTION] 2.3. OBLIGATIONS. ALL INDEBTEDNESS, OBLIGATIONS AND LIABILITIES OF THE BORROWER AND ANY OF ITS SUBSIDIARIES TO ANY OF THE BANKS AND THE AGENT, INDIVIDUALLY OR COLLECTIVELY, UNDER THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR IN RESPECT OF ANY OF THE LOANS MADE OR REIMBURSEMENT OBLIGATIONS INCURRED, OR THE NOTES, LETTERS OF CREDIT OR OTHER INSTRUMENTS AT ANY TIME EVIDENCING ANY THEREOF, WHETHER EXISTING ON THE DATE OF THIS AGREEMENT OR ARISING OR INCURRED HEREAFTER, DIRECT OR INDIRECT, JOINT OR SEVERAL, ABSOLUTE OR CONTINGENT, MATURED OR UNMATURED, LIQUIDATED OR UNLIQUIDATED, SECURED OR UNSECURED, ISSUED OR DRAWN, ARISING BY CONTRACT, OPERATION OF LAW OF OTHERWISE. OUTSTANDING. WITH RESPECT TO THE LOANS, THE AGGREGATE UNPAID PRINCIPAL THEREOF AS OF ANY DATE OF DETERMINATION. PBGC. THE PENSION BENEFIT GUARANTY CORPORATION CREATED BY [SECTION] 4002 OF ERISA AND ANY SUCCESSOR ENTITY OR ENTITIES HAVING SIMILAR RESPONSIBILITIES. 13 14 PERMITS. ALL GOVERNMENTAL PERMITS, LICENSES, AND APPROVALS NECESSARY FOR THE LAWFUL CONSTRUCTION, OPERATION AND MAINTENANCE OF THE REAL ESTATE. PERMITTED LIENS. LIENS, SECURITY INTERESTS AND OTHER ENCUMBRANCES PERMITTED BY [SECTION] 8.2. PERSON. ANY INDIVIDUAL, CORPORATION, PARTNERSHIP, TRUST, UNINCORPORATED ASSOCIATION, BUSINESS, OR OTHER LEGAL ENTITY, AND ANY GOVERNMENT OR ANY GOVERNMENTAL AGENCY OR POLITICAL SUBDIVISION THEREOF. PROPERTIES. ALL REAL ESTATE ASSETS, REAL ESTATE, AND ALL OTHER ASSETS, INCLUDING, WITHOUT LIMITATION, INTANGIBLES AND PERSONALTY OWNED BY THE BORROWER OR ANY OF ITS SUBSIDIARIES. REAL ESTATE. ALL REAL PROPERTY AT ANY TIME OWNED, LEASED (AS LESSEE OR SUBLESSEE) OR OPERATED BY THE BORROWER OR ANY OF ITS SUBSIDIARIES. REAL ESTATE ASSETS. THOSE FIXED AND TANGIBLE PROPERTIES CONSISTING OF LAND, BUILDINGS AND/OR OTHER IMPROVEMENTS WHOLLY-OWNED BY THE BORROWER OR ANY OF ITS SUBSIDIARIES AT THE RELEVANT TIME OF REFERENCE THERETO OR JOINTLY OWNED TO THE EXTENT PERMITTED UNDER [SECTION] 8.3(f) OF THIS AGREEMENT, BUT EXCLUDING ALL LEASEHOLDS OTHER THAN LEASEHOLDS UNDER GROUND LEASES HAVING AN UNEXPIRED TERM OF 30 YEARS OR MORE AND THAT CERTAIN LEASEHOLD INTEREST GRANTED BY NATURAL GAS PIPELINE COMPANY AT THE WESTVIEW SHOPPING CENTER. RECORD. THE GRID ATTACHED TO ANY NOTE, OR THE CONTINUATION OF SUCH GRID, OR ANY OTHER SIMILAR RECORD, INCLUDING COMPUTER RECORDS, MAINTAINED BY ANY BANK WITH RESPECT TO ANY LOAN REFERRED TO IN SUCH NOTE. REGISTRATION STATEMENT. THE REGISTRATION STATEMENT FORM S-4 FOR THE BORROWER FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AS REGISTRATION STATEMENT NO. 33-64811, AS FILED ON FEBRUARY 15, 1996, AS THE SAME MAY BE FURTHER AMENDED OR MODIFIED. REIMBURSEMENT OBLIGATION. THE BORROWER'S OBLIGATION TO REIMBURSE THE AGENT AND THE BANKS ON ACCOUNT OF ANY DRAWING UNDER ANY LETTER OF CREDIT AS PROVIDED IN [SECTION] 2A.2. NOTWITHSTANDING THE FOREGOING, UNLESS BORROWER SHALL NOTIFY AGENT OF ITS INTENT TO REPAY THE REIMBURSEMENT OBLIGATION ON THE DATE OF THE RELATED DRAWING UNDER ANY LETTER OF CREDIT AS PROVIDED IN [SECTION] 2A.2, SUCH REIMBURSEMENT OBLIGATION SHALL SIMULTANEOUSLY WITH SUCH DRAWING BE CONVERTED TO AND BECOME A BASE RATE LOAN AS SET FORTH IN [SECTION] 2A.3. RELEASE. SEE [SECTION] 6.18(c)(iii). S&P. STANDARD & POOR'S RATINGS GROUP AND ITS SUCCESSORS. 14 15 SUBSIDIARY. ANY CORPORATION, ASSOCIATION, TRUST, OR OTHER BUSINESS ENTITY OF WHICH THE DESIGNATED PARENT OR OTHER CONTROLLING PERSON SHALL AT ANY TIME OWN DIRECTLY OR INDIRECTLY THROUGH A SUBSIDIARY OR SUBSIDIARIES AT LEAST A MAJORITY (BY NUMBER OF VOTES) OF THE OUTSTANDING VOTING INTERESTS. TOTAL COMMITMENT. THE SUM OF THE COMMITMENTS OF THE BANKS, AS IN EFFECT FROM TIME TO TIME. TOTAL INDEBTEDNESS. ALL OF THE FOLLOWING OBLIGATIONS, CONTINGENT AND OTHERWISE, BUT WITHOUT DUPLICATION, THAT IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES SHOULD BE CLASSIFIED UPON THE OBLIGOR'S BALANCE SHEET AS LIABILITIES, OR TO WHICH REFERENCE SHOULD BE MADE BY FOOTNOTES THERETO, INCLUDING IN ANY FOLLOWING EVENT AND WHETHER OR NOT SO CLASSIFIED: (a) ALL INDEBTEDNESS, (b) ALL OTHER DEBT AND SIMILAR MONETARY OBLIGATIONS, WHETHER DIRECT OR INDIRECT; (c) ALL OTHER LIABILITIES SECURED BY ANY MORTGAGE, PLEDGE, NEGATIVE PLEDGE, SECURITY INTEREST, LIEN, NEGATIVE LIEN, CHARGE, OR OTHER ENCUMBRANCE EXISTING ON PROPERTY OWNED OR ACQUIRED SUBJECT THERETO, WHETHER OR NOT THE LIABILITY SECURED THEREBY SHALL HAVE BEEN ASSUMED; (d) ALL OTHER GUARANTEES, ENDORSEMENTS AND OTHER CONTINGENT OBLIGATIONS WHETHER DIRECT OR INDIRECT IN RESPECT OF INDEBTEDNESS OR OBLIGATIONS OF OTHERS, INCLUDING ANY OBLIGATION TO SUPPLY FUNDS TO OR IN ANY MANNER TO INVEST IN, DIRECTLY OR INDIRECTLY, THE DEBTOR, TO PURCHASE INDEBTEDNESS, OR TO ASSURE THE OWNER OF INDEBTEDNESS AGAINST LOSS, THROUGH AN AGREEMENT TO PURCHASE GOODS, SUPPLIES, OR SERVICES FOR THE PURPOSE OF ENABLING THE DEBTOR TO MAKE PAYMENT OF THE INDEBTEDNESS HELD BY SUCH OWNER OR OTHERWISE, AND THE OBLIGATIONS TO REIMBURSE THE ISSUER IN RESPECT OF ANY LETTERS OF CREDIT; AND (e) JOINT VENTURE AND PARTNERSHIP OBLIGATIONS, CONTINGENT OR OTHERWISE. TYPE. AS TO ANY LOAN ITS NATURE AS A BASE RATE LOAN, A EURODOLLAR RATE LOAN OR A LIBOR RATE LOAN. UNENCUMBERED ASSET. WITH RESPECT TO ANY REAL ESTATE ASSET, AT ANY DATE OF DETERMINATION, THE CIRCUMSTANCE THAT SUCH ASSET ON SUCH DATE (a) IS NOT SUBJECT TO ANY LIENS (INCLUDING ANY SUCH LIEN IMPOSED BY THE ORGANIZATIONAL DOCUMENTS OF THE OWNER OF SUCH ASSET, BUT EXCLUDING PERMITTED LIENS), (b) IS NOT THE SUBJECT OF A NON-MATERIAL BREACH, (c) HAS BEEN IMPROVED WITH A BUILDING OR BUILDINGS WHICH (1) HAVE BEEN ISSUED A CERTIFICATE OF OCCUPANCY, (2) ARE FULLY OPERATIONAL, AND (3) HAVE AN AGGREGATE AVERAGE OCCUPANCY OF ALL BUILDING(S) IN SUCH REAL ESTATE ASSET OF NOT LESS THAN 75% FOR THE FOUR FISCAL QUARTERS MOST RECENTLY ENDED, PROVIDED AT ANY ONE TIME TWO REAL ESTATE ASSETS THAT OTHERWISE QUALIFY AS AN UNENCUMBERED ASSET MAY HAVE AN AVERAGE OCCUPANCY OF LESS THAN 75% FOR THE FOUR FISCAL QUARTERS MOST RECENTLY ENDED, PROVIDED FURTHER THAT AT ANY DATE OF DETERMINATION ALL REAL ESTATE ASSETS THAT ARE UNENCUMBERED ASSETS SHALL HAVE AN AGGREGATE OCCUPANCY OF NOT LESS THAN 85% FOR THE FOUR FISCAL QUARTERS MOST RECENTLY ENDED, AND (d) IS WHOLLY OWNED BY A BORROWER. 15 16 UNIFORM CUSTOMS. WITH RESPECT TO ANY LETTER OF CREDIT, THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO. 500 OR ANY SUCCESSOR VERSION THERETO ADOPTED BY THE AGENT IN THE ORDINARY COURSE OF ITS BUSINESS AS A LETTER OF CREDIT ISSUER AND IN EFFECT AT THE TIME OF ISSUANCE OF SUCH LETTER OF CREDIT. 16 17 UNRESTRICTED CASH AND CASH EQUIVALENTS. AS OF ANY DATE OF DETERMINATION, THE SUM OF (a) THE AGGREGATE AMOUNT OF UNRESTRICTED CASH THEN HELD BY THE BORROWER OR ANY OF ITS CONSOLIDATED SUBSIDIARIES AND (b) THE AGGREGATE AMOUNT OF UNRESTRICTED CASH EQUIVALENTS (VALUED AT FAIR MARKET VALUE) THEN HELD BY THE BORROWER OR ANY OF ITS CONSOLIDATED SUBSIDIARIES. AS USED IN THIS DEFINITION, (i) "UNRESTRICTED" MEANS THE SPECIFIED ASSET IS NOT SUBJECT TO ANY LIENS IN FAVOR OF ANY PERSON AND (ii) "CASH EQUIVALENTS" MEANS THAT SUCH ASSET HAS A LIQUID, PAR VALUE IN CASH AND IS CONVERTIBLE TO CASH ON DEMAND. NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, THE TERM UNRESTRICTED CASH AND CASH EQUIVALENTS SHALL NOT INCLUDE THE COMMITMENTS OF THE BANKS TO MAKE LOANS UNDER THIS AGREEMENT. UNSECURED INDEBTEDNESS. ALL INDEBTEDNESS OF ANY PERSON THAT IS NOT SECURED BY A LIEN ON ANY ASSET OF SUCH PERSON. VALUE OF UNENCUMBERED ASSETS. FOR ANY PERIOD OF TWO CONSECUTIVE FISCAL QUARTERS, AN AMOUNT EQUAL TO THE SUM OF (i) CONSOLIDATED NET OPERATING INCOME ATTRIBUTABLE TO UNENCUMBERED ASSETS FOR THE MOST RECENT PERIOD OF TWO CONSECUTIVE FISCAL QUARTERS OF THE BORROWER (EXCLUDING ANY PORTION OF CONSOLIDATED NET OPERATING INCOME ATTRIBUTABLE TO UNENCUMBERED ASSETS ACQUIRED BY THE BORROWER DURING OR AFTER SUCH PERIOD) MULTIPLIED BY 2, WITH THE PRODUCT BEING DIVIDED BY THE CAPITALIZATION RATE, PLUS (ii) WITH RESPECT TO THOSE UNENCUMBERED ASSETS SO ACQUIRED BY THE BORROWER DURING SUCH PERIOD OF TWO CONSECUTIVE FISCAL QUARTERS, THE BORROWER'S ESTIMATED ANNUAL CONSOLIDATED NET OPERATING INCOME FOR SUCH UNENCUMBERED ASSETS BASED ON LEASES IN EXISTENCE AT THE DATE OF SUCH CALCULATION DIVIDED BY THE CAPITALIZATION RATE. VOTING INTERESTS. CAPITAL STOCK OF ANY CLASS OR CLASSES (HOWEVER DESIGNATED), THE HOLDERS OF WHICH ARE AT THE TIME ENTITLED, AS SUCH HOLDERS, (a) TO VOTE FOR THE ELECTION OF A MAJORITY OF THE DIRECTORS (OR PERSONS PERFORMING SIMILAR FUNCTIONS) OF THE CORPORATION, ASSOCIATION, PARTNERSHIP, TRUST OR OTHER BUSINESS ENTITY INVOLVED, OR (b) TO CONTROL, MANAGE OR CONDUCT THE BUSINESS OF THE CORPORATION, PARTNERSHIP, ASSOCIATION, TRUST OR OTHER BUSINESS ENTITY INVOLVED. [SECTION] 1.2. RULES OF INTERPRETATION. ----------------------- (a) A reference to any document or agreement shall include such document or agreement as amended, modified or supplemented from time to time in accordance with its terms and the terms of this Agreement. (b) The singular includes the plural and the plural includes the singular. (c) A reference to any law includes any amendment or modification to such law. (d) A reference to any Person includes its permitted successors and permitted assigns. 17 18 (e) Accounting terms not otherwise defined herein have the meanings assigned to them by generally accepted accounting principles applied on a consistent basis by the accounting entity to which they refer. (f) The words "include", "includes" and "including" are not limiting. (g) All terms not specifically defined herein or by generally accepted accounting principles, which terms are defined in the Uniform Commercial Code as in effect in Massachusetts, have the meanings assigned to them therein. (h) Reference to a particular "ss." refers to that section of this Agreement unless otherwise indicated. (i) The words "herein", "hereof", "hereunder" and words of like import shall refer to this Agreement as a whole and not to any particular section or subdivision of this Agreement. (j) The words "so long as any Loan or Note is outstanding" shall mean so long as such Loan or Note is not indefeasibly paid in full in cash. [SECTION] 2. THE REVOLVING CREDIT FACILITY. ----------------------------- [SECTION] 2.1. COMMITMENT TO LEND; LIMITATION ON TOTAL COMMITMENT. Subject to the provisions of [SECTION] 2.1, [SECTION] 2.5, [SECTION] 2A and the other terms and conditions set forth in this Agreement, each of the Banks severally agrees to lend to the Borrower and the Borrower may borrow, repay, and reborrow from time to time between the Effective Date and the Maturity Date upon notice by the Borrower to the Agent given in accordance with [SECTION] 2.5, such sums as are requested by the Borrower up to a maximum aggregate principal amount outstanding (after giving effect to all amounts requested) at any one time equal to such Bank's Commitment minus such Bank's Commitment Percentage of the sum of the Maximum Drawing Amount, PROVIDED that the sum of the outstanding amount of the Loans (after giving effect to all amounts requested) plus the Maximum Drawing Amount shall not at any time exceed the Total Commitment. The Loans shall be made pro rata in accordance with each Bank's Commitment Percentage and the Banks shall at all times immediately adjust inter se any inconsistency between each Bank's outstanding principal amount and each Bank's Commitment. Each request for a Loan hereunder shall constitute a representation and warranty by the Borrower that the conditions set forth in [SECTION] 11 have been satisfied (or waived in writing by the Banks) on the date of such request and will be satisfied (or waived in writing by the Banks) on the proposed Drawdown Date of the requested Loan, PROVIDED that the making of such representation and warranty by Borrower shall not limit the right of any Bank not to lend if such conditions have not been satisfied or if the Compliance Certificate delivered in connection with ss.11 is inaccurate. Nothing herein shall prevent the Borrower from seeking recourse (subject to [SECTION] 24 of this Agreement) against any Bank that wrongfully fails to advance its proportionate share of a requested Loan as 18 19 required by this Agreement. The Agent intends, and shall have the right, to syndicate, or enter into co-lending arrangements with respect to, the Loans and the Total Commitment pursuant to [SECTION] 18, and the Borrower agrees to cooperate with the Agent's syndication and/or co-lending efforts, such cooperation to include, without limitation, the provision of information reasonably requested by potential syndicate members. [SECTION] 2.2. REDUCTION OF COMMITMENT. The Borrower shall have the right at any time and from time to time upon five (5) Business Days' prior written notice to the Agent to reduce by $1,000,000 or an integral multiple of $1,000,000 in excess thereof or terminate entirely the unborrowed portion of the then Total Commitment, whereupon the Commitments of the Banks shall be reduced pro rata in accordance with their respective Commitment Percentages by the amount specified in such notice or, as the case may be, terminated. Upon the effective date of any such reduction or termination, the Borrower shall pay to the Agent for the respective accounts of the Banks the full amount of any commitment fee then accrued on the amount of the reduction. No reduction or termination of the Commitments may be reinstated. [SECTION] 2.3. THE NOTES. The Loans shall be evidenced by separate promissory notes of the Borrower in substantially the form of EXHIBIT A hereto (each a "Note"), and completed with appropriate insertions. A Note shall be payable to the order of each Bank in a principal amount equal to such Bank's Commitment. The Borrower irrevocably authorizes each Bank to make or cause to be made, at or about the time of the Drawdown Date of any Loan or at the time of receipt of any payment of principal on such Bank's Note, an appropriate notation on such Bank's Record reflecting the making of such Loan or (as the case may be) the receipt of such payment. The failure to record, or any error in so recording, any such amount on the Record shall not limit or otherwise affect the obligations of the Borrower hereunder or under any Note to make payments of principal of or interest on any Note when due. [SECTION] 2.4. INTEREST ON LOANS. ----------------- (a) Each Base Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at the Base Rate. (b) Each Eurodollar Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at a rate equal to Eurodollar Rate determined for such Interest Period plus the Applicable Margin for Eurodollar Rate Loans. (c) Each LIBOR Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at a 19 20 rate equal to the LIBOR Rate determined for such Interest Period plus the Applicable Margin for LIBOR Rate Loans. (d) The Borrower unconditionally promises to pay interest on each Loan in arrears on each Interest Payment Date with respect thereto. [SECTION] 2.5. REQUESTS FOR LOANS. ------------------ (a) The Borrower shall give to the Agent written notice in the form of Exhibit B hereto (or telephonic notice confirmed in a writing in the form of Exhibit B hereto) of each Loan requested hereunder (a "Loan Request") no less than (a) five (5) Business Days prior to the proposed Drawdown Date of such Loan. Each such notice shall specify (i) the principal amount of the Loan requested, (ii) the proposed Drawdown Date of such Loan, (iii) the Interest Period for such Loan, (iv) the Type of such Loan, (v) the permitted purpose for which such funds will be used, and (vi) in the case of a Letter of Credit, include a Letter of Credit Application, and in all cases shall be accompanied by a Compliance Certificate evidencing covenant compliance at the time of the making of such Loan and, on a pro-forma basis, after giving effect to such requested Loan. Promptly upon receipt of a Loan Request, the Agent shall notify each of the Banks thereof. Notwithstanding the maximum amount of the Total Commitment stated herein or the submission of a Loan Request, no Loan shall be required to be made by any Bank unless all of the conditions contained in [SECTION] 11 of this Agreement have been met and the Compliance Certificate delivered in connection with [SECTION] 11 is accurate. Each such notice shall be irrevocable and binding on the Borrower and shall obligate the Borrower to accept the Loan requested from the Banks on the proposed Drawdown Date provided that the Borrower may revoke a Loan Request by written notice given to the Agent on or before three (3) Business Days prior to the proposed Drawdown Date. Each Loan Request shall be in a minimum aggregate amount of $100,000 or an integral multiple of $100,000 in excess thereof. Upon delivery of a Loan Request in accordance with this Section 2.5(a), each of the Banks shall be obligated to fund its Commitment Percentage of the requested Loans subject to the limitations and conditions specified in this [SECTION] 2.5 or in [SECTION] 2.1 hereof. (b) Notwithstanding anything contained in [SECTION] 2.1 or [SECTION] 2.5(a) to the contrary, the Agent and the Banks shall not be required to fund any Loan if, after giving effect thereto, the outstanding amount of Loans and Letters of Credit advanced to the Borrower or its Subsidiaries for working capital purposes would exceed $25,000,000. The Agent and the Borrower agree and acknowledge that the limitation on Loans and Letters of Credit for working capital purposes shall not include Loans for the costs of tenant improvements, capital improvements, leasing commissions, repayment of Indebtedness or other fees or closing costs. (c) Each Loan Request for the acquisition of a Real Estate Asset shall include, in addition to the information specified in [SECTION] 2.5(a) hereof, (i) a certification by the Borrower that such acquisition is consistent with the Business Plan Summary and that an environmental inspection has 20 21 been conducted in accordance with [SECTION] 7.12 hereof and, based on such inspection, the proposed Real Estate Asset to be acquired does not have potential environmental remediation costs or other environmental liabilities in excess of $1,000,000, and (ii) a copy of the environmental site assessment report with respect to such Real Estate Asset. (d) Notwithstanding anything contained in [SECTION] 2.1 or [SECTION] 2.5(a) hereof to the contrary, in the event of any Loan Request for the development of a Real Estate Asset, in addition to the information specified in [SECTION] 2.5(a) hereof to be included with each Loan Request, Borrower shall also submit to the Agent a certification by the Borrower that the covenants contained in [SECTION] 7.20 are true and correct as of the date of the Loan Request and will be true as of the time of the making of such Loan. [SECTION] 2.6. CONVERSION OPTIONS. ----------------- (a) The Borrower may elect from time to time to convert any outstanding Loan to a Loan of another Type, PROVIDED that (i) with respect to any such conversion of a Eurodollar Rate Loan or LIBOR Rate Loan to a Base Rate Loan, the Borrower shall give the Agent at least three (3) Business Days' prior written notice of such election; (ii) with respect to any such conversion of a Eurodollar Rate Loan or LIBOR Rate Loan into a Loan of another Type, such conversion shall only be made on the last day of the Interest Period with respect thereto; (iii) subject to the further proviso at the end of this section and subject to [SECTION] 2.6(b) and [SECTION] 2.6(d) hereof with respect to any such conversion of a Base Rate Loan or a LIBOR Rate Loan to a Eurodollar Rate Loan, the Borrower shall give the Agent at least four (4) Eurodollar Business Days' prior written notice of such election; (iv) subject to the further proviso at the end of this section and subject to [SECTION] 2.6(b) and [SECTION] 2.6(d) hereof with respect to any such conversion of a Base Rate Loan or a Eurodollar Rate Loan to a LIBOR Rate Loan, the Borrower shall give the Agent at least four (4) LIBOR Business Days' prior written notice of each election and (v) no Loan may be converted into a Eurodollar Rate Loan or a LIBOR Rate Loan when any Default or Event of Default has occurred and is continuing. On the date on which such conversion is being made, each Bank shall take such action as is necessary to transfer its Commitment Percentage of such Loans to its Domestic Lending Office, its Eurodollar Lending Office or LIBOR Lending Office, as the case may be. All or any part of outstanding Loans of any Type may be converted as provided herein, PROVIDED FURTHER that each Conversion Request relating to the conversion of a Loan of another Type to a Eurodollar Rate Loan or LIBOR Rate Loan shall be for an amount equal to $600,000 or an integral multiple of $100,000 in excess thereof and shall be irrevocable by the Borrower. (b) Any Loans of any Type may be continued as such upon the expiration of an Interest Period with respect thereto by compliance by the Borrower with the notice provisions contained in [SECTION] 2.6(a); PROVIDED that no Eurodollar Rate Loan or LIBOR Rate Loan may be continued as such when any Default or Event of Default has occurred and is continuing but shall be automatically converted to a Base Rate Loan on the last day of the first Interest Period relating 21 22 thereto ending during the continuance of any Default or Event of Default of which the officers of the Agent active upon the Borrower's account have actual knowledge. (c) In the event that the Borrower does not notify the Agent of its election hereunder with respect to any Loan, such Loan shall be automatically converted to a Base Rate Loan at the end of the applicable Interest Period. (d) The Borrower may not request a Eurodollar Rate Loan or a LIBOR Rate Loan pursuant to [SECTION] 2.5, elect to convert a Loan of another Type to a Eurodollar Rate Loan or a LIBOR Rate Loan pursuant to [SECTION] 2.5(a) or elect to continue a Eurodollar Rate Loan or a LIBOR Rate Loan pursuant to [SECTION] 2.6(b) if, after giving effect thereto, there would be greater than an aggregate of five (5) Eurodollar Rate Loans and LIBOR Rate Loans outstanding. Any Loan Request for a Eurodollar Rate Loan or a LIBOR Rate Loan that would create greater than an aggregate of five (5) Eurodollar Rate Loans and LIBOR Rate Loans outstanding shall be deemed to be a Loan Request for a Base Rate Loan. All Loans which are Eurodollar Rate Loans, having identical Interest Periods and interest rates shall constitute one (1) Eurodollar Rate Loan hereunder. All Loans which are LIBOR Rate Loans having identical Interest Periods and interest rates shall constitute one (1) LIBOR Rate Loan hereunder. [SECTION] 2.7. FUNDS FOR LOANS. --------------- (a) Not later than 12:00 p.m. (Boston time) on the proposed Drawdown Date of any Loans, each of the Banks will make available to the Agent, at the Agent's Head Office, in immediately available funds, the amount of such Bank's Commitment Percentage of the amount of the requested Loans. Upon receipt from each Bank of such amount, and upon receipt of the documents required by [SECTION] 11 and the satisfaction of the other conditions set forth herein, to the extent applicable, the Agent will make available to the Borrower the aggregate amount of such Loans made available to the Agent by the Banks. The Agent shall make reasonable efforts to fund the aggregate amount of the Loans to the Borrower by 2:00 p.m. on the Drawdown Date. The failure or refusal of any Bank to make available to the Agent at the aforesaid time and place on any Drawdown Date the amount of its Commitment Percentage of the requested Loans shall not relieve any other Bank from its several obligation hereunder to make available to the Agent the amount of such other Bank's Commitment Percentage of any requested Loans but shall not obligate any other Bank or Agent to fund more than its Commitment Percentage of the requested Loans or to increase its Commitment Percentage. (b) The Agent may, unless notified to the contrary by any Bank prior to a Drawdown Date, assume that such Bank has made available to the Agent on such Drawdown Date the amount of such Bank's Commitment Percentage of the Loans to be made on such Drawdown Date, and the Agent may (but it shall not be required to), in reliance upon such assumption, make available to the Borrower a corresponding amount. If any Bank makes available to the Agent such amount on a date 22 23 after such Drawdown Date, such Bank shall pay to the Agent on demand an amount equal to the product of (i) the average computed for the period referred to in clause (iii) below, of the weighted average interest rate paid by the Agent for federal funds acquired by the Agent during each day included in such period, TIMES (ii) the amount of such Bank's Commitment Percentage of such Loans, TIMES (iii) a fraction, the numerator of which is the number of days or portion thereof that elapsed from and including such Drawdown Date to the date on which the amount of such Bank's Commitment Percentage of such Loans shall become immediately available to the Agent, and the denominator of which is 365. A statement of the Agent submitted to such Bank with respect to any amounts owing under this paragraph shall be PRIMA FACIE evidence of the amount due and owing to the Agent by such Bank. [SECTION] 2A LETTERS OF CREDIT. ----------------- 2A.1 LETTER OF CREDIT COMMITMENTS. ---------------------------- 2A.1.1 COMMITMENT TO ISSUE LETTERS OF CREDIT. ------------------------------------- Subject to the terms and conditions hereof and the execution and delivery by the Borrower of a letter of credit application on the Fronting Bank's customary form as part of a Loan Request (a "Letter of Credit Application") deleting, however, the terms and conditions customarily attached thereto, the Fronting Bank on behalf of the Banks and in reliance upon the agreement of the Banks set forth in [SECTION] 2A.1.4 and upon the representations and warranties of the Borrower contained herein, agrees, in its individual capacity, to issue, extend and renew for the account of the Borrower one or more letters of credit (individually, a "Letter of Credit"), in such form as may be requested from time to time by the Borrower and reasonably agreed to by the Fronting Bank; PROVIDED, HOWEVER, that, after giving effect to such Loan Request, (a) the sum of the aggregate Maximum Drawing Amount shall not exceed $20,000,000 at any one time and (b) the sum of (i) the Maximum Drawing Amount on all Letters of Credit and (ii) the amount of all Loans outstanding shall not exceed the Total Commitment. 2A.1.2 LETTER OF CREDIT APPLICATIONS. ----------------------------- Each Letter of Credit Application shall be completed to the reasonable satisfaction of the Agent and the Fronting Bank. In the event that any provision of any Letter of Credit Application shall be inconsistent with any provision of this Credit Agreement (including provisions applicable to a Loan Request), then the provisions of this Credit Agreement shall, to the extent of any such inconsistency, govern. 2A.1.3 TERMS OF LETTERS OF CREDIT. -------------------------- 23 24 Each Letter of Credit issued, extended or renewed hereunder shall, among other things, (i) provide for the payment of sight drafts for honor thereunder when presented in accordance with the terms thereof and when accompanied by the documents described therein, and (ii) have an expiry date no later than the date which is fourteen (14) days (or, if the Letter of Credit is confirmed by a confirmer or otherwise provides for one or more nominated persons, forty-five (45) days) prior to the Maturity Date. Each Letter of Credit so issued, extended or renewed shall be subject to the Uniform Customs. 2A.1.4. REIMBURSEMENT OBLIGATIONS OF BANKS. ---------------------------------- Each Bank severally agrees that it shall be absolutely liable, without regard to the occurrence of any Default or Event of Default or any other condition precedent whatsoever, to the extent of such Bank's Commitment Percentage, to reimburse the Fronting Bank on demand for the amount of each draft paid by the Fronting Bank under each Letter of Credit to the extent that such amount is not reimbursed by the Borrower pursuant to [SECTION] 2A.2 (such agreement for a Bank being called herein the "Letter of Credit Participation" of such Bank). 2A.1.5. PARTICIPATIONS OF BANKS. ----------------------- Each such payment made by a Bank shall be treated as the purchase by such Bank of a participating interest in the Borrower's Reimbursement Obligation under [SECTION] 2A.2 in an amount equal to such payment. Each Bank shall share in accordance with its participating interest in any interest which accrues pursuant to [SECTION] 2A.2. 2A.2. REIMBURSEMENT OBLIGATION OF THE BORROWER. ---------------------------------------- In order to induce the Fronting Bank to issue, extend and renew each Letter of Credit and the Banks to participate therein, the Borrower hereby agrees, except as contemplated in [SECTION] 2A.3 below, to reimburse or pay to the Fronting Bank, for the account of the Fronting Bank or (as the case may be) the Banks, with respect to each Letter of Credit issued, extended or renewed by the Fronting Bank hereunder, (a) except as otherwise expressly provided in [SECTION] 2A.2(b) and (c) or [SECTION] 2A.3, on each date that any draft presented under such Letter of Credit is honored by the Fronting Bank, or the Fronting Bank otherwise makes a payment with respect thereto, (i) the amount paid by the Fronting Bank under or with respect to such Letter of Credit, and (ii) the amount of any taxes (other than income taxes, franchise fees and other similar impositions based upon the net income or assets of the Bank or any Bank), fees, charges or other costs and expenses whatsoever incurred by the Fronting Bank or any Bank in connection with any payment made by the Fronting Bank or any Bank under, or with respect to, such Letter of Credit, 24 25 (b) upon the reduction (but not termination) of the Total Commitment to an amount less than the Maximum Drawing Amount, an amount equal to such difference, which amount shall be held by the Agent for the benefit of the Banks and the Agent as cash collateral for all Reimbursement Obligations, and (c) upon the termination of the Total Commitment, or the acceleration of the Reimbursement Obligations with respect to all Letters of Credit in accordance with [SECTION] 12, an amount equal to the then Maximum Drawing Amount on all Letters of Credit, which amount shall be held by the Agent for the benefit of the Banks and the Agent as cash collateral for all Reimbursement Obligations. Each such payment shall be made to the Agent at the Agent's Head Office in immediately available funds. Interest on any and all amounts remaining unpaid by the Borrower under this [SECTION] 2A.2 at any time from the date such amounts become due and payable (whether as stated in this [SECTION] 2A.2, by acceleration or otherwise) until payment in full (whether before or after judgment) shall be payable to the Agent on demand at the rate specified in [SECTION] 4.9 for overdue principal on the Loans. 2A.3 LETTER OF CREDIT PAYMENTS; FUNDING OF A LOAN. -------------------------------------------- If any draft shall be presented or other demand for payment shall be made under any Letter of Credit, the Fronting Bank shall notify the Borrower and the Banks on or before the date the Fronting Bank intends to honor such drawing, of the date and amount of the draft presented or demand for payment and of the date and time when it expects to pay such draft or honor such demand for payment, and, except as provided in this [SECTION] 2A.3, Borrower shall reimburse Agent, as set forth in [SECTION] 2A.2 above. Notwithstanding anything contained in this [SECTION] 2A.3 to the contrary, however, unless Borrower shall have notified the Agent and Fronting Bank prior to 11:00 a.m. (New York time) on the Business Day immediately prior to the date of such drawing that Borrower intends to reimburse Fronting Bank for the amount of such drawing with funds other than the proceeds of the Loans, Borrower shall be deemed to have timely given a Loan Request pursuant to [SECTION] 2.5 to Agent, requesting a Base Rate Loan on the date on which such drawing is honored and in an amount equal to the amount of such drawing. Each Bank shall, in accordance with [SECTION] 2.7, make available its PRO RATA share of such Loan to Agent, the proceeds of which shall be applied directly by Agent to reimburse Fronting Bank for the amount of such draw. In the event that any Bank fails to make available to Agent the amount of such Bank's participation on the date of the drawing, Agent shall be entitled to recover such amount on demand from such Bank plus any additional amounts payable under [SECTION] 2.7(b) in the event of a late funding by a Bank. The Fronting Bank is irrevocably authorized by the Borrower to honor draws on each Letter of Credit by the beneficiary thereof in accordance with the terms of the Letter of Credit. The responsibility of the Agent to the Borrower and the Banks shall be only to determine that the documents (including each draft) delivered under each Letter of Credit in connection with such presentment shall be in conformity in all material respects with such Letter of Credit. 2A.4 OBLIGATIONS ABSOLUTE. -------------------- 25 26 The Borrower's obligations under this [SECTION] 2A shall be absolute and unconditional under any and all circumstances and irrespective of the occurrence of any Default or Event of Default or any condition precedent whatsoever or any setoff, counterclaim or defense to payment which the Borrower may have or have had against the Agent, any Bank or any beneficiary of a Letter of Credit. The Borrower further agrees with the Agent and the Banks that the Agent and the Banks shall not be responsible for, and the Borrower's Reimbursement Obligations under [SECTION] 2A.2 shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even if such documents should in fact prove to be in any or all respects invalid, fraudulent or forged, or any dispute between or among the Borrower, the beneficiary of any Letter of Credit or any financing institution or other party to which any Letter of Credit may be transferred or any claims or defenses whatsoever of the Borrower against the beneficiary of any Letter of Credit or any such transferee. The Agent and the Banks shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit. The Borrower agrees that any action taken or omitted by the Agent or any Bank under or in connection with each Letter of Credit and the related drafts and documents, if done in good faith, shall be binding upon the Borrower and shall not result in any liability on the part of the Agent or any Bank to the Borrower. 2A.5 RELIANCE BY ISSUER. ------------------ To the extent not inconsistent with [SECTION] 2A.4, the Agent and any Fronting Bank shall be entitled to rely, and shall be fully protected in relying upon, any Letter of Credit, draft, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel, independent accountants and other experts selected by the Agent. The Agent and any Fronting Bank shall be fully justified in failing or refusing to take any action under this Agreement unless it shall first have received such advice or concurrence of the Majority Banks as it reasonably deems appropriate or it shall first be indemnified to its reasonable satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent and any Fronting Bank shall in all cases be fully protected by the Banks in acting, or in refraining from acting, under this Agreement in accordance with a request of the Majority Banks, and such request and any action taken or failure to act pursuant thereto shall be binding upon the Banks and all future holders of the Notes or of a Letter of Credit Participation. 2A.6 LETTER OF CREDIT FEE. -------------------- The Borrower shall pay to the Agent a fee (in each case, a "Letter of Credit Fee") in an amount equal to 1.5% per annum of the face amount of the issued Letter of Credit, which fee shall be payable on the date of issuance of the Letter of Credit, and which fee shall be prorated based on the stated 26 27 expiration date of the Letter of Credit if less than one year, with no rebate in the event that the Letter of Credit is terminated prior to such expiration date. [SECTION] 3. REPAYMENT OF THE LOANS. ---------------------- [SECTION] 3.1. MATURITY. The Borrower unconditionally promises to pay on the Maturity Date, and there shall become absolutely due and payable on the Maturity Date, all of the Loans outstanding on such date, together with any and all accrued and unpaid interest and charges thereon. [SECTION] 3.2. MANDATORY REPAYMENTS OF LOANS. If at any time the sum of the outstanding amount of the Loans and the Maximum Drawing Amount exceeds the Total Commitment, then the Borrower shall, within one (1) Business Day of receipt of notice of the same from the Agent, pay the amount of such excess to the Agent for the respective accounts of the Banks for application to the Loans. [SECTION] 3.3. OPTIONAL REPAYMENTS OF LOANS. The Borrower shall have the right, at its election, to repay the outstanding amount of the Loans, as a whole or in part, on any Business Day, without penalty or premium; PROVIDED that the full or partial prepayment of the outstanding amount of any Eurodollar Rate Loans or LIBOR Rate Loans made pursuant to this [SECTION] 3.3 may be made only on the last day of the Interest Period relating thereto except as otherwise provided in this [SECTION] 3.3. The Borrower shall give the Agent no later than 10:00 a.m., Boston time, at least two (2) Business Days' prior written notice of any prepayment pursuant to this [SECTION] 3.3 of any Base Rate Loans, three (3) Eurodollar Business Days' notice of any proposed repayment pursuant to this [SECTION] 3.3 of any Eurodollar Rate Loans and three (3) LIBOR Business Days' notice of any proposed repayment pursuant to this [SECTION] 3.3 of any LIBOR Rate Loans, specifying the proposed date of payment of Loans and the principal amount to be paid. The Agent shall give the Banks notice of any proposed prepayment within one (1) Business Day after receipt of written notice from the Borrower. Each such partial prepayment of the Loans shall be in an integral multiple of $100,000 and shall be accompanied by the payment of accrued interest on the principal repaid to the date of payment and shall be applied, in the absence of instruction by the Borrower, first to the principal of Base Rate Loans, then to the principal of Eurodollar Rate Loans and then to the principal of LIBOR Rate Loans. Notwithstanding anything contained herein to the contrary, the Borrower may make a full or partial prepayment of a Eurodollar Rate Loan or a LIBOR Rate Loan on a date other than the last day of the Interest Period relating thereto, if all optional prepayments (in whole or in part) on such Loans shall be accompanied by, and the Borrower hereby promises to pay, a prepayment fee in an amount 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 each installment of principal so paid or not borrowed, during the period beginning on the date of such payment or failure to borrow and ending on the last day of the Interest Period relating thereto on which date such installment would have been due (the "Reemployment Period"), exceeds (B) the total amount of interest which would 27 28 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 such amount is hereafter referred to as an "Installment Amount". (ii) Second, each Installment Amount shall be treated as payable as of the date on which the related principal installment would have been payable by the Borrower had such principal installment not been prepaid or not borrowed. (iii) Third, the amount to be paid on each such date 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. [SECTION] 4. CERTAIN GENERAL PROVISIONS. -------------------------- [SECTION] 4.1. APPROVAL AND CO-LENDER FEE; AGENT'S FEE. The Borrower agrees to pay (a) to the Agent an "Approval" fee and "Co-Lender" fee as defined and set forth in the letter agreement dated March 11, 1996 between the Agent and the Borrower (the "Approval Letter") and (b) to the Agent for its own account, an agent's fee of $75,000 per annum, payable in equal installments quarterly in arrears on May 1, August 1, November 1 and February 1 of each year and on the Maturity Date. In the event of any conflict or inconsistency between a provision set forth in the Approval Letter and a provision set forth in this Agreement, the terms and provisions of this Agreement shall prevail. [SECTION] 4.2. COMMITMENT FEE. The Borrower shall pay to the Agent for the accounts of the Banks in accordance with their respective Commitment Percentages, a commitment fee calculated at the rate of (a) one eighth of one percent (.125%) per annum on the average daily amount during each calendar quarter or portion thereof from the date hereof to the Maturity Date by which the Total Commitment exceeds the outstanding amount of Loans plus the Maximum Drawing Amount during such calendar quarter if the average outstanding amount of the Loans plus the Maximum Drawing Amount during such calendar quarter is equal to or more than 60% of the Total Commitment or (b) one quarter of one percent (.25%) per annum on the average daily amount during each calendar quarter or portion thereof from the date hereof to the Maturity Date by which the Total Commitment exceeds the outstanding amount of Loans plus the Maximum Drawing Amount during such calendar quarter if the average outstanding amount of the Loans plus the Maximum Drawing Amount during such calendar quarter is less than 60% of the Total Commitment. The commitment fee shall be payable quarterly in arrears on the first day of each calendar quarter for the immediately preceding 28 29 calendar quarter commencing on the first such date following the date hereof, with a final payment on the Maturity Date or any earlier date on which the Commitments shall terminate. [SECTION] 4.3. FUNDS FOR PAYMENTS. ------------------ (a) All payments of principal, interest, closing fees, Letter of Credit fees, commitment fees and any other amounts due hereunder (other than as provided in [SECTION] 4.5 and [SECTION] 4.6) or under any of the other Loan Documents, and all prepayments, shall be made to the Agent, for the respective accounts of the Banks, at the Agent's Head Office, in each case in Dollars in immediately available funds. (b) All payments by the Borrower hereunder and under any of the other Loan Documents shall be made without setoff or counterclaim and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory liens, restrictions or conditions of any nature now or hereafter imposed or levied by any jurisdiction or any political subdivision thereof or taxing or other authority therein unless the Borrower is compelled by law to make such deduction or withholding. If any such obligation is imposed upon the Borrower with respect to any amount payable by it hereunder or under any of the other Loan Documents, the Borrower shall pay to the Agent, for the account of the Banks or (as the case may be) the Agent, on the date on which such amount is due and payable hereunder or under such other Loan Document, such additional amount in Dollars as shall be necessary to enable the Banks or the Agent to receive the same net amount which the Banks or the Agent would have received on such due date had no such obligation been imposed upon the Borrower. The Borrower will deliver promptly to the Agent certificates or other valid vouchers for all taxes or other charges deducted from or paid with respect to payments made by the Borrower hereunder or under such other Loan Document. [SECTION] 4.4. COMPUTATIONS. All computations of interest on the Loans and of other fees to the extent applicable shall be based on a 360-day year and paid for the actual number of days elapsed. Except as otherwise provided in the definition of the term "Interest Period" with respect to Eurodollar Rate Loans and LIBOR Rate Loans, whenever a payment hereunder or under any of the other Loan Documents becomes due on a day that is not a Business Day, the due date for such payment shall be extended to the next succeeding Business Day, and interest shall accrue during such extension. [SECTION] 4.5. ADDITIONAL COSTS, ETC. If any present or future applicable law, which expression, as used herein, includes statutes, rules and regulations thereunder and interpretations thereof by any competent court or by any governmental or other regulatory body or official charged with the administration or the interpretation thereof and requests, directives, instructions and notices at any time or from time to time hereafter made upon or otherwise issued to any Bank or the Agent by any central bank or other fiscal, monetary or other authority (whether or not having the force of law), shall: 29 30 (a) subject any Bank or the Agent to any tax, levy, impost, duty, charge, fee, deduction or withholding of any nature with respect to this Agreement, the other Loan Documents, such Bank's Commitment or the Loans (other than taxes based upon or measured by the income or profits of such Bank or the Agent), or (b) materially change the basis of taxation (except for changes in taxes on income or profits) of payments to any Bank of the principal of or the interest on any Loans or any other amounts payable to any Bank under this Agreement or the other Loan Documents, or (c) impose or increase or render applicable (other than to the extent specifically provided for elsewhere in this Agreement) any special deposit, reserve, assessment, liquidity, capital adequacy or other similar requirements (whether or not having the force of law) against assets held by, or deposits in or for the account of, or loans by, or Letters of Credit issued by, commitments of an office of any Bank, or (d) impose on any Bank any other conditions or requirements with respect to this Agreement, the other Loan Documents, the Loans, the Commitment, or any class of loans, Letters of Credit or commitments of which any of the Loans or the Commitment forms a part; and the result of any of the foregoing is (i) to increase the cost to such Bank of making, funding, issuing, renewing, extending or maintaining any of the Loans or such Bank's Commitment or any Letter of Credit, or (ii) to reduce the amount of principal, interest, or other amount payable to such Bank or the Agent hereunder on account of the Commitments, and Letters of Credit or any of the Loans, or (iii) to require such Bank or the Agent to make any payment or to forego any interest or other sum payable hereunder, the amount of which payment or foregone interest or other sum is calculated by reference to the gross amount of any sum receivable or deemed received by such Bank or the Agent from the Borrower hereunder, then, and in each such case, the Borrower will, within ninety (90) days of demand made by such Bank or (as the case may be) the Agent at any time and from time to time and as often as the occasion therefor may arise, pay to such Bank or the Agent, to the extent permitted by law, such additional amounts as will be sufficient to compensate such Bank or the Agent for such additional cost, reduction, payment or foregone interest or other sum. [SECTION] 4.6. CAPITAL ADEQUACY. If any present or future law, governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) or the interpretation thereof by a court 30 31 or governmental authority with appropriate jurisdiction affects the amount of capital required or expected to be maintained by banks or bank holding companies and any Bank or the Agent determines that the amount of capital required to be maintained by it is increased by or based upon the existence of the Loans made or deemed to be made pursuant hereto, then such Bank or the Agent may notify the Borrower of such fact, and the Borrower shall pay to such Bank or the Agent from time to time within ninety (90) days of demand, as an additional fee payable hereunder, such amount as such Bank or the Agent shall determine in good faith and certify in a notice to the Borrower to be an amount that will adequately compensate such Bank or the Agent in light of these circumstances for its increased costs of maintaining such capital. Each Bank and the Agent shall allocate such cost increases among its customers in good faith and on an equitable basis. [SECTION] 4.7. CERTIFICATE. A certificate setting forth any additional amounts payable pursuant to [SECTIONS] 4.5 or 4.6 and a brief explanation of such amounts which are due, including reasonably detailed information regarding the method and calculation of such amount, submitted by any Bank or the Agent to the Borrower, shall be PRIMA FACIE evidence that such amounts are due and owing. [SECTION] 4.8. INDEMNITY. In addition to the other provisions of this Agreement regarding any such matters, the Borrower agrees to indemnify each Bank and to hold each Bank harmless from and against any loss, cost or reasonable expense (including loss of the spread to which such Bank would have been entitled through the end of the applicable Interest Period in excess of the applicable interest rate(s) then in effect) that such Bank may sustain or incur as a consequence of (a) a default by the Borrower in payment of the principal amount of or any interest on any Eurodollar Rate Loans or LIBOR Rate Loans as and when due and payable, including any such loss or expense caused by Borrower's breach or other default and arising from interest or fees payable by such Bank to lenders of funds obtained by it in order to maintain its Eurodollar Rate Loans or LIBOR Rate Loans, (b) a default by the Borrower in making a borrowing or conversion after the Borrower has given (or is deemed to have given) a Loan Request or a Conversion Request, and (c) the making of any payment of a Eurodollar Rate Loan or LIBOR Rate Loan or the making of any conversion of a Eurodollar Rate Loan or a LIBOR Rate Loan to a Loan of another Type on a day that is not the last day of the applicable Interest Period with respect thereto, including interest or fees payable by such Bank to lenders of funds obtained by it in order to maintain any such Eurodollar Rate Loan or LIBOR Rate Loan; PROVIDED, however, that the Borrower shall not be required to so indemnify any Bank pursuant to clause (b) above which wrongfully fails or refuses to fund its proportionate share of a Loan in accordance with the terms of this Agreement. [SECTION] 4.9. INTEREST ON OVERDUE AMOUNTS. Overdue principal and (to the extent permitted by applicable law) interest on the Loans and all other overdue amounts payable hereunder or under any of the other Loan Documents shall bear interest compounded monthly and payable on demand at a rate per annum equal to four percent (4%) above the rate of interest otherwise payable hereunder until such amount shall be paid in full (after as well as before judgment). In addition, the Borrower shall pay to the Agent for the account of the Banks a late charge equal to three percent (3%) of any 31 32 amount of principal and/or interest and/or charges on the Loans which is not paid within ten (10) days of the date when due. [SECTION] 4.10. INABILITY TO DETERMINE EURODOLLAR RATE OR LIBOR RATE. In the event, prior to the commencement of any Interest Period relating to any Eurodollar Rate Loan or LIBOR Rate Loan, the Agent after consulting with the Banks shall determine in good faith that adequate and reasonable methods do not exist for ascertaining the Eurodollar Rate or the LIBOR Rate that would otherwise determine the rate of interest to be applicable to any Eurodollar Rate Loan or LIBOR Rate Loan during any Interest Period, the Agent shall forthwith give notice of such determination (which shall be conclusive and binding on the Borrower) to the Borrower. In such event (a) any Loan Request with respect to Eurodollar Rate Loans or LIBOR Rate Loans, as the case may be, shall be automatically withdrawn and shall be deemed a request for Base Rate Loans, (b) each Eurodollar Rate Loan or LIBOR Rate Loan, as the case may be, will automatically, on the last day of the then current Interest Period thereof, become a Base Rate Loan, and (c) the obligations of the Banks to make Eurodollar Rate Loans or LIBOR Rate Loans, as the case may be, shall be suspended until the Agent determines in good faith that the circumstances giving rise to such suspension no longer exist, whereupon the Agent shall promptly so notify the Borrower. [SECTION] 4.11. ILLEGALITY. Notwithstanding any other provisions herein, if any present or future law, regulation, treaty or directive or in the interpretation or application thereof shall make it unlawful for any Bank to make or maintain Eurodollar Rate Loans or LIBOR Rate Loans, such Bank shall forthwith give notice of such circumstances to the Borrower and thereupon (a) the Commitment of such Bank to make Eurodollar Rate Loans or LIBOR Rate Loans, as the case may be, or convert Loans of another Type to Eurodollar Rate Loans or LIBOR Rate Loans, as the case may be, shall forthwith be suspended and (b) the Eurodollar Rate Loans or LIBOR Rate Loans, as the case may be, then outstanding shall be converted automatically to Base Rate Loans on the last day of each Interest Period applicable to such Eurodollar Rate Loans or LIBOR Rate Loans or within such earlier period as may be required by law. The Borrower hereby agrees promptly to pay to the Agent for the account of such Bank, upon demand, any additional amounts necessary to compensate such Bank for any costs incurred by such Bank in making any conversion in accordance with this [SECTION] 4.11, including any interest or fees payable by such Bank to lenders of funds obtained by it in order to make or maintain its Eurodollar Rate Loans or LIBOR Rate Loans hereunder. [SECTION] 5. INTENTIONALLY OMITTED. --------------------- 32 33 [SECTION] 6. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants to the Agent and each of the Banks as follows. [SECTION] 6.1. AUTHORITY; ETC. -------------- (a) ORGANIZATION; GOOD STANDING. The Borrower and each Subsidiary which is a Borrower (i) is a corporation or other entity duly organized under the laws of its state of organization and is validly existing and in good standing under the laws of such state, (ii) has all requisite corporate or partnership or other organizational power to own its properties and conduct its business as now conducted and as presently contemplated, and (iii) to the extent required by law is in good standing as a foreign entity and is duly authorized to do business in each jurisdiction where such qualification is necessary except where a failure to be so qualified in such other jurisdiction would not have a materially adverse effect on the business, properties or financial condition of the Borrower. Each of the Subsidiaries that is not a Borrower is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has all requisite power to conduct its business as now conducted in each jurisdiction where its business is conducted. (b) AUTHORIZATION. The execution, delivery and performance of this Agreement and the other Loan Documents to which the Borrower is to become a party and the transactions contemplated hereby and thereby (i) are within the organizational authority of the Borrower, (ii) have been duly authorized by all necessary organizational proceedings on the part of the Borrower, (iii) do not materially conflict with or result in any material breach or contravention of any provision of law, statute, rule or regulation to which the Borrower or any of its Subsidiaries is subject or any judgment, order, writ, injunction, license or permit applicable to the Borrower or any of its Subsidiaries and (iv) do not materially conflict with any provision of its articles of incorporation or other charter documents or bylaws of, or any agreement or other instrument binding upon, the Borrower or any of its Subsidiaries or to which any of their properties are subject. (c) ENFORCEABILITY. The execution and delivery of this Agreement and the other Loan Documents to which the Borrower is or is to become a party will result in valid and legally binding obligations of the Borrower enforceable against it in accordance with the respective terms and provisions hereof and thereof, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors' rights and except to the extent that availability of the remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought. [SECTION] 6.2. GOVERNMENTAL APPROVALS. The execution, delivery and performance by the Borrower of this Agreement and the other Loan Documents to which the Borrower is or is to become a party and the transactions contemplated hereby and thereby do not require the approval or consent of, or filing with, any governmental agency or authority other than those already obtained or those which 33 34 would not have a material adverse effect on the Borrower or any of its Subsidiaries or any of the properties if not obtained. [SECTION] 6.3. TITLE TO PROPERTIES; LEASES. Except as indicated on the consolidated balance sheet or on SCHEDULE 6.3 hereto, the Borrower and its Subsidiaries own all of the properties reflected in the consolidated balance sheet of the Borrower and its Subsidiaries as at the Balance Sheet Date or acquired since that date (except properties sold or otherwise disposed of since that date). [SECTION] 6.4. FINANCIAL STATEMENTS. The following financial statements have been furnished to each of the Banks. (a) A consolidated pro forma balance sheet of the Borrower (for each of Bradley Real Estate, Inc. and Tucker Properties Corporation) and its Subsidiaries as included in the Registration Statement as of September 30, 1995, and a pro forma statement of income for the period ended September 30, 1995. There are no contingent liabilities of the Borrower or any of its Subsidiaries as of such date involving material amounts, known to the officers of the Borrower not disclosed in the Registration Statement. (b) Operating statements for each of the Real Estate Assets for the periods ending September 30, 1995 and December 31, 1995. (c) The Business Plan Summary of the Borrower. [SECTION] 6.5. NO MATERIAL CHANGES, ETC. Since the Balance Sheet Date, there has occurred no material adverse change in the financial condition or assets or business of the Borrower and its Subsidiaries as shown on or reflected in the consolidated balance sheet of the Borrower and its Subsidiaries as of the Balance Sheet Date, or the other statements contained in the Registration Statement, other than changes in the ordinary course of business that have not had any material adverse effect on the business or properties or financial condition of the Borrower or its Subsidiaries, taken as a whole. [SECTION] 6.6. FRANCHISES, PATENTS, COPYRIGHTS, ETC. Except as set forth in SCHEDULE 6.6, each of the Borrower and its Subsidiaries possesses all material franchises, patents, copyrights, trademarks, trade names, licenses and permits, and rights in respect of the foregoing, adequate for the conduct of its business substantially as now conducted without known conflict with any rights of others, including all material Permits. [SECTION] 6.7. LITIGATION. Except as listed and described on SCHEDULE 6.7 hereto, there are no actions, suits, proceedings or investigations of any kind pending or, to Borrower's knowledge, threatened against the Borrower or any of its Subsidiaries before any court, tribunal or administrative agency or board that, if adversely determined, might, either in any case or in the aggregate, materially adversely affect the properties, financial condition or business of the Borrower and its Subsidiaries 34 35 or materially impair the right of the Borrower and its Subsidiaries to carry on business substantially as now conducted by them, or which question the validity of this Agreement or any of the other Loan Documents, any action taken or to be taken pursuant hereto or thereto, or which will materially adversely affect the ability of the Borrower to pay and perform the Obligations in the manner contemplated by this Agreement and the other Loan Documents. [SECTION] 6.8. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Borrower nor any of its Subsidiaries is subject to any charter, trust or other legal restriction, or any judgment, decree, order, rule or regulation that has or is expected in the future to have a materially adverse effect on the business, properties or financial condition of the Borrower or any of its Subsidiaries. Neither the Borrower nor any of its Subsidiaries is a party to any contract or agreement that has or is expected, in the judgment of the Borrower's officers, to have any materially adverse effect on the business, properties or financial condition of the Borrower or any of its Subsidiaries. [SECTION] 6.9. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. Neither the Borrower nor any of its Subsidiaries is in violation of any provision of its articles of incorporation or other charter documents, by-laws, or any agreement or instrument to which it is subject or by which it or any of its properties is bound or any decree, order, judgment, statute, license, rule or regulation, in any of the foregoing cases in a manner that could materially adversely affect the financial condition, properties or business of the Borrower or any of its Subsidiaries. [SECTION] 6.10. TAX STATUS. The Borrower and its Subsidiaries (a) have made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, and (b) have paid all taxes and other governmental assessments and charges shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and by appropriate proceedings. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Borrower know of no basis for any such claim. [SECTION] 6.11. NO EVENT OF DEFAULT. No Default or Event of Default has occurred and is continuing. [SECTION] 6.12. INVESTMENT COMPANY ACT. Neither the Borrower nor any of its Subsidiaries is an "investment company", or an "affiliated company" or a "principal underwriter" of an "investment company", as such terms are defined in the Investment Company Act of 1940. [SECTION] 6.13. ABSENCE OF FINANCING STATEMENTS, ETC. There is no Lien that purports to cover, affect or give notice of any present or possible future lien or encumbrance on, or security interest in, any properties of the Borrower or any of its Subsidiaries or any rights relating thereto, except with respect to Permitted Liens. [SECTION] 6.14. INTENTIONALLY OMITTED. 35 36 [SECTION] 6.15. CERTAIN TRANSACTIONS. Except as set forth on SCHEDULE 6.15 hereto, and except for ordinary course, arm's length transactions, none of the officers, directors or employees of the Borrower or any of its Subsidiaries is presently a party to any transaction with the Borrower or any of its Subsidiaries (other than for services as employees, officers and trustees), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Borrower, any corporation, partnership, trust or other entity in which any officer, director or any such employee or natural Person related to such officer, director or employee or other Person in which such officer, director or employee has a direct or indirect beneficial interest has a substantial interest or is an officer or director. [SECTION] 6.16. EMPLOYEE BENEFIT PLANS; MULTIEMPLOYER PLANS; GUARANTEED PENSION PLANS. As of the date hereof, neither the Borrower nor any ERISA Affiliate maintains or contributes to any Guaranteed Pension Plan. Borrower presently contributes to the Multiemployer Plans specified on SCHEDULE 6.16 attached hereto. Borrower presently maintains and contributes to Employee Benefit Plans. To the extent that Borrower or any ERISA Affiliate maintains or contributes to any Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan, it has, and shall at all times in the future, do so in compliance with [SECTION] 7.19 hereof. [SECTION] 6.17. REGULATIONS U AND X. No portion of any Loan is to be used for the purpose of purchasing or carrying any "margin security" or "margin stock" as such terms are used in Regulations U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224. [SECTION] 6.18. ENVIRONMENTAL COMPLIANCE. The Borrower has taken all necessary steps to investigate the past and present condition and usage of the Real Estate and the operations conducted thereon. Based upon such investigation, to Borrower's knowledge, except as set forth in the environmental reports delivered to the Agent, in the Registration Statement or on SCHEDULE 6.18 attached hereto: (a) None of the Borrower or any of its Subsidiaries, or any operator of the Real Estate or any portion thereof, or any operations thereon is in violation, or alleged material violation, of any judgment, decree, order, law, license, rule or regulation pertaining to environmental matters (hereinafter collectively referred to as the "Environmental Laws"), including without limitation, those arising under the Resource Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental Response, Compensation and Liability Act of 1980 as amended ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, or any state or local statute, regulation, ordinance, order or decree relating to health, safety or the environment, including, without limitation, the environmental statutes, regulations, orders and decrees of the states in which such Real Estate 36 37 is located, which violation would have a material adverse effect on the business, properties or financial condition of the Borrower or its Subsidiaries. (b) Neither the Borrower nor any of its Subsidiaries has received written notice from any third party including, without limitation any federal, state or local governmental authority, (i) that it has been identified by the United States Environmental Protection Agency ("EPA") as a potentially responsible party under CERCLA with respect to a site listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B (1986); (ii) that any hazardous waste, as defined by 42 U.S.C. [SECTION] 9601(5), any hazardous substances as defined by 42 U.S.C. [SECTION] 9601(14), any pollutant or contaminant as defined by 42 U.S.C. [SECTION] 9601(33) or any toxic substances, oil or hazardous materials or other chemicals or substances regulated by any Environmental Laws ("Hazardous Materials") which it has generated, transported or disposed of have been found at any site at which a federal, state or local agency or other third party has conducted or has ordered that the Borrower or any of its Subsidiaries conduct a remedial investigation, removal or other response action pursuant to any Environmental Law; or (iii) that it is or shall be a named party to any claim, action, cause of action, complaint, or legal or administrative proceeding (in each case, contingent or otherwise) arising out of any third party's incurrence of costs, expenses, losses or damages of any kind whatsoever in connection with the release of Hazardous Materials. (c) (i) No portion of the Real Estate has been used for the handling, processing, storage or disposal of Hazardous Materials except in material compliance with applicable Environmental Laws; and except as set forth on SCHEDULE 6.18, no underground tank or other underground storage receptacle for Hazardous Materials is located on any portion of the Real Estate; (ii) in the course of any activities conducted by the Borrower or any of its Subsidiaries, or the operators of any Real Estate, or to the best of Borrower's knowledge, any ground or space tenants on any Real Estate, no Hazardous Materials have been generated or are being used on the Real Estate except in material compliance with applicable Environmental Laws; (iii) there has been no present or, to the best of Borrower's knowledge, past, releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, disposing or dumping (a "Release") or threatened Release of Hazardous Materials on, upon, into or from the Real Estate in violation of applicable Environmental Laws, which Release would have a material adverse effect on the value of any of such Real Estate or adjacent real property; (iv) to the best of Borrower's knowledge, there have been no Releases in violation of applicable Environmental Laws, on, upon, from or into any real property in the vicinity of any of the Real Estate which, through soil or groundwater contamination, may have come to be located on, and which would have a material adverse effect on the value of, the Real Estate; and (v) to the best of Borrower's knowledge, any Hazardous Materials that have been generated on any of the Real Estate have been transported off-site in compliance with applicable Environmental Laws. Notwithstanding that any representation contained herein may be limited to the knowledge of the Borrower, any such limitation shall not affect the covenants specified in [SECTION] 7.10 or elsewhere in this Agreement. 37 38 (d) None of the Real Estate is or shall be subject to any applicable environmental clean-up responsibility law or environmental restrictive transfer law or regulation, solely by virtue of the transactions set forth herein and contemplated hereby. 38 39 [SECTION] 6.19. SUBSIDIARIES. Schedule 6.19 hereto contains, as of the Closing Date, an accurate list of all of the presently existing Subsidiaries of the Borrower, setting forth their respective jurisdictions of organization and the percentage of their respective Capital Stock owned by the Borrower or other Subsidiaries of the Borrower. All of the issued and outstanding shares of Capital Stock of such Subsidiaries have been duly authorized and issued and are fully paid and non-assessable. Bradley Financing Partnership is not permitted to be a Borrower to this Agreement. Each Subsidiary which hereafter becomes a Borrower shall as a condition of becoming a Borrower comply with [SECTIONS] 10.2, 10.3, 10.4, 10.7 and 10.13. [SECTION] 6.20. LOAN DOCUMENTS. All of the representations and warranties of the Borrower and its Subsidiaries made in the other Loan Documents are true and correct in all material respects. [SECTION] 7. AFFIRMATIVE COVENANTS OF THE BORROWER. The Borrower covenants and agrees as follows, so long as any Loan, Letter of Credit or Note is outstanding or the Banks have any obligations to make Loans or the Agent has any obligation to issue, extend or renew any Letters of Credit: [SECTION] 7.1. PUNCTUAL PAYMENT. The Borrower will unconditionally duly and punctually pay the principal and interest on the Loans, the Letter of Credit fees, and all other amounts provided for in the Note, this Agreement, and the other Loan Documents all in accordance with the terms of the Note, this Agreement and the other Loan Documents. [SECTION] 7.2. MAINTENANCE OF OFFICE. The Borrower will maintain its chief executive office in Boston, Massachusetts or at such other place in the United States of America as the Borrower shall designate upon written notice to the Agent to be delivered within fifteen (15) days of such change, where notices, presentations and demands to or upon the Borrower in respect of the Loan Documents may be given or made. [SECTION] 7.3. RECORDS AND ACCOUNTS. The Borrower will (a) keep, and cause each of its Subsidiaries to keep, true and accurate records and books of account in which full, true and correct entries in all material respects will be made in accordance with generally accepted accounting principles and (b) maintain adequate accounts and reserves for all taxes (including income taxes), depreciation and amortization of its properties and the properties of its Subsidiaries, contingencies, and other reserves. 39 40 [SECTION] 7.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. The Borrower will deliver to each of the Banks: (a) as soon as practicable, but in any event not later than ninety (90) days after the end of each fiscal year of the Borrower, the audited consolidated balance sheet of the Borrower and its Subsidiaries at the end of such year, and the related consolidated audited statement of income, statement of changes in shareholders' equity and statement of cash flows for such year, each setting forth in comparative form the figures for the previous fiscal year and all such statements to be in reasonable detail, prepared in accordance with generally accepted accounting principles, and accompanied by an auditor's report prepared without qualification by K.P.M.G. Peat Marwick or by another independent certified public accountant reasonably acceptable to the Agent and each of the Banks; (b) as soon as practicable, but in any event not later than forty-five (45) days after the end of the March 31, June 30 and September 30 fiscal quarters of the Borrower, copies of the unaudited consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such quarter, and the related unaudited statement of income, statement of changes in shareholders' equity and statement of cash flows for the portion of the Borrower's fiscal year then elapsed, all in reasonable detail and prepared in accordance with generally accepted accounting principles (which may be provided by inclusion in the Form 10-Q of the Borrower filed with the SEC for such period provided pursuant to subsection (g) below), together with a certification by the principal financial or accounting officer of the Borrower that the information contained in the financial statements accompanying such filing fairly presents the financial position of the Borrower on the date thereof (subject to year-end adjustments); (c) As soon as practicable, but in any event not later than 45 days after the end of each fiscal quarter of the Borrower, the following reports in form and substance reasonably satisfactory to the Agent, all certified by the entity's chief financial officer or chief accounting officer: a statement of Funds From Operations, a statement of cash flows for each individual Real Estate Asset, a statement detailing Consolidated Outstanding Indebtedness, Consolidated Secured Indebtedness, Consolidated Unsecured Indebtedness, and Consolidated Cash Flow, a listing of capital expenditures, a report listing and describing all newly acquired Real Estate Assets, including their projected net operating income, cash flow, cost and secured or unsecured Indebtedness assumed in connection with such acquisition, if any, summary information and such other information on all Real Estate Assets as may be reasonably requested; (d) as soon as practicable, but in any event not later than forty-five (45) days after the end of each of the fiscal quarters of the Borrower, copies of a statement of the Consolidated Net Operating Income for such fiscal quarter for each Real Estate Asset, prepared on a basis consistent with the statements furnished pursuant to [SECTION] 6.4(c), certified by the chief financial or accounting officer of the Borrower; 40 41 (e) as soon as practicable, but in any event no later than forty-five (45) days after the end of each fiscal quarter of the Borrower, the Borrower will provide the Agent with (i) a current rent roll and record of the billed rent and common area maintenance charges (if applicable) for each tenant, and (ii) a schedule of any environmental remediation costs payable with respect to such Real Estate Asset; (f) simultaneously with the delivery of the financial statements referred to in subsections (a) and (b) above, a Compliance Certificate and (if applicable) reconciliations to reflect changes in generally accepted accounting principles since the Balance Sheet Date; (g) as soon as practicable, but in any event not later than ninety (90) days after the end of each fiscal year of the Borrower, copies of the Form 10-K statement filed with the Securities and Exchange Commission ("SEC") for such fiscal year, and as soon as practicable, but in any event not later than forty-five (45) days after the end of each fiscal quarter, copies of the Form 10-Q statement filed with the SEC for such fiscal quarter, PROVIDED that in either case if the SEC has granted an extension for the filing of such statements, Borrower shall deliver such statements to the Agent simultaneously with the filing thereof with the SEC; (h) promptly following the filing or mailing thereof, copies of all other material of a financial nature filed with the SEC or sent to the shareholders of the Borrower; (i) promptly after request by the Agent, evidence of payment of real estate taxes, other taxes, assessments and other governmental charges against the Real Estate, in the form of receipted tax bills or other evidence reasonably acceptable to the Agent; and (j) from time to time such other financial data and information as the Agent may reasonably request and which are reasonably necessary for the Banks to complete their financial analysis of Borrower. 41 42 [SECTION] 7.5. NOTICES. ------- (a) DEFAULTS. The Borrower will promptly after obtaining knowledge of the same notify the Agent in writing of the occurrence of any Default or Event of Default, or a Non-Material Breach having a material adverse effect on an Unencumbered Asset or a Subsidiary taken as a whole that owns Unencumbered Assets. If any Person shall give any notice or take any other action in respect of a claimed default (whether or not constituting a Default or an Event of Default under this Agreement) under any note, evidence of Indebtedness, indenture or other obligation to which or with respect to which the Borrower or any of its Subsidiaries is a party or obligor, whether as principal or surety, and such default would permit the holder of such note or obligation or other evidence of Indebtedness to accelerate the maturity thereof, which acceleration would have a material adverse effect on the Borrower and its Subsidiaries taken as a whole, the Borrower shall forthwith give written notice thereof to the Agent and each of the Banks, describing the notice or action and the nature of the claimed default. (b) ENVIRONMENTAL EVENTS. The Borrower will promptly notify the Agent in writing of any of the following events: (i) upon Borrower's obtaining knowledge of any violation of any Environmental Law regarding any Real Estate or Borrower's or any of its Subsidiaries' operations which violation could have a material adverse effect on such Real Estate or on Borrower's or such Subsidiary's operations; (ii) upon Borrower's obtaining knowledge of any potential or known Release of any Hazardous Substance at, from, or into any Real Estate which it reports in writing or is reportable by it in writing to any governmental authority and which is material in amount or nature or which could materially adversely affect the value of such Real Estate; (iii) upon Borrower's receipt of any notice of violation of any Environmental Laws or of any Release of Hazardous Substances in violation of applicable Environmental Laws, including a notice or claim of liability or potential responsibility from any third party (including without limitation any federal, state or local governmental officials) and including notice of any formal inquiry, proceeding, demand, investigation or other action with regard to (A) Borrower's or any Person's operation of any Real Estate, (B) contamination on, from or into any Real Estate, or (C) investigation or remediation of off-site locations at which Borrower, any of its Subsidiaries or any of their predecessors are alleged to have directly or indirectly disposed of Hazardous Substances; or (iv) upon Borrower's obtaining knowledge that any expense or loss has been incurred by such governmental authority in connection with the assessment, containment, removal or remediation of any Hazardous Substances with respect to which Borrower or any of its Subsidiaries may be liable or for which a lien may be imposed on any Real Estate. (c) NOTIFICATION OF CLAIMS AGAINST REAL ESTATE. The Borrower will, promptly upon becoming aware thereof, notify the Agent in writing of any setoff, claims, withholdings or other defenses which could have a material adverse effect on any Real Estate. 42 43 (d) NOTICE OF LITIGATION AND JUDGMENTS. The Borrower will, and will cause each of its Subsidiaries to, give notice to the Agent in writing within fifteen (15) days of becoming aware of any litigation or proceedings threatened in writing or any pending litigation and proceedings affecting the Borrower or any of its Subsidiaries or to which the Borrower or any of its Subsidiaries is or is to become a party involving an uninsured claim (or as to which the insurer reserves rights) against the Borrower or any of its Subsidiaries that at the time of giving of notice could reasonably be expected to have a materially adverse effect on the Borrower or any of its Subsidiaries or their properties, business or financial condition, and stating the nature and status of such litigation or proceedings. The Borrower will, and will cause each of its Subsidiaries to, give notice to the Agent, in writing, in form and detail reasonably satisfactory to the Agent, within ten (10) days of any judgment not covered by insurance, final or otherwise, against the Borrower or any of its Subsidiaries in an amount in excess of $300,000. [SECTION] 7.6. EXISTENCE; MAINTENANCE OF REIT STATUS; MAINTENANCE OF PROPERTIES. The Borrower will do or cause to be done all things necessary to preserve and keep in full force and effect its status as a real estate investment trust in compliance with all applicable provisions of the Code relating to such status. The Borrower will do or cause to be done all things necessary to preserve and keep in full force its organizational existence, rights and franchises, and those of its Subsidiaries, which in the judgment of the Borrower may be necessary to properly and advantageously conduct the businesses being conducted by it and its Subsidiaries. The Borrower will, in a manner not inconsistent with its Business Plan Summary, (a) cause all of its properties and those of its Subsidiaries used or useful in the conduct of its business or the business of its Subsidiaries to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment, (b) cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Borrower may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times, and (c) continue, and cause its Subsidiaries to continue, to engage primarily in the businesses now conducted by them and in related businesses, to the extent necessary to comply with the other terms and conditions set forth in this Agreement. [SECTION] 7.7. INSURANCE. The Borrower will, and will cause each of its Subsidiaries to, maintain insurance with financially sound and reputable insurers against such casualties and contingencies as shall be in accordance with the general practices of businesses engaged in similar activities in similar geographic areas and in amounts, containing such terms, in such forms and for such periods as may be reasonable and prudent. At the request of the Agent, the Borrower will provide the Agent with evidence of such insurance. [SECTION] 7.8. TAXES; MECHANICS' AND MATERIALMENS' LIENS. The Borrower will, and will cause each of its Subsidiaries to, pay real estate taxes, other taxes, assessments and other governmental charges against the Real Estate before the same become delinquent, and will duly pay and discharge, or cause to be paid and discharged, before the same shall become overdue, all taxes, assessments and other 43 44 governmental charges imposed upon it and its other properties, sales and activities, or any part thereof, or upon the income or profits therefrom, as well as all claims for labor, materials, or supplies that if unpaid might by law become a lien or charge upon any of its properties; PROVIDED that any such tax, assessment, charge, levy or claim need not be paid if the validity or amount thereof shall currently be contested in good faith by appropriate proceedings and if the Borrower or such Subsidiary shall have set aside on its books adequate reserves with respect thereto; and PROVIDED FURTHER that the Borrower and each Subsidiary of the Borrower will pay all such taxes, assessments, charges, levies or similar governmental claims forthwith prior to consummation of proceedings to foreclose any Lien that may have attached as security therefor. [SECTION] 7.9. INSPECTION OF PROPERTIES AND BOOKS. ---------------------------------- (a) The Borrower shall permit the Banks, through the Agent or any of the Banks' other designated representatives, to visit and inspect any of the Real Estate, to examine the books of account of the Borrower and its Subsidiaries (and to make copies thereof and extracts therefrom) and to discuss the affairs, finances and accounts of the Borrower and its Subsidiaries with, and to be advised as to the same by, its officers, all during regular business hours and upon reasonable advance notice, in each case at the expense of the Banks except as set forth in [SECTION] 7.9(b). (b) The Borrower shall permit the Agent, through the Agent or any of the Agent's other designated representatives, on an annual basis and at the expense of the Borrower, to visit and inspect a representative sample (it being agreed that the goal shall be to visit all of the properties during the term of this Agreement) of the properties of the Borrower and its Subsidiaries (during regular business hours and upon reasonable advance notice) and to review environmental and hazardous waste inspection reports and reports of third party inspecting engineers regarding structural matters with respect to such properties. The Banks may employ professional engineering and environmental consultants to assist them in the review of such reports, and the fees and expenses of such consultants shall also be paid by the Borrower. [SECTION] 7.10. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS. The Borrower will, and will cause each of its Subsidiaries to, comply with (a) all applicable laws and regulations now or hereafter in effect wherever its business is conducted, including all Environmental Laws, (b) the provisions of its organizational documents, and other charter documents and by-laws, (c) all agreements and instruments to which it is a party or by which it or any of its Real Estate Assets may be bound, including the Leases, and (d) all applicable decrees, orders, and judgments, unless such non-compliance constitutes a Non-Material Breach. If at any time any Permit from any governmental Person shall be required in order that the Borrower may fulfill or be in compliance with any of its obligations hereunder, the Borrower will immediately take or cause to be taken all reasonable steps within the power of the Borrower to obtain such authorization, consent, approval, permit or license and furnish the Agent and the Banks with evidence thereof. 44 45 [SECTION] 7.11. LESSEE COMPLIANCE WITH ENVIRONMENTAL LAWS. Borrower and each of its Subsidiaries shall use reasonable efforts to ensure compliance in all material respects by all tenants and subtenants, if any, with, all applicable Environmental Laws and to ensure that all tenants and subtenants obtain and comply with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws, except to the extent that failure to do so would constitute a Non-Material Breach; PROVIDED that in no event shall the Borrower or its Subsidiaries be required to modify the terms of Leases, or renewals thereof, with any tenants (i) at properties owned by the Borrower or its Subsidiaries as of the date hereof, or (ii) at properties hereafter acquired by the Borrower or its Subsidiaries as of the date of such acquisition, to add provisions to such effect. [SECTION] 7.12. ENVIRONMENTAL ASSESSMENTS. Prior to the acquisition of a Real Estate Asset after the Closing Date, the Borrower will, and will cause each of its Subsidiaries to, perform or cause to be performed a Phase I environmental site assessment report in accordance with ASTM standards. In connection with any such investigation, the Borrower shall cause to be prepared a report of such investigation, to be made available to any Bank upon reasonable request, for informational purposes and to assure compliance with the specifications and procedures. [SECTION] 7.13. USE OF PROCEEDS. Subject to the provisions of [SECTION] 2.5 hereof, the proceeds of the Loans shall be used by the Borrower for working capital purposes (up to an aggregate of $25,000,000 outstanding at any time) as permitted by [SECTION] 2.5(b) hereof, tenant improvements, leasing commissions, improvements necessary for the operation of the Real Estate Assets, repayment of indebtedness, payment of loan fees and closing costs, acquisitions of Real Estate in accordance with the Borrower's Business Plan Summary delivered to the Agent herewith and as permitted by [SECTION] 2.5(c) hereof, and payment of costs of Assets Under Development as permitted by [SECTION] 2.5(d) and [SECTION] 9.7. [SECTION] 7.14. FURTHER ASSURANCES. The Borrower will, and will cause each of its Subsidiaries to, cooperate with the Agent and the Banks and execute such further instruments and documents and perform such further acts as the Agent and the Banks shall reasonably request to carry out to their satisfaction the transactions contemplated by this Agreement and the other Loan Documents. [SECTION] 7.15. INTEREST RATE PROTECTION. The Borrower shall maintain in effect interest rate protection arrangements, in form and substance reasonably satisfactory to the Agent, providing for the rate of interest applicable to the Loans to be capped at a rate satisfactory to the Agent with respect to a portion equal to not less than $100,000,000 for a period of two (2) years from the Effective Date. The Borrower shall maintain such arrangements in full force and effect during the period specified above, and shall not, without the written consent of the Agent, modify terminate or transfer such arrangements during such period. [SECTION] 7.16 REAL ESTATE ASSETS SUBSEQUENTLY ACQUIRED. Within forty-five (45) days after the acquisition of a Real Estate Asset permitted by [SECTION] 2.5(c) or [SECTION] 2.5(d) hereof, Borrower shall, to the 45 46 extent in Borrower's possession, provide to the Agent with respect to such Real Estate Asset (i) a construction engineer's statement of condition report, (ii) a capital expenditure program, (iii) an actual historical operating statement (to the extent available to the Borrower), (iv) historical operating statement estimated by the Borrower (to the extent a true historical operating statement is not available to the Borrower), (v) a ten year cash flow analysis, (vi) financial statements and profiles for all major tenants and guarantors (to the extent available to the Borrower), (vii) insurance certificates for such Real Estate Asset, and (viii) the investment summary presented to the Board of Directors of the Borrower with respect to such acquisition. [SECTION] 7.17. ENVIRONMENTAL INDEMNIFICATION. The Borrower covenants and agrees that it will indemnify and hold the Agent and each Bank harmless from and against any and all claims, expense, damage, loss or liability incurred by the Agent or any Bank (including all reasonable costs of legal representation incurred by the Agent or any Bank, but excluding, as applicable, for the Agent or a Bank any claim, expense, damage, loss or liability as a result of the gross negligence or willful misconduct of the Agent or such Bank) relating to (a) any Release or threatened Release of Hazardous Substances on any Real Estate; (b) any violation of any Environmental Laws with respect to conditions at any Real Estate or the operations conducted thereon; or (c) the investigation or remediation of off-site locations at which the Borrower or any of its Subsidiaries or their predecessors are alleged to have directly or indirectly disposed of Hazardous Substances. It is expressly acknowledged by the Borrower that this covenant of indemnification shall survive the payment of the Loans and shall inure to the benefit of the Agent and the Banks, and their successors and assigns. [SECTION] 7.18. RESPONSE ACTIONS. The Borrower covenants and agrees that if any Release or disposal of Hazardous Substances shall occur or shall have occurred on any Real Estate in violation of applicable Environmental Laws, the Borrower will cause the prompt containment and removal of such Hazardous Substances and remediation of such Real Estate as necessary to comply with all Environmental Laws. [SECTION] 7.19. EMPLOYEE BENEFIT PLANS. ---------------------- (a) REPRESENTATION. The Borrower and its ERISA Affiliates do not currently maintain or contribute to any Guaranteed Pension Plan. (b) NOTICE. The Borrower will obtain the consent of the Agent and the Banks prior to the establishment of any Guaranteed Pension Plan by the Borrower or any ERISA Affiliate. (c) IN GENERAL. Each Employee Benefit Plan maintained by the Borrower or any ERISA Affiliate will be operated in compliance in all material respects with the provisions of ERISA and, to the extent applicable, the Code, including but not limited to the provisions thereunder respecting prohibited transactions. 46 47 (d) TERMINABILITY OF WELFARE PLANS. Except as provided in SCHEDULE 7.19, with respect to each Employee Benefit Plan maintained by the Borrower or an ERISA Affiliate which is an employee welfare benefit plan within the meaning of [SECTION] 3(1) or [SECTION] 3(2)(B) of ERISA, the Borrower, or the ERISA Affiliate, as the case may be, has the right to terminate each such plan at any time (or at any time subsequent to the expiration of any applicable bargaining agreement) without liability other than liability to pay claims incurred prior to the date of termination. (e) MULTIEMPLOYER PLANS. Without the consent of the Agent, the Borrower will not enter into, maintain or contribute to, any Multiemployer Plan, other than the Multiemployer Plans specified on SCHEDULE 6.16. (f) UNFUNDED OR UNDERFUNDED LIABILITIES. The Borrower will not, at any time, have accrued, unfunded or underfunded liabilities with respect to Employee Benefit Plans in an amount exceeding $500,000 in the aggregate, or with respect to Guaranteed Pension Plans in an amount exceeding $1,000,000 in the aggregate, or permit any condition to exist under Multiemployer Plans that would create withdrawal liability in an amount exceeding $1,000,000 in the aggregate. [SECTION] 7.20. CAPITAL FOR DEVELOPMENT AND ACQUISITION. The Borrower will, and will cause each of its Subsidiaries to, maintain available to it sources of Unrestricted Cash and Cash Equivalents which are equal to or greater than the sum of (a) the total cost to complete all Assets Under Development by the Borrower and its Subsidiaries PLUS (b) the total amount that the Borrower and its Subsidiaries may be obligated to pay under agreements for the purchase of Real Estate Assets, which sources may include the amount of the Total Commitment available to Borrower under this Agreement in excess of outstanding Loans. [SECTION] 7.21. NO AMENDMENT TO CERTAIN DOCUMENTS. The Borrower will not, and will not permit any of its Subsidiaries to, cause or permit its certificate of incorporation or by-laws or other organizational or charter documents to be modified, amended or supplemented in any respect without the prior written consent of the Agent if such modification would affect the Borrower's status as a real estate investment trust or otherwise materially adversely affect the rights of the Banks and the Agent hereunder or under any of the other Loan Documents. [SECTION] 8. CERTAIN NEGATIVE COVENANTS OF THE BORROWER. The Borrower covenants and agrees as follows, so long as any Loan, Letter of Credit or Note is outstanding or the Banks have any obligation to make any Loans or the Agent or any Fronting Bank has any obligations to issue, extend or renew any Letters of Credit: 47 48 [SECTION] 8.1. RESTRICTIONS ON INDEBTEDNESS AND TOTAL INDEBTEDNESS --------------------------------------------------- The Borrower may, and may permit its Subsidiaries to, create, incur, assume, guarantee or be or remain liable for, contingently or otherwise, any Total Indebtedness other than the specific Total Indebtedness which is prohibited under this [SECTION] 8.1 and with respect to which the Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume, guarantee or be or remain liable for, contingently or otherwise, as follows: (i) Consolidated Unsecured Indebtedness (excluding the Obligations) in an amount in excess of $1,000,000 at any one time until such time as the Borrower receives a long term unsecured debt rating or Indicative Rating from either Moody's or S&P, of not less than BBB- or Baa3, whichever is applicable; (ii) Consolidated Secured Indebtedness in an aggregate amount which would create a Default under [SECTION] 9.2 hereof; (iii) An aggregate amount in excess of $500,000 at any one time in respect of taxes, assessments, governmental charges or levies and claims for labor, materials and supplies for which payment therefor shall be required to be made in accordance with the provisions of [SECTION] 7.8; (iv) An aggregate amount in excess of $500,000 at any one time in respect of uninsured judgments or awards, with respect to which the applicable periods for taking appeals have expired, or with respect to which final and unappealable judgments have been rendered; and (v) Other Liabilities (other than Indebtedness) of the Borrower or its Subsidiaries which are not incurred in the ordinary course of business and which exceed $5,000,000 in the aggregate, at any one time. The terms and provisions of this [SECTION] 8.1 are in addition to, and not in limitation of, the covenants set forth in [SECTION] 9 of this Agreement. Notwithstanding anything contained herein to the contrary, the Borrower will not, and will not permit any of its Subsidiaries to, incur any Indebtedness which, together with other Indebtedness incurred by the Borrower and its Subsidiaries since the date of the most recent compliance certificate delivered to the Agent in accordance with this Agreement, exceeds $5,000,000 in the aggregate unless the Borrower shall have delivered a Compliance Certificate to the Agent evidencing covenant compliance at the time of delivery of the certificate and, on a pro-forma basis after giving effect to such proposed Indebtedness [SECTION] 8.2. RESTRICTIONS ON LIENS, ETC. The Borrower will not, and will not permit any of its Subsidiaries to, create or incur or agree not to create or incur or suffer to be created or incurred or 48 49 to exist any Lien upon any of its Real Estate Assets of any character whether now owned or hereafter acquired, or upon the rents, income or profits therefrom; PROVIDED that the Borrower may create or incur or suffer to be created or incurred or to exist: (i) Liens securing Consolidated Secured Indebtedness permitted pursuant to [SECTION] 8.1 hereof; (ii) Liens securing taxes, assessments, governmental charges, or levies or claims for labor, materials and supplies which are permitted by [SECTION] 8.1 hereof; (iii) deposits or pledges made in connection with, or to secure payment of, workmen's compensation, unemployment insurance, old age pensions or other social security obligations; (iv) Liens in respect of judgments or awards, the Total Indebtedness with respect to which is permitted by [SECTION] 8.1; (v) encumbrances on properties consisting of easements, rights of way, covenants, restrictions on the use of real property and defects and irregularities in the title thereto; landlord's or lessor's Liens under Leases to which the Borrower or any of its Subsidiaries is a party or bound; and other minor Liens or encumbrances on properties none of which in the opinion of the Borrower interferes materially and adversely with the use of the property affected in the ordinary conduct of the business of the Borrower, and which matters (x) do not individually or in the aggregate have a materially adverse effect on the business of the Borrower or its Subsidiaries and (xx) do not make title to such property unmarketable by the conveyancing standards in effect where such property is located; (vi) any Leases; (vii) presently outstanding Liens and other encumbrances listed on SCHEDULE 8.2 hereto; and (viii) other Liens in connection with any Indebtedness or Total Indebtedness permitted under [SECTION] 8.1. 49 50 [SECTION] 8.3. RESTRICTIONS ON INVESTMENTS AND ACQUISITIONS. The Borrower will not, and will not permit any of its Subsidiaries to, make or permit to exist or to remain outstanding any Investment or become or remain a partner in any partnership or joint venture, or to acquire any Real Estate Assets, except: (a) Investments in marketable direct or guaranteed obligations of the United States of America that mature within one (1) year from the date of purchase by the Borrower; (b) Investments in demand deposits, certificates of deposit, bankers acceptances and time deposits of United States banks having total assets in excess of $1,000,000,000; (c) Investments in securities commonly known as "commercial paper" issued by a corporation organized and existing under the laws of the United States of America or any state thereof that at the time of purchase have been rated and the ratings for which are not less than "P 1" if rated by Moody's and not less than "A 1" if rated by S&P; (d) Investments existing or contemplated on the date hereof and listed on SCHEDULE 8.3(d) hereto; (e) So long as no Event of Default has occurred and is continuing or would occur after giving effect thereto, acquisitions of Real Estate of the type of Real Estate Assets currently owned by the Borrower and the Capital Stock of Persons whose primary operations consist of the ownership, development, operation and management of properties of the type of Real Estate Assets owned by the Borrower, in each case which are consistent with the Business Plan Summary and in which the total consideration (both cash and non-cash) paid for such acquisition does not exceed $100,000,000, it being agreed that the acquisition of multiple assets in one transaction or a series of related transactions shall constitute one acquisition for purposes of the $100,000,000 limitation; PROVIDED, HOWEVER that (i) the Borrower shall not, and shall not permit any of its Subsidiaries to, acquire any Real Estate Asset without the prior written consent of the Agent if the environmental investigation for such Real Estate Asset determines that the potential environmental remediation costs and other environmental liabilities associated with such Real Estate Asset exceed $1,000,000; and (ii) the Borrower shall not permit any of its Subsidiaries which is not a party to, or which does not become a party to, this Agreement to acquire any Real Estate Asset; (f) Investments in any other partnerships, joint ventures, corporations or other entities (other than Subsidiaries) (including, without limitation, those currently existing and those entered into subsequently) in an amount not to exceed $25,000,000 in the aggregate (excluding for the purposes of the $25,000,000 limitation, the Investment by the Borrower in the Williams Square Partnership) including, without limitation, any Total Indebtedness incurred or assumed thereby; 50 51 (g) any other Investments made in the ordinary course of the Borrower's business in a manner consistent with the Business Plan Summary of the Borrower; and (h) Investments in Subsidiaries. [SECTION] 8.4. MERGER, CONSOLIDATION AND DISPOSITION OF PROPERTIES. --------------------------------------------------- (a) The Borrower will not, and will not permit any of its Subsidiaries to, become a party to any merger, consolidation, reorganization or liquidation or agree to transfer all or substantially all of its assets, in each case in transactions in excess of $1,000,000, except (i) the merger or consolidation of one or more Subsidiaries of the Borrower with or into the Borrower, or (ii) the merger or consolidation of two or more Subsidiaries of the Borrower or as otherwise approved in advance by the Banks. (b) The Borrower will not, and will not permit any of its Subsidiaries to, become a party to or agree to or effect any disposition of any Unencumbered Asset or Real Estate Asset unless at least five (5) Business Days prior to such disposition the Borrower shall have provided a statement in the form of EXHIBIT C hereto signed by the principal financial or accounting officer of the Borrower and setting forth in reasonable detail computations evidencing compliance with the covenants contained in [SECTION] 9.1 through 9.7 hereof after giving effect to such proposed transfer and all liabilities, fixed or contingent, pursuant thereto and certifying that no Default or Event of Default has occurred and is continuing. [SECTION] 8.5. SALE AND LEASEBACK. The Borrower will not, and will not permit any of its Subsidiaries to, enter into any arrangement, directly or indirectly, whereby the Borrower or any Subsidiary of the Borrower shall sell or transfer any property owned by it in order then or thereafter to lease such property. [SECTION] 8.6. COMPLIANCE WITH ENVIRONMENTAL LAWS. The Borrower will not, and will not permit any of its Subsidiaries to, do any of the following: (a) use any of the Real Estate or any portion thereof as a facility for the handling, processing, storage or disposal of Hazardous Materials in violation of applicable Environmental Laws, (b) cause or permit to be located on any of the Real Estate any underground tank or other underground storage receptacle for Hazardous Materials except in material compliance with Environmental Laws, (c) generate any Hazardous Materials on any of the Real Estate except in material compliance with Environmental Laws, or (d) conduct any activity at any Real Estate or use any Real Estate in any manner so as to cause a Release in violation of applicable Environmental Laws; unless any such occurrence would constitute a Non-Material Breach hereunder. [SECTION] 8.7. DISTRIBUTIONS. So long as no Event of Default has occurred and is continuing, the Borrower and its Subsidiaries shall be permitted to make Distributions from time to time in amounts 51 52 determined by Borrower, PROVIDED, HOWEVER, that in no event shall Borrower make any Distribution if (a) such Distribution, together with other Distributions made in such fiscal quarter, in the aggregate, would exceed 95% of Funds From Operations for such fiscal quarter, or (b) such Distribution, together with other Distributions made in such period of four (4) consecutive fiscal quarters, in the aggregate, would exceed 90% of Funds From Operations for such period. Notwithstanding the foregoing, the Borrower shall be permitted at any time to make those Distributions which are necessary to maintain its tax status as a real estate investment trust; PROVIDED, HOWEVER, that any such Distributions permitted to be made during the continuance of an Event of Default shall in no way constitute a waiver of or forbearance of such Event of Default by the Banks, it being understood and agreed that the Banks shall continue to have all rights and remedies with respect to such Event of Default as are provided in the Agreement, the other Loan Documents and applicable law. [SECTION] 9. FINANCIAL COVENANTS OF THE BORROWER. The Borrower covenants and agrees that so long as any Loan, Letter of Credit or Note is outstanding or the Banks have any obligation to make any Loans or the Agent or any Fronting Bank has any obligations to issue, extend or renew any Letters of Credit that: [SECTION] 9.1. CONSOLIDATED OUTSTANDING INDEBTEDNESS. As at the end of any fiscal quarter or any other date of measurement, the Borrower shall not permit Consolidated Outstanding Indebtedness to exceed 50% of Consolidated Market Value. [SECTION] 9.2. CONSOLIDATED SECURED INDEBTEDNESS. As at the end of any fiscal quarter or any other date of measurement, the Borrower shall not permit Consolidated Secured Indebtedness to exceed 40% of Consolidated Market Value. [SECTION] 9.3. NET WORTH. The Borrower shall not at any time permit Consolidated Net Worth to be less than the sum of (a) $200,000,000 PLUS (b) 50% of the aggregate proceeds received by the Borrower (net of related fees and expenses customarily incurred in transactions of such type) in connection with any offering of stock in the Borrower after the Closing Date and on or prior to the date such determination of Consolidated Net Worth is made. [SECTION] 9.4. UNENCUMBERED ASSETS. As at the end of any fiscal quarter or any other date of measurement, the Borrower shall not permit the Value of Unencumbered Assets to be less than 1.75 times Consolidated Unsecured Indebtedness. [SECTION] 9.5. CASH FLOW. As at the end of any fiscal quarter or any other date of measurement, the Borrower shall not permit the sum of (a) Consolidated Cash Flow MINUS (b) Annual Capital Expenditure Reserve to be less than 2 TIMES Consolidated Debt Service, based on the most recent two (2) fiscal quarter results annualized. 52 53 [SECTION] 9.6. UNENCUMBERED ASSET DEBT SERVICE COVERAGE. As at the end of any fiscal quarter or any other date of measurement, the Borrower shall not permit Consolidated Unencumbered Asset Cash Flow to be less than 1.50 TIMES Consolidated Unsecured Debt Service Charges, based on the most recent two (2) fiscal quarter results annualized, provided that as at the end of any fiscal quarter or any other date of measurement after June 30, 1996, the Borrower shall not permit Consolidated Unencumbered Asset Cash Flow to be less than 1.75 TIMES Consolidated Unsecured Debt Service Charges, based on the most recent two (2) fiscal quarter results annualized. [SECTION] 9.7. ASSETS UNDER DEVELOPMENT. (a) The Borrower shall not permit Assets Under Development to exceed 10% of Consolidated Capitalization Value at any time. (b) The Borrower shall not, and shall not permit any of its Subsidiaries to, commence any construction of new Buildings or additions to existing Buildings unless (i) such proposed project is at least 50% pre-leased by size and at least 50% pre-leased by pro-forma and (ii) the Borrower and such Subsidiary are, and during the course of construction, remain in compliance with [SECTION] 7.20. [SECTION] 10. CONDITIONS TO EFFECTIVENESS. This Agreement shall become effective when each of the following conditions precedent have been satisfied: [SECTION] 10.1. LOAN DOCUMENTS. Each of the Loan Documents shall have been duly executed and delivered by the respective parties thereto, shall be in full force and effect and shall be in form and substance satisfactory to each of the Banks. Each Bank shall have received a fully executed copy of each such document prior to or on the Effective Date. [SECTION] 10.2. CERTIFIED COPIES OF ORGANIZATION DOCUMENTS. Each of the Banks shall have received from the Borrower and each Subsidiary of the Borrower a copy, certified as of a recent date by a duly authorized officer of such Person to be true and complete on the Closing Date, of its articles of incorporation and by-laws any other charter and organization documents as in effect on such date of certification, and a certificate of good standing from the Borrower's jurisdiction of incorporation. [SECTION] 10.3. RESOLUTIONS. All corporate action or other charter or organizational acts on the part of the Borrower necessary for the valid execution, delivery and performance by the Borrower of this Agreement and the other Loan Documents to which it is or is to become a party shall have been duly and effectively taken, and evidence thereof satisfactory to the Banks shall have been provided to each of the Banks. Each Bank shall have received from the Borrower true copies of the resolutions adopted by its Board of Directors or other organizational vote authorizing the transactions described herein, each certified by its secretary or equivalent organizational Person to be true and complete and in effect on the Effective Date and evidence that the secretary or equivalent organizational Person is authorized to so certify by the Borrower's charter documents. 53 54 [SECTION] 10.4. INCUMBENCY CERTIFICATE; AUTHORIZED SIGNERS. Each of the Banks shall have received from the Borrower an incumbency certificate, dated as of the Effective Date, signed by a duly authorized officer of the Borrower and giving the name and bearing a specimen signature of each individual who shall be authorized: (a) to sign, in the name and on behalf of the Borrower, each of the Loan Documents to which the Borrower is or is to become a party; (b) to make Loan Requests and Conversion Requests; and (c) to give notices and to take other action on behalf of the Borrower under the Loan Documents. [SECTION] 10.5. TAXES. The Bank shall have received evidence of payment of real estate taxes and municipal charges on the Real Estate which were due and payable on or before the Effective Date. [SECTION] 10.6. CERTIFICATES OF INSURANCE. The Agent shall have received (a) a certificate of insurance as to the insurance maintained by Borrower and its Subsidiaries on the Real Estate (including flood insurance if necessary) from the insurer or an independent insurance broker dated as of the Effective Date, identifying insurers, types of insurance, insurance limits, and policy terms; and (b) such further information and certificates from Borrower, its insurers and insurance brokers as the Agent may reasonably request. [SECTION] 10.7. OPINIONS OF COUNSEL CONCERNING ORGANIZATION AND LOAN DOCUMENTS. Each of the Banks and the Agent shall have received favorable opinions addressed to the Banks and the Agent and dated as of the Effective Date (other than for [SECTION] 6.19 opinions), in form and substance satisfactory to the Banks and the Agent from Goodwin, Procter & Hoar with respect to Massachusetts and Maryland law. [SECTION] 10.8 PAYMENT OF FEES. The Borrower shall have paid to the Agent the fees referred to in ss.4.1 and shall have paid all other expenses as provided in [SECTION] 15 hereof then outstanding. [SECTION] 10.9 INTEREST RATE PROTECTION. The Agent shall have received evidence satisfactory to the Agent that the Borrower has obtained and is maintaining interest rate protection arrangements in accordance with the requirements set forth in [SECTION] 7.15 hereof. [SECTION] 10.10 FINANCIAL ANALYSES OF PROPERTIES. Each Bank shall have completed to its satisfaction, a financial analysis of each Real Estate Asset, which analyses shall include, without limitation, a review of the most recent rent rolls, the historical operating statements, cash flow projections, capital expenditure budgets, market data, leases and tenant financial statements. Each such analysis shall be completed at each Bank's sole expense with materials furnished by the Borrower at the Borrower's expense. [SECTION] 10.11. INSPECTION OF PROPERTIES. The Agent shall have completed to its satisfaction an inspection of a representative sample of the Borrower's Real Estate Assets, including Unencumbered Assets, at Borrower's expense. 54 55 [SECTION] 10.12. CAPITAL EXPENDITURE BUDGETS. The Agent shall have received and approved capital expenditure budgets for each of the Real Estate Assets, in form and substance satisfactory to the Agent. [SECTION] 10.13. UCC LIEN SEARCHES. The Agent shall have received UCC lien searches of the applicable public records disclosing no conditional sales contracts, security agreements, chattel mortgages, leases of personalty, financing statements or other encumbrances which affect any of the Real Estate (other than UCC financing statements approved by the Agent and Permitted Liens). [SECTION] 10.14. CERTIFICATE OF MERGER. The Agent shall have received satisfactory evidence of the completion of the Borrower's acquisition of Tucker Properties Corporation, which evidence shall include, without limitation, the filing of a Certificate of Merger with the Maryland Department of Taxes and Assessment merging Tucker Properties Corporation into the Borrower and copies of all required consents and approvals. [SECTION] 10.15. PARTNERSHIP AGREEMENTS. The Agent shall have received, reviewed and approved all partnership and joint venture agreements to which the Borrower is a party and which relate to any assets of the Borrower, including, without limitation, those partnership agreements of Bradley Operating Partnership, Bradley Financing Partnership and the Williams Square Partnership. [SECTION] 10.16. EXISTING INDEBTEDNESS. The existing Indebtedness of the Borrower (a) to the Banks under the Amended and Restated Revolving Credit Agreement dated as of January 27, 1994, as amended, and (b) set forth on SCHEDULE 10.16 (which Indebtedness shall not be Permitted Indebtedness) shall have been satisfied in full. 10.17. RELEASE DOCUMENTS. The Agent shall have delivered to the Borrower appropriate release documentation necessary to release all security interests granted by the Borrower in the properties and assets of the Borrower, including, without limitation, appropriate releases of mortgages and deeds of trust and UCC termination statements. [SECTION] 11. CONDITIONS TO ALL BORROWINGS. The obligations of the Banks to make any Loan, and of the Agent to issue, extend or renew any Letter of Credit, in each case whether on or after the Effective Date, shall also be subject to the satisfaction of the following conditions precedent: [SECTION] 11.1. REPRESENTATIONS TRUE; NO EVENT OF DEFAULT; COMPLIANCE CERTIFICATE. Each of the representations and warranties of the Borrower contained in this Agreement, the other Loan Documents or in any document or instrument delivered pursuant to or in connection with this Agreement shall be true as of the date as of which they were made and shall also be true at and as of the time of the making of such Loan or the issuance, extension or renewal of such Letter of Credit, with the same effect as if made at and as of that time (except (i) to the extent of changes resulting 55 56 from transactions contemplated or permitted by this Agreement and the other Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, (ii) to the extent that such representations and warranties relate expressly to an earlier date and (iii) for Non-Material Breaches); the Borrower shall have performed and complied with all terms and conditions herein required to be performed by it or prior to the Drawdown Date of such Loan; and no Default or Event of Default shall have occurred and be continuing on the date of any Loan Request or on the Drawdown Date of such Loan. Each of the Banks shall have received a Compliance Certificate evidencing covenant compliance after giving effect to such requested Loan. [SECTION] 12. EVENTS OF DEFAULT; ACCELERATION; ETC. ------------------------------------- [SECTION] 12.1 EVENTS OF DEFAULT AND ACCELERATION. If any of the following events ("Events of Default") shall occur: (a) the Borrower shall fail to pay any principal of the Loans when the same shall become due and payable; (b) the Borrower shall fail to pay any interest on the Loans or any other sums due hereunder or under any of the other Loan Documents when the same shall become due and payable, and such failure continues for three (3) days; (c) the borrower shall fail to comply with any of its covenants contained in [SECTION] 7.5, [SECTION] 7.6, [SECTION] 7.7, [SECTION] 8 or [SECTION] 9 hereof and such failure continues for thirty (30) days (subject to the Non-Material Breach standard for [SECTION] 8.6 if the breach thereof is a Non-Material Breach); (d) the Borrower or any of its Subsidiaries shall fail to perform any other term, covenant or agreement contained herein or in any of the other Loan Documents (other than those specified elsewhere in this [SECTION] 12) for thirty (30) days after written notice of such failure from Agent to the Borrower PROVIDED that if Borrower is diligently and in good faith prosecuting a cure of such breach, an Event of Default shall not be deemed to have occurred until ninety (90) days after such written notice; (e) any representation or warranty of the Borrower or relating to any of its Subsidiaries in this Agreement or any of the other Loan Documents shall prove to have been false in any material respect upon the date when made or deemed to have been made or repeated, and the same does not constitute a Non-Material Breach under this Agreement, PROVIDED, HOWEVER, that if the condition or event making the representation and warranty false is capable of being cured by the Borrower or such Subsidiary, the Borrower shall have a period of thirty (30) days in the case of a breach specifically with respect to an Unencumbered Asset, and sixty (60) days in the case of any other breach, after the date that the Borrower first obtained knowledge of such condition or event during which the Borrower may cure such condition or event (or, if such condition or event is not 56 57 reasonably capable of being cured within the initial cure period, such additional period of time as may be reasonably required in order to cure such condition or event but in any event such period shall not exceed six (6) months from the date that the Borrower first obtained knowledge of such condition or event), and no Event of Default shall exist hereunder during such initial cure period or additional period so long as the Borrower continuously and diligently pursues the cure of such condition or event and the other conditions to such cure period have not changed; (f) the Borrower or any of its Subsidiaries shall fail to pay at maturity, or within any applicable period of grace, any Indebtedness or obligation in respect of any Capitalized Leases in an aggregate amount in excess of $10,000,000 or fail to observe or perform any material term, covenant or agreement contained in any agreement by which it is bound, evidencing or securing Indebtedness or obligation in respect of any Capitalized Leases in an aggregate amount in excess of $10,000,000 for such period of time as would permit (assuming the giving of appropriate notice if required) the holder or holders thereof or of any obligations issued thereunder to accelerate the maturity thereof; and in any event, such failure shall continue for sixty (60) days, unless the amount, applicability or validity thereof is being contested by the Borrower or such Subsidiary in good faith by appropriate legal proceedings and the Borrower or such Subsidiary has reserves adequate to pay any such disputed amounts; (g) the Borrower or any of its Subsidiaries shall make an assignment for the benefit of creditors, or admit in writing its inability to pay or generally fail to pay its debts as they mature or become due, or shall petition or apply for the appointment of a trustee or other custodian, liquidator or receiver of the Borrower or any of its Subsidiaries or of any substantial part of the properties of the Borrower or any of its Subsidiaries or shall commence any case or other proceeding relating to the Borrower or any of its Subsidiaries under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, or shall take any action to authorize or in furtherance of any of the foregoing, or if any such petition or application shall be filed or any such case or other proceeding shall be commenced against the Borrower or any of its Subsidiaries and the Borrower or any of its Subsidiaries shall indicate its approval thereof, consent thereto or acquiescence therein or such petition or application shall not have been dismissed within sixty (60) days following the filing thereof; (h) a decree or order is entered appointing any such trustee, custodian, liquidator or receiver or adjudicating the Borrower or any of its Subsidiaries bankrupt or insolvent, or approving a petition in any such case or other proceeding, or a decree or order for relief is entered in respect of the Borrower or any Subsidiary of the Borrower in an involuntary case under federal bankruptcy laws as now or hereafter constituted, and such petition, decree or order shall not have been dismissed within sixty (60) days following the entry thereof; 57 58 (i) there shall remain in force, undischarged, unsatisfied and unstayed, for more than sixty days, whether or not consecutive, any uninsured final judgment against the Borrower or any of its Subsidiaries that, with other outstanding uninsured final judgments, undischarged, against the Borrower or any of its Subsidiaries exceeds in the aggregate at any one time $500,000; (j) if any of the Loan Documents or any material provision of any Loan Documents shall be unenforceable, cancelled, terminated, revoked or rescinded otherwise than in accordance with the terms thereof or with the express prior written agreement, consent or approval of the Agent, or any action at law, suit or in equity or other legal proceeding to make unenforceable, cancel, revoke or rescind any of the Loan Documents shall be commenced by or on behalf of the Borrower or any of its Subsidiaries, or any court or any other governmental or regulatory authority or agency of competent jurisdiction shall make a determination that, or issue a judgment, order, decree or ruling to the effect that, any one or more of the Loan Documents is illegal, invalid or unenforceable in accordance with the terms thereof; (k) the Borrower or any of its Subsidiaries shall be indicted for a federal crime, a punishment for which could include the forfeiture of any material assets of the Borrower or any of its Subsidiaries; (l) any "Event of Default", as defined in any of the other Loan Documents, shall occur and be continuing; (m) with respect to any Guaranteed Pension Plan, an ERISA Reportable Event shall have occurred and the Majority Banks shall have determined in their reasonable discretion that such event reasonably could be expected to result in liability of the Borrower or any of its Subsidiaries to the PBGC or such Guaranteed Pension Plan in an aggregate amount exceeding $500,000 and such event in the circumstances occurring reasonably could constitute grounds for the termination of such Guaranteed Pension Plan by the PBGC or for the appointment by the appropriate United States District Court of a trustee to administer such Guaranteed Pension Plan; or a trustee shall have been appointed by the United States District Court to administer such Guaranteed Pension Plan; or the PBGC shall have instituted proceedings to terminate such Guaranteed Pension Plan; then, and in any such event, so long as the same may be continuing, the Agent may (unless instructed to the contrary by the Majority Banks), and upon the request of the Majority Banks shall, by notice in writing to the Borrower declare all amounts owing with respect to this Agreement, the Notes and the other Loan Documents to be, and they shall thereupon forthwith become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower; PROVIDED that in the event of any Event of Default specified in [SECTION] 12.1(g) or 12.1(h), all such amounts shall become immediately due and payable automatically and without any requirement of notice from the Agent or action by the Majority Banks. 58 59 [SECTION] 12.2 TERMINATION OF COMMITMENTS. If any one or more Events of Default specified in [SECTION] 12.1(g) or [SECTION] 12.1(h) shall occur, any unused portion of the Commitments hereunder shall forthwith terminate and the Banks shall be relieved of all obligations to make Loans to the Borrower and the Agent and any Fronting Bank shall be relieved of all further obligations to issue, extend or renew Letters of Credit. If any other Event of Default shall have occurred and be continuing, any Bank may by notice to the Borrower terminate the unused portion of its Commitment hereunder, and upon such notice being given such unused portion of its Commitment hereunder shall terminate immediately and such Bank shall be relieved of all further obligations to make Loans and the Agent and any Fronting Bank shall be relieved of all further obligations to issue, extend or renew Letters of Credit. No termination of such Bank's Commitment hereunder shall relieve the Borrower of any of the Obligations or any of its existing obligations to such Bank arising under other agreements or instruments. [SECTION] 12.3 REMEDIES. In case any one or more of the Events of Default shall have occurred and be continuing, and whether or not the Banks shall have accelerated the maturity of the Loans pursuant to [SECTION] 12.1, each Bank, if owed any amount with respect to the Loans may, with the consent of the Majority Banks, direct the Agent to proceed to protect and enforce the rights and remedies of the Agent and the Banks under this Agreement, the Notes or any of the other Loan Documents by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Agreement and the other Loan Documents or any instrument pursuant to which the Obligations are evidenced, including to the full extent permitted by applicable law the obtaining of the EX PARTE appointment of a receiver, and, if any amount shall have become due, by declaration or otherwise, to proceed to enforce the payment thereof or any other legal or equitable right of such Bank. No remedy herein conferred upon any Bank or the Agent or the holder of any Note or purchaser of any Letter of Credit Participation is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of law. [SECTION] 13. SETOFF. During the continuance of any Event of Default, any deposits (general or specific, time or demand, provisional or final, regardless of currency, maturity, or the branch of where such deposits are held) or other sums credited by or due from any of the Banks to the Borrower or any of its Subsidiaries and any securities or other property of the Borrower or any of its Subsidiaries in the possession of such Bank may be applied to or set off against the payment of Obligations and any and all other liabilities, direct, or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, of the Borrower to such Bank. Each of the Banks agrees with each other Bank that (a) if an amount to be set off is to be applied to Indebtedness of the Borrower to such Bank, other than Indebtedness evidenced by the Notes held by such Bank, such amount shall be applied ratably to such other Indebtedness and to the Indebtedness evidenced by all such Notes held by such Bank, and (b) if such Bank shall receive from the Borrower, whether by voluntary payment, exercise of the right of setoff, counterclaim, cross action, enforcement of the 59 60 claim evidenced by the Notes held by such Bank by proceedings against the Borrower at law or in equity or by proof thereof in bankruptcy, reorganization, liquidation, receivership or similar proceedings, or otherwise, and shall retain and apply to the payment of the Note or Notes held by such Bank any amount in excess of its ratable portion of the payments received by all of the Banks with respect to the Notes held by all of the Banks, such Bank will make such disposition and arrangements with the other Banks with respect to such excess, either by way of distribution, PRO TANTO assignment of claims, subrogation or otherwise as shall result in each Bank receiving in respect of the Notes held by it, its proportionate payment as contemplated by this Agreement; PROVIDED that if all or any part of such excess payment is thereafter recovered from such Bank, such disposition and arrangements shall be rescinded and the amount restored to the extent of such recovery, but without interest. Notwithstanding the foregoing, no Bank shall exercise a right of setoff if such exercise would limit or prevent the exercise of any other remedy or other recourse against the Borrower. [SECTION] 14. THE AGENT. ---------- [SECTION] 14.1. AUTHORIZATION. The Agent is authorized to take such action on behalf of each of the Banks and to exercise all such powers as are hereunder and under any of the other Loan Documents and any related documents delegated to the Agent, together with such powers as are reasonably incident thereto, PROVIDED that no duties or responsibilities not expressly assumed herein or therein shall be implied to have been assumed by the Agent. The relationship between the Agent and the Banks is and shall be that of agent and principal only, and nothing contained in this Agreement or any of the other Loan Documents shall be construed to constitute the Agent as a trustee for any Bank. [SECTION] 14.2. EMPLOYEES AND AGENTS. The Agent may exercise its powers and execute its duties by or through employees or agents and shall be entitled to take, and to rely on, advice of counsel concerning all matters pertaining to its rights and duties under this Agreement and the other Loan Documents. The Agent may utilize the services of such Persons as the Agent in its sole discretion may reasonably determine, and all reasonable fees and expenses of any such Persons shall be paid by the Borrower. [SECTION] 14.3. NO LIABILITY. Neither the Agent nor any of its shareholders, directors, officers or employees nor any other Person assisting them in their duties nor any agent or employee thereof, shall be liable for any waiver, consent or approval given or any action taken, or omitted to be taken, in good faith by it or them hereunder or under any of the other Loan Documents, or in connection herewith or therewith, or be responsible for the consequences of any oversight or error of judgment whatsoever, except that the Agent or such other Person, as the case may be, may be liable for losses due to its willful misconduct or gross negligence. 60 61 [SECTION] 14.4. NO REPRESENTATIONS. The Agent shall not be responsible for the execution or validity or enforceability of this Agreement, the Notes, any of the other Loan Documents or for the validity, enforceability or collectability of any such amounts owing with respect to the Notes, or for any recitals or statements, warranties or representations made herein or in any of the other Loan Documents or in any certificate or instrument hereafter furnished to it by or on behalf of the Borrower, or be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants or agreements herein. The Agent shall not be bound to ascertain whether any notice, consent, waiver or request delivered to it by the Borrower or any holder of any of the Notes shall have been duly authorized or is true, accurate and complete. The Agent has not made nor does it now make any representations or warranties, express or implied, nor does it assume any liability to the Banks, with respect to the credit worthiness or financial condition of the Borrower. Each Bank acknowledges that it has, independently and without reliance upon the Agent or any other Bank, and based upon such information and documents as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Agent's Special Counsel has only represented Agent and FNBB in connection with the Loan Documents and the only attorney-client relationship or duty of care is between Agent's Special Counsel and Agent. Each Bank, at such Bank's sole cost and expense (except as otherwise provided in [SECTION] 15 hereof), has been independently represented by separate counsel on all matters regarding the Loan Documents. [SECTION] 14.5. PAYMENTS. (a) A payment by the Borrower to the Agent hereunder or any of the other Loan Documents for the account of any Bank shall constitute a payment to such Bank subject to the PRO RATA rights to repayment based upon the Commitment Percentage of each Bank. The Agent agrees promptly to distribute to each Bank such Bank's pro rata share of payments received by the Agent for the account of the Banks except as otherwise expressly provided herein or in any of the other Loan Documents. (b) If in the opinion of the Agent the distribution of any amount received by it in such capacity hereunder, under the Notes or under any of the other Loan Documents might involve it in liability, it may refrain from making distribution until its right to make distribution shall have been adjudicated by a court of competent jurisdiction. If a court of competent jurisdiction shall adjudge that any amount received and distributed by the Agent is to be repaid, each Person to whom any such distribution shall have been made shall either repay to the Agent its proportionate share of the amount so adjudged to be repaid or shall pay over the same in such manner and to such Persons as shall be determined by such court; PROVIDED that if such court specifies that such amount shall be repaid due entirely to the action or inaction of a Bank or Banks, only such Bank or Banks shall be required to repay to the Agent their share of the amount so adjudged to be repaid attributable to such Bank or Banks. 61 62 (c) Notwithstanding anything to the contrary contained in this Agreement or any of the other Loan Documents, any Bank that fails (i) to make available to the Agent its PRO RATA share of any Loan or to purchase any Letter of Credit Participation, or (ii) to comply with the provisions of [SECTION] 12 or [SECTION] 13 with respect to making dispositions and arrangements with the other Banks, where such Bank's share of any payment received, whether by setoff or otherwise, is in excess of its PRO RATA share of such payments due and payable to all of the Banks, in each case as, when and to the full extent required by the provisions of this Agreement, or to adjust promptly such Bank's outstanding principal and its pro rata Commitment Percentage as provided in [SECTION] 2.1 hereof, shall be deemed delinquent (a "Delinquent Bank") and shall be deemed a Delinquent Bank until such time as such delinquency is satisfied. A Delinquent Bank shall be deemed to have assigned any and all payments due to it from the Borrower, whether on account of outstanding Loans, interest, fees or otherwise, to the remaining nondelinquent Banks for application to, and reduction of, their respective PRO RATA shares of all outstanding Loans. The Delinquent Bank hereby authorizes the Agent to distribute such payments to the nondelinquent Banks in proportion to their respective PRO RATA shares of all outstanding Loans. A Delinquent Bank shall be deemed to have satisfied in full a delinquency when and if, as a result of application of the assigned payments to all outstanding Loans of the nondelinquent Banks, the Banks' respective PRO RATA shares of all outstanding Loans have returned to those in effect immediately prior to such delinquency and without giving effect to the nonpayment causing such delinquency. [SECTION] 14.6. HOLDERS OF NOTES. The Agent may deem and treat the payee of any Note or the purchaser of any Letter of Credit Participation as the absolute owner or purchaser thereof for all purposes hereof until it shall have been furnished in writing with a different name by such payee or by a subsequent holder, assignee or transferee. [SECTION] 14.7. INDEMNITY. The Banks ratably agree hereby to indemnify and hold harmless the Agent from and against any and all claims, actions and suits (whether groundless or otherwise), losses, damages, costs, expenses (including any expenses for which the Agent has not been reimbursed by the Borrower as required by [SECTION] 15), and liabilities of every nature and character arising out of or related to this Agreement, the Notes, or any of the other Loan Documents or the transactions contemplated or evidenced hereby or thereby, or the Agent's actions taken hereunder or thereunder, except to the extent that any of the same shall be directly caused by the Agent's willful misconduct or gross negligence. [SECTION] 14.8. AGENT AS BANK. In its individual capacity, FNBB shall have the same obligations and the same rights, powers and privileges in respect to its Commitment and the Loans made by it, and as the holder of any of the Notes and as the purchaser of any Letter of Credit Participations, as it would have were it not also the Agent. [SECTION] 14.9. RESIGNATION. The Agent may resign at any time by giving sixty (60) days' prior written notice thereof to the Banks and the Borrower. Upon any such resignation, the Majority Banks shall 62 63 have the right to appoint a successor Agent. Unless a Default or Event of Default shall have occurred and be continuing, appointment of such successor Agent shall be subject to the reasonable approval of the Borrower. If no successor Agent shall have been so appointed by the Majority Banks and shall have accepted such appointment within thirty (30) days after the retiring Agent's giving of notice of resignation or the Borrower has disapproved or failed to approve a successor agent within such period, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be a financial institution which is a Bank hereunder, meets the requirements of an Eligible Assignee and has a rating of not less than A2/P2 or its equivalent by S&P and is otherwise subject to the reasonable approval of the Borrower to be given or denied within five (5) days of written notice to the Borrower from Agent of such appointment. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation, the provisions of this Agreement and the other Loan Documents shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. [SECTION] 14.10. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT. Each Bank hereby agrees that, upon learning of the existence of a Default or an Event of Default, it shall promptly notify the Agent thereof. The Agent hereby agrees that upon receipt of any notice under this [SECTION] 14.10 it shall promptly notify the other Banks of the existence of such Default or Event of Default. [SECTION] 15. EXPENSES. Subject to any specific limitations set forth in this Agreement, the Borrower agrees to pay (a) the reasonable costs of producing and reproducing this Agreement, the other Loan Documents and the other agreements and instruments mentioned herein, (b) any taxes (including any interest and penalties in respect thereto) payable by the Agent or any of the Banks (other than taxes based upon the Agent's or any Bank's net income), or other taxes payable on or with respect to the transactions contemplated by this Agreement, including any taxes payable by the Agent or any of the Banks after the Effective Date (the Borrower hereby agreeing to indemnify the Banks with respect thereto), (c) all reasonable fees, expenses and disbursements of the Agent's Special Counsel or any local counsel to the Agent incurred in connection with the preparation, administration or interpretation of the Loan Documents and other instruments mentioned herein, each closing hereunder, and amendments, modifications, approvals, consents or waivers hereto or hereunder, (d) the fees, costs, expenses and disbursements of the Agent incurred in connection with the preparation, administration or interpretation of the Loan Documents and other instruments mentioned herein including without limitation, the Approval Fee and the costs incurred by the Agent in connection with its inspection of the Real Estate, and the fees and disbursements of the Agent's Special Counsel and the Borrower's legal counsel in preparing documentation, (e) the fees, costs, expenses and disbursements of the Agent incurred in connection with the syndication and/or participation of the Loans, including, without limitation, travel costs, costs of preparing syndication materials and photocopying costs (f) all reasonable out-of-pocket expenses (including reasonable 63 64 attorneys' fees and costs, which attorneys may be employees of any Bank or the Agent and the fees and costs of appraisers, engineers, investment bankers, surveyors or other experts retained by the Agent or any Bank in connection with any such enforcement proceedings) incurred by any Bank or the Agent in connection with (i) the enforcement of or preservation of rights under any of the Loan Documents against the Borrower or the administration thereof after the occurrence and during the continuance of a Default or Event of Default (including, without limitation, expenses incurred in any restructuring and/or "workout" of the Loans), and (ii) any litigation, proceeding or dispute whether arising hereunder or otherwise, in any way related to the Agent's or the Bank's relationship with the Borrower or any of its Subsidiaries, (g) all reasonable fees, expenses and disbursements of the Agent incurred in connection with UCC searches, (h) all costs incurred by the Agent in the future in connection with its inspection of the Real Estate. The covenants of this [SECTION] 15 shall survive payment or satisfaction of payment of amounts owing with respect to the Notes. [SECTION] 16. INDEMNIFICATION. The Borrower agrees to indemnify and hold harmless the Agent and the Banks and the shareholders, directors, agents, officers, subsidiaries, and affiliates of the Agent and the Banks from and against any and all claims, actions or causes of action and suits whether groundless or otherwise, and from and against any and all liabilities, losses, settlement payments, obligations, damages and expenses of every nature and character arising out of this Agreement or any of the other Loan Documents or the transactions contemplated hereby or which otherwise arise in connection with the financing including, without limitation unless directly caused by the gross negligence or willful misconduct of a Bank or the Agent (but such limitation on indemnification shall only apply to the Agent or Bank being grossly negligent or committing willful misconduct), (a) any actual or proposed use by the Borrower of the proceeds of any of the Loans, (b) any actual or alleged infringement of any patent, copyright, trademark, service mark or similar right of the Borrower, (c) the Borrower entering into or performing this Agreement or any of the other Loan Documents or (d) with respect to the Borrower and its respective properties, the violation of any Environmental Law, the Release or threatened Release of any Hazardous Substances or any action, suit, proceeding or investigation brought or threatened with respect to any Hazardous Substances (including, but not limited to claims with respect to wrongful death, personal injury or damage to property), (e) any cost, claim liability, damage or expense in connection with any harm the Borrower may be found to have caused in the role of a broker, in each case including, without limitation, the reasonable fees and disbursements of counsel and allocated costs of internal counsel incurred in connection with any such investigation, litigation or other proceeding. In litigation, or the preparation therefor, the Banks and the Agent shall each be entitled to select their own separate counsel and, in addition to the foregoing indemnity, the Borrower agrees to pay promptly the reasonable fees and expenses of such counsel. If, and to the extent that the obligations of the Borrower under this [SECTION] 16 are unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment in satisfaction of such obligations which is permissible under applicable law. The provisions of this [SECTION] 16 shall survive the repayment of the Loans and the termination of the obligations of the Banks hereunder and shall continue in full force and effect as to the Banks so long as the possibility of any such claim, action, cause of action or suit exists. 64 65 [SECTION] 17. SURVIVAL OF COVENANTS, ETC. All covenants, agreements, representations and warranties made herein, in the Notes, in any of the other Loan Documents or in any documents or other papers delivered by or on behalf of the Borrower pursuant hereto shall be deemed to have been relied upon by the Banks and the Agent, notwithstanding any investigation heretofore or hereafter made by it, and shall survive the making by the Banks of the Loans and the issuance, extension or renewal of any Letters of Credit, as herein contemplated, and shall continue in full force and effect so long as any Letter of Credit or any amount due under this Agreement or the Notes or any of the other Loan Documents remains outstanding or the Banks have any obligation to make any Loans or the Agent has any obligation to issue, extend or renew any Letter of Credit. The indemnification obligations of the Borrower provided herein and the other Loan Documents shall survive the full repayment of amounts due and the termination of the obligations of the Banks hereunder and thereunder to the extent provided herein and therein. All statements contained in any certificate or other paper delivered to the Agent or any Bank at any time by or on behalf of the Borrower pursuant hereto or in connection with the transactions contemplated hereby shall constitute representations and warranties by the Borrower hereunder. [SECTION] 18. ASSIGNMENT; PARTICIPATIONS; ETC. -------------------------------- [SECTION] 18.1. CONDITIONS TO ASSIGNMENT BY BANKS. Except as provided herein, each Bank may assign to one or more Eligible Assignees all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of its Commitment Percentage and Commitment and the same portion of the Loans at the time owing to it, and the Notes held by it and its participating interest in the risk relating to any Letters of Credit, PROVIDED that (a) the Agent and the Borrower each shall have the right to approve any Eligible Assignee, which approval shall not be unreasonably withheld, it being agreed that the Agent and the Borrower must approve or reject a proposed Eligible Assignee within seven (7) days of receiving a written request from any Bank for such approval, and if the Agent or the Borrower fails to respond within such seven (7) day period, such request for approval shall be deemed approved by the Agent or the Borrower, or both, as the case may be, (b) each such assignment shall be of a constant, and not a varying, percentage of all the assigning Bank's rights and obligations under this Agreement, (c) each assignment shall be in an amount that is a whole multiple of $1,000,000, (d) each Bank which is a Bank on the date hereof shall retain, free of any such assignment, an amount of its Commitment of not less than $10,000,000 and (e) the parties to such assignment shall execute and deliver to the Agent, for recording in the Register (as hereinafter defined), an Assignment and Acceptance, substantially in the form of EXHIBIT F hereto (an "Assignment and Acceptance"), together with any Notes subject to such assignment. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five (5) Business Days after the execution thereof, (i) the assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Bank hereunder, and (ii) the assigning Bank shall, to the extent provided in such assignment and upon payment to the Agent of the registration fee referred to in [SECTION] 18.3, be released from its obligations under this Agreement. 65 66 [SECTION] 18.2. CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS; COVENANTS. By executing and delivering an Assignment and Acceptance, the parties to the assignment thereunder confirm to and agree with each other and the other parties hereto as follows: (a) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim, the assigning Bank 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 the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto; (b) the assigning Bank makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or any other Person primarily or secondarily liable in respect of any of the Obligations, or the performance or observance by the Borrower or any other Person primarily or secondarily liable in respect of any of the Obligations of any of their obligations under this Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (c) such assignee confirms that it has received a copy of this Agreement, together with copies of the most recent financial statements referred to in [SECTION] 6.4 and [SECTION] 7.4 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (d) such assignee will, independently and without reliance upon the assigning Bank, the Agent or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (e) such assignee represents and warrants that it is an Eligible Assignee; (f) such assignee appoints and authorizes the 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 the Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto; (g) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Bank; (h) such assignee represents and warrants that it is legally authorized to enter into such Assignment and Acceptance; and (i) such assignee acknowledges that it has made arrangements with the assigning Bank satisfactory to such assignee with respect to its pro rata share of Letter of Credit fees in respect to outstanding Letters of Credit. [SECTION] 18.3. REGISTER. The Agent shall maintain a copy of each Assignment and Acceptance delivered to it and a register or similar list (the "Register") for the recordation of the names and addresses of the Banks and the Commitment Percentages of, and principal amount of the Loans owing to the Banks from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Agent and the Banks may treat each Person whose name is recorded in the Register as a Bank hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower and the Banks at any reasonable time and from time to time upon reasonable prior notice. Upon each such recordation, the assigning Bank agrees to pay to the Agent a registration fee in the sum of $2,500.00. [SECTION] 18.4. NEW NOTES. Upon its receipt of an Assignment and Acceptance executed by the parties to such assignment, together with each Note subject to such assignment, the Agent shall (a) record the information 66 67 contained therein in the Register, and (b) give prompt notice thereof to the Borrower and the Banks (other than the assigning Bank). Within five (5) Business Days after receipt of such notice, the Borrower, at its own expense, shall execute and deliver to the Agent, in exchange for each surrendered Note, a new Note to the order of such Eligible Assignee in an amount equal to the amount assumed by such Eligible Assignee pursuant to such Assignment and Acceptance and, if the assigning Bank has retained some portion of its Loans hereunder, a new Note to the order of the assigning Bank in an amount equal to the amount retained by it hereunder. Such new Notes shall provide that they are replacements for the surrendered Notes, shall be in an aggregate principal amount equal to the aggregate principal amount of the surrendered Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of the assigned Notes. Within five (5) days of issuance of any new Notes pursuant to this [SECTION] 18.4, the Borrower shall deliver an opinion of counsel, addressed to the Banks and the Agent, relating to the due authorization, execution and delivery of such new Notes and the legality, validity and binding non-preferential effect thereof, in form and substance satisfactory to the Banks. The surrendered Notes shall be cancelled and returned to the Borrower. [SECTION] 18.5. PARTICIPATIONS. Each Bank may sell participations to one or more banks or other entities in a portion of such Bank's rights and obligations under this Agreement and the other Loan Documents not to exceed forty-nine percent (49%) of its Commitment Percentage; PROVIDED that (a) the Agent shall have given its prior written consent to such participation, (b) each such participation shall be in an amount of not less than $1,000,000, (c) any such sale or participation shall not affect the rights and duties of the selling Bank hereunder to the Borrower and the Bank shall continue to exercise all approvals, disapprovals and other functions of a Bank, (d) the only rights granted to the participant pursuant to such participation arrangements with respect to waivers, amendments or modifications of the Loan Documents shall be the rights to approve the vote of the Bank as to waivers, amendments or modifications that would reduce the principal of or the interest rate on any Loans, extend the term or increase the amount of the Commitment of such Bank as it relates to such participant, reduce the amount of any fees to which such participant is entitled or extend any regularly scheduled payment date for principal or interest, PROVIDED that all approvals affecting a Loan or this Agreement under this clause (d) shall be by a fifty-one percent (51%) vote of such Bank's Commitment Percentage, and (e) no participant shall have the right to grant further participations or assign its rights, obligations or interests under such participation to other Persons without the prior written consent of the Agent. The Agent shall promptly advise the Borrower in writing of any such sale or participation. [SECTION] 18.6. PLEDGE BY LENDER. Any Bank may at any time pledge all or any portion of its interest and rights under this Agreement (including all or any portion of its Note) to any of the twelve Federal Reserve Banks organized under [SECTION] 4 of the Federal Reserve Act, 12 U.S.C. [SECTION] 341. No such pledge or the enforcement thereof shall release the pledgor Bank from its obligations hereunder or under any of the other Loan Documents. [SECTION] 18.7. NO ASSIGNMENT BY BORROWER. The Borrower shall not assign or transfer any of its rights or obligations under any of the Loan Documents without the prior written consent of each of the Banks. [SECTION] 18.8. DISCLOSURE. The Borrower agrees that in addition to disclosures made in accordance with standard banking practices any Bank may disclose information obtained by such Bank pursuant to this Agreement to assignees or participants and potential assignees or participants hereunder. [SECTION] 19. NOTICES, ETC. Except as otherwise expressly provided in this Agreement, all notices and other communications made or required to be given pursuant to this Agreement or the Notes or any Letter of Credit 67 68 Applications shall be in writing and shall be delivered in hand, mailed by United States registered or certified first class mail, postage prepaid, sent by overnight courier, or sent by telegraph, telecopy, telefax or telex and confirmed by delivery via courier or postal service, addressed as follows: (a) if to the Borrower, at Bradley Real Estate, Inc., 699 Boylston Street, Boston, Massachusetts 02116, Attention: Thomas P. D'Arcy and Irving E. Lingo, Jr., with a copy to Ross D. Gillman, Esq., Goodwin Procter & Hoar, Exchange Place, Boston, Massachusetts 02109 or at such other address for notice as the Borrower shall last have furnished in writing to the Agent; and (b) if to the Agent, at 100 Federal Street, Boston, Massachusetts 02110, Attention: Mr. Howard Blackwell, or such other address for notice as the Agent shall last have furnished in writing to the Borrower, with a copy to Paul M. Vaughn, Esq., Bingham, Dana & Gould, 150 Federal Street, Boston, Massachusetts 02110. (c) if to any Bank, at such Bank's address set forth on SCHEDULE 1 hereto, or such other address for notice as such Bank shall have last furnished in writing to the Person giving the notice. Any such notice or demand shall be deemed to have been duly given or made and to have become effective (i) if delivered by hand, overnight courier or facsimile to a responsible officer of the party to which it is directed, at the time of the receipt thereof by such officer or the sending of such facsimile and (ii) if sent by registered or certified first-class mail, postage prepaid, on the third Business Day following the mailing thereof. [SECTION] 20. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE. THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED THEREIN, ARE CONTRACTS UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SUCH COMMONWEALTH (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE BORROWER AGREES THAT ANY SUIT BY IT FOR THE ENFORCEMENT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT ONLY IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND BORROWER CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT FOR ANY SUIT BY AGENT OR ANY BANK AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN [SECTION] 19. THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT. IN ADDITION TO THE COURTS OF THE COMMONWEALTH OR ANY FEDERAL COURT SITTING THEREIN, THE AGENT OR ANY BANK MAY BRING ACTION(S) FOR ENFORCEMENT ON A NONEXCLUSIVE BASIS WHERE ANY COLLATERAL EXISTS AND THE BORROWER CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN [SECTION] 19. [SECTION] 21. HEADINGS. The captions in this Agreement are for convenience of reference only and shall not define or limit the provisions hereof. 68 69 [SECTION] 22. COUNTERPARTS. This Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument. In proving this Agreement it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought. [SECTION] 23. ENTIRE AGREEMENT, ETC. The Loan Documents and any other documents executed in connection herewith or therewith express the entire understanding of the parties with respect to the transactions contemplated hereby. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated, except as provided in [SECTION] 25. [SECTION] 24. WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS. THE BORROWER HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. EXCEPT TO THE EXTENT EXPRESSLY PROHIBITED BY LAW, THE BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES, INCLUDING ANY DAMAGES PURSUANT TO M.G.L. C.93A ET SEQ. THE BORROWER (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE AGENT OR ANY BANK HAD REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE AGENT OR SUCH BANK WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B) ACKNOWLEDGES THAT THE AGENT AND THE BANKS HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH THEY ARE PARTIES BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED HEREIN. [SECTION] 25. CONSENTS, AMENDMENTS, WAIVERS, ETC. Any consent or approval required or permitted by this Agreement may be given, and any term of this Agreement or of any other instrument related hereto or mentioned herein may be amended, and the performance or observance by the Borrower of any terms of this Agreement or such other instrument or the continuance of any Default or Event of Default may be waived (either generally or in a particular instance and either retroactively or prospectively) with, but only with, the written consent of the Majority Banks, and, in the case of amendments, with the written consent of the Borrower other than amendments to schedules made in the ordinary course as contemplated by this Agreement. Notwithstanding the foregoing, (i) the rate of interest on and the term or amount of the Notes, (ii) the amount of the Commitments of the Banks, (iii) the amount of any fee payable to a Bank hereunder, (iv) any provision herein or in any of the Loan Documents which expressly requires consent of all the Banks, (v) the funding provisions of [SECTION] 2.1 and [SECTION] 2.5 hereof, and (vi) the rights, duties and obligations of the Agent specified in [SECTION] 14 hereof, may not be amended without the written consent of each Bank affected thereby. No waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of the Agent or any Bank in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice to or demand upon the Borrower shall entitle the Borrower to other or further notice or demand in similar or other circumstances. 69 70 [SECTION] 26. SEVERABILITY. The provisions of this Agreement are severable, and if any one clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Agreement in any jurisdiction. 70 71 IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as a sealed instrument as of the date first set forth above. BRADLEY REAL ESTATE, INC. By: /s/ Irving E. Lingo, Jr. ----------------------------- Name: Irving E. Lingo, Jr. Title: Chief Financial Officer BRADLEY OPERATING LIMITED PARTNERSHIP BY: BRADLEY REAL ESTATE, INC. By: /s/ Irving E. Lingo, Jr. ----------------------------- Name: Irving E. Lingo, Jr. Title: Chief Financial Officer THE FIRST NATIONAL BANK OF BOSTON, INDIVIDUALLY AND AS AGENT By: /s/Howard N. Blackwell ----------------------------- Howard N. Blackwell Director By: /s/ David H. Craig ------------------------------ David H. Craig Assistant Vice President 71 EX-10.3 4 INDENTURE 1 Exhibit 10.3 ================================================================================ TUCKER FINANCING PARTNERSHIP, as Issuer TO BANKERS TRUST COMPANY OF CALIFORNIA, N.A., as Indenture Trustee ------------------------------------- BANKERS TRUST COMPANY as Servicer ------------------------------------- INDENTURE Dated as of June 1, 1994 ------------------------------------- 7.30% MORTGAGE NOTES DUE SEPTEMBER 30, 2000 secured by a Mortgage, Security Agreement, Fixture Filing Statement, Assignment of Leases and Rents, and Financing Statement covering each of the Mortgaged Properties listed in Schedule 1 annexed hereto ================================================================================ 2 TUCKER FINANCING PARTNERSHIP ---------------------------- Certain Sections of this Indenture relating to Sections 310 through 318, inclusive, of the Trust Indenture Act of 1939:
Trust Indenture Act Section Indenture Section [Sec.] 310(a)(1)........................................... 607 (a)(2).............................................. 607 (a)(3).............................................. 618 (a)(4).............................................. Not Applicable (b)................................................. 606, 611 [Sec.] 311(a).............................................. 610 (b)................................................. 610 312(a).............................................. 701, 702(a) (b)................................................. 702(b) (c)................................................. 702(c) [Sec.] 313(a).............................................. 703(a) (b)................................................. 703 (c)................................................. 703(a) (d)................................................. 703(b) [Sec.] 314(a)(1),(2) and (3)............................... 704(a) (a)(4).............................................. 102, 1006 (b)................................................. 1008(t) (c)(1).............................................. 102 (c)(2).............................................. 102 (c)(3).............................................. Not Applicable (d)................................................. 102, 705(a) (e)................................................. 102 [Sec.] 315(a).............................................. 601(b) (b)................................................. 603 (c)................................................. 601(b) (d)................................................. 601(b) (e)................................................. 514 [Sec.] 316(a)(1)(A)........................................ 512 (a)(1)(B)........................................... 513 (a)(2).............................................. Not Applicable (b)................................................. 508 (c)................................................. 104(c) [Sec.] 317(a)(1)........................................... 503 (a)(2).............................................. 504 (b)................................................. 1004 [Sec.] 318(a).............................................. 107
3 TABLE OF CONTENTS
Page ---- ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION......................................... 3 SECTION 101. Definitions ................................. 3 SECTION 102. Compliance Certificates and Opin- ions........................................ 31 SECTION 103. Form of Documents Delivered to Indenture Trustee or the Servicer........... 32 SECTION 104. Acts of Holders............................... 33 SECTION 105. Notices to the Indenture Trustee, the Servicer and the Issuer................. 35 SECTION 106. Notice to the Holders of the Notes; Waiver...................................... 36 SECTION 107. Conflict with Trust Indenture Act............. 37 SECTION 108. Effects of Headings and Table of Contents.................................... 37 SECTION 109. Successors and Assigns........................ 37 SECTION 110. Separability Clause........................... 37 SECTION 111. Benefits of Indenture......................... 37 SECTION 112. Governing Law; Jurisdiction................... 38 SECTION 113. Legal Holidays................................ 38 SECTION 114. Limited Recourse.............................. 39 SECTION 115. Security Agreement............................ 40 SECTION 116. Survival of Representations, Etc.............. 41 SECTION 117. Relationship of the Indenture Trustee to the Issuer and Third Parties..................................... 41 ARTICLE TWO FORM OF NOTES........................................................ 42 SECTION 201. Forms Generally............................... 42 SECTION 202. Form of Indenture Trustee's Certificate of Authentication............... 43 SECTION 203. Form of the Notes............................. 43
(i) 4
Page ---- ARTICLE THREE THE NOTES............................................................ 43 SECTION 301. Equal and Ratable Security; Amount............ 43 SECTION 302. Denominations................................. 44 SECTION 303. Conditions Precedent to Issuance of the Notes................................... 44 SECTION 304. Execution, Authentication and Delivery of the Notes....................... 44 SECTION 305. [Reserved] ................................. 45 SECTION 306. Payment Account; Holdover Account............. 45 SECTION 307. Persons Deemed Owners......................... 48 SECTION 308. Registration, Registration of Transfer and Exchange....................... 48 SECTION 309. Mutilated, Destroyed, Lost and Stolen Notes................................ 50 SECTION 310. Interest...................................... 51 SECTION 311. Payment of Principal and Interest............. 52 SECTION 312. Interest on New Notes......................... 55 SECTION 313. Cancellation ................................. 55 SECTION 314. Paying Agent ................................. 56 ARTICLE FOUR SATISFACTION AND DISCHARGE........................................... 57 SECTION 401. Satisfaction and Discharge of Indenture................................... 57 SECTION 402. Application of Trust Money.................... 58 ARTICLE FIVE REMEDIES............................................................. 58 SECTION 501. Events of Default............................. 58 SECTION 502. Acceleration of Maturity; Rescission and Annulment.................... 60 SECTION 503. Collection of Indebtedness and Suits for Enforcement by Indenture Trustee..................................... 62 SECTION 504. Indenture Trustee or Servicer May File Proofs of Claim........................ 63 SECTION 505. Indenture Trustee and Servicer May Enforce Claims Without Possession of Notes.................................... 65
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Page ---- SECTION 506. Application of Money Collected................ 65 SECTION 507. Limitation on Suits........................... 66 SECTION 508. Unconditional Right of Holders to Receive Principal and Interest.............. 67 SECTION 509. Restoration of Rights and Remedies............ 67 SECTION 510. Rights and Remedies Cumulative................ 67 SECTION 511. Delay or Omission Not Waiver.................. 68 SECTION 512. Control by Holders............................ 68 SECTION 513. Waiver of Past Defaults....................... 69 SECTION 514. Undertaking for Costs......................... 69 SECTION 515. Waiver of Appraisement and Other Laws........................................ 70 SECTION 516. Marshalling; Payments Set Aside; Further Assurance........................... 70 ARTICLE SIX THE INDENTURE TRUSTEE................................................ 71 SECTION 601. Certain Duties and Responsibili- ties........................................ 71 SECTION 602. Money Held in Trust........................... 75 SECTION 603. Notice of Defaults............................ 76 SECTION 604. Certain Rights of Indenture Trustee and the Servicer............................ 76 SECTION 605. Compensation and Reimbursement................ 78 SECTION 606. Disqualification; Conflicting Interests................................... 79 SECTION 607. Eligibility of the Indenture Trustee and the Servicer.................... 80 SECTION 608. Authorization of Indenture Trustee and the Servicer............................ 80 SECTION 609. Merger, Conversion, Consolidation or Succession to Business................... 81 SECTION 610. Preferential Collection of Claims Against Issuer.............................. 81 SECTION 611. Resignation and Removal; Appoint- ment of Successor........................... 82 SECTION 612. Acceptance of Appointment by Successor................................... 84 SECTION 613. Appointment of Authenticating Agent....................................... 85 SECTION 614. The Rating Agencies........................... 87 SECTION 615. Investments ................................. 88 SECTION 616. Unclaimed Funds; Holdover Account............. 88
(iii) 6
Page ---- SECTION 617. Communications to be Sent to the Rating Agencies............................. 89 SECTION 618. Separate Indenture Trustees and Co-trustees................................. 90 SECTION 619. Fidelity Bond and Errors and Omis- sions Coverage.............................. 92 ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY INDENTURE TRUSTEE AND ISSUER.......................................... 93 SECTION 701. Issuer to Furnish Indenture Trustee and Servicer Names and Addresses of Holders.................................. 93 SECTION 702. Preservation of Information; Com- munications to Holders...................... 93 SECTION 703. Reports by Indenture Trustee.................. 94 SECTION 704. Reports by the Issuer......................... 94 SECTION 705. Release of Collateral......................... 95 ARTICLE EIGHT CONDITIONS PRECEDENT................................................. 95 SECTION 801. Conditions Precedent to Exchange of Notes for the Original Note.............. 95 ARTICLE NINE SUPPLEMENTAL INDENTURES; AMENDMENTS.................................. 97 SECTION 901. Supplemental Indentures or Amendments Without Consent of Holders..................................... 97 SECTION 902. Supplemental Indentures With Con- sent of Holders............................. 98 SECTION 903. Execution of Supplemental Inden- tures....................................... 99 SECTION 904. Delivery of Supplements....................... 99 SECTION 905. Effect of Supplemental Indentures.............100 SECTION 906. Conformity with Trust Indenture Act.........................................100 SECTION 907. Reference in Notes to Supplemental Indentures..................................100 ARTICLE TEN
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Page ---- REPRESENTATIONS, WARRANTIES AND COVENANTS............................100 SECTION 1001. Representations and Warranties of the Issuer.................................100 SECTION 1002. Payment of Principal and Interest............109 SECTION 1003. Maintenance of Office or Agency..............109 SECTION 1004. Paying Agent; Issuing Agent; Money for Note Payments to be Held in Trust......................................110 SECTION 1005. [Reserved] .................................110 SECTION 1006. Statement as to Compliance...................111 SECTION 1007. Register for the Mortgage Notes..............111 SECTION 1008. Affirmative Covenants........................111 SECTION 1009. Negative Covenants.........................120 SECTION 1010. Additions to Mortgaged Property..............125 ARTICLE ELEVEN REDEMPTION OF NOTES; LIEN RELEASES...................................125 SECTION 1101. Redemption .................................125 SECTION 1102. Redemption Proceeds..........................129 SECTION 1103. Election to Redeem; Notice to Indenture Trustee..........................130 SECTION 1104. Partial Redemption...........................130 SECTION 1105. Notice of Redemption.........................131 SECTION 1106. Notes Redeemed in Part.......................131 SECTION 1107. Notes Payable on Redemption Date.............132 SECTION 1108. Deposit of Redemption Price..................132 SECTION 1109. Lien Releases..............................132 ARTICLE TWELVE RESERVES.............................................................134 SECTION 1201. Reserves .................................134 SECTION 1202. Initial Repair Reserve.......................134 SECTION 1203. Maintenance and Capital Improvement Reserve..........................135 SECTION 1204. Credit Enhancement Reserve...................136 SECTION 1205. Arthur Andersen Reserve Account..............136 SECTION 1206. Security Interest............................137 SECTION 1207. Investment .................................137
(v) 8
Page ---- ARTICLE THIRTEEN EXPENSES AND INDEMNITY...............................................138 SECTION 1301. Expenses; Indemnity..........................138 SCHEDULES: Schedule 1......................................... Mortgaged Properties Schedule 2........................................Allocated Note Amounts Schedule 3....................... Anchor Leases and Operating Agreements Schedule 4 ..........................................Insurance Coverages Schedule 5 ........................................Environmental Reports Schedule 6 ..........................................Initial Repair Work Schedule 7 .........................................Financing Statements EXHIBITS: Exhibit A..................................................Form of Notes Exhibit B...................................................... Mortgage Exhibit C.......................................... Assignment of Leases Exhibit D............................ Assignment of Management Agreement Exhibit E....................................... Environmental Indemnity Exhibit F..........................Form of Security Documents Assignment
(vi) 9 INDENTURE --------- THIS INDENTURE, dated as of June 1, 1994, between TUCKER FINANCING PARTNERSHIP, a general partnership organized and existing under the laws of the State of Delaware (the "ISSUER"), having an address at 40 Skokie Boulevard, Northbrook, Illinois 60062-1626, attention: Kenneth L. Tucker, and BANKERS TRUST COMPANY OF CALIFORNIA, N.A., a national banking association chartered under the laws of the United States of America (together with its successors and any separate co-trustee appointed pursuant to Section 618, the "INDENTURE TRUSTEE"), having an address at 3 Park Plaza, 16th Floor, Irvine, California 92714, attention: Kidder/Tucker REMIC, as trustee for the benefit of the Holders from time to time of the Notes, and Bankers Trust Company, a New York banking corporation (the "Servicer") having an address at Four Albany Street, New York, New York 10006, attention Kidder/Tucker REMIC, as servicer. All capitalized terms used herein shall have the meanings provided in Article One. W I T N E S S E T H : - - - - - - - - - - WHEREAS, the Issuer has duly authorized the execution and delivery of this Indenture to provide for the issuance in the aggregate principal amount of ONE HUNDRED MILLION AND 00/100 DOLLARS ($100,000,000) of its 7.30% Mortgage Notes (as amended, restated, replaced, supplemented or otherwise modified from time to time, individually, a "NOTE" and collectively, the "NOTES") due September 30, 2000; WHEREAS, the Notes shall be issued in exchange for and replace the Original Note (as hereinafter defined), which Original Note shall be cancelled; WHEREAS, contemporaneously with the execution of this Indenture in replacement of the Loan Agreement, (i) Kidder Peabody Mortgage Capital Corporation has assigned and transferred all of its right, title and interest in, to and under the Security Documents to the Indenture Trustee pursuant to the Security Documents Assignment (as 10 hereinafter defined) and (ii) the Loan Agreement is being terminated; and WHEREAS, all things necessary have been done to make the Notes, when the Notes are executed by the Issuer and authenticated and delivered by the Indenture Trustee hereunder, the valid obligations of the Issuer, in accordance with their terms, and to make this Indenture and the Security Documents valid and legally binding agreements of the Issuer, in accordance with their respective terms; NOW, THEREFORE, THIS INDENTURE WITNESSETH that, to secure the payment of the principal of, interest on and other amounts due from time to time in respect of the Outstanding Notes, and the performance of the Issuer's covenants herein contained and contained in the Notes and the Security Documents, and to declare the terms and conditions on which the Outstanding Notes are secured, and in consideration of the premises and of the purchase of the Notes by the Holders thereof, the Issuer, by these presents, does grant, assign, pledge, set over and confirm to the Indenture Trustee, and grants for the benefit of the Indenture Trustee on behalf of the Holders of the Notes issued hereunder, a security interest in, all of the Issuer's estate, right, title and interest in, to and under any and all of the Trust Estate (including any and all extensions and modifications thereof), any and all rights to make claims for, collect, receive and receipt for any and all rents, income, revenues, issues, insurance, condemnation and sale proceeds, profits, security and other monies payable or receivable under the Trust Estate or with respect to the Trust Estate, to bring proceedings thereunder or for the specific or other enforcement thereof or with respect thereto, in the name of the Issuer or otherwise, and the right to make all waivers and agreements, to grant or refuse requests, to give or withhold notices, and to execute and deliver, in the name and on behalf of the Issuer, as agent and attorney-in-fact, any and all instruments in connection therewith and to do any and all things which the Issuer is or may be entitled to do thereunder, all as limited by and more fully described herein and in the other Transaction Documents, but no obligation of the Issuer under the provisions of the Transaction Documents or of any other instruments included in the Trust Estate or with respect thereto shall be impaired or diminished by virtue thereof, nor shall any such obligation be imposed upon the Indenture Trustee. -2- 11 TO HAVE AND TO HOLD all and singular the Trust Estate, whether now owned or held or hereafter acquired, unto the Indenture Trustee and its successors and assigns forever, for the benefit of the Holders of the Notes as set forth below. IN TRUST for the benefit and security of the Holders from time to time of all the Outstanding Notes issued hereunder, in accordance with the terms as hereinafter provided, and of all other sums payable hereunder or on the Notes, and for the performance and observance of and compliance with the provisions of this Indenture, the other Transaction Documents and any other instruments included in the Trust Estate, all in accordance with this Indenture. AND IT IS HEREBY COVENANTED AND DECLARED that (a) the Notes are to be authenticated and delivered by the Indenture Trustee and the Trust Estate is to be held and applied by the Indenture Trustee, subject to the further covenants, conditions and trusts hereinafter set forth, and (b) the Notes and the Mortgaged Properties are to be serviced by the Servicer as the agent of the Indenture Trustee in accordance with the terms and provisions hereinafter set forth, and the Issuer does hereby represent and warrant, and covenant and agree, to and with the Indenture Trustee, for the benefit and security of all Holders of the Notes, as follows: ARTICLE ONE ----------- DEFINITIONS AND OTHER PROVISIONS -------------------------------- OF GENERAL APPLICATION ---------------------- SECTION 101. Definitions. ----------- For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (2) all other terms used herein which are de- fined in the Trust Indenture Act, either directly or -3- 12 by reference therein, have the meanings assigned to them therein; (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles in the United States of America; (4) the word "including" shall be construed to be followed by the words "without limitation"; (5) unless the context otherwise requires, any reference to an "Article" or a "Section" refers to an Article or a Section, as the case may be, of this Indenture; and (6) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; ACCELERATION shall mean that the Default Amount shall become and thereafter be immediately due and payable in accordance with the terms of the Notes and this Indenture, whether automatically or by action of the Indenture Trustee or the Holders. ACT, when used with respect to any Holder, shall have the meaning specified in Section 104. AFFILIATE shall mean, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by or is under common control with such Person or is a director or officer of such Person or of an Affiliate of such Person. For purposes of this definition, control of a Person shall mean the power, direct or indirect, (i) to vote 10% or more of the securities having ordinary voting power for the election of directors of such Person, or (ii) to direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. ALLOCATED NOTE AMOUNT shall mean, with respect to each Mortgaged Property, the amount of the aggregate original principal balance of the Notes allocated to such Mortgaged Property, as set forth on Schedule 2 annexed hereto. -4- 13 ANCHOR LEASES SHALL MEAN, collectively, the "Anchor Leases" listed on Schedule 3 and, with respect to future Leases, any Lease demising a portion of a Mortgaged Property comprising at least 20,000 square feet of rentable space. ARTHUR ANDERSEN RESERVE shall have the meaning specified in Section 1201. ARTHUR ANDERSEN RESERVE ACCOUNT shall have the meaning specified in Section 1205. ARTHUR ANDERSEN SPACE shall have the meaning specified in Section 1205. ASSIGNMENT OF LEASES shall mean, that certain Assignment of Leases and Rents dated as of the Original Closing Date by Issuer, as assignor, to the Originator, as assignee, and assigned and transferred by the Originator to KPMCC pursuant to the KPMCC Assignment, and in turn assigned and transferred by KPMCC to the Indenture Trustee pursuant to the Security Documents Assignment, in respect of the Leases and Rents relating to the Mortgaged Properties, a copy of which Assignment of Leases is annexed hereto as Exhibit C, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. ASSIGNMENT OF MANAGEMENT AGREEMENT shall mean the Assignment of Management Agreement dated as of the Original Closing Date, among the Issuer, as assignor, the Originator, as assignee, and the Operating Partnership, as Manager, and assigned and transferred by the Originator to KPMCC pursuant to the KPMCC Assignment, and in turn assigned and transferred by KPMCC to the Indenture Trustee pursuant to the Security Documents Assignment, a copy of which Assignment of Management Agreement is annexed hereto as Exhibit D, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. AUTHENTICATING AGENT shall mean any Person authorized in writing by the Indenture Trustee pursuant to Section 613 to act on behalf of the Indenture Trustee to authenticate the Notes. AUTHORIZED AGENT shall mean any Person authorized by the Issuer in writing to act on behalf of the Issuer to give or receive notices or instructions. -5- 14 AUTHORIZED PARTNER shall have the meaning provided in Section 304. BANKING DAY shall mean any day other than a Saturday, Sunday or a day on which commercial banks located in New York, New York or the State of California are required or authorized by applicable law or executive order to close. CALCULATION PERIOD shall mean a period of four (4) consecutive calendar quarters ending on the March 31, June 30, September 30 or December 31 immediately preceding the date as of which the Debt Service Coverage Ratio is to be determined. CASH shall mean coin or currency of the United States of America or immediately available federal funds, including funds delivered by wire transfer. CASUALTY shall have the meaning specified in Section 1101(a). CERCLA shall mean the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. ss. 9601 et seq.), as heretofore or hereafter amended or supplemented from time to time, including, without limitation, the Superfund Amendments and Reauthorization Act of 1986. CHARGES shall have the meaning specified in Section 310(e). CODE shall mean the Internal Revenue Code of 1986, as amended from time to time, any successor statute thereto, and any temporary or final regulations of the United States Department of the Treasury promulgated pursuant thereto. COMMISSION shall mean the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. CONDEMNATION shall have the meaning specified in Section 1101(a). -6- 15 CONTRIBUTING ENTITIES shall mean Tucker Master General Partnership, Tucker State Street Limited Partnership and Tucker-Sheridan Associates Limited Partnership. CONTRIBUTION AGREEMENTS shall mean, collectively, each of those certain Contribution Agreements dated as of the Original Closing Date between a Contributing Entity and the Operating Partnership, as the same may be amended, restated, supplemented or otherwise modified from time to time. CORPORATE TRUST OFFICE shall mean the principal office of the Indenture Trustee at which at any particular time its corporate trust business shall be administered, which on the date hereof is 3 Park Plaza, 16th floor, Irvine, California 92714, Attention: Kidder/Tucker REMIC 1994-C2. CORPORATION shall mean a corporation, association, company, joint-stock company or business trust. CREDIT ENHANCEMENT EVENT shall mean the occurrence of any of the following events: (i) a termination by Arthur Andersen & Co. of all or any material portion (greater than 10%) of its Lease with respect to office space at the One North State Street Mortgaged Property unless a cancellation fee of at least $1,800,000 shall have been made in connection therewith and shall have been deposited in the Arthur Andersen Reserve Account in accordance with Section 1205 hereof, (ii) a termination by First National Bank of Chicago of all or any material portion (greater than 10%) of its Lease with respect to office space at the One North State Street Mortgaged Property, or (iii) Net Operating Income Available for Debt Service for the Calculation Period ended June 30, 1999 shall be less than $25,074,543. CREDIT ENHANCEMENT RESERVE shall have the meaning specified in Section 1201. CREDIT ENHANCEMENT RESERVE ACCOUNT shall have the meaning specified in Section 1204. DEBT shall mean, with respect to any Person, without duplication, (i) all indebtedness of such Person for borrowed money, (ii) all indebtedness of such Person for the deferred purchase price of property or services, -7- 16 (iii) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments (other than performance, surety and appeal bonds arising in the ordinary course of business), (iv) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (v) all obligations of such Person under leases which have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases, to the extent required to be so recorded, (vi) all reimbursement, payment or similar obligations of such Person, contingent or otherwise, under acceptance, letter of credit or similar facilities, (vii) all Debt referred to in clauses (i) through (vi) above of any Person guaranteed directly or indirectly by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (A) to pay or purchase such Debt or to advance or supply funds for the payment or purchase of such Debt, (B) to purchase, sell or lease (as lessee) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Debt or to assure the holder of such Debt against loss in respect of such Debt, (C) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (D) otherwise to assure a creditor against loss in respect of such Debt, and (viii) all Debt referred to in clauses (i) through (vi) above secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any lien, security interest or other charge or encumbrance upon or in property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Debt. DEBT SERVICE COVERAGE RATIO shall mean, with respect to any Calculation Period, the ratio of the Net Operating Income Available for Debt Service with respect to such Calculation Period, after giving effect to the relevant release of a Mortgaged Property pursuant to Section 1109 hereof, if any, to the interest accrued in respect of the aggregate outstanding principal balances of the outstanding Notes during such Calculation Period, after taking account of any relevant redemption of the outstanding Notes under Article Eleven. -8- 17 DEFAULT shall mean the occurrence of any event specified in Section 501, whether or not any requirement in connection with such event for the giving of notice or the lapse of time, or both, shall have been satisfied. DEFAULT AMOUNT shall mean, with respect to any Note which has been accelerated, an amount equal to the principal of and accrued interest on such Note then outstanding, plus the applicable Yield Maintenance Charge, if any, as of the date of determination. DEFAULTED INTEREST shall have the meaning provided in Section 311. DEFAULT RATE shall mean a rate of interest that is equal to eleven percent (11%) per annum. DISCOUNT RATE shall mean the rate per annum which, when compounded monthly, is equivalent to the Treasury Rate when compounded semi-annually. DOLLARS, U.S. $, $ shall mean the lawful money of the United States of America. ELIGIBLE ACCOUNT shall mean either (i) an account maintained with a depository institution or trust company the long term unsecured debt obligations of which are rated by each Rating Agency in its highest rating category at the time of any deposit therein or (ii) a trust account maintained with a federal depository institution, a state chartered depository institution or a trust company with trust powers acting in its fiduciary capacity, in each case which may be an account maintained with the Indenture Trustee or the Servicer. Eligible Accounts may bear interest. ELIGIBLE INVESTMENTS shall mean each of the following: (i) direct obligations of, or obligations fully guaranteed as to full and timely payment of principal and interest by, (a) the United States or any agency or instrumentality thereof provided that such obligations are backed by the full faith and credit of the United States of America, or (b) the Federal Home Loan Mortgage Corporation ("Freddie Mac"), the Federal National Mortgage Association ("Fannie Mae") or the Federal Farm Credit System provided that any such obligation at the time of purchase or contractual -9- 18 commitment for purchase are qualified by each Rating Agency as an Eligible Investment under the Indenture as evidenced in writing; (ii) demand and time deposits in or certificates of deposit of, or bankers' acceptances issued by, any bank or trust company, savings and loan association or savings bank, which are fully insured by the Federal Deposit Insurance Corporation or any successor thereto (the "FDIC"), provided that such investments need not be insured if the commercial paper and long-term unsecured debt obligations of such depository institution or trust company (or in the case of the principal depository institution in a holding company system, the commercial paper or long-term unsecured debt obligations of such holding company) have the highest rating available for such securities by each Rating Agency, or such lower rating as will not result in the downgrading or withdrawal of the rating then assigned to any Class of Certificates by either Rating Agency as evidenced in writing; (iii) repurchase obligations with respect to any security described in clause (i) above entered into with a depository institution or trust company (acting as principal) described in clause (ii) above; (iv) general obligations of or obligations guaranteed by any State of the United States or the District of Columbia receiving, at the time of such investment or contracted commitment providing for such investment, the highest long-term unsecured debt rating available for such securities by each Rating Agency, or such lower rating as will not result in the downgrading or withdrawal of the rating then assigned to any Class of Certificates by each Rating Agency as evidenced in writing; (v) securities bearing interest or sold at a discount that are issued by any corporation incorporated under the laws of the United States of America or any State thereof or the District of Columbia and are rated by each Rating Agency in its highest long-term unsecured rating category at the time of such investment or contractual commitment providing for such investment; PROVIDED, HOWEVER, that securities issued by any such corporation will not be Eligible Investments to the extent that investment therein will cause the then outstanding principal -10- 19 amount of securities issued by such corporation and held as part of the Trust Estate to exceed 20% of the aggregate principal amount of all Eligible Investments held as a part of the Trust Estate; (vi) commercial or finance company paper (including both non-interest-bearing discount obligations and interest-bearing obligations payable on demand or on a specified date not more than one year after the date of issuance thereof) that is rated by each Rating Agency in its highest short-term unsecured debt rating available at the time of such investment or contractual commitment providing for such investment, and is issued by a corporation the outstanding senior long-term debt obligations of which are then rated by each Rating Agency in its highest long-term unsecured debt rating available, or such lower rating as will not result in the downgrading or withdrawal of the rating then assigned to any Class of Certificates by either Rating Agency as evidenced in writing; (vii) guaranteed reinvestment agreements acceptable to each Rating Agency issued by any bank, insurance company or other corporation rated in the highest long-term unsecured rating level available to such issuers by each Rating Agency at the time of such investment, provided that any such agreement must by its terms provide that it is terminable by the purchaser without penalty in the event any such rating is at any time lower than such level; (viii) units of taxable money market funds rated by each Rating Agency in its highest rating category or which funds have been designated in writing by each Rating Agency as Eligible Investments with respect to this definition; (ix) if previously confirmed in writing to the Servicer, any other demand, money market or time deposit, or any other obligation, security or investment, that may be acceptable to each Rating Agency as a permitted investment of funds backing securities rated "AAA"; and (x) such other obligations as are acceptable as Eligible Investments to each Rating Agency; PROVIDED, HOWEVER, that such instrument continues to qualify as a cash flow investment pursuant to Code Section -11- 20 860G(a)(6) and that no instrument or security shall be an Eligible Investment if (x) such instrument or security evidences a right to receive only interest payments, (y) the right to receive principal and interest payments derived from the underlying investment provides a yield to maturity in excess of 120% of the yield to maturity at par of such underlying investment or (z) such instrument or security can be redeemed prior to its stated maturity date at an amount less than the purchase price paid therefor. ENCUMBRANCE shall mean any mortgage, deed of trust, pledge, lien, encumbrance, assignment by way of security, hypothecation, security interest, conditional sale, capital lease or other title retention or security arrangement securing any obligation of any Person. ENVIRONMENTAL CLAIM shall mean any notice of violation, claim, demand, abatement order or other order or direction (conditional or otherwise) by any Person for any damage, including, without limitation, personal injury (including sickness, disease or death), tangible or intangible property damage, contribution, indemnity, indirect or consequential damages, damage to the environment, pollution, contamination or other adverse effects on the environment, removal, cleanup or remedial action or for fines, penalties or restrictions, resulting from or based upon (i) the existence or occurrence, or the alleged existence or occurrence, of a Hazardous Substance Activity or (ii) the violation, or alleged violation, of any Environmental Laws in connection with a Mortgaged Property or any portion thereof. ENVIRONMENTAL INDEMNITY shall mean the Environmental Indemnity Agreement dated as of the Original Closing Date, made by Issuer in favor of the Indemnitees, and assigned and transferred by the Originator to KPMCC pursuant to the KPMCC Assignment, and in turn assigned and transferred by KPMCC to the Indenture Trustee pursuant to the Security Documents Assignment, a copy of which Environmental Indemnity is annexed hereto as Exhibit E, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. ENVIRONMENTAL LAWS shall mean all laws, statutes, ordinances, orders, rules, codes, regulations and judgments and any judicial or administrative interpretations thereof relating to health, safety and protection of the -12- 21 environment, including, without limitation, those relating to fines, orders, injunctions, penalties, damages, contribution, cost recovery compensation, removal, cleanup or remedial action, losses or injuries resulting from Hazardous Substance Activity, in any manner applicable to the Issuer, the Mortgaged Property or any part thereof, or the ownership, use, occupancy or operation thereof, including, without limitation, CERCLA, the Hazardous Material Transportation Act (49 U.S.C. [Sec.] 1801 ET SEQ.) the Resource Conservation and Recovery Act (42 U.S.C. [Sec.] 6901 ET SEQ.), the Federal Water Pollution Control Act (33 U.S.C. [Sec.] 1251 ET SEQ.), the Clean Air Act (42 U.S.C. [Sec.] 7401 ET SEQ.), the Toxic Substances Control Act (15 U.S.C. [Sec.] 2601 ET SEQ.), the Occupational Safety and Health Act (29 U.S.C. [Sec.] 651 ET SEQ.) and the Emergency Planning and Community Right-to-Know Act (42 U.S.C. [Sec.] 11001 ET SEQ.), each as heretofore or hereafter amended or supplemented from time to time, and any analogous future or present applicable local, state and federal statutes and regulations promulgated pursuant thereto, each as in effect as of the date of determination. ENVIRONMENTAL REPORTS shall mean, collectively, the reports and letters listed on Schedule 5 annexed hereto. EQUIPMENT shall mean the "Equipment" as defined in the Mortgage and, if the context so indicates, the "Equipment" relating to a particular Mortgaged Property. EVENT OF DEFAULT shall mean the occurrence of any event specified in Section 501 and the continuance of any such event beyond the expiration of any requirement in connection with such event for the giving of notice or the lapse of time, or both. EXCHANGE ACT shall mean the Securities Exchange Act of 1934 and any statute successor thereto, in each case as amended from time to time. EXPIRATION DATE shall have the meaning provided in Section 104. GOVERNMENTAL AUTHORITY shall mean any court, board, agency, commission, office or authority of any nature whatsoever for any governmental unit (federal, state, county, district, municipal, city or otherwise) whether now or hereafter in existence. -13- 22 GP CORP shall mean Tucker Financing Corp., a corporation organized under the laws of the State of Delaware, and its successors and assigns. HAZARDOUS SUBSTANCE shall mean (i) any chemical, material or substance defined as or included in the definition of "hazardous wastes," "hazardous materials," "hazardous substance," "extremely hazardous substance," "pollutants," "restricted hazardous waste," or "toxic substances" or words of similar import under any applicable Environmental Laws, (ii) any oil, petroleum or petroleum derived substance, any drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, any flammable substances or explosives, any radioactive materials, or any other materials which cause any Mortgaged Property to be in violation of any applicable Environmental Laws and (iii) asbestos in any form which is friable, urea formaldehyde foam insulation or electrical equipment which contains any oil or dielectric fluid containing levels of polychlorinated biphenyls in excess of fifty parts per million. HAZARDOUS SUBSTANCE ACTIVITY shall mean any storage, holding, existence, release, spill, leaking, pumping, pouring, injection, escaping, deposit, disposal, dispersal, leaching, migration, use, treatment, emission, discharge, generation, processing, abatement, removal, disposition, handling or transportation of any Hazardous Substance from, under, into or on any Mortgaged Property, including, without limitation, the discharge of any Hazardous Substance emanating from any Mortgaged Property through the air, soil, surface water, groundwater or property and also including, without limitation, the abandonment or disposal of any barrels, containers and other closed receptacles containing any Hazardous Substance from or on such Mortgaged Property, in each case whether sudden or non-sudden, accidental or non-accidental; PROVIDED, HOWEVER, that neither (i) limited quantities of Hazardous Substances used or stored at any Mortgaged Property in all respects in compliance with applicable Environmental Laws in connection with the normal operation, occupancy, use or maintenance of such Mortgaged Property nor (ii) limited quantities of Hazardous Substances sold at any Mortgaged Property in the ordinary course of business of a seller whose activities, including such seller's storage of such Hazardous Substances, are in all respects in compliance with applicable Environmental Laws, shall constitute a Hazardous Substance Activity. -14- 23 HOLDER shall mean each Person in whose name a Note is registered in the Register. HOLDOVER ACCOUNT shall have the meaning provided in Section 306(d). IMPOSITIONS shall mean all real estate and personal property taxes, water, sewer and vault charges, municipal or other permit fees and all other taxes, levies, fees, assessments and other similar charges, general and special, ordinary and extraordinary, foreseen and unforeseen, of every kind and nature whatsoever, which at any time prior to, at or after the execution hereof may be assessed, levied or imposed by, in each case, a Governmental Authority upon a Mortgaged Property or the Rents or the ownership, use, occupancy or enjoyment thereof, and any interest, costs or penalties with respect to any of the foregoing. IMPROVEMENTS shall have the meaning set forth in Section 1010. INDEMNIFIED LIABILITIES shall have the meaning specified in Section 1301(c). INDEMNITEES shall mean, collectively, the Originator, KPMCC, Kidder, the Indenture Trustee, the Pass-Through Trustee and their respective officers, directors, agents, parents and Affiliates. INDENTURE shall mean this instrument as originally executed and as it may be supplemented or amended from time to time by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including, for all purposes of this instrument, and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this instrument and any such supplemental indenture, respectively. INDENTURE TRUSTEE shall mean the Person named as the "Indenture Trustee" in the first paragraph of this instrument until a successor Person or successor Persons shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Indenture Trustee" shall mean or include each Person who is then an Indenture Trustee hereunder. -15- 24 INITIAL REPAIR RESERVE shall have the meaning specified in Section 1201. INITIAL REPAIR RESERVE ACCOUNT shall have the meaning specified in Section 1202. INITIAL REPAIR WORK shall mean each of the items listed on Schedule 6 hereto. INTEREST PAYMENT DATE shall mean, in the case of the initial Interest Period for each Note, June 29, 1994 and, (x) in the case of each succeeding Interest Period for each Note, the second Banking Day preceding the first day of the following Interest Period or, (y) in the case of the final Interest Period for each Note, the second Banking Day preceding the Maturity Date of the Notes. INTEREST PERIOD shall mean with respect to each Note, each calendar month during the term of the Note or, in the case of the initial Interest Period, the Issuance Date through the last day of the calendar month in which the Issuance Date occurs. INTERNAL REVENUE CODE shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor statute, and the regulations promulgated and the rulings issued thereunder. INSURANCE COVERAGES shall have the meaning specified in Section 1008(r). ISSUANCE DATE shall mean the date on which the Notes are initially issued by the Issuer and authenticated and delivered by the Indenture Trustee pursuant hereto. ISSUER shall mean the Person named as the "Issuer" in the first paragraph of this Indenture until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Issuer" shall mean such successor Person. ISSUER'S PARTNERSHIP AGREEMENT shall mean the Partnership Agreement of Tucker Financing Partnership dated as of October 4, 1993, between GP Corp and the Operating Partnership, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. -16- 25 ISSUER REQUEST or ISSUER ORDER shall mean a written request or order signed in the name of the Issuer by an Authorized Partner and delivered to the Indenture Trustee. KIDDER shall mean Kidder Peabody & Co., Incorporated, a corporation organized under the laws of the State of New York, and its successors and assigns. KPAC shall mean Kidder, Peabody Acceptance Corporation I, a corporation organized under the laws of the State of Delaware, and its successors and assigns. KPMCC shall mean Kidder Peabody Mortgage Capital Corporation, a corporation organized under the laws of the State of Delaware, and its successors and assigns. KPMCC ASSIGNMENT shall mean the Assignment dated as of the Original Closing Date between the Originator, as assignor, and KPMCC, as assignee, pursuant to which the Originator assigned and transferred to KPMCC all of the Originator's right, title and interest in, to and under the Original Note, the Loan Agreement and the Security Documents. LEASE shall mean any lease, or, to the extent of the interest therein of the Issuer, any sublease or subsublease, license, concession or other agreement (whether written or oral and whether now or hereafter in effect) pursuant to which any person is granted a possessory interest in, or right to use or occupy all or any portion of any space in a Mortgaged Property, and every modification, amendment or other agreement relating to such lease, sublease, subsublease, or other agreement entered into in connection with such lease, sublease, subsublease, or other agreement and every guarantee of the performance and observance of the covenants, conditions and agreements to be performed and observed by the other party thereto. LEGAL RATE shall have the meaning specified in Section 310(e). LEGAL REQUIREMENTS shall mean any and all present and future judicial and administrative rulings or decisions, and any and all present and future federal, state and local laws, ordinances, rules, regulations, permits and certificates of any Governmental Authority, in each case in any way applicable to the Issuer or the -17- 26 Mortgaged Property (or the ownership or use thereof), excluding any Environmental Laws. LOAN AGREEMENT shall mean the Loan Agreement dated as of the Original Closing Date between the Originator, as lender thereunder, and the Issuer, as borrower thereunder, and assigned and transferred by the Originator to KPMCC pursuant to the Loan Purchase Agreement and the KPMCC Assignment, which Loan Agreement shall be replaced by, and terminated contemporaneously with the execution and delivery of, this Indenture. LOAN PURCHASE AGREEMENT shall mean the Loan Purchase Agreement dated as of the Original Closing Date between the Originator and KPMCC, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. MAINTENANCE AND CAPITAL IMPROVEMENT RESERVE shall have the meaning specified in Section 1201. MAINTENANCE AND CAPITAL IMPROVEMENT RESERVE ACCOUNT shall have the meaning specified in Section 1203. MAINTENANCE AND CAPITAL IMPROVEMENT EXPENDITURES shall mean any expenditures made by the Issuer in respect of a Mortgaged Property for the maintenance, repair, painting or decoration of such Mortgaged Property or for capital improvements in respect of such Mortgaged Property. MANAGEMENT AGREEMENT shall mean the Management Agreement dated as of the Original Closing Date, between the Issuer and the Operating Partnership, as Manager, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. MANAGER shall have the meaning specified in Section 1008(n). MATERIAL ADVERSE EFFECT shall mean any circumstance or event that (i) has or could reasonably be expected to have a material adverse effect on the validity, priority, perfection or enforceability of the Transaction Documents or any of them, (ii) has or could reasonably be expected to have a material adverse effect on the prospect of timely payment of interest and principal of the Notes or on the value of, or the Indenture Trustee's ability to have recourse as set forth in the Transaction Documents against, any Mortgaged Property or any material portion thereof. -18- 27 MATURITY DATE shall mean with respect the Notes, the date on which the final payment of principal of, and Yield Maintenance Charge, if any, on the Notes becomes due and payable as therein and herein provided, whether at its Stated Maturity, by declaration of acceleration, or otherwise. MORTGAGE shall mean that certain first priority Mortgage, Security Agreement, Fixture Filing Statement, Assignment of Leases and Rents and Financing Statement dated as of the Original Closing Date between the Issuer, as mortgagor, and the Originator, as mortgagee, and assigned and transferred by the Originator to KPMCC pursuant to the KPMCC Assignment, and in turn assigned and transferred by KPMCC to the Indenture Trustee pursuant to the Security Documents Assignment, a copy of which Mortgage is annexed hereto as Exhibit B, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, which Mortgage has been placed of record as an Encumbrance upon each Mortgaged Property. MORTGAGED PROPERTIES shall mean, collectively, each Mortgaged Property then subject to the liens and Encumbrances created by the Mortgage. MORTGAGED PROPERTY shall mean, individually, any one of the six (6) properties listed on Schedule 1 annexed hereto then encumbered by the Mortgage, as more particularly described in the Mortgage, including, without limitation, all right, title and interest of the Issuer in all Real Property, fixtures, improvements, Equipment and Personalty relating thereto and all other items described in the Granting Clauses of the Mortgage in respect thereof. NET OPERATING INCOME AVAILABLE FOR DEBT SERVICE shall mean, with respect to any Calculation Period, the Operating Income for such Calculation Period MINUS the Operating Expenses for such Calculation Period. NEW NOTE shall have the meaning specified in Section 312. NOTE AND NOTES shall have the respective meanings set forth in the Recitals of this Indenture, each such Note to be substantially in the form of Exhibit A annexed hereto. OBLIGATIONS shall mean all present and future indebtedness, obligations and liabilities, and all renewals -19- 28 and extensions thereof, now or hereafter owing to the Holders of Notes, the Indenture Trustee and the Servicer pursuant to this Indenture, the Notes and the Security Documents, together with any costs, expenses or attorney's fees incurred in the enforcement or collection thereof, regardless of whether such indebtedness, obligations and liabilities are direct, indirect, fixed, absolute, contingent, liquidated or unliquidated. OFFICER'S CERTIFICATE shall mean a non-recourse certificate signed by the Authorized Partner or in the case of a successor Person to the Issuer which is not a partnership, a certificate signed by a person or persons of similar authority and responsibility, and delivered to the Indenture Trustee. OPERATING AGREEMENTS shall mean, collectively, the operating agreements and reciprocal easement agreements listed on Schedule 3 and, with respect to future operating agreements or reciprocal easement agreements, any agreement between Issuer and one or more owners or operators of buildings adjacent to or comprising a part of a Mortgaged Property, which agreement contains an operating covenant. OPERATING EXPENSES shall mean all expenses paid in cash and incurred by or on behalf of the Issuer in connection with or arising out of the ownership, operation or use of the Mortgaged Properties, including, without limitation, the following: (i) expenses normally incurred in connection with the operation of properties similar in character and use to each Mortgaged Property in the jurisdiction of its location, including cleaning, repair, maintenance, management, leasing, decoration or painting of such Mortgaged Property or the provision of services to any tenant; (ii) wages, benefits, payroll taxes, uniforms, insurance costs, and all other related expenses incurred for on-site building personnel, up to and including the level of the on-site building manager, engaged in cleaning, repair, maintenance, management, leasing, decoration or painting of each Mortgaged Property or the provision of services to any tenant; (iii) costs incurred for all electricity, oil, gas, water, steam, heat, ventilation, air-conditioning and any other energy, telecommunications, utility or -20- 29 similar item, including without limitation, overtime usage, and the cost of building and cleaning supplies or the payment of any amount therefor to others on behalf of any tenant; (iv) premiums for liability, casualty, fidelity, business interruption, loss of "rental value" and other insurance required by the Transaction Documents, any Anchor Lease, any Operating Agreement or any reciprocal easement agreement or the payment of any amount therefor to others on behalf of any tenant; (v) legal, accounting and auditing fees, expenses and disbursements; (vi) Impositions; (vii) TI Amortization Amounts; and (viii) all other expenses paid in cash which in accordance with generally accepted accounting principles consistently applied would be included in the Issuer's financial or operating statements for such period as operating expenses of a Mortgaged Property. Notwithstanding the foregoing, Operating Expenses shall not include (a) depreciation or other non-cash items (other than TI Amortization Amounts), (b) except to the extent the same is included in Operating Income, any item of expense which would otherwise be considered within Operating Expenses pursuant to the provisions above but is paid or to be paid by any tenant and not reimbursed by the Issuer or is paid by the Issuer from forfeited tenant security deposits, (c) any income or similar taxes on the income of the Issuer, (d) interest, principal or Yield Maintenance Charges payable in respect of the Notes and (e) any amounts required to be deposited in any Reserve Account. OPERATING INCOME shall mean all income and revenues received in cash by the Issuer in connection with or arising out of the ownership, operation or use of the Mortgaged Properties and from the Leases, including, without limitation, the following: (i) all amounts earned as rent, additional rent, percentage rent, charges for electricity, oil, gas, water, steam, heat, ventilation, air-conditioning, and -21- 30 any other energy, telecommunications, utility or similar items, including without limitation, overtime usage, escalation charges, license fees, maintenance fees, charges for improvements, Impositions and other amounts payable to the Issuer pursuant to Leases entered into in accordance with the Transaction Documents; (ii) condemnation proceeds under a temporary (and not a permanent) taking to the extent that such proceeds are compensation for lost rent; (iii) real estate tax refunds; (iv) business interruption and loss of "rental value" insurance proceeds; and (v) all other amounts received in cash in respect of items which in accordance with generally accepted accounting principles consistently applied would be included in the financial statements for a Mortgaged Property as operating income or in respect of the Leases. Notwithstanding the foregoing, Operating Income shall not include (v) any condemnation proceeds, except to the extent that such proceeds are compensation for lost rent and relate to a temporary and not a permanent taking of the Mortgaged Property, (w) insurance proceeds, unless (and except to the extent that) such proceeds are characterized as business interruption or loss of "rental value" insurance proceeds, (x) any proceeds resulting from the sale, exchange, transfer, financing or refinancing of all or any part of a Mortgaged Property, regardless of whether such sale, exchange, transfer, financing or refinancing was permitted or not permitted pursuant to the Transaction Documents, (y) any rent accrued by the Issuer but not received because of any free rent provisions or other rental concessions in any Lease, and (z) forfeited security deposits and other security deposits received. OPERATING PARTNERSHIP shall mean Tucker Operating Limited Partnership, a limited partnership organized under the laws of the State of Delaware, and its successors and assigns. OPINION OF COUNSEL shall mean a written opinion of counsel, who shall be selected by the Issuer (unless -22- 31 such selection is reasonably disapproved by Indenture Trustee). OP'S PARTNERSHIP AGREEMENT shall mean the Agreement of Limited Partnership of Tucker Operating Limited Partnership, dated as of October 4, 1993, between the REIT as sole general partner and Kenneth L. Tucker, Richard H. Tucker and such other persons as are party thereto as limited partners, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. ORIGINAL CLOSING DATE shall mean October 12, 1993. ORIGINAL NOTE shall mean the mortgage note dated the Original Closing Date in the aggregate principal stated amount of $100,000,000 issued by the Issuer to the Originator pursuant to the Loan Agreement and assigned and transferred by the Originator to KPMCC pursuant to the Loan Purchase Agreement and the KPMCC Assignment, which Original Note shall be surrendered to the Issuer for cancellation simultaneously with the execution, authentication and delivery of the Notes pursuant to this Indenture. ORIGINATOR shall mean Value Line Mortgage Corporation, a corporation organized under the laws of Pennsylvania, and its successors and assigns. OUTSTANDING, when used with respect to any Notes, shall mean, as of the date of determination, any Note theretofore authenticated and delivered under this Indenture, EXCEPT: (i) Notes theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation; (ii) Notes for which payment or redemption in full in the necessary amount has been deposited with or irrevocably conveyed to the Indenture Trustee in trust for the Holders of such Notes in accordance with this Indenture; provided that if such Notes are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and -23- 32 (iii) Notes in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to this Indenture, other than any such Notes in respect of which there shall have been presented to the Indenture Trustee proof satisfactory to it that such Notes are held by a bona fide purchaser in whose hands such Notes are valid obligations of the Issuer; PROVIDED, HOWEVER, that in determining whether the Holders of the requisite principal amount of the Outstanding Notes have given any request, demand, authorization, vote, direction, notice, consent or waiver hereunder, Notes owned by the Issuer, any other obligor upon the Notes, or an Affiliate of the Issuer or any such other obligor, shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Indenture Trustee shall be protected in relying upon any such request, demand, authorization, vote, direction, notice, consent or waiver, only Notes which the Indenture Trustee knows to be so owned shall be so disregarded. Notes so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee delivers notice in writing to the Indenture Trustee of the pledgee's right to act with respect to such Notes and that the pledgee is not the Issuer, any other obligor upon the Notes, or an Affiliate of the Issuer or any such other obligor. PASS-THROUGH CERTIFICATES shall mean the Commercial Mortgage Pass-Through Certificates, Series 1994-C2, issued pursuant to the Trust and Servicing Agreement. PASS-THROUGH TRUSTEE shall mean the trustee under the Trust and Servicing Agreement, and its successors and assigns. PAYING AGENT shall mean any Person authorized by the Issuer pursuant to Section 314 to pay the principal of and interest on any Notes on behalf of the Issuer. PAYMENT ACCOUNT shall have the meaning specified in Section 306(a). PERMITTED DEBT shall mean (i) the Notes and the other obligations, indebtedness and liabilities evidenced and secured by the Transaction Documents; (ii) amounts, not secured by any Mortgaged Property, payable by or on behalf of the Issuer, within 90 days following receipt of a proper invoice or statement in respect thereof, for or in respect of the operation of the Mortgaged Properties in the -24- 33 ordinary course of operating the Issuer's business, including amounts payable by or on behalf of the Issuer to suppliers, contractors, mechanics, vendors, materialmen or other persons providing property or services to the Issuer or to the Mortgaged Properties, or in connection with the operation, leasing, cleaning, maintaining, or repair thereof incurred, in each case, in the ordinary course of operating the Issuer's business; and (iii) amounts, not secured by any Mortgaged Property, payable or reimbursable, within 90 days following receipt of a proper invoice or statement in respect thereof, to any tenant on account of work performed at a Mortgaged Property by or on behalf of such tenant or for costs incurred by such tenant in connection with its occupancy of space at a Mortgaged Property. PERMITTED ENCUMBRANCES shall mean, collectively, the "Permitted Encumbrances" as defined in the Mortgage and, if the context so indicates, the "Permitted Encumbrances" relating to a particular Mortgaged Property. PERMITTED TRANSFER shall mean the following: (i) With respect to the Issuer's interest in the Mortgaged Property, the transactions contemplated or otherwise permitted pursuant to the terms of the Transaction Documents shall constitute Permitted Transfers of the Mortgaged Property. (ii) With respect to the 1.0% general partnership interest of GP Corp in the Issuer, no transfer, pledge or hypothecation of such interest or any portion thereof shall be a Permitted Transfer. (iii) With respect to the 99% general partnership interest of the Operating Partnership in the Issuer, transfers of any portion of such interest to the REIT shall constitute Permitted Transfers, and no other transfer, pledge or hypothecation of such interest or any portion thereof shall be a Permitted Transfer. (iv) With respect to the 100% shareholder interest of the REIT in GP Corp, no transfer, pledge or hypothecation of such interest or any portion thereof shall be a Permitted Transfer. (v) With respect to the 4.1% limited partnership interest of the limited partners in the Operating Partnership, any transfer, pledge or hypothecation of -25- 34 any portion of such interest shall be a Permitted Transfer. (vi) With respect to the 95.9% partnership interest of the REIT in the Operating Partnership, no transfer, pledge or hypothecation of such interest or any portion thereof shall be a Permitted Transfer, except that (i) the issuance of additional partnership interests in the Operating Partnership and (ii) any transfer of limited partnership interests in the Operating Partnership, shall be deemed Permitted Transfers to the extent that after giving effect to any such issuance or transfer the REIT shall own not less than 51% of the aggregate partnership interests in the Operating Partnership. PERSON shall mean an individual, corporation, company, partnership, trust, joint stock company, joint venture, unincorporated association, government, Governmental Authority or other entity. PERSONALTY shall mean the "Personalty" as defined in the Mortgage and, if the context so indicates, the "Personalty" relating to a particular Mortgaged Property. PREDECESSOR NOTE of any particular Note shall mean every previous Note evidencing all or a portion of the same indebtedness as that evidenced by such particular Note and, for the purposes of this definition, any Note authenticated and delivered under Section 309 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Note shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Note. QUALIFIED ENGINEERING CONSULTANT shall mean an engineering consultant selected by the Issuer (i) having all licenses, registrations and/or certifications required to act as such in the jurisdiction in which the relevant Mortgaged Property is located, and (ii) reasonably acceptable to the Servicer. QUALIFIED ENVIRONMENTAL CONSULTANT shall mean an environmental consultant selected by the Issuer (i) having all licenses, registrations and/or certifications required to act as such in the jurisdiction in which the relevant Mortgaged Property is located and (ii) reasonably acceptable to Servicer. -26- 35 RATED INSURANCE CARRIER means (i) an insurance carrier with a claims paying ability rating of at least "AA-" or better from S&P and, if rated by D&P, of at least "A" or better from D&P and (ii) any other insurance carrier approved in writing by each Rating Agency. RATING AGENCIES shall mean, at any time, collectively, each nationally recognized credit rating agency that has issued a credit rating in respect of the Notes at the request of the Issuer or KPAC. REAL PROPERTY shall mean the "Real Property" as defined in the Mortgage and, if the context so indicates, the "Real Property" relating to a particular Mortgaged Property. REDEMPTION DATE shall have the meaning specified in Section 1101. REDEMPTION PRICE shall have the meaning specified in Section 1102. REGISTER and NOTE REGISTRAR shall have the respective meanings provided in Section 308(a). REGULAR RECORD DATE for the interest payable on any Interest Payment Date for the Notes shall mean the fifth Banking Day next preceding such Interest Payment Date. REIT means Tucker Properties Corporation, a corporation organized under the laws of Maryland, and its successors and assigns. REIT DOCUMENTS shall mean, (i) the Articles of Incorporation of the REIT and (ii) the By-Laws of the REIT. RELATED DOCUMENTS shall mean, collectively, the Issuer's Partnership Agreement, the OP's Partnership Agreement, the Contribution Agreements, the REIT Documents, the Trust and Servicing Agreement, the Underwriting Agreement, the certificate of incorporation and by-laws of GP Corp, the Management Agreement, the Original Note and the Loan Agreement. RENT COLLECTION ACCOUNT shall have the meaning specified in Section 1008(p). -27- 36 RENT ROLLS shall have the meaning specified in Section 1001(m)(ii). RENTS shall mean the "Rents" as defined in the Mortgage and, if the context so indicates, the "Rents" relating to a particular Mortgaged Property. RESERVES shall mean the Initial Repair Reserve, the Arthur Andersen Reserve, the Maintenance and Capital Improvement Reserve and the Credit Enhancement Reserve. RESERVE ACCOUNTS shall mean the Initial Repair Reserve Account, the Arthur Andersen Reserve Account, the Maintenance and Capital Improvement Reserve Account and the Credit Enhancement Reserve Account. Each Reserve Account shall be established and maintained as an Eligible Account. RESPONSIBLE OFFICER, when used with respect to the Indenture Trustee, shall mean any officer of the Indenture Trustee customarily performing functions with respect to corporate trust matters and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of such officer's knowledge of and familiarity with the particular subject. SECURITIES ACT shall mean the Securities Act of 1933 and any statute successor thereto, in each case as amended from time to time. SECURITY DOCUMENTS shall mean, collectively, the Mortgage, the Assignment of Leases, the Assignment of Management Agreement, the Environmental Indemnity, any Uniform Commercial Code financing statements executed in connection therewith and any additional documents executed by the Issuer in connection therewith or with the Notes. SECURITY DOCUMENTS ASSIGNMENT shall mean the Assignment dated the date hereof between KPMCC, as assignor, in favor of the Indenture Trustee, as assignee, for the benefit of the Holders of the Notes, substantially in the form of Exhibit F, annexed hereto, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. SERVICER means the Person named as the "Servicer" in the first paragraph of this Indenture until a successor Person or successor Persons shall have become such pursuant to the applicable provisions of this Indenture and The -28- 37 Trust and Servicing Agreement, and thereafter "Servicer" shall mean or include each Person who is then the Servicer hereunder and thereunder. S&P shall mean Standard & Poor's Rating Group. SPECIAL RECORD DATE for the payment of any Defaulted Interest shall mean a date fixed pursuant to Section 311. STATED MATURITY shall have the meaning specified in Section 301. TI AMORTIZATION AMOUNTS shall mean, with respect to any Calculation Period, the portion of all tenant improvement expenses, leasing commissions and other tenant leasing inducements in respect of the Mortgaged Properties that are not subject to reimbursement by tenants and are allocable to such Calculation Period based upon a three-year straight line amortization of all such non-reimbursable tenant improvement expenses and leasing commissions incurred subsequent to October 1, 1990. TITLE COMPANY shall mean, collectively, Commonwealth Land Title Insurance Company and each other title insurer insuring the liens of a Mortgage upon any Mortgaged Property, and their respective successors and assigns. TITLE INSURANCE POLICY shall mean with respect to each Mortgaged Property, the mortgagee title insurance policy or policies issued by the Title Company in accordance with the commitments therefor issued on the Original Closing Date with respect to such Mortgaged Property and insuring the lien of the Mortgage encumbering such Mortgaged Property subject only to the Permitted Encumbrances and containing the endorsements and affirmative assurances required by such commitments. TRANSACTION DOCUMENTS shall mean, collectively, this Indenture, the Notes and the Security Documents. TRANSFER AGENT shall have the meaning specified in Section 314. TREASURY RATE shall mean the yield per annum calculated by the linear interpolation of the yield, as reported in Federal Reserve Statistical Release H.15-Selected Interest Rates under the heading "U.S. -29- 38 government securities/ Treasury constant maturities" for the week ending prior to the date of the relevant redemption of any Note, of U.S. Treasury constant maturities with a maturity date (one longer and one shorter) most nearly approximating the maturity date of the Note being redeemed. In the event Release H.15 is no longer published, the Indenture Trustee shall select a comparable publication to determine the Treasury Rate. TRUST AND SERVICING AGREEMENT shall mean the Trust and Servicing Agreement dated as of the date hereof among KPAC, the Servicer and the Pass-Through Trustee for the purpose of issuing the Pass-Through Certificates backed by, and/or representing interests in, the Notes, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. TRUST ESTATE shall mean, collectively, each "Mortgaged Property" under and defined in the Mortgage and all monies, accounts, instruments and other property now or hereafter subject or intended to be subject to this Indenture, the Notes or any of the Security Documents or constituting a part of the security for the Holders of the Notes or the performance by the Issuer of its obligations thereunder or hereunder or under any of the Security Documents as of any particular time, including all property subject to the security interests evidenced by the Security Documents (including the after-acquired property clauses thereof) and all amounts in the Rent Collection Account and the Reserve Accounts and any other property that is conveyed or pledged to the Indenture Trustee, from time to time, for the benefit of the Holders of the Notes. TRUST INDENTURE ACT shall mean the Trust Indenture Act of 1939, as amended, as in force at the date as of which this instrument was executed; PROVIDED, HOWEVER, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. UCC or UNIFORM COMMERCIAL CODE shall mean the Uniform Commercial Code as in effect in a State. UNDERWRITING AGREEMENT shall mean the Underwriting Agreement dated May 11, 1993 between KPAC and Kidder relating to the offering and sale of the Pass-Through Certificates, as such agreement may be amended, -30- 39 restated, replaced, supplemented or otherwise modified from time to time. YIELD MAINTENANCE CHARGE shall mean, with respect to any prepayment of principal of a Note, whether in whole or in part and whether voluntary or mandatory (including, without limitation, by reason of an acceleration or redemption), an amount equal to the greater of (A) one percent (1%) of the amount of the principal balance of the Note being prepaid, or (B) the product of (i) a fraction whose numerator is an amount equal to the portion of the principal balance of the Note being prepaid and whose denominator is the outstanding principal balance of such Note on the date of such prepayment (before giving effect to such prepayment), multiplied by (ii) an amount equal to the remainder obtained by subtracting (x) an amount equal to the entire outstanding principal balance of the Note as of the date of such prepayment (before giving effect to such prepayment) from (y) the present value as of the date of such prepayment of the remaining scheduled payments of principal and interest on the Note (before giving effect to such prepayment) determined by discounting such payments at the Discount Rate. The calculation of the Yield Maintenance Charge shall be made by the Indenture Trustee and shall, absent manifest error, be final, conclusive and binding upon all parties. SECTION 102. Compliance Certificates and Opinions. Upon any application or request by the Issuer to the Indenture Trustee or the Servicer to take any action under any provision of this Indenture, the Issuer shall furnish to the Indenture Trustee or the Servicer, as the case may be, such certificates and opinions as may be required under the Trust Indenture Act. Each such certificate or opinion shall be given in the form of an Officer's Certificate, if to be given by the Authorized Partner, or an Opinion of Counsel, if to be given by counsel, and shall comply with the requirements of the Trust Indenture Act and any other requirements set forth in this Indenture. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (except for certificates provided for in Section 1006) shall include: -31- 40 (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. SECTION 103. Form of Documents Delivered to Indenture Trustee ------------------------------------------------ or the Servicer. - --------------- In any case where several matters are required to be certified by any specified Person, it is not necessary that all such matters be certified by only one such Person, or that they be so certified by only one document, but one such Person may certify with respect to some matters and one or more other such Persons may certify with respect to other matters, and any such Persons may certify as to such matters in one or several documents. Any certificate or opinion of the Authorized Partner of the Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless the officer of such Authorized Partner knows, or had reasonable grounds to believe, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, partners in the Issuer or partners in or officers of such partners, stating that the information with respect to such factual matters is in the possession of the Issuer, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. -32- 41 Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 104. Acts of Holders. --------------- (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture or any other Transaction Document to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing which agent shall be deemed to be the Servicer so long as the Pass-Through Trustee is the Holder (and the Trust and Servicing Agreement shall be sufficient evidence of such appointment). Except as herein otherwise expressly provided, such action will become effective when such instrument or instruments are delivered to the Indenture Trustee, and, where it is expressly required, to the Issuer. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "ACT" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent or proxy, or of the holding by any Person of a Note, shall be sufficient for any purpose of this Indenture or any other Transaction Documents and (subject to Section 601) conclusive in favor of the Indenture Trustee and the Issuer, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Indenture Trustee deems sufficient. (c) The Issuer may set any day as a record date for the purpose of determining the Holders of Outstanding -33- 42 Notes entitled to give, make or take any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given, made or taken by Holders of Notes, PROVIDED that the Issuer may not set a record date for, and the provisions of this paragraph shall not apply with respect to, the giving or making of any notice, declaration, request or direction referred to in the immediately succeeding paragraph. If any record date is set pursuant to this paragraph, the Holders of Outstanding Notes on such record date, and no other Holders, shall be entitled to take the relevant action, whether or not such Holders remain Holders after such record date; PROVIDED that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date by Holders of the requisite principal amount of Outstanding Notes on such record date. Nothing in this paragraph shall be construed to prevent the Issuer from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be cancelled and of no effect), and nothing in this paragraph shall be construed to render ineffective any action taken by Holders of the requisite principal amount of Outstanding Notes on the date such action is taken. Promptly after any record date is set pursuant to this paragraph, the Issuer, at its own expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Indenture Trustee in writing and to each Holder of Notes in the manner set forth in Section 106. The Indenture Trustee shall take the most recent record date for the purpose of determining the Holders of Outstanding Notes entitled to join in the giving or making of (i) any notice of Default, (ii) any declaration of acceleration referred to in Section 502, (iii) any request to institute proceedings referred to in Section 507(2) or (iv) any direction referred to in Section 512. The Holders of Outstanding Notes on such record date, and no other Holders, shall be entitled to join in such notice, declaration, request or direction, whether or not such Holders remain Holders after such record date; PROVIDED that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date by Holders of the requisite principal amount of Outstanding Notes on such record date. Promptly after the record date is set pursuant to this paragraph, the Indenture Trustee, at the Issuer's expense, shall cause notice of such record date, the proposed action by Holders and the applicable -34- 43 Expiration Date to be given to the Issuer in writing and to each Holder of Notes in the manner set forth in Section 106. With respect to any record date set pursuant to this Section, the party hereto which sets such record dates may designate any day as the "EXPIRATION DATE" and from time to time may change the Expiration Date to any earlier or later day; PROVIDED that no such change shall be effective unless notice of the proposed new Expiration Date is given to the other party hereto in writing, and to each Holder of Notes in the manner set forth in Section 106, on or prior to the existing Expiration Date. If an Expiration Date is not designated with respect to any record date set pursuant to this Section, the party hereto which set such record date shall be deemed to have initially designated the 180th day after such record date as the Expiration Date with respect thereto, subject to its right to change the Expiration Date as provided in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be later than the 180th day after the applicable record date. (d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Note shall bind every future Holder of the same Note and the Holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Indenture Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Note. (e) If this Indenture (i) does not specify what percentage of the Holders of the Notes shall be entitled or required to give or take any request, demand, authorization, direction, notice, consent, waiver or other action hereunder, or (ii) specifies that any such action is to be taken by the "OUTSTANDING NOTES", such reference shall require such action to be taken by all of the Holders of the Notes. SECTION 105. Notices to the Indenture Trustee, the Servicer ---------------------------------------------- and the Issuer. - -------------- Any request, demand, authorization, direction, notice, consent, waiver or Act of or by the Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, -35- 44 (1) the Indenture Trustee or the Servicer shall be sufficient for every purpose hereunder if in writing and sent by telefax, by hand delivery, or by registered or certified mail, return receipt requested, postage prepaid or by overnight courier service, to the Indenture Trustee at its Corporate Trust Office (in the case of delivery to the Indenture Trustee) and to the Servicer at the address set forth in the first paragraph of this Indenture (in the case of delivery to the Servicer), or (2) the Issuer shall be sufficient for every purpose hereunder if in writing and sent by telefax, or by hand delivery, or by registered or certified mail, return receipt requested, postage prepaid or by overnight courier service, to the Issuer addressed to it at the address specified in the first paragraph of this Indenture, or at any other address furnished in writing to the Indenture Trustee or the Servicer by the Issuer. SECTION 106. Notice to the Holders of the Notes; Waiver. ------------------------------------------ Where this Indenture provides for notice to the Holders of the Notes, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders of Notes shall be filed with the Indenture Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Inden- -36- 45 ture Trustee shall constitute a sufficient notification for every purpose hereunder. All requests, demands, authorizations, directions, notices, consents, waivers and other communications required or permitted under this Indenture shall be in writing in the English language. SECTION 107. Conflict with Trust Indenture Act. --------------------------------- If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under such Act to be a part of and govern this Indenture, the required provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, such provisions of the Trust Indenture Act shall be deemed to apply to this Indenture as so modified or excluded, as the case may be. SECTION 108. Effects of Headings and Table of Contents. ----------------------------------------- The Article and Section headings hereof and the Table of Contents are for convenience of reference only and shall not affect the construction hereof. SECTION 109. Successors and Assigns. ---------------------- All covenants and agreements in this Indenture by the Issuer shall bind its successors and assigns, whether so expressed or not. SECTION 110. Separability Clause. ------------------- In case any provision of this Indenture or of the Notes or any Security Document shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 111. Benefits of Indenture. --------------------- Nothing in this Indenture or in the Notes or any Security Document, express or implied, shall give to any Person, other than the parties hereto and thereto, their successors hereunder and thereunder and the Holders of the Notes any benefit or any legal or equitable right, remedy or claim under this Indenture or any Security Document. -37- 46 SECTION 112. Governing Law; Jurisdiction. --------------------------- (a) This Indenture, the Notes and the obligations arising hereunder and thereunder shall be governed by, and construed in accordance with, the laws of the State of Illinois applicable to contracts made and performed in such State and any applicable law of the United States of America, except that at all times the provisions for the creation, perfection, and enforcement of the liens and security interests created pursuant hereto and pursuant to the Security Documents shall be governed by and construed according to the law of the State in which the applicable Mortgaged Property is located, it being understood that, to the fullest extent permitted by the law of such State, the law of the State of Illinois shall govern the validity and the enforceability of all Security Documents and all of the indebtedness or obligations arising hereunder or thereunder. To the fullest extent permitted by law, the Issuer hereby unconditionally and irrevocably waives any claim to assert that the law of any other jurisdiction governs this Indenture and the Notes. (b) To the extent permitted by applicable law, any action or proceeding against any of the parties hereto relating in any way to this Indenture or any Note may be brought and enforced in any federal or state court in Chicago, Illinois or New York, New York and the Issuer irrevocably submits to the jurisdiction of each such court in respect of any such action or proceeding. The Issuer hereby agrees to venue in such courts and hereby waives, to the fullest extent permitted by law, any claim that any such action or proceeding was brought in an inconvenient forum. As long as any of the Notes remain Outstanding, the Issuer hereby irrevocably appoints GP Corp, with an office at 40 Skokie Boulevard, Northbrook, Illinois 60062-7626, as its authorized agent for service of process in any legal action or proceeding relating in any way to this Indenture or any Note. Service of process upon such agent and written notice of such notice mailed or delivered to the Issuer in the manner provided in this Indenture shall, to the fullest extent permitted by law, be deemed in every respect effective service upon the Issuer in any such legal action or proceeding. SECTION 113. Legal Holidays. -------------- In any case where any Interest Payment Date, Redemption Date or Maturity Date of any Note shall not be a Banking Day, then (notwithstanding any other provision of -38- 47 this Indenture or of the Notes) payment of principal of and interest on such Note need not be made on such date, but may be made on the next succeeding Banking Day with the same force and effect as if made on the Interest Payment Date or Redemption Date or at the Maturity Date; PROVIDED, HOWEVER, that no interest shall accrue on the amount so payable with respect to such Interest Payment Date, Redemption Date or Maturity Date for the period from and after such Interest Payment Date, Redemption Date or Maturity Date, as the case may be, if paid on the next succeeding Banking Day at the rate herein provided. SECTION 114. Limited Recourse. ---------------- (a) Notwithstanding anything to the contrary in this Indenture, the other Transaction Documents or the Related Documents, but subject to the last sentence of this Section 114(a), the Issuer's obligations to pay the principal of and interest on the Notes and any and all other amounts payable hereunder, thereunder and under the other Transaction Documents by the Issuer (but exclusive of all amounts payable pursuant to Section 1301 hereof), shall be limited recourse obligations of the Issuer payable and collectible only out of the Trust Estate and the proceeds thereof (including the Rents) in accordance with the terms and conditions of this Indenture and the Transaction Documents. The Issuer shall not have any obligation to pay any such amount except to make payments out of the Trust Estate and the proceeds thereof (including the Rents) and no other property or asset of the Issuer, or of any of the Issuer's partners, shall be subject to any lien, levy, execution, or other enforcement procedure for satisfaction of any right or remedy of the Indenture Trustee or any Holder of any Note or any other Person in connection with the Notes. Any judgment or decree obtained in connection with the Notes shall be enforceable against the Issuer or any of the Issuer's successors or assigns only to the extent of the Issuer's interest in the Trust Estate and the proceeds thereof (including the Rents) which may then be subjected to any lien created and given to secure the Notes; and no such judgment or decree shall be enforceable by execution against or become or remain a lien on any property or asset of the Issuer or of any of the Issuer's successors or assigns not part of the Trust Estate and the proceeds thereof (including the Rents) then subject to any lien created and given to secure the Notes. Any right of setoff or counterclaim which the Indenture Trustee or any Holder of any Note or any other Person might otherwise have by law shall be limited to the Trust Estate and the proceeds -39- 48 thereof (including the Rents). The foregoing provisions of this Section shall not be construed to limit the rights of the Indenture Trustee, any Holder of any Note and the other Indemnitees under and pursuant to the Environmental Indemnity and under Section 616 with respect to amounts remaining unclaimed after two years. Notwithstanding the foregoing provisions of this Section, the Indenture Trustee and the Holders of the Notes shall have recourse to the Issuer and to the partners in the Issuer (but not to any limited partner, officer or employee of the Operating Partnership or any shareholder, director, officer or employee of GP Corp or the REIT) (i) to the extent provided in the Environmental Indemnity, (ii) for all obligations of the Issuer to pay costs, expenses and indemnities under and pursuant to Section 1301 hereof (regardless of the identity of the payee), (iii) for any loss, cost, damage or expense caused by, arising out of or relating to any fraudulent misrepresentation contained in any Transaction Document or any certificate or instrument delivered to the Indenture Trustee or any Holder of any Note in connection therewith, (iv) for any loss, cost, damage or expense caused by, arising out of or relating to any appropriation of funds in contravention of any Transaction Document by the Issuer or any of its partners, which funds relate in any way to the Notes, the Trust Estate or the obligations of the Issuer or the rights of the Indenture Trustee or any Holder of any Note under the Transaction Documents. (b) The provisions of Section 114(a) above shall not (1) constitute a waiver of any obligation evidenced by the Notes, this Indenture or any Security Document, or in any way be construed to release or impair the liens, Encumbrances and security interests created by this Indenture, the Mortgage and the other Security Documents, (2) limit the rights of the holder of the Mortgage to name the Issuer as a party defendant in any action or suit for judicial foreclosure and sale or for enforcement of any other remedies provided in this Indenture, the Notes or any Security Document, provided that, subject to the last sentence of Section 114(a), any money or deficiency judgment obtained by such holder shall be enforceable by such holder only to the extent of the Issuer's interest in the Trust Estate. (c) The parties hereto agree that the provisions of this Section 114 are hereby incorporated into each Note and each Security Document other than the Environmental Indemnity by reference as if set forth therein in full. SECTION 115. Security Agreetment ------------------- -40- 49 This Indenture shall constitute a security agreement under the Uniform Commercial Code as in effect in each State where any Transaction Document or any portion of the Trust Estate is located. Upon the occurrence of any Event of Default, and in addition to any other rights available under this Indenture, the Notes, the Security Documents or any other instruments included in the Trust Estate or otherwise available at law or in equity, the Indenture Trustee, on behalf of the Holders of the Notes, shall have all rights and remedies of a secured party on default under the Uniform Commercial Code to enforce the assignments and security interests set forth in this Indenture and, in addition, shall have the right, subject to compliance with any mandatory requirements of applicable law, to sell or apply any rights and other interests assigned or pledged hereby in accordance with the terms of this Indenture at public or private sale. All amounts received hereunder shall be applied first to all costs and expenses incurred by the Indenture Trustee in connection with such collection and enforcement and thereafter as provided in this Indenture. SECTION 116. Survival of Representations, Etc. --------------------------------- All representations, warranties, covenants and agreements made herein by Issuer and in certificates delivered by Issuer pursuant hereto shall survive and shall continue in full force and effect until the Notes and all accrued interest thereon and all other amounts secured by or evidenced by this Indenture and the other Transaction Documents are paid in full. SECTION 117. Relationship of the Indenture Trustee to the -------------------------------------------- Issuer and Third Parties. - ------------------------ The Issuer agrees that (i) the Indenture Trustee and the Pass-Through Trustee, solely on account of their acting in their capacities as the Indenture Trustee and the Pass-Through Trustee, respectively, shall not be liable to any contractor, subcontractor, supplier, laborer, architect, engineer or any other party for services performed or materials supplied in connection with any Mortgaged Property, (ii) the Indenture Trustee and the Pass-Through Trustee shall not be liable for any debts or claims accruing in favor of any such parties against the Issuer or others against any Mortgaged Property, (iii) the Issuer is not, and the Issuer shall not be, an agent of the Indenture Trustee or the Pass-Through Trustee for any purposes and (iv) the Indenture Trustee and the Pass-Through Trustee are -41- 50 not now, and upon the exercise of any or all of their respective remedies under this Indenture or under any other Transaction Document or any Related Document, shall not be, joint venturers or partners with the Issuer in any manner whatsoever. The Indenture Trustee and the Pass-Through Trustee shall not be deemed to be in privity of contract with any contractor or provider of services to any Mortgaged Property, nor shall any payment of funds directly to a contractor, subcontractor, or provider of services be deemed to create any third party beneficiary status or recognition of same by the Indenture Trustee or the Pass-Through Trustee. The Issuer agrees that the Indenture Trustee and the Pass-Through Trustee shall have no duty to detect or warn the Issuer or any third party of any deficiency or defect in any matter or thing submitted to the Indenture Trustee or the Pass-Through Trustee for approval or otherwise. Approvals granted by the Indenture Trustee or the Pass-Through Trustee for any matters covered under this Indenture, the other Transaction Documents or any Related Document shall be narrowly construed to cover only the parties and facts identified in any written approval or, if not in writing, such approvals shall be solely for benefit of the Issuer. ARTICLE TWO ----------- FORM OF NOTES ------------- SECTION 201. Forms Generally. --------------- The Notes and the Indenture Trustee's certificate of authentication shall be in substantially the form set forth in this Article with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with any law or with any rules made pursuant thereto or with the rules of any applicable securities exchange or governmental agency or as may, consistent herewith, be determined by the Authorized Partner executing the Notes, as evidenced by its execution of such Notes. All Notes shall be substantially identical except as to denomination and as provided herein. The definitive Notes shall be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the -42- 51 Authorized Partner executing such Notes, as evidenced by its execution of such Notes. SECTION 202. Form of Indenture Trustee's Certificate of ------------------------------------------ Authentication. - -------------- The Indenture Trustee's certificates of authentication for Notes shall be in substantially the following form: This Note is one of the Notes referred to in the above-mentioned Indenture. -------------------------------------, as Indenture Trustee By: ---------------------------------- Authorized Officer SECTION 203. Form of the Notes. ----------------- The Notes shall be issued in substantially the form of Exhibit A annexed hereto. ARTICLE THREE ------------- THE NOTES --------- SECTION 301. Equal and Ratable Security; Amount. ---------------------------------- (a) The aggregate principal amount of Notes which may be authenticated and delivered under this Indenture is limited to ONE HUNDRED MILLION AND 00/100 DOLLARS ($100,000,000), except for Notes authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Notes pursuant to Section 305, 308, 309, 907 or 1106. The Notes shall be issued in one series: 7.30% Mortgage Notes due September 30, 2000. The stated maturity of the Notes shall be September 30, 2000 (THE "STATED MATURITY"), on which date the Issuer shall repay the principal amount of each Note in full together with interest thereon to (but excluding) the date of payment. -43- 52 Each Note shall rank PARI PASSU with each other Note and shall be equally and ratably entitled to the benefits of and secured by this Indenture and the Security Documents. (b) This Indenture shall be a continuing lien to secure the full payment of the principal of and interest on all the Notes, which shall in all respects be equally and ratably secured hereby and by the Security Documents without preference, priority or distinction on account of the actual time or times of the authentication and delivery or maturity of the Notes. SECTION 302. Denominations. ------------- The Notes shall be issuable only in registered form, without coupons and only in denominations of $100,000 and any integral multiple of one dollar in excess thereof. SECTION 303. Conditions Precedent to Issuance of the Notes. --------------------------------------------- The Notes shall be executed by the Issuer and authenticated by the Indenture Trustee on the Issuance Date only upon satisfaction by the Issuer of the following conditions: (a) delivery to the Indenture Trustee by Issuer of an Officer's Certificate as to the satisfaction of the condition set forth in Section 801(a); (b) delivery by KPMCC of the Security Documents Assignment to the Indenture Trustee; (c) delivery by Issuer of fully executed counterparts of this Indenture to the Indenture Trustee; and (d) delivery to the Servicer by the Title Company of the Title Insurance Policy naming the Indenture Trustee as named insured. SECTION 304. Execution, Authentication and Delivery of the --------------------------------------------- Notes. - ----- Each Note shall be executed manually on behalf of the Issuer by GP Corp, acting in its capacity as managing general partner of the Issuer, by the President or an -44- 53 Executive Vice President of GP Corp (the "Authorized Partner"). ------------------ The signature of the Authorized Partner on the Notes is to be manual. Notes bearing the manual signature of Persons who were at any time the authorized officers of the Authorized Partner shall bind the Issuer, notwithstanding that such Persons or any of them have ceased to be so authorized prior to the authentication and delivery of such Notes or were not so authorized at the date of such Notes. At any time and from time to time after the execution and delivery of this Indenture, the Issuer may deliver a single Note in the principal amount of $100,000,000 executed by the Issuer to the Indenture Trustee for authentication, together with an Issuer Order for the authentication and delivery of such Note, which Note shall be registered in the name of the Pass-Through Trustee; and the Indenture Trustee in accordance with such Issuer Order shall authenticate and deliver such Note as in this Indenture provided and not otherwise. Each Note shall be dated its date of authentication. No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Note a certificate of authentication substantially in the form provided for herein executed by the Indenture Trustee by manual signature, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture and the Security Documents. SECTION 305. [Reserved]. SECTION 306. Payment Account; Holdover Account. --------------------------------- (a) On or prior to the Issuance Date, the Indenture Trustee shall establish one or more Eligible Accounts (collectively, the "PAYMENT ACCOUNT"), in the Indenture Trustee's name each bearing a designation clearly indicating that such account and all funds deposited therein (including all investments of such deposited funds and all income or other gain from such investments) are held for the exclusive benefit of the Holders. Except as provided herein, the Indenture Trustee shall have exclusive -45- 54 control and sole right of withdrawal with respect to the Payment Account for the purpose of making deposits in and withdrawals from the Payment Account in accordance with this Indenture. Funds in the Payment Account shall not be commingled with any other monies. All monies deposited from time to time in the Payment Account and all investments made with such monies, including all income or other gain from such investments, shall be held by the Indenture Trustee in the Payment Account for the benefit of the Holders as herein provided. (b) So long as no Event of Default shall have occurred and be continuing, all of the funds on deposit in the Payment Account shall be invested and reinvested by the Indenture Trustee, at the written direction of the Issuer, in one or more Eligible Investments, subject to the following requirements: (i) such Eligible Investments shall not mature later than the Banking Day prior to the next Interest Payment Date; (ii) the securities purchased with the monies in the Payment Account shall be deemed a part of the Payment Account; (iii) each such Eligible Investment shall be made in the name of the Indenture Trustee (in its capacity as such) or in the name of a nominee of the Indenture Trustee under its complete and exclusive dominion and control (or, if applicable law provides for perfection of pledges of an instrument not evidenced by a certificate or other instrument through registration of such pledge on books maintained by or on behalf of the issuer of such investment, such pledge may be so registered); (iv) the Indenture Trustee shall have the sole control over such investment, the income thereon and the proceeds thereof; (v) other than the investments described in clause (iii) above, any certificate or other instrument evidencing such investment shall be delivered directly to the Indenture Trustee or its agent; and -46- 55 (vi) the proceeds of each investment shall be remitted by the purchaser thereof directly to the Indenture Trustee. All income or other gain from investments of monies deposited in the Payment Account shall be deposited by the Indenture Trustee in the Payment Account promptly upon receipt, and any loss resulting from such investments shall be charged to the Payment Account. The Indenture Trustee shall not be liable to any Holder of any Note, the Issuer or any other Person for any loss (including non-realization of any profit or gain in the event that the Indenture Trustee is required to sell Eligible Investments in accordance with the terms of this Indenture or in the event that the Indenture Trustee does not invest such amounts in those Eligible Investments yielding the highest return) resulting from any such investment or sale in accordance with this Indenture, whether by depreciation in value or otherwise. (c) On each Interest Payment Date, Redemption Date or the Maturity Date of any Note, as applicable, the Indenture Trustee shall apply all amounts on deposit in the Payment Account to pay the following amounts in the following order of priority: (i) any interest (including, without limitation, any Defaulted Interest and interest thereon at the Default Rate) due and payable on the Notes shall be paid to the Holders on an equal and ratable basis; (ii) any principal due and payable on the Notes shall be paid to the Holders on an equal and ratable basis; (iii) any Yield Maintenance Charges due and payable on the Notes shall be paid to the Holders on an equal and ratable basis; and (iv) the balance, if any, shall be transferred to the Issuer upon written request from the Issuer. (d) Funds in the Payment Account for payment of principal of the Notes at Stated Maturity and not claimed in accordance with this Indenture shall be deposited by the Indenture Trustee in an Eligible Account (the "HOLDOVER ACCOUNT") in the Indenture Trustee's name and shall be held -47- 56 for the account of the Holder or Holders of such Notes pursuant to Section 616. (e) In the event that the Payment Account does not contain amounts on deposit sufficient to satisfy subdivisions (i), (ii) and (iii) of paragraph (c) of this Section 306, the Indenture Trustee may exercise all remedies provided for by this Indenture and/or the Security Documents and any other instrument included in the Trust Estate. SECTION 307. Persons Deemed Owners. --------------------- Prior to due presentment of a Note for registration of transfer, the Issuer, the Servicer or the Indenture Trustee and any agent of the Issuer, the Servicer or the Indenture Trustee may treat the Person in whose name such Note is registered as the absolute and sole owner of such registered Note for the purpose of receiving payment of principal of and (subject to Section 311) interest on such Note and for all other purposes whatsoever, whether or not such Note be overdue, and none of the Issuer, the Servicer or the Indenture Trustee or any agent of the Issuer, the Servicer or the Indenture Trustee shall be affected by written notice to the contrary, and payment of the principal of and interest on such Note by the Indenture Trustee shall be made only to or upon the order of such Holder. SECTION 308. Registration, Registration of Transfer and ------------------------------------------ Exchange. - -------- (a) The Issuer and the Indenture Trustee shall cause to be kept at the Corporate Trust Office a register (the register maintained in such office and in any other office or agency of the Issuer at any place where the principal of and any interest on the Notes is payable being herein sometimes collectively referred to as the "REGISTER") in which, subject to such reasonable regulations as it may prescribe, the Issuer shall provide for the registration of Notes and of transfers of Notes. The Indenture Trustee is hereby appointed "NOTE REGISTRAR" for the purpose of registering Notes and transfers of Notes as herein provided. (b) Upon surrender for registration of transfer of any Note at any office or agency of the Issuer designated pursuant to Section 1003 for such purpose, the Issuer shall execute, and the Indenture Trustee shall authenticate -48- 57 and deliver, in the name of the designated transferee or transferees, one or more new Notes of any authorized denominations and of a like aggregate principal amount; provided that the Issuer and the Indenture Trustee shall have been provided with an Opinion of Counsel or other evidence reasonably satisfactory to the Issuer that such transfer does not violate the Securities Act. At the option of the Holder, Notes may be exchanged for other Notes of any authorized denominations and of a like aggregate principal amount, upon surrender of the Notes to be exchanged at such office or agency. Whenever any Notes are so surrendered for exchange, the Issuer shall execute, and the Indenture Trustee shall authenticate and deliver, the Notes which the Holder making the exchange is entitled to receive. All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Issuer, evidencing the same debt and entitled to the same benefits under this Indenture and the Security Documents as the Notes surrendered upon such registration of transfer or exchange. Every Note presented or surrendered for registration of transfer or for exchange shall (if so required by the Issuer or the Indenture Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Issuer and the Note Registrar duly executed by the Holder thereof or his attorney duly authorized in writing. (c) No service charge shall be made for any registration of transfer or exchange of Notes, but the Issuer or the Indenture Trustee may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Notes, other than exchanges pursuant to Section 305, 907 or 1106 not involving any transfer. (d) If the Notes are to be redeemed in part, the Issuer shall not be required (A) to issue, register the transfer of or exchange any Notes during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of any such Notes selected for redemption under Section 1103 and ending at the close of business on the day of such mailing, or (B) to register the transfer of or exchange of any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. -49- 58 SECTION 309. Mutilated, Destroyed, Lost and Stolen Notes. ------------------------------------------- If any mutilated Note is surrendered to the Indenture Trustee, the Issuer shall execute, and the Indenture Trustee shall authenticate and deliver in exchange therefor, a new Note of like principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Issuer and the Indenture Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Note and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Issuer or the Indenture Trustee that such Note has been acquired by a bona fide purchaser, the Issuer shall execute and upon its request the Indenture Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Note, a new Note of like principal amount and bearing a number not contemporaneously outstanding. In every case of mutilation or defacement, the applicant shall surrender to the Indenture Trustee the Note so mutilated or defaced. In case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, the Issuer in its discretion may, instead of issuing a new security, pay such Note. Upon the issuance of any new Note under this Section 309, the Issuer or the Indenture Trustee may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Indenture Trustee) connected therewith. Every new Note issued pursuant to this Section 309 in lieu of any mutilated, destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Issuer, evidencing the same debt as the predecessor Note, whether or not the mutilated, destroyed, lost or stolen Note shall be at any time enforceable by anyone, and any such new Note shall be entitled to all the benefits of this Indenture and of the Security Documents equally and proportionately with any and all other Notes and to the same extent as such predecessor Note. All Notes shall be held and owned upon the express condition that, to the extent permitted by law, the -50- 59 foregoing provisions are exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen securities or negotiable instruments. SECTION 310. Interest. -------- (a) Subject to the provisions of paragraph (d) of this Section, each Note shall bear interest at the rate of 7.30% per annum on the outstanding principal balance of such Note, from the date of initial authentication and delivery of such Note or the most recent Interest Payment Date for which interest has been paid or duly provided for, as the case may be, to, but not including, the date of payment of the principal amount of such Note, but without duplication of any interest paid in connection with any repayment or redemption of principal of such Note pursuant to Section 301 and Section 1102, respectively. The Issuer shall make payment or provide for payment pursuant to this Indenture of the interest accruing in respect of each Outstanding Note for each Interest Period on the Interest Payment Date for such Interest Period. (b) The Indenture Trustee shall notify any Paying Agent (with a copy to the Issuer) on or prior to the related Interest Payment Date as to the aggregate amount of interest that shall be payable on all Outstanding Notes in respect of such Interest Payment Date. (c) The Indenture Trustee shall compute interest on the Notes on the basis of a 360-day year consisting of twelve (12) months of thirty (30) days each. (d) If the Issuer shall default in any payment of principal of, interest on, or Yield Maintenance Charge in respect of, any Note, or any other amount owed by the Issuer under this Indenture or any of the other Transaction Documents, whether by acceleration or otherwise, the Issuer shall pay interest at the Default Rate in respect of all amounts due and owing by the Issuer, upon demand from time to time, to the extent permitted by applicable law, until such defaulted amount has been paid by the Issuer, together with interest thereon at the Default Rate. Payment or acceptance of the increased rates provided for in this subsection is not a permitted alternative to timely payment and shall not constitute a waiver of any Default or Event of Default or an amendment to this Indenture or any other -51- 60 Transaction Document and shall not otherwise prejudice or limit any rights or remedies of the Indenture Trustee or any Holder of any Note. (e) Notwithstanding anything in this Indenture or in the Notes to the contrary, if at any time the interest rate applicable to the Notes, together with all fees and charges which are treated as interest under applicable law (collectively, the "CHARGES"), as provided for in this Indenture or in any other document executed in connection herewith, or otherwise contracted for, charged, received, taken or reserved by the Indenture Trustee or any Holder of any Note, shall exceed the maximum lawful rate (the "LEGAL RATE") which may be contracted for, charged, taken, received or reserved by the Indenture Trustee or any Holder of any Note in accordance with applicable law, the rate of interest payable under such Note, together with all Charges payable, shall be limited to the Legal Rate and any interest or Charges not so charged, taken, received or reserved by the Indenture Trustee or any Holder of any Note at such time shall be spread, prorated or amortized over the term of this Indenture or such Note to the fullest extent permitted by law. SECTION 311. Payment of Principal and Interest. --------------------------------- (a) Interest in respect of the Notes shall be paid as follows: (i) Any interest on any Notes which is payable, and is punctually paid or duly provided for by the Issuer, on any Interest Payment Date shall be paid to the Person in whose name such Notes (or any Predecessor Note) is registered on the Register at the close of business on the Regular Record Date immediately preceding such Interest Payment Date. (ii) The interest on the Notes shall be payable at the office or agency of the Issuer in the Borough of Manhattan, The City of New York maintained for such purpose and at any other office or agency maintained by the Issuer for such purpose; PROVIDED, HOWEVER, that at the option of the Issuer payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Note Register and PROVIDED FURTHER, HOWEVER, that in the case of a registered Holder of greater than $10,000,000 aggregate principal amount of Notes payments of interest may be made by wire transfer to -52- 61 an account denominated in U.S. Dollars maintained by the payee with a bank in the Borough of Manhattan, The City of New York by giving notice to the Indenture Trustee, not less than 5 Banking Days prior to the related Regular Record Date or Special Record Date. (iii) Any interest on any registered Note which is payable, but is not punctually paid or duly provided for on any Interest Payment Date (herein called "DEFAULTED INTEREST") shall, subject to Section 113, continue to accrue, to the extent permitted by applicable law, at the Default Rate on such amounts not paid when due but shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest and interest thereon at the Default Rate shall be paid by the Issuer to the Persons in whose names the Notes (or their respective Predecessor Notes) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Issuer shall notify the Indenture Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Note and the date of the proposed payment, and at the same time the Issuer shall deposit with the Indenture Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest and interest thereon at the Default Rate or shall make arrangements satisfactory to the Indenture Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Issuer shall fix a special record date (the "SPECIAL RECORD DATE") for the payment of such Defaulted Interest. The Issuer shall promptly notify the Indenture Trustee of such Special Record Date and, in the name and at the expense of the Issuer, the Indenture Trustee shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of a Note at the address of such Holder as it appears in the Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest and interest thereon at the Default Rate shall be paid to the Person in whose name each -53- 62 respective Note (or respective Predecessor Note) is registered at the close of business on such Special Record Date. (iv) The Issuer may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Issuer to the Indenture Trustee of the proposed payment, such manner of payment shall be deemed practicable by the Indenture Trustee. (b) Principal in respect of the Notes shall be paid as follows at the Stated Maturity of the Notes: (i) The Indenture Trustee shall pay the outstanding principal amount of each Note in immediately available funds from funds in the Payment Account as promptly as possible after presentation to the Indenture Trustee of such Note upon the Stated Maturity, but shall initiate such transfer no later than 4:00 p.m. (New York time) on the day of such presentation, provided that such presentation has been made no later than 11:00 a.m. (New York time). If presentation is made after 11:00 a.m. (New York time) on any day, such presentation shall be deemed to have been made on the immediately succeeding Banking Day. (ii) In the event that a Note is not presented for payment by 11:00 a.m. (New York time) on the Stated Maturity, the Indenture Trustee shall transfer any principal thereof and interest thereon (and any other amounts owing in respect thereof, including any Yield Maintenance Charge) to the Holdover Account. If the Holder of such Note shall present such Note to the Indenture Trustee within two years after the Stated Maturity, the Indenture Trustee shall pay such Note from funds in the Holdover Account. In no event shall such Note earn interest after the Stated Maturity. If such Note is not presented for payment within two years after the Stated Maturity, the Indenture Trustee shall not honor a demand for payment of such Note and the Indenture Trustee shall act in accordance with Section 616 in respect of the unclaimed funds in the Holdover Account. (iii) If at 4:00 p.m. (New York time) on the Stated Maturity, any funds remain in the Payment -54- 63 Account after (i) the payment of each Note which is presented by 11:00 a.m. (New York time) for payment on such date, (ii) the transfer of funds to the Holdover Account for each Note which is not presented for payment on such date (or is presented after 11:00 a.m. (New York time) on such date) and (iii) the payment of all other amounts due and owing by the Issuer under this Indenture or the Transaction Documents, then the Indenture Trustee shall notify the Issuer of the amount of such remaining funds and such remaining funds upon notice from the Issuer shall be transferred by the Indenture Trustee to the Issuer in accordance with written wire transfer instructions given by the Issuer to the Indenture Trustee. (c) Principal, interest and Yield Maintenance Charges in respect of the Notes shall be paid in accordance with Article Eleven hereof in connection with any required or permitted redemption of the Notes, whether in whole or in part. SECTION 312. Interest on New Notes. --------------------- Interest shall be deemed to have been paid on each new Note (a "NEW NOTE") issued pursuant to Section 308 or Section 309 hereof in exchange for, in substitution for, or in lieu of a Predecessor Note to the date to which interest was paid on such Predecessor Note. Each New Note issued pursuant to Section 308 or Section 309 hereof in exchange for or in substitution for or in lieu of a Predecessor Note shall be a valid obligation of the Issuer evidencing the same debt as such Predecessor Note and shall be entitled to the benefits of this Indenture and of the Security Documents to the same extent as such Predecessor Note. SECTION 313. Cancellation. ------------ All Notes surrendered for payment, redemption, registration of transfer or exchange shall, if surrendered to any Person other than the Indenture Trustee, be delivered to the Indenture Trustee and shall be promptly cancelled by it. The Issuer may at any time deliver to the Indenture Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Issuer may have acquired in any manner whatsoever, and all Notes so delivered shall be promptly cancelled by the Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange for any Notes cancelled as provided in this -55- 64 Section, except as expressly permitted by this Indenture. All cancelled Notes held by the Indenture Trustee shall be disposed of in its customary manner. All Notes delivered to any Paying Agent appointed by the Issuer pursuant to Section 314 hereof for payment, redemption, registration of transfer or exchange as herein or in the Notes provided shall be forwarded to the Indenture Trustee by the Paying Agent to which they are delivered. All such Notes shall be cancelled and destroyed by the Indenture Trustee or such other person as may be jointly designated by the Issuer and the Indenture Trustee. SECTION 314. Paying Agent. ------------ The Issuer may, at its discretion, appoint one or more agents (a "PAYING AGENT" or "PAYING AGENTS") for the payment (subject to applicable laws and regulations) of the principal of, any interest on or Yield Maintenance Charge with respect to the Notes, and one or more agents (a "TRANSFER AGENT" or "TRANSFER AGENTS") for the transfer and exchange of Notes, at such place or places as the Issuer may determine; PROVIDED, HOWEVER, that the Issuer shall at all times maintain a Paying Agent and Transfer Agent in the Borough of Manhattan, The City of New York. The Issuer hereby appoints the Indenture Trustee as the Paying Agent and the Transfer Agent. The Issuer shall promptly notify the Indenture Trustee of the name and address of each Paying Agent and Transfer Agent appointed by it and of the country or countries in which a Paying Agent or Transfer Agent may act in that capacity, and will notify the Indenture Trustee of the resignation or termination of any Paying Agent or Transfer Agent. Subject to the provisions of this Section 314, the Issuer may vary or terminate the appointment of any such Paying Agent or Transfer Agent at any time and from time to time upon giving not less than ninety (90) days' notice to such Paying Agent or Transfer Agent, as the case may be, and to the Indenture Trustee. In respect of the Notes, the Issuer shall cause notice of any resignation, termination or appointment of any Paying Agent or Transfer Agent or of the Indenture Trustee and of any change in the office through which any such agent will act to be given as provided in this Indenture. -56- 65 ARTICLE FOUR ------------ SATISFACTION AND DISCHARGE -------------------------- SECTION 401. Satisfaction and Discharge of Indenture. --------------------------------------- This Indenture shall upon Issuer Request cease to be of further effect (except for any rights of the Holders of the Notes to receive payment from the Holdover Account and, in the case of clause (1)(ii) below, for the rights of the Holders of Notes hereunder to receive payment of the principal of and interest on the Notes in conformity with Section 616), and the Indenture Trustee, at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (1) all Notes theretofore authenticated and delivered (other than (i) Notes which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 309 and (ii) Notes for which payment money has theretofore been deposited in trust or segregated and held in trust by the Indenture Trustee and thereafter repaid to the Issuer or discharged from such trust, in each case as provided in Section 616) have been delivered to the Indenture Trustee for cancellation; (2) the Issuer has paid or caused to be paid all other sums payable hereunder and under the Transaction Documents by the Issuer, including, without limitation, any applicable Yield Maintenance Charges; and (3) the Issuer has delivered to the Indenture Trustee an Officer's Certificate stating that all conditions precedent provided for herein and in the Transaction Documents relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Issuer to the Indenture Trustee under Section 605, the obligations of the Indenture Trustee to any Authenticating Agent under Section 613, the obligations of the Indenture Trustee under Section 402 and Section 616 and the obligations of the Issuer under Section 1301 shall survive. Notwithstanding the foregoing, the Issuer's obligations under this Indenture and in respect of the -57- 66 Notes shall survive the discharge of this Indenture if and to the extent that any payment of any amount paid by the Issuer to the Indenture Trustee or any Holder is avoided as a preferential transfer, or otherwise rescinded or required to be restored under applicable law. Upon the payment of all of the Outstanding Notes in full, the Indenture Trustee shall notify each of the Rating Agencies and the Pass-Through Trustee of such event. Prior to the satisfaction and discharge of this Indenture, all monies then held by any Paying Agent shall upon demand of the Indenture Trustee be paid over to the Indenture Trustee (for deposit into the Payment Account) and thereupon such Paying Agent shall be released from all further liability with respect to such monies. SECTION 402. Application of Trust Money. -------------------------- Subject to the provisions of Section 616, all monies deposited by the Indenture Trustee in the Holdover Account shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, as the Indenture Trustee may determine, either directly or through any Paying Agent to the Persons entitled thereto, of the principal of and interest on the Notes for whose payment such monies have been so deposited in the Holdover Account by the Indenture Trustee. ARTICLE FIVE ------------ REMEDIES -------- SECTION 501. Events of Default. ----------------- The following events shall constitute Events of Default under each of the Transaction Documents (whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) any payment of (i) principal of, or Yield Maintenance Charge with respect to, any Note when due hereunder or under such Note shall not be paid by the Issuer when due and payable, whether at Stated Maturity, upon redemption, by acceleration or otherwise, -58- 67 (ii) interest shall not be paid by the Issuer within one Banking Day of the date such interest is due and payable, whether at Stated Maturity, upon redemption, by acceleration or otherwise, or (iii) any other amount due under this Indenture or any other Transaction Document shall not be paid by the Issuer within three Banking Days after written notice from the Indenture Trustee thereof; or (2) any representation or warranty made by the Issuer in this Indenture or in any other Transaction Document, or any representation, warranty, statement or information contained in any certificate made or delivered by the Issuer or any of its partners, officers, employees or agents in connection with or pursuant to the Transaction Documents shall prove to have been false in any material respect as of the date made or deemed to be made; or (3) any case, proceeding or other action, whether voluntary or involuntary, shall be commenced against the Issuer, the REIT, the Operating Partnership or GP Corp seeking to have an order for relief entered against any of them as debtor, or seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of any of their debts under any Federal or state law relating to bankruptcy, insolvency, reorganization or relief of debtors, or seeking appointment of a receiver, trustee, custodian or other similar official for any of them or for any substantial part of their property, and any such case, proceeding or other action (i) results in the entry of an order for relief against the Issuer, the REIT, the Operating Partnership or GP Corp which is not fully stayed within sixty (60) days after the entry thereof or (ii) remains undismissed for a period of sixty (60) days; or (4) a receiver or trustee of all or substantially all of the property of the Issuer, the REIT, the Operating Partnership or GP Corp is appointed and is not discharged within sixty (60) days, or if any of the foregoing makes a general assignment for the benefit of creditors, or admits in writing its inability to pay its debts, or is adjudged insolvent by any Federal or state court of competent jurisdiction, or if an attachment or execution is levied against all or substantially all of the property of any of the foregoing and is not discharged within sixty (60) days; or -59- 68 (5) the Issuer or GP Corp is dissolved, terminated or liquidated, or the Operating Partnership is dissolved, terminated or liquidated and is not reconstituted within five days thereafter; or (6) the Issuer shall fail to perform or observe its covenants set forth in Sections 1008(d)(i) or (q) or Section 1009; or (7) except as otherwise specified in this Section 501, the Issuer shall fail to perform or observe any covenant or agreement contained in this Indenture or in any other Transaction Document and such failure shall continue unremedied beyond the grace or cure period specified in the Transaction Documents therefor, or, if no such grace or cure period is so specified, for a period of 30 days, PROVIDED that if such default cannot be remedied with diligent effort within a period of 30 days, but is susceptible to cure within a period of 180 days, such longer period, not to exceed 180 days, as the Issuer may need to remedy such default if the Issuer is proceeding with diligent effort to remedy such default and provides the Trustee with an Officer's Certificate or other evidence as to its efforts to cure within a period of 90 days; or (8) any Transaction Document, for any reason other than the satisfaction in full of all obligations of the Issuer thereunder, shall cease to be in all material respects in full force and effect (other than in accordance with its terms) thereby preventing the Indenture Trustee or any Holder from obtaining the practical realization of the benefits thereof or shall be declared null and void or the liens and the security interests purported to be created by the Mortgage and/or the Assignment of Leases shall cease to be valid, perfected, first priority security interests; or (9) the occurrence of an Event of Default under and as defined in any of the other Transaction Documents. SECTION 502. Acceleration of Maturity; Rescission and ---------------------------------------- Annulment. - --------- (a)(i) If an Event of Default specified in Section 501(1), 501(2), 501(6), 501(7), 501(8) or 501(9) -60- 69 occurs and is continuing, then in every such case the Indenture Trustee or the Holders of a majority in aggregate principal amount of the Outstanding Notes, by a notice in writing to the Issuer (and to the Indenture Trustee if given by the Holders of the Notes), may declare the Notes to be due and payable and the Default Amount to be due and payable immediately, and upon any such declaration the Default Amount shall become immediately due and payable. (ii) If an Event of Default specified in Section 501(3), 501(4) or 501(5) occurs and is continuing, then the Default Amount shall automatically be and become due and payable immediately without any action whatsoever on the part of the Indenture Trustee or the Holders of the Notes. (b) Upon acceleration of the Notes under Section 502(a), the sum of (A) the Default Amount and (B) any other amounts, including accrued interest to the date of such acceleration, payable to the Holders of the Notes shall become due and payable immediately. In case the Default Amount shall be declared due and payable, upon payment by the Issuer of the Default Amount and accrued interest thereon, the Issuer shall be released from, and be deemed to satisfy all of its obligations under the Notes. (c) At any time after an acceleration of the Notes and before a judgment or decree for payment of the money due has been obtained by the Indenture Trustee as hereinafter provided in this Article, the Holders of not less than 66 2/3% in aggregate principal amount of Outstanding Notes, in the case of acceleration arising by virtue of an Event of Default specified in Section 501(1), by written notice to the Issuer and the Indenture Trustee, may rescind and annul such acceleration and its consequences if (1) the Issuer has paid or deposited with the Indenture Trustee a sum sufficient to pay (A) all interest, if any, due and payable on all Outstanding Notes; (B) the principal of any Outstanding Notes, which has become due otherwise than by such declaration of acceleration, and interest thereon at the rate or rates prescribed therefor in such Notes; -61- 70 (C) to the extent permitted by applicable law, interest upon any Default Amount at the Default Rate; (D) all sums paid or advanced by the Indenture Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Servicer, the Indenture Trustee, its agents and counsel; and (2) all Events of Default with respect to Outstanding Notes, other than the non-payment of the Default Amount have been cured or waived as provided in Section 513. No such rescission shall affect any subsequent default or impair any right consequent thereon. (d) The Issuer covenants that if (1) default is made in the payment of any interest on or Yield Maintenance Charge with respect to any Note when such interest or Yield Maintenance Charge becomes due and payable, or (2) default is made in the payment of the Default Amount or the principal of any Note at the Maturity Date thereof, the Issuer will, upon demand of the Indenture Trustee, pay to the Indenture Trustee, for the benefit of the Holders of such Notes, the whole amount then due and payable on such Notes for principal and interest or the Default Amount, and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal, any overdue interest and any overdue Yield Maintenance Charge and on the Default Amount, at the Default Rate, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Servicer, the Indenture Trustee and their agents and counsel. SECTION 503. Collection of Indebtedness and Suits for ---------------------------------------- Enforcement by Indenture Trustee. - -------------------------------- If the Issuer fails to pay all amounts due upon an acceleration under Section 502 forthwith upon demand, then the Indenture Trustee, in its own name and as trustee -62- 71 of an express trust, or the Servicer, on behalf of the Indenture Trustee, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Issuer or any other obligor upon such Notes and collect the monies adjudged or decreed to be payable in the manner provided by law out of the Trust Estate, wherever situated, or may institute such non-judicial proceedings in lieu of judicial proceedings as are then permitted by applicable law, and may take such actions through a mortgage trustee if necessary or advisable under applicable law. If an Event of Default with respect to the Notes occurs and is continuing, subject to the provisions of Section 114 hereof, the Indenture Trustee or the Servicer, on behalf of the Indenture Trustee, may in its discretion proceed to protect and enforce its rights and the rights of the Holders of the Notes by such appropriate judicial proceedings as the Indenture Trustee or the Servicer, on behalf of the Indenture Trustee, shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture, any Note or any Security Document or in aid of the exercise of any power granted herein or therein, or to enforce any other proper remedy; PROVIDED, HOWEVER, that, as set forth in Section 512, and subject to Section 507, the Holders of the Notes or their representative (which may be the Pass-Through Trustee or the Servicer) may direct the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee or exercising any trust or power conferred on the Indenture Trustee or otherwise granted to the Indenture Trustee hereunder. Further, the Indenture Trustee may appoint the Holders of the Notes or their representative (which may be the Pass-Through Trustee or the Servicer) to act on its behalf to conduct any proceeding for any remedy referred to in the preceding sentence. SECTION 504. Indenture Trustee or Servicer May File Proofs of ------------------------------------------------ Claim. - ----- In the case of pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Issuer or any other obligor upon the Notes, or the property of the Issuer or such other obligor or their creditors, the Indenture Trustee (irrespective of whether the principal of the Notes shall then be due and -63- 72 payable as therein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee (or Servicer on its behalf) shall have made any demand on the Issuer for the payment of overdue principal or interest) or the Servicer on behalf of the Indenture Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized under the Trust Indenture Act in order to have claims of the Holders and the Indenture Trustee allowed in any such proceeding. In particular, the Indenture Trustee shall be authorized: (i) to file and prove a claim for the whole amount of the principal of and any interest and Yield Maintenance Charges and other amounts owing and unpaid on the Notes or otherwise under this Indenture or the Security Documents and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee, its agents and counsel) the Servicer and of the Holders allowed in such judicial proceeding, (ii) to collect and receive any monies, notes or other property payable or deliverable on any such claims and to distribute the same in accordance with this Indenture; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Indenture Trustee (or to the Servicer on its behalf) and, in the event that the Indenture Trustee shall consent to the making of such payments directly to the Holders, to pay to the Indenture Trustee and the Servicer any amount due it for the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee or the Servicer, their agents and counsel, and any other amounts due the Indenture Trustee or the Servicer hereunder. No provision of this Indenture shall be deemed to authorize the Indenture Trustee or the Servicer to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof or to authorize the Indenture Trustee or the Servicer to vote in respect of the claim of any Holder in -64- 73 any such proceeding; PROVIDED, HOWEVER, that the Indenture Trustee may, on behalf of the Holders, vote for the election of a trustee in bankruptcy or similar official and be a member of a creditors' or other similar committee. Nothing herein contained shall be deemed to limit each Holder's right to file and prove its claim with respect to Notes held by it and to collect and receive any award in any such proceeding. SECTION 505. Indenture Trustee and Servicer may Enforce ------------------------------------------ Claims Without Possession of Notes. - ---------------------------------- All rights of action and claims under this Indenture or the Notes may be prosecuted and enforced by the Indenture Trustee or the Servicer on its behalf without the possession of any of the Notes or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Indenture Trustee or the Servicer shall be brought in the name of the Indenture Trustee as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Servicer, the Indenture Trustee, its agents and counsel and be applied in accordance with Section 506 hereof. SECTION 506. Application of Money Collected. ------------------------------ Any money collected by the Indenture Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Indenture Trustee and, in case of the distribution of such money on account of the principal of or interest on the Notes, upon presentation of the Notes and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Indenture Trustee, the Servicer and each Paying Agent hereunder; SECOND: PRO RATA to the payment of the amounts then due and unpaid for interest on the Notes and the principal of the Notes and all Yield Maintenance Charges and other amounts, if any, due on the Notes on an equal and ratable basis without preference or priority of any kind; -65- 74 THIRD: If any Notes then remain Outstanding, then to the Payment Account to the extent necessary to pay the outstanding Notes; and FOURTH: To the payment of the remainder, if any, to the Issuer, its successors or assigns, or to whomsoever may lawfully be entitled thereto or as a court of competent jurisdiction may determine. Payment of the Outstanding Notes on a PRO RATA basis shall be based, for the payment of interest, on the relative proportions of the accrued interest on any Outstanding Note to the aggregate amount of accrued interest on all Outstanding Notes, and, for the payment of principal, on the outstanding principal amount of any Outstanding Note to the aggregate outstanding principal amount of all Outstanding Notes. SECTION 507. Limitation on Suits. ------------------- Except as provided in Section 508, no Holder of any Note shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture or any Security Document, or for the appointment of a receiver or trustee, or for any other remedy hereunder or thereunder, unless: (1) such Holder has previously given written notice to the Indenture Trustee of a continuing Event of Default; (2) the Holders of more than 25% in aggregate principal amount of the Outstanding Notes shall have made written request to the Indenture Trustee to institute proceedings in respect of such Event of Default in its own name as Indenture Trustee hereunder; (3) such Holder or Holders have offered to the Indenture Trustee reasonable indemnity or security against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Indenture Trustee for 30 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Indenture Trustee during -66- 75 such 30-day period by the Holders of a majority in principal amount of the Outstanding Notes; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture or any Security Document to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders to enforce any right under this Indenture or any Security Document, except in the manner herein provided and for the equal and ratable benefit of all of such Holders. SECTION 508. Unconditional Right of Holders to Receive ----------------------------------------- Principle and Interest. - ---------------------- Notwithstanding any other provision in this Indenture, the Holder of any Note shall have the right, which is absolute and unconditional, to receive payment of the principal of and interest on such Note on the Stated Maturity expressed in such Note (or, in the case of redemption, on the Redemption Date, together with any applicable Yield Maintenance Charge) and to institute suit for the enforcement of any such payment, subject to the provisions of Section 507, and such rights shall not be impaired without the consent of such Holder. SECTION 509. Restoration of Rights and Remedies. ---------------------------------- If the Indenture Trustee, the Servicer or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture or under any Transaction Document and such proceeding has been discontinued, waived, rescinded, or abandoned for any reason, or has been determined adversely to the Indenture Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Issuer, the Indenture Trustee, the Servicer and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Indenture Trustee, the Holders, the Servicer and the Issuer shall continue as though no such proceeding had been instituted. SECTION 510. Rights and Remedies Cumulative. ------------------------------ Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes in Section 309, no right or remedy herein -67- 76 conferred upon or reserved to the Indenture Trustee, the Servicer or to the Holders of Notes is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder, under the Transaction Documents or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 511. Delay or Omission not Waiver. ---------------------------- None of the Indenture Trustee, the Servicer nor any Holder of any Note shall by any act, delay, omission or otherwise be deemed to have waived any of its rights, remedies or privileges hereunder and no waiver shall be valid unless made pursuant of this Indenture. A waiver made pursuant to this Indenture of any right, remedy or privilege hereunder on any one occasion shall not be construed as a bar to any right, remedy or privilege which the Indenture Trustee, the Servicer or any Holder of any Note would otherwise have had on any future occasion. No failure to exercise nor any delay in exercising on the part of the Indenture Trustee, the Servicer or any Holder of any Note, any right, power or privilege hereunder or under the Notes shall be deemed a waiver of any default or acquiescence therein or shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. Every right and remedy given by this Indenture or by any Transaction Document or by law to the Indenture Trustee, the Servicer or to the Holders may be exercised from time to time, and as often as may be deemed expedient, to the extent permitted by applicable law, by the Indenture Trustee, the Servicer or by the Holders, as the case may be. SECTION 512. Control by Holders. ------------------ The Holders of a majority in aggregate principal amount of the Outstanding Notes (or their representative, which may be the Pass-Through Trustee or the Servicer) shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred on the Indenture Trustee or otherwise granted to the Indenture Trustee hereunder, PROVIDED that such direction shall not be in conflict with any rule of law or with this Indenture and that the Indenture Trustee may take any -68- 77 other action deemed proper by the Indenture Trustee which is not inconsistent with such direction. SECTION 513. Waiver of Past Defaults. ----------------------- The Holders of not less than 66 2/3% in aggregate principal amount of the Outstanding Notes, on behalf of the Holders of all the Notes, may waive any past Default hereunder and its consequences, except a Default: (1) in the payment of principal of or interest on any Notes, which shall require the waiver of each Holder of any Note so affected; or (2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Note affected; or (3) depriving the Indenture Trustee or any Holder of an Encumbrance upon any of the Mortgaged Properties. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. SECTION 514. Undertaking for Costs. --------------------- All parties to this Indenture agree, and each Holder of any Note by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture or any Transaction Document, or in any suit against the Indenture Trustee for any action taken, suffered or omitted by it as Indenture Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess costs against any such party litigant in the manner and to the extent provided in the Trust Indenture Act; PROVIDED that neither this Section nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Issuer. -69- 78 SECTION 515. Waiver of Appraisement and Other Laws. ------------------------------------- The Issuer covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim to take the benefit or advantage of, any appraisement, valuation, redemption, usury, stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture or any Security Document or the absolute sale of the Trust Estate or any part thereof. SECTION 516. Marshalling; Payments Set Aside; Further --------------------------------------- Assurance. - --------- The Issuer, for itself and all who may claim under it, waives, to the extent that it may lawfully do so, all right to have the property in the Trust Estate marshal- led upon any foreclosure hereof, and agrees that any court having jurisdiction to foreclose this Indenture and/or any Security Document may order the sale of the Trust Estate as an entirety. To the extent that the Issuer makes a payment or payments hereunder or the Indenture Trustee or any Holder of any Note enforces its security interests or exercises its rights of setoff, and such payment or payments or the proceeds of such enforcement or 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 Encumbrances, rights and remedies therefor, shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. Upon the reasonable request of the Indenture Trustee, the Issuer will execute, acknowledge, record and/ or file such documents in form reasonably satisfactory to the Indenture Trustee and do such further acts as may be reasonably necessary, desirable or proper to carry out more effectively the purposes of this Indenture, including with respect to all collateral pledged under the Transaction Documents. -70- 79 ARTICLE SIX ----------- THE INDENTURE TRUSTEE --------------------- SECTION 601. Certain Duties and Responsibilities. ----------------------------------- The duties and responsibilities of the Indenture Trustee and the Servicer shall be as set forth in this Section. (a) Subject to Section 601(b), the duties and responsibilities of the Indenture Trustee in respect of the Transaction Documents shall be as follows: (1) The Indenture Trustee and the Servicer as agent for the Indenture Trustee shall have the full power and authority to do all things not inconsistent with the provisions hereof or any other Transaction Document which the Indenture Trustee or the Servicer may deem advisable in order to enforce the provisions hereof or thereof or to take any action with respect to a Default or an Event of Default hereunder or thereunder, or to institute, appear in or defend any suit or other proceeding with respect hereto or thereto, or to protect the interests of the Holders. Neither the Indenture Trustee nor the Servicer shall be answerable or accountable except for its own bad faith, willful misconduct or negligence. The Indenture Trustee and the Servicer as agent of the Indenture Trustee shall be authorized to make, at the expense of the Issuer, all required refilings of any Transaction Document to preserve the Encumbrances created thereby to the extent not done so by the Issuer as provided herein or therein, but shall have no obligation to take any other action to protect, preserve or enforce any rights or interests in the Transaction Documents or towards the execution or enforcement of the trusts hereby created which, in the Indenture Trustee's or the Servicer's opinion, shall be likely to involve expense or liability to the Indenture Trustee, unless the Indenture Trustee shall have received an agreement satisfactory to the Indenture Trustee in its sole discretion to indemnify it against such liability and expense. The Indenture Trustee shall not be required to inquire as to the performance or observance of any of the covenants or agreements in any Transaction Document to be performed or observed by the Issuer (including, without limita- -71- 80 tion, the necessity or desirability under any applicable law to re-record, re-register or re-file any Transaction Document) except for the delivery of scheduled reports, certificates and statements required by the terms of this Indenture and ensuring the timely filing of Uniform Commercial Code continuation statements in respect of the Uniform Commercial Code financing statements listed on Schedule 7 attached hereto. In accepting the trusts hereunder and under the other Transaction Documents, the Indenture Trustee is acting solely as Indenture Trustee hereunder and not in its individual capacity. (2) Neither the Indenture Trustee nor the Servicer shall incur any liability in acting upon any signature, notice, request, consent, instrument, certificate, opinion, or other instrument reasonably believed by it to be genuine. In administering the trusts, the Indenture Trustee may execute any of the trusts or powers directly or through its agents or attorneys and may consult with counsel, accountants and other professionals or consultants to be selected and employed by it, and the Indenture Trustee shall not be liable for anything done, suffered or omitted in good faith by it in accordance with the advice of any such Person nor for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Indenture Trustee was negligent in ascertaining the pertinent facts. (3) Neither the Indenture Trustee nor the Servicer shall have any duty to make, arrange or ensure the completion of any recording, filing or registration of any Transaction Document, any instrument of further assurance, any instrument constituting part of the Trust Estate, or any amendments or supplements to any of said instruments, other than those refilings referred to in Section 601(a)(1) above, and neither the Indenture Trustee nor the Servicer shall have any duty to make, arrange or ensure the completion of the payment of any fees, charges or taxes in connection therewith (and the Indenture Trustee and the Servicer may act with respect to the Transaction Documents and pay out deposited monies without regard thereto), or to give any notice thereof, or to make, arrange or ensure the completion of the payment of or be under any duty in respect of any tax, assessment or other governmental charge which may be levied or assessed on -72- 81 any of the Trust Estate or any part thereof or against the Issuer. (4) Whenever in administering the trust the Indenture Trustee or the Servicer as the agent of the Indenture Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Indenture Trustee or the Servicer, as the case may be, may, in the absence of willful misconduct or knowledge to the contrary on the part of the Indenture Trustee, rely upon (unless other evidence in respect thereof be specifically prescribed herein or in any other Transaction Document) an Officer's Certificate and such Officer's Certificate shall be full warrant to the Indenture Trustee and the Servicer for any action taken, suffered or omitted by either of them on the faith thereof, but in its discretion the Indenture Trustee may in lieu thereof accept other evidence of such fact or matter or may require such further or additional evidence as may seem reasonable to it. (5) Neither the Indenture Trustee nor the Servicer shall be concerned with or accountable to any Person for the use or application of any deposited monies which shall be released or withdrawn in accordance with the provisions hereof or of any other Transaction Document, or of any property or securities or the proceeds thereof which shall be released from the Encumbrance hereof or thereof in accordance with the provisions hereof or thereof and neither the Indenture Trustee nor the Servicer shall have any liability for the acts of other parties which are not in accordance with the provisions hereof. (6) Neither the Indenture Trustee nor the Servicer shall be liable to any Holder with respect to any action taken, suffered or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a majority in principal amount of the Outstanding Notes relating to the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee (or the Servicer as agent for the Indenture Trustee), or exercising any trust or power conferred upon the Indenture Trustee (or the Servicer as agent for the Indenture Trustee), under this Indenture. -73- 82 (7) Neither the Indenture Trustee nor the Servicer shall be charged with knowledge of any Event of Default under any Transaction Document (except default in the payment of monies to the Indenture Trustee or the Servicer which the Issuer is required to pay or cause to be paid to the Indenture Trustee or the Servicer, as the case may be, on or before a specified date and except default in the delivery of any certificate, opinion or other document expressly required to be delivered to the Indenture Trustee pursuant to any Transaction Document), unless either (i) a Responsible Officer of the Indenture Trustee assigned to its corporate trust department in the case of the Indenture Trustee, or a Servicing Officer (as defined in the Trust and Servicing Agreement), in the case of the Servicer, shall have knowledge of such Event of Default or (ii) written notice of such Event of Default shall have been given to and received by the Indenture Trustee or the Servicer, as the case may be, by the Issuer, any other obligor on the Notes or by any Holders of at least 10% in aggregate principal amount of the Notes then Outstanding. The Indenture Trustee (or the Servicer as agent for the Indenture Trustee) may, without the consent of the Holders, give any consent, waiver or approval under and contemplated by any Transaction Document, but shall not (i) without the consent of the Holders of not less than 66 2/3% in aggregate principal amount of the Outstanding Notes consent to any amendment or modification of any Transaction Document in any respect having a material adverse effect on the interests of the Holders generally, except as expressly provided by the terms thereof, (ii) consent to any amendment or modification of any Transaction Document in any respect having a material adverse effect on the interests of any individual Holder apart from the effect on the interests of the Holders generally without the consent of each individual Holder that would be affected thereby, or (iii) without the prior written consent of all the Holders, consent to or accept any cancellation or termination of any Transaction Document, or any change in the manner or amount of payment of the Notes. (b) The duties and responsibilities of the Indenture Trustee in respect of this Indenture shall be as provided by the Trust Indenture Act. Notwithstanding the foregoing, no provision of this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of -74- 83 any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall in the exercise of its good faith business judgment believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Indenture Trustee shall be subject to the provisions of this Section 601(b). (c) It is expressly understood and agreed among the parties hereto that the Servicer is authorized to act on behalf of the Indenture Trustee with respect to the servicing of the Trust Estate and to take any action permitted to be taken hereunder by the Indenture Trustee or its agent (provided that the Servicer takes such action in accordance with the servicing standards in the Trust and Servicing Agreement), and that the Indenture Trustee shall not, without the consent of the Servicer (which consent may not be unreasonably withheld), take any action independently of the Servicer with respect to the servicing of the Trust Estate, unless the Servicer has been terminated hereunder or under the Trust and Servicing Agreement. SECTION 602. Money Held in Trust. ------------------- Money held by the Indenture Trustee, or the Servicer as the agent for the Trustee, hereunder shall be held in trust for the purposes for which it was paid, and shall be segregated from any other monies held by the Servicer, and if held by the Indenture Trustee shall be segregated at the Corporate Trust Office from any other monies held by the Indenture Trustee, and may be deposited by the Indenture Trustee under such general conditions as may be prescribed by law in the trust department of the Indenture Trustee. Neither the Indenture Trustee nor the Servicer shall be under any liability for interest on any money received by it hereunder except as provided in this Indenture or as otherwise agreed with the Issuer. Within thirty days after the end of each month or portion thereof during the term of the Notes, the Indenture Trustee (or the Servicer as its agent) shall deliver to the Issuer and, upon request, to the Holder of any Note, a statement of the receipts and disbursements from the Payment Account and any other amounts received or disbursed by the Indenture Trustee (or the Servicer as its agent) under this Indenture or otherwise in respect of the Trust Estate during the preceding calendar month. Absent an Event of Default, the -75- 84 Indenture Trustee shall not be obligated to review the statement of the receipts of and the disbursements from the Payment Account to determine that the funds have been disbursed by the Issuer in accordance with this Indenture. SECTION 603. Notice of Defaults. ------------------ The Indenture Trustee and the Servicer, promptly after either of them acquires knowledge of the occurrence of any Default under this Indenture or any other Transaction Document, shall notify in writing the Servicer (in the case of knowledge acquired by the Indenture Trustee), the Indenture Trustee (in the case of knowledge acquired by the Servicer), Issuer, all Holders of then Outstanding Notes, and the Rating Agencies of any such Default, unless all such Defaults known to the Indenture Trustee, or the Servicer, as the case may be, shall have been cured before the giving of such notice; PROVIDED that, except in the case of a Default in the payment of the principal of and interest on any of the Notes, the Indenture Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee composed of directors and/or Responsible Officers of the Indenture Trustee in good faith determines that the withholding of such notice is in the interest of Holders of the Notes. SECTION 604. Certain Rights of Indenture TRustee and the ------------------------------------------- Servicer. - -------- Subject to the provisions of Section 601: (a) the Indenture Trustee and the Servicer may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Issuer mentioned herein shall be sufficiently evidenced by an Issuer Request or Issuer Order; (c) whenever in the administration of this Indenture the Indenture Trustee or the Servicer shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action -76- 85 hereunder, the Indenture Trustee or the Servicer, as the case may be (in either case unless other evidence be herein specifically prescribed), may, in the absence of bad faith on its part, rely upon an Officer's Certificate; (d) the Indenture Trustee and the Servicer may, and, if the Holders of more than 10% in aggregate principal amount of Outstanding Notes so request (or, with respect to any lawsuit in which the Indenture Trustee is named as a party, at the request of any Holder), shall, consult with counsel and the written advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) neither the Indenture Trustee nor the Servicer shall be under any obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Indenture Trustee or the Servicer, as the case may be, reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) neither the Indenture Trustee nor the Servicer, as the case may be, shall be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document (except as may be required of the Servicer in connection with the Trust and Servicing Agreement), but the Indenture Trustee or the Servicer, as the case may be, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Indenture Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Issuer, personally or by agent or attorney; and (g) the Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Indenture Trustee shall not be -77- 86 responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. SECTION 605. Compensation and Reimbursement. ------------------------------ (a) The Servicer agrees: (1) to pay to the Indenture Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse the Indenture Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Indenture Trustee in accordance with any provision of this Indenture, the other Transaction Documents, the Underwriting Agreement, the Trust and Servicing Agreement or the Management Agreement (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to the Indenture Trustee's negligence, willful misconduct or bad faith; and (3) to indemnify (to the extent recoverable pursuant to Section 1301) the Indenture Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence, willful misconduct, or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, under the other Transaction Documents or under any other instrument included in the Trust Estate, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. (b) The Servicer shall be entitled to reimbursement for amounts paid by it pursuant to clauses (2) and (3) of Section 605(a) pursuant to, and to the extent provided in, Section 1301. -78- 87 SECTION 606. Disqualification; Conflicting Interests. --------------------------------------- (a) If the Indenture Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Indenture Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. (b) If the Indenture Trustee has or shall acquire any conflicting interest under the provisions of any state law applicable to this Indenture or the Mortgage, the following shall apply: (1) such Indenture Trustee shall, within ninety days after ascertaining that it has such conflicting interest, either eliminate such conflicting interest or resign, such resignation to become effective upon the appointment of a successor Indenture Trustee and such successor's acceptance of such appointment; and the Issuer shall take prompt steps to have a successor appointed in the manner provided herein; (2) in the event that such Indenture Trustee shall fail to comply with the provisions of subparagraph (a), such Indenture Trustee shall, within ten days after the expiration of such ninety-day period, transmit notice of such failure by mail (i) to all registered Holders as the names and addresses of such Holders appear in the Register, (ii) to such Holders as have, within the two years preceding such transmission, filed their names and addresses with the Indenture Trustee for the purpose of receiving notices or reports to the Holders, and (iii) to all Holders whose names and addresses are contained in information currently preserved by the Indenture Trustee for such purpose in accordance with provisions of this Indenture requiring the Issuer to furnish or cause to be furnished to the Indenture Trustee at stated intervals of not more than six months, and at such other times as the Indenture Trustee may request in writing, all information in the possession or control of the Issuer, or of any of its Paying Agents, as to the names and addresses of the Holders, and requiring the Indenture Trustee to preserve, in as current a form as is reasonably practicable, all such information so furnished to it or received by it in the capacity of Paying Agent; and -79- 88 (3) any Holder who has been a bona fide Holder for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of such Indenture Trustee, and the appointment of a successor, if such Indenture Trustee fails, after written request therefor by such Holder, to comply with the provisions of subparagraph (1). SECTION 607. Eligibility of the Indenture Trustee and the -------------------------------------------- Servicer. - -------- (a) The Issuer agrees, for the benefit of the Holders, that there shall at all times be an Indenture Trustee hereunder which shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $100,000,000, and is subject to supervision or examination by Federal or State authority and has a rating on its unsecured long-term debt of at least "BBB" from each Rating Agency. If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition as published. If at any time the Indenture Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. (b) The Servicer shall at all times as it is acting as the agent of the Indenture Trustee hereunder meet the eligibility requirements set forth in Section 6.04(i)(B) of the Trust and Servicing Agreement. If at any time the Servicer shall cease to be eligible in accordance with the provisions of this Section or Section 6.04(i)(B) of the Trust and Servicing Agreement, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. SECTION 608. Authorization of Indenture Trustee and the ------------------------------------------ Servicer. - -------- (a) The Indenture Trustee represents and warrants that it is duly authorized under applicable law, its articles of association and its by-laws to authenticate the Notes in accordance with the terms hereof, to perform its obligations hereunder and under the Security Documents -80- 89 Assignment and the other Transaction Documents and to execute and deliver this Indenture and the Security Documents Assignment and all corporate action necessary or required therefor has been duly and effectively taken or obtained. (b) The Servicer represents and warrants that it is duly authorized under applicable law, its articles of association and its by-laws to service the Trust Estate and the Notes in accordance with the terms hereof and of the Trust and Servicing Agreement, to perform its obligations hereunder and thereunder and to execute and deliver this Indenture and the Trust and Servicing Agreement, and all corporate action necessary or required therefor has been duly and effectively taken or obtained. SECTION 609. Merger, Conversion, Consolidation or Succession ----------------------------------------------- to Business. - ----------- Any corporation into which the Indenture Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which it shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Indenture Trustee, shall be the successor of the Indenture Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Notes shall have been authenticated, but not delivered, by the Indenture Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Indenture Trustee may adopt such authentication and deliver the Notes so authenticated with the same effect as if such successor Indenture Trustee had itself authenticated such Notes. SECTION 610. Preferential Collection of Claims Against ----------------------------------------- Issuer. - ------ If and when the Indenture Trustee or the Servicer shall be or become a creditor of the Issuer (or any other obligor upon the Notes), the Indenture Trustee as its agent shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Issuer (or any such other obligor). -81- 90 SECTION 611. Resignation and Removal; Appointment of --------------------------------------- Successor. - --------- (a) No resignation or removal of the Indenture Trustee or the Servicer and no appointment of a successor Indenture Trustee or Servicer pursuant to this Article shall become effective until the acceptance of appointment by the successor Indenture Trustee in accordance with the applicable requirements of Section 612 or the acceptance of appointment by the successor Servicer in accordance with the applicable requirements of the Trust and Servicing Agreement. (b) The Indenture Trustee may resign at any time by giving written notice thereof to the Issuer and a copy of such notice to the Servicer. If the instrument of acceptance by a successor Indenture Trustee required by Section 612 shall not have been delivered to the Indenture Trustee within 30 days after the giving of such notice of resignation, the resigning Indenture Trustee may petition any court of competent jurisdiction for the appointment of a successor Indenture Trustee. (c) The Indenture Trustee may be removed at any time by the Holders of a majority in principal amount of the Outstanding Notes and notice of such action by the Holders shall be delivered to the Indenture Trustee, the Servicer, the Rating Agencies and the Issuer. (d) If at any time: (1) the Indenture Trustee shall fail to comply with Section 606 after written request for compliance by the Indenture Trustee or from the Issuer or from any Holder who has been a bona fide Holder of a Note for at least six months, or (2) the Indenture Trustee shall cease to be eligible under Section 607 and shall fail to resign after written request therefor by the Issuer or by any such Holder of Notes, or (3) the Indenture Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Indenture Trustee or of its property shall be appointed or any public officer shall take charge or control of the Indenture Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, -82- 91 then, in any such case, (i) the Issuer may remove the Indenture Trustee with respect to all Notes, or (ii) subject to Section 514, any Holder who has been a bona fide Holder of a Note for at least six months may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Indenture Trustee with respect to all Notes and the appointment of a successor Indenture Trustee or Indenture Trustees. (e) If the Indenture Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Indenture Trustee for any cause, the Issuer shall promptly appoint a successor Indenture Trustee or Indenture Trustees with respect to the Notes (which appointment shall be subject to the approval of the Holders of a majority in aggregate principal amount of the Outstanding Notes) and shall comply with the applicable requirements of Section 612. The Indenture Trustee shall, however, continue to act as Paying Agent for Outstanding Notes until the appointment of a successor Paying Agent. If, within 60 days after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Indenture Trustee shall not have been appointed by the Issuer and shall not have accepted such appointment in accordance with the applicable requirements of Section 612, then a successor Indenture Trustee shall be appointed by Act of the Holders of a majority in aggregate principal amount of the Outstanding Notes delivered to the Issuer and the retiring Indenture Trustee, and the successor Indenture Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 612, become the successor Indenture Trustee with respect to the Notes. If, within 120 days after such resignation, removal or incapability, or the occurrence of such vacancy, no successor Indenture Trustee shall have been so appointed and accepted appointment in the manner required by Section 612, the Issuer or any bona fide Holder of a Note may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Indenture Trustee. Notwithstanding any resignation or removal of a Person acting as Indenture Trustee hereunder, the Servicer shall be deemed for purposes of this Indenture and the servicing of the Notes and the Trust Estate the agent of any successor Indenture Trustee duly appointed and acting as such hereunder, including any successor Indenture Trustee appointed pursuant to this Article. -83- 92 (f) The Issuer shall give written notice of each resignation and each removal of the Indenture Trustee or the Servicer and each appointment of a successor Indenture Trustee by giving notice of such event to each of the Holders, the Servicer (in the case of a resignation or removal of the Indenture Trustee), the Indenture Trustee (in the case of a resignation or removal of the Servicer) and the Rating Agencies. Each notice shall include the name of the successor Indenture Trustee and the address of its Corporate Trust Office. SECTION 612. Acceptance of Appointment by Successor. -------------------------------------- (a) In case of the appointment hereunder of a successor Indenture Trustee, the successor Indenture Trustee so appointed shall execute, acknowledge and deliver to the Issuer and to the retiring Indenture Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Indenture Trustee shall become effective and such successor Indenture Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Indenture Trustee except that the retiring Indenture Trustee shall continue to act as Paying Agent for the Outstanding Notes until the appointment of a successor Paying Agent; but, on the request of the Issuer or the successor Indenture Trustee, such retiring Indenture Trustee shall, upon payment of all amounts due to it, execute and deliver an instrument transferring to such successor Indenture Trustee all the rights, powers and trusts of the retiring Indenture Trustee, including transferring the Payment Account, Holdover Account, the Rent Collection Account and the Reserve Accounts, to the successor Indenture Trustee, shall duly assign, transfer and deliver to such successor Indenture Trustee all property and money held by such retiring Indenture Trustee hereunder, shall take such action as may be necessary to provide for the appropriate interest in the Trust Estate to be vested in such successor Indenture Trustee, and shall execute and deliver any amendments to the Transaction Documents necessary in connection therewith, but shall not be responsible for the recording of such documents and instruments as may be necessary to give effect to the foregoing. Upon request of any such successor Indenture Trustee, the Issuer shall execute any and all instruments for more fully and certainly vesting in and confirming to -84- 93 such successor Indenture Trustee all such rights, powers and trusts referred to in this Section. No successor Indenture Trustee shall accept its appointment unless at the time of such acceptance such successor Indenture Trustee shall be qualified and eligible under this Article. (b) In case of the appointment or other succession of a replacement Servicer hereunder, which shall only be made upon receipt of written confirmation from each Rating Agency that such succession or replacement shall not result in a withdrawal or downgrade of the rating of any Class of Certificates then outstanding, the successor Servicer shall execute, acknowledge and deliver to the Company and the Indenture Trustee an instrument accepting such appointment; PROVIDED, HOWEVER, that any successor Servicer under the Trust and Servicing Agreement shall, by its acceptance of appointment or its succession thereunder, automatically succeed to the obligations of the Servicer hereunder to the extent provided under the Trust and Servicing Agreement. Notwithstanding the foregoing, the predecessor Servicer shall execute and deliver an instrument transferring to such successor Servicer all the rights, power and trusts of the predecessor Servicer, including transferring all property and money held by such predecessor Servicer hereunder, and shall execute and deliver any amendments to the Loan Documents necessary in connection with the transfer of its obligations as Servicer. SECTION 613. Appointment of Authenticating Agent. ----------------------------------- The Indenture Trustee may appoint an Authenticating Agent or Agents with respect to the Notes which shall be authorized to act on behalf of the Indenture Trustee to authenticate Notes issued upon original issue and upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 304, and Notes so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Indenture Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Notes by the Indenture Trustee or the Indenture Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Indenture Trustee by an Authenticating Agent and a certificate of authentication -85- 94 executed on behalf of the Indenture Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Issuer and shall at all times be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $100,000,000 and subject to supervision or examination by Federal or State authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Indenture Trustee or the Authenticating Agent. An Authenticating Agent may resign at any time by giving written notice thereof to the Indenture Trustee and to the Issuer. The Indenture Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Issuer. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Indenture Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Issuer and shall give notice of such appointment in the manner provided in Section 106 to all Holders of Notes. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an -86- 95 Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. The Indenture Trustee agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section, and the Indenture Trustee shall be entitled to be reimbursed for such payments. If an appointment is made pursuant to this Section, the Notes may have endorsed thereon, in addition to the Indenture Trustee's certificate of authentication, an alternative certificate of authentication in the following form: This is one of the Notes referred to in the within-mentioned Indenture. BANKERS TRUST COMPANY OF CALIFORNIA, N.A., As Indenture Trustee By__________________________, As Authenticating Agent By__________________________, Authorized Officer SECTION 614. The Rating Agencies. ------------------- The Indenture Trustee and the Servicer shall deliver to the Rating Agencies all of the materials received by the Indenture Trustee or the Servicer from the Issuer pursuant to Section 1008(a)(ii) hereof, any other quarterly or annual materials in the possession of the Indenture Trustee or the Servicer requested by the Rating Agencies in accordance with their monitoring activities, a copy of any notices delivered by or to the Issuer under Section 502 hereof and notice of any Improvements at any Mortgaged Property or any part thereof of which the Indenture Trustee or the Servicer, as the case may be, receives notice. -87- 96 SECTION 615. Investments. ----------- The Indenture Trustee and the Servicer shall invest any amounts held under this Indenture, pending their application to the purposes herein provided, in Eligible Investments, which investment, so long as no Event of Default has occurred and is continuing hereunder, shall (unless otherwise provided herein) be upon the written direction of the Issuer. Neither the Indenture Trustee nor the Servicer shall make any investment requiring a payment above par for an obligation if the obligation may be prepaid at the option of the issuer thereof prior to its maturity nor shall the Indenture Trustee or the Servicer make any investment in an interest-only strip if the security related thereto is prepayable. Any such investments shall mature or be redeemable upon the option of the holder thereof on or prior to the earlier of (x) three months from the date of their purchase or (y) the Banking Day preceding the day before the date such amounts are required to be applied under this Indenture. Neither the Indenture Trustee nor the Servicer shall be responsible for their respective inability to invest funds received after 12:00 noon New York City time. After application to the purposes for which any amounts invested pursuant to this Section 615 are held and so long as no Event of Default has occurred and is continuing hereunder, any investment income earned from such investments shall be transferred to the Issuer. SECTION 616. Unclaimed Funds; Holdover Account. --------------------------------- At the expiration of two years following the Stated Maturity of Notes issued hereunder, the Indenture Trustee shall notify the Issuer of any monies deposited in the Holdover Account for such Notes then remaining on deposit and unclaimed by the lawful owner thereof and all such monies and any accrued interest on such monies shall be paid to the Issuer upon written request of the Issuer for the payment thereof and the person entitled to receive such monies thereafter shall look only to the Issuer for payment thereof as an unsecured general creditor (and in such event such Holder may look to the Issuer to the extent of the amounts so discharged notwithstanding the provisions of Section 114), and all liability of the Indenture Trustee or any Paying Agent with respect to such trust money shall thereupon cease; provided that the Indenture Trustee, before being required to make any such repayment, may, at the expense of the Issuer, cause to be published at least once but not more than three times in a newspaper in the -88- 97 English language customarily published on each Banking Day and of general circulation, in New York, New York, a notice to the effect that said monies remain unclaimed and have not been applied for the purpose for which they were deposited, and that after a date specified therein, which shall be not less than 30 days after the date of first publication of said notice, any unclaimed balance of said monies then remaining in the hands of the Indenture Trustee will be paid to the Issuer upon its written directions. Any successor to the Issuer through merger, consolidation or otherwise or any recipient of substantially all the assets of the Issuer in a liquidation of the Issuer shall remain liable for the amount of any unclaimed balance paid to the Issuer pursuant to this Section. SECTION 617. Communications to be Sent to the Rating --------------------------------------- Agencies. - -------- (a) The Indenture Trustee and the Servicer shall send a copy of each supplement, notice, certificate, request, demand, financial statement and any other written communication sent by it or received by it pursuant to or in connection with this Indenture, the other Transaction Documents or any Mortgaged Property or any part thereof, other than statements of the Indenture Trustee's fees and expenses and other communications of a similarly solely administrative nature (in the Indenture Trustee's or the Servicer's, as the case may be, sole opinion), to the Rating Agencies and to any Holder requesting delivery of all or part of such information in writing who provides the Indenture Trustee with an address for delivery of such information and reasonably satisfactory evidence that such Person is a Holder. The Indenture Trustee shall send to the Rating Agencies within two Banking Days of its receipt thereof (i) a copy of any election of notice of redemption (in whole or in part) affecting the Notes and (ii) a copy of any request for the Indenture Trustee's consent or approval. (b) The Indenture Trustee shall: (i) immediately send to the Issuer after the date on which any installment of interest or other amounts on the Notes becomes due and payable hereunder and is not paid, a written demand for payment thereof; (ii) immediately send to the Issuer after any amount other than principal or interest becomes due -89- 98 and payable hereunder and is not paid, a written demand for payment of such amount; (iii) send to the Issuer, within five Banking Days after a Responsible Officer of the Indenture Trustee acquires actual knowledge that any mechanic's lien or other Encumbrance has been filed against any Mortgaged Property or any part thereof, a written demand that the Issuer bond or otherwise satisfy such Encumbrance; and (iv) promptly send to the Issuer as soon as the Indenture Trustee acquires knowledge thereof of (A) any failure by the Issuer to perform or comply with any of the terms of this Indenture or any other Transaction Document, or (B) any breach of a representation or warranty made by the Issuer in this Indenture, any other Transaction Document or any other agreement or instrument to which the Issuer is a party, written notice of such failure or breach and demand for cure in accordance with the Indenture. SECTION 618. Separate Indenture Trustees and Co-trustees. ------------------------------------------- (a) At any time or times, for the purpose of meeting legal requirements applicable to the Indenture Trustee or the Trust Estate, the Indenture Trustee shall have the power to appoint one or more Persons to act as separate trustees or co-trustees hereunder, jointly with the Indenture Trustee, of any of the Trust Estate, including the Mortgaged Properties, subject to this Indenture, and any such Persons shall be such separate trustee or co-trustee, with such powers and duties consistent with the Transaction Documents as shall be specified in the instrument appointing such Person but without thereby releasing the Indenture Trustee from any of its duties hereunder. If the Indenture Trustee shall request the Issuer and/or the Servicer so to do, the Issuer and/or the Servicer, as the case may be, shall join with the Indenture Trustee in the execution of such instrument, but the Indenture Trustee shall have the power to make such appointment without making such request. -90- 99 (b) Every separate trustee and co-trustee shall, to the extent not prohibited by law, be subject to the following terms and conditions: (1) The rights, powers, duties and obligations conferred or imposed upon such separate or co-trustee shall be conferred or imposed upon and exercised or performed by the Indenture Trustee and such separate or co-trustee jointly, as shall be provided in the appointing instrument, except to the extent that under any law of any jurisdiction in which any particular act is to be performed any nonresident trustee shall be incompetent or unqualified to perform such act, in which event such rights, powers, duties and obligations shall be exercised and performed by such separate trustee or co-trustee; (2) The Notes shall be authenticated and delivered, and all rights, powers, and obligations hereunder in respect of the custody of securities, cash and other personal property held by, or required to be deposited or pledged with, the Indenture Trustee hereunder, shall be exercised solely, by the Indenture Trustee (or by the Servicer as its agent); and (3) The Indenture Trustee may at any time by written instrument accept the resignation of or remove, upon the concurrence of the Issuer, any such separate trustee or co-trustee, and, upon the request of the Indenture Trustee, the Issuer and the Servicer shall join with the Indenture Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to make effective such resignation or removal, but the Indenture Trustee shall have the power to accept such resignation or to make such removal without making such request. A successor to a separate trustee or co-trustee so resigning or removed may be appointed in the manner otherwise provided herein. (c) Such separate trustee or co-trustee, upon acceptance of such trust, shall be vested with the estates or property specified in such instrument, jointly with the Indenture Trustee, and the Indenture Trustee shall take such action as may be necessary to provide for the appropriate interest in the Trust Estate to be vested in such separate trustee or co-trustee, including the execution and delivery of any amendments to the Transaction Documents necessary in connection therewith and the recording of such -91- 100 documents and instruments as may be necessary to give effect to the foregoing. Any separate trustee or co-trustee may, at any time, by written instrument constitute the Indenture Trustee, his agent or attorney in fact with full power and authority, to the extent permitted by law, to do all acts and things and exercise all discretion authorized or permitted by him, for and in behalf of him and in his name. If any separate trustee or co-trustee shall be dissolved, become incapable of acting, resign, be removed or die, all the estates, property, rights, powers, trusts, duties and obligations of said separate trustee or co-trustee, so far as permitted by law, shall vest in and be exercised by the Indenture Trustee, without the appointment of a successor to said separate trustee or co-trustee, until the appointment of a successor to said separate trustee or co-trustee is necessary as provided in this Indenture. (d) Any notice, request or other writing, by or on behalf of any Holder, delivered to the Indenture Trustee shall be deemed to have been delivered to all separate trustees and co-trustees. SECTION 619. Fidelity Bond and Errors and Omissions Coverage. ----------------------------------------------- In connection with its responsibilities hereunder, and for the term of this Indenture, the Indenture Trustee shall maintain a fidelity bond in an amount sufficient to satisfy the Rating Agencies. Notwithstanding the foregoing, the Indenture Trustee will be deemed to have complied with the requirement set forth in the preceding sentence if one of its respective affiliates has such fidelity bond coverage and, by the terms of such fidelity bond, the coverage afforded thereunder extends to the Indenture Trustee. In addition, the Indenture Trustee shall keep in force during the term of the Indenture a policy or policies of insurance covering loss occasioned by the errors and omissions of its officers, employees and agents in connection with its obligations under the Indenture, such policies to be in such form and amounts as are necessary to satisfy the Rating Agencies. Any fidelity bond or errors and omissions coverage maintained by the Servicer or its affiliates in accordance with the Trust and Servicing Agreement shall extend to the Servicer's obligations under this Indenture. In any event, the Servicer shall maintain such bond and such -92- 101 coverage in such form and amounts as are necessary to satisfy the Rating Agencies. The foregoing provisions of this Section 619 shall not apply to any Indenture Trustee or Servicer to the extent that the long-term obligations of such Person is then rated in one of the two highest rating categories by each Rating Agency. ARTICLE SEVEN ------------- HOLDERS' LISTS AND REPORTS BY INDENTURE TRUSTEE AND ISSUER --------------------------------------- SECTION 701. Issuer to Furnish Indenture Trustee and Servicer ------------------------------------------------ Names and Addresses of Holders. - ------------------------------ The Issuer will furnish or cause to be furnished to the Indenture Trustee and the Servicer: (a) semi-annually, not later than February 15 and August 15 in each year, a list, in such form as the Indenture Trustee and the Servicer may reasonably and respectively require, of the names and addresses of the Holders as of the preceding December 31 or June 30, as the case may be, and (b) at such other times as the Indenture Trustee or the Servicer may request in writing, within 30 days after the receipt by the Issuer of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; EXCLUDING from any such list names and addresses received by the Indenture Trustee in its capacity as Note Registrar. SECTION 702. Preservation of Information; Communications to ---------------------------------------------- Holders. - ------- (a) The Indenture Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Indenture Trustee as provided in Section 701 and the names and addresses of Holders received by the Indenture Trustee in its capacity as Note Registrar. The Indenture Trustee may destroy any list furnished to it as provided in Section 701 upon receipt of a new list so furnished. -93- 102 (b) The rights of the Holders to communicate with other Holders with respect to their rights under this Indenture or under the Notes, and the corresponding rights and privileges of the Indenture Trustee, shall be as provided by the Trust Indenture Act. (c) Every Holder of Notes, by receiving and holding the same, agrees with the Issuer and the Indenture Trustee that none of the Issuer, the Servicer, the Indenture Trustee nor any agent of any of them shall be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to the Trust Indenture Act. SECTION 703. Reports by Indenture Trustee. ---------------------------- (a) The Indenture Trustee shall transmit to Holders such reports concerning the Indenture Trustee and its actions (and those of the Servicer as its agent) under this Indenture as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. (b) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Indenture Trustee with each stock exchange upon which any Notes are listed, with the Commission, the Servicer and with the Issuer. The Issuer will notify the Indenture Trustee and the Servicer when any Notes are listed on any stock exchange. SECTION 704. Reports by the Issuer. --------------------- (a) The Issuer shall file with the Indenture Trustee and the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant to such Act; PROVIDED that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or 15 of the Exchange Act shall be filed with the Indenture Trustee within 15 days after the same is so required to be filed with the Commission. (b) The Issuer shall, at the Issuer's expense, promptly deliver to the Indenture Trustee and the Servicer, for distribution to the Rating Agencies at the Issuer's expense, copies of all reports, statements and information -94- 103 required to be delivered by the Issuer pursuant to any Transaction Document. SECTION 705. Release of Collateral. --------------------- In the event the Issuer seeks to obtain a release of the Encumbrance of any of the Mortgaged Properties pursuant to Section 1109, the Issuer shall file with the Indenture Trustee and the Commission, and transmit to the Holders and each Rating Agency, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act. ARTICLE EIGHT ------------- CONDITIONS PRECEDENT -------------------- SECTION 801. Conditions Precedent to Exchange of Notes for --------------------------------------------- the Original Note. - ----------------- The obligation of the initial Holder to accept the Notes in exchange for the Original Note is subject to the fulfillment by the Issuer of the following conditions precedent no later than the Issuance Date: (a) REPRESENTATIONS AND WARRANTIES; COMPLIANCE WITH CONDITIONS. The representations and warranties of the Issuer contained in this Indenture and the other Transaction Documents shall be true and correct in all material respects on and as of the Issuance Date with the same effect as if made on and as of such date, and no event shall have occurred and be continuing that would constitute, by reason of the execution, delivery and performance of this Indenture, the grant of the Encumbrances in the Mortgaged Properties contemplated hereby, the issuance of the Notes, or the consummation of the other transactions contemplated by this Indenture or the other Transaction Documents, a Default or an Event of Default and no Default or Event of Default would occur as a result of the issuance of the Notes; and the Issuer shall be in compliance in all material respects with all terms and conditions set forth in this Indenture and in each Note and the other Transaction Documents on its part to be observed or performed. (b) SECURITY DOCUMENTS ASSIGNMENT. The Indenture Trustee shall have received from KPMCC fully executed and acknowledged counterparts of the Security Documents -95- 104 Assignment submitted for recordation in the appropriate recording office in respect of each Mortgaged Property and such other documents and instruments as the Indenture Trustee may reasonably request, so as to effectively transfer and assign all of KPMCC's rights, titles and interests in, to and under each of the Security Documents to the Indenture Trustee. (c) INDENTURE AND NOTES. The Indenture Trustee shall have received from the Issuer fully executed and acknowledged counterparts of this Indenture. (d) MORTGAGE AND ASSIGNMENT OF LEASES. Each of the Mortgage and the Assignment of Leases shall be in full force and effect and the Indenture Trustee shall have received a true, correct and complete copy thereof. The Indenture Trustee shall have received satisfactory evidence to it that the Mortgage and Assignment of Leases in respect of each Mortgaged Property continues to be validly and effectively recorded in the appropriate recording office for such Mortgaged Property so as to maintain a valid and enforceable first priority Encumbrance on such Mortgaged Property and the Leases and Rents in respect of such Mortgage Property, subject only to the Permitted Encumbrances and such other Encumbrances as are permitted pursuant to the Security Documents. (e) MANAGEMENT AGREEMENT, ENVIRONMENTAL INDEMNITY AND ASSIGNMENT OF MANAGEMENT AGREEMENT. Each of the Management Agreement, the Environmental Indemnity and the Assignment of Management Agreement shall be in full force and effect and the Indenture Trustee shall have received a true, correct and complete copy thereof. (f) ENCUMBRANCES. The Issuer shall have taken or caused to be taken such actions in such a manner so that the Indenture Trustee has valid and perfected first priority Encumbrances as of the Issuance Date in all of the Mortgaged Properties, subject only to applicable Permitted Encumbrances and such other Encumbrances as are permitted pursuant to the Security Documents, and the Indenture Trustee shall have received satisfactory evidence thereof. (g) INSURANCE. The Indenture Trustee shall have received valid certificates of insurance for the policies of insurance required by the Mortgage to be carried evidencing (A) the issuance of such policies by one or more Rated Insurance Carriers, (B) the payment of all premiums payable for the existing policy period, but not to exceed -96- 105 one year, and (C) coverage which meets all of the requirements set forth in the Mortgage. (h) TITLE INSURANCE. The Indenture Trustee shall have received the Title Insurance Policy naming the Indenture Trustee as named insured. (i) OPINIONS. The Indenture Trustee shall have received an opinion of counsel for the Issuer, prepared in accordance with the requirements of the Trust Indenture Act. (j) COMPLETION OF PROCEEDINGS. All corporate and other proceedings taken or to be taken in connection with the transactions contemplated by this Indenture, the Notes, the Security Documents and the Related Documents and all documents incidental thereto shall be satisfactory in form and substance to the Indenture Trustee, and the Indenture Trustee shall have received all such counterpart originals or certified copies of such documents as the Indenture Trustee may reasonably request. ARTICLE NINE ------------ SUPPLEMENTAL INDENTURES; AMENDMENTS ----------------------------------- SECTION 901. Supplemental Indentures or Amendments Without --------------------------------------------- Consent of Holders. - ------------------ Without the consent of any Holder, the Issuer, the Servicer and the Indenture Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto or one or more amendments hereto or to all or any of the Notes or to any Security Document, in form satisfactory to the Indenture Trustee and the Servicer, for any of the following purposes: (1) to add to the covenants of the Issuer for the benefit of the Holders of all Notes or to surrender any right or power herein conferred upon the Issuer, PROVIDED that such surrender shall not adversely affect the interests of any Holder of the Notes; or (2) to evidence and provide for the acceptance of appointment hereunder by a successor Indenture Trustee or Servicer; or -97- 106 (3) to cure any ambiguity, or to cure, correct or supplement any defective or inconsistent provision herein, in the Notes or in any Security Document, or to make any other provisions with respect to matters or questions arising under this Indenture, the Notes or any Security Document which shall not be inconsistent with the provisions of this Indenture, PROVIDED that such action shall not adversely affect the interests of the Holders of the Notes. SECTION 902. Supplemental Indentures With Consent of Holders. ------------------------------------------------ With the consent of the Holders of not less than 66-2/3% in aggregate principal amount of the Outstanding Notes, the Issuer and the Indenture Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of the Notes under this Indenture; PROVIDED, HOWEVER, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Note affected thereby: (1) change the Stated Maturity of the principal of, or any installment of interest on, any Note, or reduce the principal amount thereof or the rate of interest thereon, or change any obligation of the Issuer to pay additional amounts in respect of the Notes or change the coin or currency in which any Note or any interest or other amount thereon is payable, or change the method of calculating the Default Amount or the Yield Maintenance Charge, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date); or (2) reduce the percentage in principal amount of the Outstanding Notes, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or for any other reason under this Indenture; or (3) modify any of the provisions of this Section, Section 513 or Section 1009, except to -98- 107 increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Note affected thereby; or (4) except as otherwise expressly provided in this Indenture or the Security Documents, deprive any Holder of the benefit of a first priority security interest in the Mortgaged Properties as provided in the Mortgages, or permit the creation of any Encumbrance ranking prior to or on a parity with the Encumbrance of this Indenture or any Security Document with respect to any of the Trust Estate, or terminate the Encumbrance of this Indenture or any Security Document on any property at any time subject hereto or thereto or deprive the Holder of any Note of the security afforded by the Encumbrance of this Indenture or any Security Document. It shall not be necessary for any Act of the Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 903. Execution of Supplemental Indentures. ------------------------------------ In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Indenture Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Indenture Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Indenture Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 904. Delivery of Supplements. ----------------------- Promptly after the execution by the Issuer, the Indenture Trustee and the Servicer of any supplemental indenture pursuant to the provisions of this Article, the Indenture Trustee shall mail, by first class mail, postage prepaid, a conformed copy of such supplement to each Holder of Notes and to the Rating Agencies. Any failure of the Indenture Trustee to give such notice, or any defect -99- 108 therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. SECTION 905. Effect of Supplemental Indentures. --------------------------------- Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Notes theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. SECTION 906. Conformity with Trust Indenture Act. ----------------------------------- Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. SECTION 907. Reference in Notes to Supplemental Indentures. --------------------------------------------- Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Indenture Trustee, bear a notation in form approved by the Indenture Trustee as to any matter provided for in such supplemental indenture. If the Issuer shall so determine, new Notes so modified as to conform, in the opinion of the Indenture Trustee and the Issuer, to any such supplemental indenture may be prepared and executed by the Issuer and authenticated and delivered by the Indenture Trustee in exchange for Outstanding Notes. ARTICLE TEN ----------- REPRESENTATIONS, WARRANTIES AND COVENANTS ----------------------------------------- SECTION 1001. Representations and Warranties of the Issuer. -------------------------------------------- The Issuer hereby represents and warrants to the Indenture Trustee, as of the Issuance Date, as follows: (a) (i) The Issuer has been duly formed and is validly existing as a general partnership under the laws of the State of Delaware, with requisite partnership power and authority to own its properties and to transact the -100- 109 businesses in which it is now engaged. The Issuer is duly qualified to do business and to consummate the transactions contemplated hereby. The Issuer possesses all rights, licenses, permits and authorizations, governmental or otherwise, necessary to entitle it to own its properties and to transact the businesses in which it is now engaged, and the sole business of the Issuer is the ownership, management and operation of the Mortgaged Properties. The Issuer's Partnership Agreement has been duly executed, delivered, and is in full force and effect in accordance with its terms and has not been modified or amended. (ii) The Operating Partnership has been duly formed and is validly existing and in good standing as a limited partnership under the laws of the State of Delaware, with requisite partnership power and authority to own its properties and to transact the businesses in which it is now engaged, including, without limitation, to be a partner in the Issuer and the manager under the Management Agreement. The Operating Partnership is duly qualified to do business and is in good standing in each jurisdiction where it is required to be so qualified in connection with its properties, businesses and operations. The Operating Partnership possesses all rights, licenses, permits and authorizations, governmental or otherwise, necessary to entitle it to own its properties and to transact the businesses in which it is now engaged, including, without limitation, to be a general partner in the Issuer, and to execute and deliver the Transaction Documents and the Related Documents to which it is a party or to which the Issuer is a party on behalf of the Issuer. The Operating Partnership is duly qualified to do business and is in good standing in each jurisdiction where it is required to be so qualified in connection with its properties, businesses and operations. The Operating Partnership possesses all rights, licenses, permits and authorizations, governmental or otherwise, necessary to entitle it to own its properties and to transact the businesses in which it is now engaged. The Operating Partnership holds a 99% partnership interest in the Issuer. The Operating Partnership's Partnership Agreement and certificate of limited partnership have been duly executed, delivered and filed, and are in full force and effect in accordance with their respective terms and have not been modified or amended. (iii) The REIT has been duly organized and is validly existing and in good standing as a corporation under the laws of the State of Maryland, with all requisite corporate power and authority to own its properties and to -101- 110 transact the businesses in which it is now engaged, including, without limitation, to be the general partner in the Operating Partnership and the sole shareholder in GP Corp, and to execute and deliver the Transaction Documents and the Related Documents to which it is a party or to which the Operating Partnership is a party on behalf of the Operating Partnership. The REIT is duly qualified to do business and is in good standing in each jurisdiction where it is required to be so qualified in connection with its properties, businesses and operations. The REIT possesses all rights, licenses, permits and authorizations, governmental or otherwise, necessary to entitle it to own its properties and to transact the businesses in which it is now engaged. The REIT is the sole general partner in the Operating Partnership, holding a 95.9% general partnership interest therein. The REIT is the sole shareholder in GP Corp holding 100% of the outstanding shares of stock therein. The REIT Documents have been duly executed, delivered and filed, and are in full force and effect in accordance with their respective terms and have not been modified or amended. (iv) GP Corp has been duly organized and is validly existing and in good standing as a corporation under the laws of Delaware, with requisite corporate power and authority to own its properties and to transact the businesses in which it now engaged, including, without limitation, to be a partner in the Issuer, and to execute and deliver the Transaction Documents and the Related Documents to which it is a party or to which the Issuer is a party on behalf of the Issuer. GP Corp is duly qualified to do business and is in good standing in each jurisdiction where it is required to be so qualified in connection with its properties, businesses and operations. GP Corp possesses all rights, licenses, permits and authorizations, governmental or otherwise, necessary to entitle it to own its properties and to transact the businesses in which it is now engaged, and the sole business of GP Corp is to be a general partner in the Issuer. GP Corp holds a 1% general partnership interest in the Issuer. GP Corp is a duly qualified "real estate investment trust subsidiary" as defined in Section 856(i)(2) of the Internal Revenue Code. The certificate of incorporation and by-laws of GP Corp have been duly executed, delivered and filed, and are in full force and effect in accordance with their respective terms and have not been modified or amended. (b) Each of the Issuer, the Operating Partnership, the REIT, GP Corp, and each Contributing Entity has -102- 111 taken all necessary corporate, partnership or trust action, as the case may be, to authorize the execution, delivery and performance of this Indenture, the other Transaction Documents and the Related Documents to which they are parties. This Indenture, the other Transaction Documents and the Related Documents have been duly executed and delivered by or on behalf of the Issuer, the Operating Partnership, the REIT, GP Corp, and each Contributing Entity, as applicable, and constitute legal, valid and binding obligations of the Issuer, the Operating Partnership, the REIT, GP Corp, and/or each Contributing Entity, as applicable, enforceable against such parties in accordance with their respective terms, subject to applicable bankruptcy, insolvency and similar laws affecting rights of creditors generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). (c) The execution, delivery and performance by the Issuer, the Operating Partnership, GP Corp, the REIT and each Contributing Entity of the Transaction Documents and the Related Documents to which they are parties will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance (other than pursuant to the Transaction Documents) upon any of the property or assets of the Issuer, the Operating Partnership, GP Corp, the REIT or the Contributing Entities, as applicable, pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Issuer, the Operating Partnership, GP Corp, the REIT or a Contributing Entity is a party or by which any of such parties is or are bound or to which any of its or their property or assets is subject, nor will such action result in any violation of the provisions of the Issuer's Partnership Agreement, the OP's Partnership Agreement, the certificate of incorporation and by-laws of GP Corp, the REIT Documents, the constituent documents of each Contributing Entity or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Issuer, the Operating Partnership, GP Corp, the REIT or the Contributing Entities or any of its or their properties or assets, and any consent, approval, authorization, order, registration or qualification of or with any court or any such regulatory authority or other governmental agency or body required for the execution, delivery and performance by the Issuer, the Operating Partnership, GP Corp, the REIT or each Contributing Entity of the Transaction Documents and -103- 112 the Related Documents to which they are parties, has been obtained and is in full force and effect. (d) There is no action, suit, proceeding or investigation pending or, to the best of the Issuer's knowledge, threatened before any court, judicial or quasi-judicial body or administrative agency, (i) for the condemnation or taking by power of eminent domain of any portion of any Mortgaged Property, (ii) to revoke, attack or challenge the validity of, or rescind or modify the zoning of any portion of any Mortgaged Property or any building or improvement thereon or other permits previously issued with respect thereto, (iii) otherwise relating to the validity of the Mortgage or the Assignment of Leases or the proposed or actual use of any Mortgaged Property, (iv) with respect to this Indenture, the other Transaction Documents or the Related Documents or the transactions contemplated hereby or thereby or (v) that, individually or in the aggregate, would have a Material Adverse Effect. (e) The financial statements for the Issuer and for the Mortgaged Properties, copies of which have been furnished to the Indenture Trustee on or before the Issuance Date, comport with the requirements of Section 1008(a) and fairly present in all material respects the financial condition of the Issuer and of the Mortgaged Properties as at the dates of such financial statements and the results of operations and changes in net assets and cash flows for the period ended on the dates of such financial statements, all in conformity with generally accepted accounting principles, and no material adverse change in the financial condition of the Issuer and/or of any Mortgaged Property has occurred since the dates of such financial statements. (f) The Issuer's principal place of business and chief executive office is 40 Skokie Boulevard, Northbrook, Illinois 60062-1626 and the foregoing address is the place at which its books and records relating to the Mortgaged Properties are kept. (g) The Issuer has good and indefeasible title in fee to the Real Property, and good title to the Personalty and the Equipment, in each case, after giving effect to the transactions contemplated by the Transaction Documents, free and clear of all Encumbrances whatsoever except the Permitted Encumbrances, such other Encumbrances as are permitted hereunder and the Encumbrances created by the Security Documents. The Mortgage, has been recorded in the appropriate records, together with any Uniform Commercial -104- 113 Code financing statements required to be filed in connection therewith, and as so recorded creates as security for the Notes (i) a valid, perfected first lien on each Mortgaged Property, subject only to Permitted Encumbrances, such other Encumbrances as are permitted pursuant to the Transaction Documents and the Encumbrances created by the Transaction Documents and (ii) a perfected first priority security interest in and to, and a perfected first priority collateral assignment of the Personalty (including the Leases) in which the Issuer has an interest, all in accordance with the terms thereof, in each case subject only to any applicable Permitted Encumbrances, such other Encumbrances as are permitted pursuant to the Transaction Documents and the Encumbrances created by the Transaction Documents. Except for any Permitted Encumbrance, such other Encumbrances as are permitted pursuant to the Transaction Documents and the Encumbrances created by the Transaction Documents, after giving effect to the transactions contemplated by the Transaction Documents, there are no Encumbrances or claims for work, labor or materials affecting any Mortgaged Property which are or may be prior to, or of equal priority with, the Encumbrances created by the Mortgage. The Permitted Encumbrances and other Encumbrances permitted pursuant to the Transaction Documents do not adversely affect the use or operation of the Mortgaged Properties as contemplated on the date hereof or the ability of the Issuer to timely pay principal and interest due under the Notes. (h) All property and similar tax returns required to have been filed with respect to each Mortgaged Property have been duly and timely filed, and all installments for the payment of real estate, property or similar taxes due to date and all other material Impositions imposed against, affecting or relating to each Mortgaged Property (other than those which have not become due), together with any fine, penalty, interest or cost for non-payment pursuant to such returns or pursuant to any assessments have been paid and discharged. (i) The Issuer has no knowledge of any proposed tax assessment against a Mortgaged Property which could reasonably be expected to result in a Material Adverse Effect, other than those which are being actively contested by the Issuer in good faith and by appropriate proceedings, and for which such reserves or other appropriate provisions, if any, as shall be required in conformity with generally accepted accounting principles shall have been made or provided. -105- 114 (j) The construction and use of each portion of each Mortgaged Property does not violate in any material respect and will not violate in any material respect (i) any zoning or building laws and ordinances or (ii) any building permits or any conditions, easements, rights-of-way, covenants or restrictions of record affecting any portion of the Mortgaged Property. Without limiting the foregoing, all material permits, certificates and licenses required to be obtained by the Issuer (or any other Person) for or in connection with the construction, development and use of the Mortgaged Properties have been issued and are in full force and effect. Each Mortgaged Property complies in all material respects with currently existing Legal Requirements (including, without limitation, applicable zoning ordinances) without the use or inclusion of any other property for parking or any other purpose. (k) The Issuer is not subject to regulation under the Public Utility Holding Company Act of 1935 or the Federal Power Act. Neither the Issuer nor the Operating Partnership is required to be registered as an "investment company" within the meaning of the Investment Company Act of 1940. (l) (i) Except as disclosed in the Environmental Reports, neither the Issuer nor any Contributing Entity has any liability, including, without limitation, any contingent liability, in connection with any Hazardous Substance Activity, on, at or relating to, any portion of the Mortgaged Properties under any Environmental Law. (ii) Except as disclosed in the Environmental Reports, (A) there exists and has existed no Hazardous Substance Activity at, upon, under or within any portion of the Mortgaged Properties in violation of any Environmental Law and (B) there exists no condition which may constitute a violation of any Environmental Law at, upon, under, within or flowing or emanating from any portion of the Mortgaged Properties. (iii) Except as disclosed in the Environmental Reports, (A) neither the Issuer nor any other Person has been or is involved in activities at or related to any portion of the Mortgaged Properties which activities could reasonably be expected to lead to (1) the imposition of any liability on the Issuer under any Environmental Law, or on any subsequent or former owner of any portion of the Mortgaged Properties, or (2) the creation of a lien with respect to any liability on any portion of the Mortgaged -106- 115 Properties under any Environmental Law; and (B) no activity by any tenant or occupant of any portion of the Mortgaged Properties could reasonably be expected to result in a claim or liability under any Environmental Law on such tenant or occupant, on the Issuer or on any other subsequent or former owner of any portion of the Mortgaged Properties. (iv) Except as disclosed in the Environmental Reports, the Issuer is not, and has no reason to believe that it may become, subject to a material liability under any Environmental Law. (m) (i) Except as otherwise disclosed on Schedule 3, all Anchor Leases and Operating Agreements are in full force and effect and no term or condition thereof has been amended or modified in any material respect. (ii) The Issuer has delivered to the Servicer a true and correct copy of the rent roll or schedule, as the case may be, dated December 31, 1993, for each Mortgaged Property (collectively, the "RENT ROLLS"), which sets forth each and every Lease which is in full force and effect as of such date with respect to each Mortgaged Property. The information set forth on the Rent Rolls is true and correct in all material respects as of such date. Except as disclosed in the Rent Rolls, no Leases are in effect as of such date with respect to any Mortgaged Property. The Issuer is (either directly or through an authorized agent) the owner and holder of the landlord's interest under each of the Leases set forth on the Rent Rolls and there are no prior outstanding assignments of any of such Leases, or any portion of the rents, additional rents, charges, issues or profits due and payable or to become due and payable thereunder, except for Permitted Encumbrances, such other Encumbrances as are permitted pursuant to the Transaction Documents and the Encumbrances created by the Transaction Documents. Each Lease constitutes the legal, valid and binding obligation of the Issuer and, to the knowledge of the Issuer, of each of the other parties thereto, enforceable in accordance with its terms, subject to bankruptcy, insolvency, reorganization or other similar laws relating to creditors' rights generally, and no notice of any lease default by any tenant under any Anchor Lease which remains uncured has been sent by the Issuer, except as disclosed on Schedule 3, and no notice of any default by the Issuer under any Anchor Lease which remains uncured has been received by the Issuer, except as disclosed on Schedule 3. -107- 116 (n) Attached as Schedule 4 is a complete and accurate description of all policies of insurance currently in effect as of the Issuance Date for the Mortgaged Properties, each of which is in an amount not less than the amount necessary to avoid the operation of any co-insurance provisions with respect to any Mortgaged Property. All premiums for the existing policy period, but not in excess of one year, have been paid with respect to each such insurance policy. Each such insurance policy requires at least 30 days' prior notice to the Servicer of termination or cancellation. The insurance policies described on Schedule 4 conform in all respects to the requirements in respect of property and liability insurance contained in the Mortgage. (o) Neither this Agreement nor any other Transaction Document nor any other certificate, agreement or notice furnished to the Indenture Trustee by or on behalf of the Issuer for use in connection with the transactions contemplated by this Agreement contains any untrue statement of a material fact or omits to state a material fact. (p) The amounts to be received by the Indenture Trustee and the Holders under this Indenture and the Notes, to the extent that such amounts are or may be deemed to be interest under the Notes or any of the other Transaction Documents or otherwise in connection with the transactions contemplated by the Transaction Documents, constitute lawful interest and are not usurious or unlawful, and no aspect of the transactions contemplated by this Indenture or any of the other Transaction Documents is or will be usurious. (q) No brokerage fees or commissions are payable in connection with this Indenture or the Notes to any Person claiming by, through or under the Issuer. (r) All utility services, which are sufficient to permit each Mortgaged Property to be utilized in accordance with its current use, are available at or within the boundary lines of the respective Mortgaged Property. With respect to each Mortgaged Property, there is sufficient access to permit utilization of such Mortgaged Property fully in accordance with its current use. (s) The Issuer is not a party to any separate agreements with tenants, other than their respective Leases, relating to a loan or other advance of funds made in connection with such Lease. -108- 117 (t) All amounts received by the Issuer from the Operating Partnership on or prior to the date hereof in order to fund the Initial Reserve Account deposits or for any other purpose were funded to the Issuer by the Operating Partnership as capital contributions and have been reflected as such on the books and records of the Issuer. SECTION 1002. Payment of Principal and Interest. --------------------------------- The Issuer covenants and agrees for the benefit of the Holders of the Notes that it will duly and punctually pay the principal of and interest on the Notes and any fees and other amounts, including, without limitation, Yield Maintenance Charges, due and payable in accordance with the terms of the Notes, this Indenture and the Security Documents. SECTION 1003. Maintenance of Office or Agency. ------------------------------- The Issuer will maintain or cause to be maintained an office or agency in the Borough of Manhattan, The City of New York, where Notes may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Issuer in respect of the Notes and this Indenture or the Security Documents may be served. The Issuer will give prompt written notice to the Indenture Trustee of the location, and any change in the location, of such office or agency. If at any time the Issuer shall fail to maintain any such required office or agency or shall fail to furnish the Indenture Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Indenture Trustee, and the Issuer hereby appoints the Indenture Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Issuer may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; PROVIDED, HOWEVER, that no such designation or rescission shall in any manner relieve the Issuer of its obligation to maintain an office or agency in accordance with the requirements set forth in the preceding paragraph. The Issuer will give prompt written notice to the Indenture Trustee and prompt notice to the Holders, in accordance with the provisions of Section 106, of any such designation or rescission and of any change in the location of such office or agency. -109- 118 SECTION 1004. Paying Agent; Issuing Agent; Money for Note ------------------------------------------- PAyments to be Held in Trust. - ---------------------------- The Issuer hereby appoints the Indenture Trustee as Paying Agent at its Corporate Trust Office in connection with the Notes. The Issuer may not have more than one Paying Agent for the Notes at any time, however, the Servicer may act as the agent of the Indenture Trustee for such purpose and the Servicer hereby agrees to so act. On each due date for the principal of or interest on any Notes, the Issuer shall deposit with the Paying Agent a sum sufficient to pay when due the principal of or interest on the Notes so becoming due, such sum to be held as provided by the Trust Indenture Act, and (unless such Paying Agent is the Indenture Trustee) the Issuer will promptly notify the Indenture Trustee of its action or failure to so act. On each due date of the principal of or interest on any Notes, the Paying Agent shall withdraw from the Payment Account a sum sufficient to pay when due the principal of or interest on the Notes so becoming due. The Issuer will cause any Paying Agent other than the Indenture Trustee to execute and deliver to the Indenture Trustee an instrument in which such Paying Agent shall agree with the Indenture Trustee, subject to the provisions of this Section, that such Paying Agent will (i) comply with the provisions of the Trust Indenture Act applicable to it as a Paying Agent and (ii) during the continuance of any Default by the Issuer (or any other obligor upon the Notes) in the making of any payment in respect of the Notes, and upon the written request of the Indenture Trustee, forthwith pay to the Indenture Trustee all sums held in trust by such Paying Agent for payment in respect of the Notes. The Issuer may, at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Issuer Order direct the Paying Agent (if other than the Indenture Trustee or the Issuer) to pay, to the Indenture Trustee all sums held in trust by the Paying Agent, such sums to be held by the Indenture Trustee upon the same trusts as those upon which such sums were held by the Paying Agent; and, upon such payment by the Paying Agent to the Indenture Trustee, the Paying Agent shall be released from all further liability with respect to such money. SECTION 1005. [Reserved]. -110- 119 SECTION 1006. Statement as to Compliance. -------------------------- The Issuer will deliver to the Indenture Trustee, within 120 days after the end of each fiscal year, an Officer's Certificate stating, as to the authorized officer signatory thereto, that in the course of the performance by such officer of his present duties, he would normally obtain knowledge or have made due inquiry as to the existence of any Default or Event of Default and that to the best knowledge of such officer, based on such knowledge or due inquiry, (a) the Issuer has fulfilled all its obligations under this Indenture and the Security Documents throughout such year, or, if there has been a Default in the fulfillment of any such obligation, specifying each such Default known to such officer and the nature and status thereof, and (b) no Event of Default has occurred and is continuing or, if such an event has occurred and is continuing, specifying each such event known to such officer and the nature and status thereof. In addition, such Officers' Certificate shall state whether or not to the best knowledge of the signers thereof the Issuer is in default in the performance and observance of any of the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder). The Indenture Trustee shall deliver copies of such Officers' Certificate to the Holders, the Servicer and the Rating Agencies. SECTION 1007. Register for the Mortgage Notes. ------------------------------- The Issuer shall cause the Indenture Trustee to keep, and the Indenture Trustee shall keep, at the Corporate Trust Office a register within the meaning of Section 163(f) of the Code for the registration or transfer of the Notes. Such register shall be maintained (and transfers and exchanges of the Notes shall be effected) substantially in the same manner, and with the same effect, as the Register is maintained (and transfers and exchanges of the Notes are effected) by the Indenture Trustee in accordance with Section 308 and the other provisions of Article Three, as applicable. SECTION 1008. Affirmative Covenants. --------------------- The Issuer hereby covenants and agrees with the Indenture Trustee that: (a) The Issuer (i) shall do or cause to be done all things necessary to preserve and keep in full force and -111- 120 effect the Issuer's existence, rights (partnership and statutory) and franchises, and (ii) will furnish to the Indenture Trustee, the Pass-Through Trustee and the Rating Agencies (A) within 50 days after the end of each calendar quarter, an unaudited operating statement for each Mortgaged Property, (B) within 50 days after the end of each calendar quarter, an update to the Rent Rolls setting forth in reasonable detail any changes thereto, (C) within 105 days after the end of each calendar year, an operating statement for each Mortgaged Property, (D) within 50 days after the end of each calendar quarter, an unaudited statement of financial condition of the Issuer and the related statements of income and retained earnings and statements of changes in financial position for such quarterly period and for the elapsed portion of the calendar year ended with the last day of such quarterly period, in each case setting forth comparative figures for the related periods in the prior calendar year, (E) within 105 days after the end of each calendar year, the statements of financial condition of the Issuer as of the end of such calendar year and the related statements of income and retained earnings and statements of changes in financial position for such calendar year, in each case setting forth comparative figures for the preceding calendar year and certified by independent certified public accountants of recognized national standing, in each case together with a report of such accounting firm (which report may be contained in such accounting firm's audit report) stating that in the course of its regular audit of the financial statements of the Issuer, which audit was conducted in accordance with generally accepted auditing standards, such accounting firm obtained no knowledge of any Default or Event of Default which has occurred and is continuing or, if in the opinion of such accounting firm such a Default or Event of Default has occurred and is continuing, a statement as to the nature thereof, (F) such other reports or information as are provided by the Issuer to the partners in the Issuer, or the partners in such partners, with respect to the Issuer or the Mortgaged Properties at the same time as sent to such partners, and (G) such other financial information prepared by the Issuer in the ordinary course with respect to the Issuer or the Mortgaged Properties as the Indenture Trustee may from time to time reasonably request. (b) The Issuer will continue to engage in the businesses presently conducted by it as and to the extent the same are necessary for the ownership, maintenance, management and operation of the Mortgaged Properties. The Issuer will qualify to do business under the laws of each -112- 121 jurisdiction as and to the extent the same are required for the ownership, maintenance, management and operation of the Mortgaged Properties. For so long as this Indenture remains in effect, the sole business of the Issuer shall be the ownership, maintenance, management and operation of the Mortgaged Properties and the sole business of GP Corp shall be to be a general partner in the Issuer. (c) The Issuer will comply in all material respects with all applicable laws, rules, regulations and orders of any Governmental Authority relative to the conduct of its business in connection with the operation of the Mortgaged Properties; the Issuer will obtain or cause to be obtained as promptly as possible any governmental, administrative or agency approval and make any filing or registration therewith which at the time shall be required with respect to the performance of its obligations under this Indenture, the Security Documents or the Related Documents to which it is a party; the Issuer will procure and continuously maintain in full force and effect, and will abide by and satisfy all material terms and conditions of, all material permits, licenses and other authorizations required or granted for (i) construction of improvements which constitute part of any Mortgaged Property, (ii) any existing use of any Mortgaged Property or any part thereof, or (iii) the lawful and proper installation, operation and maintenance of the Mortgaged Properties. (d) The Issuer will, promptly upon obtaining knowledge thereof, give written notice to the Indenture Trustee of: (i) the occurrence of any Default or Event of Default; (ii) any litigation or proceedings affecting any Mortgaged Property or any part thereof which litigation or proceeding if determined adversely to the Issuer's interest would have a Material Adverse Effect; and (iii) any material dispute between the Issuer and any Governmental Authority or any tenant or other occupant at any Mortgaged Property. (e) The Issuer will keep books of record and account in which full, true and correct entries in accordance with generally accepted accounting principles will be made of all dealings or transactions in relation to the business and activities of the Issuer. (f) The Issuer will warrant and defend (i) the title to each Mortgaged Property and every part thereof, subject only to Encumbrances permitted hereunder (including Permitted Encumbrances), and (ii) the validity and priority -113- 122 of the liens of the Mortgage and the Assignment of Leases, subject only to Encumbrances permitted hereunder (including Permitted Encumbrances), in each case against the claims of all Persons whomsoever. The Issuer shall reimburse the Indenture Trustee for any losses, costs, damages or expenses (including reasonable attorneys' fees and court costs) incurred by the Indenture Trustee if an interest in any Mortgaged Property, other than as permitted hereunder, is claimed by another Person (other than a Person claiming such interest through the Indenture Trustee or its assigns); PROVIDED, HOWEVER, that the Issuer or the Title Company may defend any such claims so long as the Indenture Trustee's interests are not adversely affected by such defense. (g) If any part of any Mortgaged Property shall be subjected to a Casualty or the actual or, to the Issuer's knowledge, threatened commencement of a Condemnation, the Issuer shall give prompt written notice thereof to the Indenture Trustee and supply the Indenture Trustee with such documents relating to same as are in the possession or control of, or can reasonably be obtained by, the Issuer or the Operating Partnership. (h) In the event (i) that the Mortgage is foreclosed in whole or in part or that the Mortgage is put into the hands of an attorney for collection, suit, action or foreclosure, (ii) of the foreclosure of any mortgage prior to or subsequent to the Mortgage in which proceeding the Indenture Trustee is made a party, or (iii) of the bankruptcy, insolvency, rehabilitation or other similar proceeding in respect of the Issuer or an assignment by the Issuer for the benefit of its creditors, the Issuer, its successors or assigns, shall be chargeable with and agrees to pay all costs of collection and defense, including reasonable attorneys' fees in connection therewith and in connection with any appellate proceeding or post-judgment action involved therein, which shall be due and payable together with all required service or use taxes. (i) The Issuer, within 10 days after request from the Indenture Trustee, shall from time to time as reasonably requested by the Indenture Trustee furnish to the Indenture Trustee a statement, duly acknowledged and certified, setting forth (a) the amount then owing under this Indenture and the Notes, and (b) the date through which interest on any Note has been paid, and acknowledging that this Indenture and the other Transaction Documents are legal, valid and binding obligations and have not been -114- 123 modified or, if modified, giving the particulars of such modification. (j) The Issuer will execute, acknowledge, record and/or file such further statements, documents, agreements, Uniform Commercial Code financing and continuation statements and such other instruments and do such further acts as the Indenture Trustee from time to time may reasonably request as necessary, desirable or proper to carry out more effectively the purposes of this Indenture and the other Transaction Documents, to subject to the lien and security interest of the Mortgage any property intended by the terms hereof or of the Mortgage to be covered by the Mortgage, including, without limitation, any renewals, additions, substitutions, replacements, betterments or appurtenances to the Mortgaged Property encumbered thereby or to evidence, perfect or otherwise implement or assure the lien and security interest intended by the terms hereof or of the Mortgage to be covered by the Mortgage or in order to exercise or enforce its rights under this Indenture and the Security Documents. (k) [Reserved]. (l) The Issuer shall in a timely manner observe, perform and fulfill each and every covenant, term and provision of each Transaction Document and the Management Agreement applicable to it, and shall not enter into or otherwise suffer or permit any amendment, waiver, supplement, termination or other modification of any Transaction Document, the Issuer's Partnership Agreement or the Management Agreement without the prior written consent of the Indenture Trustee. (m) Subject to the immediately succeeding sentences of this paragraph, the Issuer shall observe every material covenant, obligation and agreement to be performed and observed on its part under the existing Leases and Operating Agreements and any and all future Leases and Operating Agreements, and will use commercially reasonable efforts to cause each and every lessee and guarantor (if any) of each Lease and each party under an Operating Agreement to perform and observe each and every material covenant, obligation and agreement to be performed or observed on the part of such party, lessee and/or guarantor under or in respect of each Operating Agreement, Lease or guaranty thereof, as applicable. Notwithstanding the foregoing provisions of this paragraph, the Issuer shall have the right (i) to terminate Leases (other than Anchor Leases) in con- -115- 124 nection with its operation of the Mortgaged Properties so long as no Event of Default shall have occurred and be continuing, (ii) to terminate Leases (including Anchor Leases) in accordance with their respective terms upon a default by the tenant thereunder whether or not an Event of Default has occurred and is continuing, and (iii) so long as no Event of Default has occurred and is continuing, to terminate Anchor Leases in connection with its operation of the Mortgaged Properties so long as the Debt Service Coverage Ratio with respect to the Mortgaged Properties as a whole is not less than 2.0:1.0 after giving effect to such Anchor Lease termination and the execution of any new Anchor Lease with respect to the related premises. The Issuer shall also have the right to terminate Operating Agreements without the consent of the Indenture Trustee (i) in accordance with their respective terms upon a default by the other party thereto, or (ii) so long as no Event of Default has occurred and is continuing, in connection with its operation of the Mortgaged Property so long as the Debt Service Coverage Ratio with respect to the Mortgaged Properties as a whole is not less than 2.0:1.0 after giving effect to such Operating Agreement termination. The Issuer may, without the Indenture Trustee's prior consent, enter into, modify or amend any Lease or any Operating Agreement so long as such new Lease, Operating Agreement, or modification or amendment, as the case may be, would not have a Material Adverse Effect. The Issuer shall promptly send initial drafts of all Anchor Leases and Operating Agreements which it proposes to execute and all amendments to Anchor Leases and Operating Agreements to the Servicer and keep the Servicer reasonably informed of the substance of all subsequent negotiations with respect to each Anchor Lease and Operating Agreement. (n) The Issuer shall cause each Mortgaged Property to be managed by the Operating Partnership pursuant to the Management Agreement, and the Issuer shall, and shall use commercially reasonable efforts to cause the Operating Partnership to, comply with the terms of the Management Agreement in all material respects. The Management Agreement shall provide, among other things, that (i) the Operating Partnership may not terminate the Management Agreement except in the case of non-payment of management fees for a period of 90 days after notice to the Issuer and the Indenture Trustee, (ii) the Operating Partnership will recognize and attorn to the Indenture Trustee (or its successor or designee) under the Management Agreement upon foreclosure of the Mortgage or other taking of title by the Indenture Trustee (or its successor or designee) to any -116- 125 Mortgaged Property, and (iii) the Servicer shall have the right to terminate (or to direct the Issuer to terminate, as applicable) the Management Agreement upon certain events, including, without limitation, (1) the insolvency of the Operating Partnership, (2) the occurrence of an Event of Default, or (3) the failure of the Mortgaged Properties to maintain a Debt Service Coverage Ratio of at least 1.84:1.0. In the event the Operating Partnership is replaced as manager at any Mortgaged Property in accordance with the terms of the Management Agreement, the Issuer shall promptly engage a new property manager which manages at least six other retail properties comparable to the Mortgaged Properties, as the manager of such Mortgaged Property (each, a "MANAGER"); provided, that (x) such Manager and the related management agreement must be approved by the Servicer and (y) each Rating Agency shall have been given written notice identifying the Manager to be engaged and shall not, within fifteen (15) days after receiving such notice, have indicated that the appointment of such Manager would result in a reduction or withdrawal of the then effective rating of the Notes by such Rating Agency. The Issuer shall, or shall cause the Manager to, manage and operate each such Mortgaged Property in a reasonably prudent manner pursuant to a management agreement substantially similar to the Management Agreement. The Issuer will provide to the Servicer a copy of any such new management agreement within five (5) Banking Days of its execution by the Issuer and such new manager, and the Issuer shall promptly assign such new management agreement to the Indenture Trustee as additional collateral for the Obligations pursuant to an assignment substantially similar to the Assignment of Management Agreement. (o) The Issuer's Partnership Agreement provides that no bankruptcy or insolvency filing or proceeding in respect of the Issuer shall be made or commenced without the consent of GP Corp, and the Issuer shall not acquiesce, petition or otherwise invoke or cause any other Person to invoke the process of the United States of America, any state or other political subdivision thereof or any other jurisdiction, or any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government for the purpose of commencing or sustaining a case against the Issuer under a Federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, seques- trator or other similar official of the Issuer or all or any part of its property or assets or ordering the winding-up or liquidation of the affairs of the Issuer, if such -117- 126 action has not been consented to by GP Corp. The certificate of incorporation and by-laws of GP Corp provide that no bankruptcy or insolvency filing or proceeding in respect of the Issuer or in respect of GP Corp shall be made or commenced without the unanimous affirmative vote of the directors of GP Corp, and neither the Issuer nor GP Corp shall acquiesce, petition or otherwise invoke or cause any other Person to invoke the process of the United States of America, any state or other political subdivision thereof or any other jurisdiction, or any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government for the purpose of commencing or sustaining a case against the Issuer or GP Corp under a Federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Issuer or GP Corp or all or any part of its or their property or assets or ordering the winding-up or liquidation of the affairs of the Issuer or GP Corp, if such action has not been consented to by a unanimous vote of such directors. GP Corp shall at all times on or after November 13, 1993 have two independent directors who are not Affiliates of any Contributing Entity or any limited partner of the Operating Partnership. (p) The Issuer shall establish and maintain, in the name of the Indenture Trustee, one or more Eligible Accounts at banking institutions designated by the Issuer and approved by the Servicer for purposes of receiving all gross Rents from the Mortgaged Properties (collectively, the "RENT COLLECTION ACCOUNT") and shall direct all tenants under Leases at the Mortgaged Properties to make payment of all Rents directly to the relevant Rent Collection Account. As collateral security for the Obligations, the Issuer hereby pledges and assigns to the Indenture Trustee in trust for the benefit of the Holders of the Notes a continuing security interest in the Rent Collection Account. The Rent Collection Account shall be subject to the exclusive dominion and control of the Indenture Trustee and/or any Servicer acting on behalf of the Indenture Trustee. Amounts received in the Rent Collection Account from time to time shall be invested in Eligible Investments maturing not later than the Banking Day prior to the Interest Payment Date following receipt thereof. On any Banking Day on which an Event of Default shall not have occurred and be continuing, upon request of the Issuer, the Indenture Trustee shall disburse from the Rent Collection Account to the Issuer the amount, if any, by which (x) the amount on deposit in the Rent Collection Account on such -118- 127 date exceeds (y) the sum of (i) the amount of interest due and payable on the Interest Payment Date for the Interest Period in which such release is requested plus (ii) any other amount then due and owing to the Indenture Trustee or the Servicer under this Indenture or any other Transaction Document plus (iii) any amount required to be deposited into a Reserve Account on or within thirty-five days following the date of such request. On each Interest Payment Date, unless an Event of Default shall have occurred and be continuing, all amounts then on deposit in the Rent Collection Account, including all income or earnings on Eligible Investments credited to the Rent Collection Account, shall be applied in the following order of priority: (i) to the interest then due and owing in respect of the Notes, (ii) to any other amounts then due and owing to the Indenture Trustee or the Servicer under this Indenture or any other Transaction Document and (iii) any remaining balance shall be remitted to, or upon the instructions of, the Issuer. The Issuer covenants and agrees to take any and all actions requested by the Indenture Trustee from time to time to maintain the Indenture Trustee's first priority perfected lien upon and security interest in the Rent Collection Account and the Rents on deposit therein from time to time. The Issuer and the Indenture Trustee agree to cause each banking institution at which a Rent Collection Account is established to forward to each of the Issuer and the Indenture Trustee at their respective addresses for notices set forth herein all periodic statements relating to such Rent Collection Account. Upon the occurrence of an Event of Default, the Indenture Trustee may apply all sums in the Rent Collection Account from time to time to the amounts then due and payable in respect of the Notes and to any other amounts due and owing to the Indenture Trustee or the Servicer under this Indenture or any other Transaction Document. (q) The Issuer will do or cause to be done all things necessary to preserve and keep in full force and effect its existence and will maintain adequate capitalization (taking into account, among other things, the market value of its assets) for its business purposes; that it will not modify its partnership agreement in any manner that would have a Material Adverse Effect; will pay all expenses of the Mortgaged Properties from property of the Issuer; will maintain books and records and bank accounts separate from those of its Affiliates and will maintain a separate business office (which may be a management office at any of the Mortgaged Properties); will at all times hold itself out to the public as a legal entity separate and -119- 128 distinct from any of its Affiliates (including in its leasing activities, in entering into any contract, in preparing its financial statements, and its stationery), and will cause its Affiliates to conduct business with it on an arm's-length basis (or, as to property management, on the basis provided in the Management Agreement); will file its own tax returns or, if part of a consolidated group, will join in the consolidated tax return of such group as a separate member thereof; will cause its management to meet regularly to carry on its business; will not commingle its assets with any of its Affiliates; and will not guarantee any obligation of any of its Affiliates. (r) As of the Issuance Date, each of the insurance coverages required by Section 2.1(d) of the Mortgage (the "INSURANCE COVERAGES") shall be provided by a Rated Insurance Carrier. If the Issuer replaces any insurance carrier or any Insurance Coverages at any time, such replacement insurance carrier shall be, and any such replacement Insurance Coverage shall be provided by, a Rated Insurance Carrier. If any insurance carrier providing any Insurance Coverage shall at any time cease to be a Rated Insurance Carrier, the Issuer shall replace such Insurance Carrier with a Rated Insurance Carrier within one hundred and twenty (120) days following the date on which such insurance carrier ceases to be a Rated Insurance Carrier. (s) The Issuer shall complete, or cause to be completed, not later than November 30, 1994 and in a competent and professional manner, all of the Initial Repair Work. SECTION 1009. Negative Covenants. ------------------ The Issuer hereby covenants and agrees with the Indenture Trustee that: (a) Except for Permitted Transfers and except as otherwise expressly provided for in this paragraph (a) and in paragraphs (b), (c) and (d) below, the Issuer shall not, without the prior written consent of the Indenture Trustee, sell, transfer, convey, assign or otherwise dispose of, directly or indirectly, any interest in any Mortgaged Property other than (i) Equipment or other Personalty as from time to time may become worn or obsolete, PROVIDED that such Equipment or other Personalty shall be replaced with other Equipment or other Personalty with a value at least equal to that of the replaced Equipment or other Personalty and free from any security interest or lien other than a -120- 129 lease thereof, and by such removal and replacement, the Issuer shall be deemed to have subjected such new Equipment or other Personalty to the lien of the Mortgage, or (ii) Equipment or other Personalty as from time to time may become worn or obsolete; PROVIDED that such Equipment or other Personalty is not material in its use to the value and operation of the related Mortgaged Property, or (iii) Equipment or other Personalty as from time to time may in the reasonable judgment of the Issuer be determined to be unusable or unnecessary for the continued operation of the related Mortgaged Property as currently operated, or (iv) entering into any occupancy Lease of any portion of a Mortgaged Property to any tenant or any Operating Agreement (or similar agreement) relating to a Mortgaged Property, or (v) any Mortgaged Property released from the lien of the Mortgage in accordance with Section 1109 hereof or (vi) as may otherwise be permitted pursuant to the terms of the Mortgage. (b) Except for Permitted Transfers and except as otherwise expressly provided for in this paragraph (b) and in paragraph (a) above and paragraphs (c) and (d) below, the Issuer shall not, without the prior written consent of the Indenture Trustee, directly or indirectly, (A) sell, convey, transfer or otherwise dispose of, grant easements or other rights with respect to, or mortgage, encumber or create a security interest in, any Mortgaged Property or any portion thereof or the income or any other revenues therefrom or the proceeds payable upon the sale, transfer or other disposition of any Mortgaged Property or any portion thereof, or (B) permit or suffer any such action to be taken. The Indenture Trustee hereby agrees (i) to subordinate the lien of the Mortgage and the Assignment of Leases to any modification of existing easements, rights-of-way, restrictive covenants or similar agreements included in the Permitted Encumbrances and to the creation by the Issuer of additional easements, rights-of-way, restrictive covenants or similar agreements affecting title to the Mortgaged Properties, and, upon the request of the Issuer, to execute nondisturbance and attornment agreements in a form reasonably satisfactory to the Servicer and the Indenture Trustee, in each case so long as it will either benefit the related Mortgaged Property or will not affect the utility, operation or value of the related Mortgaged Property in any material adverse respect and will not cause any Mortgaged Property to be in violation of any Legal Requirements, Leases or insurance requirements described in the Transaction Documents, or result in the loss of any certificate of occupancy, and (ii) that the Issuer may enter -121- 130 into and record a notice of lease in respect of any Lease entered into in accordance with the terms of the Transaction Documents (any Lease covered by such notice being expressly subject and subordinate to the lien of the Mortgage and the Assignment of Leases). (c) Except for Permitted Transfers, no sale, transfer, assignment or other disposition of (i) the general partnership interest of GP Corp in the Issuer or the general partnership interest of the Operating Partnership in the Issuer, (ii) the general partnership interest of the REIT in the Operating Partnership, or (iii) the shareholder interest of the REIT in GP Corp, shall be made without the Indenture Trustee's prior written consent, which consent may be given or withheld in the Indenture Trustee's sole discretion, and the Issuer shall not permit or suffer any such action to be taken. (d) The Issuer shall not, without the prior written consent of the Indenture Trustee, create, incur, assume or suffer to exist any Encumbrance on any portion of the Mortgaged Property or permit any such action to be taken, except: (i) Permitted Encumbrances; (ii) Encumbrances created by or permitted pursuant to Transaction Documents; (iii) liens for taxes, assessments or other governmental charges not yet due or which are being diligently contested in good faith and by appropriate proceedings, if (A) reasonable reserves in an amount not less than the tax, assessment or governmental charge being so contested shall have been deposited in cash (or Eligible Investments) with the Indenture Trustee to be held during the pendency of such contest, (B) no risk of sale, forfeiture or loss of any interest in any Mortgaged Property or any part thereof arises during the pendency of such contest and (C) such contest does not have a Material Adverse Effect; (iv) carriers', warehousemen's, mechanic's, materialmen's, repairmen's and other similar liens arising in the ordinary course of business and which are being diligently contested in good faith and by appropriate proceedings in accordance with the provisions of the Mortgage, if (A) (i) reasonable reserves in an amount not less than the claim secured by such -122- 131 lien which is the subject of such contest shall have been deposited in cash (or Eligible Investments) with the Indenture Trustee, to be held during the pendency of such contest, or (ii) the Issuer has caused such contested lien to be duly bonded in accordance with applicable law, (B) no risk of sale, forfeiture or loss of any interest in any Mortgaged Property or any part thereof arises during the pendency of such contest and (C) such contest does not have a Material Adverse Effect; (v) zoning restrictions, easements, rights-of-way, restrictions on use of real property and other similar Encumbrances incurred or entered into in the ordinary course of business which do not, individually or in the aggregate, (A) materially detract from the value of the portion of any Mortgaged Property subject thereto, (B) materially interfere with the operation and use of, or the ordinary conduct of the business on, any Mortgaged Property subject thereto, or (C) materially interfere with the validity, enforceability or priority of the Encumbrances created by the Transaction Documents; and (vi) Leases of any portion of any Mortgaged Property, provided such Leases comply with the requirements of the Transaction Documents. (e) The Issuer shall not initiate, acquiesce or consent to any zoning or other land use change or reclassification of any Mortgaged Property or any portion thereof or seek any variance under any existing zoning or other land use ordinance or use or permit the use of any Mortgaged Property or any portion thereof in any manner that could result in such use becoming a non-conforming use under any zoning ordinance or any other applicable land use law, rule or regulation, without the prior consent of the Indenture Trustee. (f) The Issuer shall not enter into, acquiesce in, suffer or permit any amendment, restatement or other modification of any of the Transaction Documents, the Issuer's Partnership Agreement, or the Management Agreement without the prior written consent of the Indenture Trustee in each instance. (g) The Issuer shall not engage in any business or activity other than in connection with, or relating to, the ownership, use, management and operation of the Mort- -123- 132 gaged Properties, the performance of its obligations under the Transaction Documents and any other activities incidental thereto. (h) The Issuer shall not purchase or own any properties other than the Mortgaged Properties. (i) The Issuer shall not create, incur or assume any Debt; PROVIDED, HOWEVER, that if no Event of Default shall have occurred and be continuing, the Issuer may, without the consent of the Indenture Trustee, incur, create or assume Permitted Debt. (j) The Issuer shall not liquidate or dissolve or enter into any consolidation, merger, joint venture, syndicate or other combination. (k) Except as otherwise permitted pursuant to the Transaction Documents, the Issuer shall not make or allow any changes to be made in the use of any Mortgaged Property or any part thereof from that in effect on the Issuance Date without the prior written consent of the Indenture Trustee; PROVIDED, HOWEVER, that the Issuer shall be permitted to make or allow changes to be made in the use of a portion of any Mortgaged Property without the consent of the Indenture Trustee to the extent that such changes are consistent with the operation of the Mortgaged Property as a community shopping center or, in the case of the One North State Street Mortgaged Property, a mixed-use retail and office building. (l) Except as otherwise permitted pursuant to the Transaction Documents, the Issuer shall not purchase, acquire or lease any property from, or sell, transfer or lease any property to, or lend or advance any money to, or borrow any money from, or guarantee any obligation of, or acquire any stock, obligations or securities of, or enter into any merger or consolidation agreement, or any management or similar arrangement with, any Contributing Entity or any Affiliate of the Issuer or any Contributing Entity or enter into any other transaction or arrangement or make any payment to (whether for management, technical, consulting or any other services) or otherwise deal with, in the ordinary course of business or otherwise, any Contributing Entity or any Affiliate of the Issuer or any Contributing Entity on terms other than arm's-length commercially reasonable terms (or as to property management, on the terms provided in the Management Agreement); PROVIDED, HOWEVER, that the Issuer may distribute, transfer, sell or -124- 133 assign any Mortgaged Property released from the Encumbrance of the Mortgage in accordance with Section 1109 to the Operating Partnership on such terms and at such times as the Issuer may elect in its sole discretion. (m) The Issuer shall not make any distribution to, or otherwise lend, advance or transfer any amount to, the Operating Partnership, GP Corp, the REIT or any Affiliate of any of the foregoing, at any time at which a failure by the Issuer to make any deposit to a Reserve Account pursuant to Article Twelve hereof has occurred and is continuing. SECTION 1010. Additions to Mortgaged Property. ------------------------------- Except as expressly provided in this Indenture or the Mortgage in connection with damage, casualty or condemnation involving a Mortgaged Property, the Issuer, tenants and other occupants of each Mortgaged Property shall have the right to make modernization, renovations, improvements and/or additions (collectively, "IMPROVEMENTS") to such Mortgaged Property without the prior consent of the Servicer; PROVIDED, HOWEVER, that in any case, no such Improvement shall be made without the prior written consent of the Servicer if such Improvement would have a Material Adverse Effect, or a material adverse impact upon the use or operation of the Mortgaged Property which is the subject of such Improvement, or would result in the Debt Service Coverage Ratio for any Calculation Period to be less than 1.84:1.0. All Improvements shall be constructed in compliance with all applicable Legal Requirements, whether or not the Servicer's consent is required in connection therewith. The Issuer shall give the Servicer prior written notice of its intention to construct Improvements with respect to any Mortgaged Property, whether or not the Servicer's consent is required in connection therewith pursuant to this Section, if the cost of any such Improvement or any series of related Improvements is in excess of $1,000,000. ARTICLE ELEVEN -------------- REDEMPTION OF NOTES; LIEN RELEASES ---------------------------------- SECTION 1101. Redemption. ---------- (a) (i) The Notes shall only be subject to redemption as provided in, and in accordance with all of the terms and conditions of, this Article Eleven. The -125- 134 Notes are subject to mandatory redemption, in whole or in part, after the Issuance Date in certain instances of Casualty or Condemnation, in the manner and to the extent set forth in this Section 1101(a). (ii) Issuer shall give prompt written notice to the Indenture Trustee of (A) any damage to or destruction of all or any portion of the Mortgaged Properties, and (B) any actual or, to the knowledge of Issuer, proposed, contemplated or threatened taking of all or any portion of the Mortgaged Properties by reason of any public improvements or condemnation or similar proceeding. Any damage or destruction of all or any portion of the Mortgaged Properties the insurance proceeds in respect of which exceed $250,000 shall be referred to herein as a "Casualty" and such insurance proceeds shall be referred to herein as "Insurance Proceeds". Any taking, condemnation or other similar proceeding the condemnation award proceeds or other compensation payable in respect of which exceed $250,000 shall be referred to herein as a "Condemnation" and such condemnation award proceeds or other compensation shall be referred to herein as "Condemnation Proceeds." (iii) All Insurance Proceeds and all Condemnation Proceeds shall be applied and disbursed in accordance with the provisions of this Section. All proceeds of insurance which do not constitute Insurance Proceeds and all awards or other compensation which do not constitute Condemnation Proceeds shall be the property of and payable to the Issuer or such other tenant, occupant or other Person who is pursuant to any Lease or Operating Agreement entitled to such proceeds of insurance or condemnation compensation. (iv) In the event of (x) any Casualty at or Condemnation of the Mortgaged Properties or any part thereof, and if an Event of Default shall have occurred and be continuing, or (y) any Casualty at or Condemnation of the Mortgaged Properties or any part thereof which results in occupants having interests in five percent (5%) or more (in the aggregate) of the total square footage of all Mortgaged Properties devoted to retail, mixed and appurtenant uses (exclusive of common areas and leasable square footage which is not then subject to a Lease) exercising their rights to cancel their respective Leases or to abate their rent under their respective Leases and such abatement is not covered by rent interruption/abatement insurance (a "Major Casualty/Condemnation"), Servicer, on behalf of the Indenture Trustee, shall receive all Insurance Proceeds or Condemnation Proceeds, as the -126- 135 case may be, and shall have the right to determine in its reasonable judgment whether to disburse such Insurance Proceeds or condemnation Proceeds to Issuer or to apply such proceeds to the redemption of the Notes on the first Interest Payment Date occurring at least 3 Banking Days after receipt of such Insurance Proceeds or Condemnation Proceeds, as the case may be. In the event the Servicer determines in its reasonable judgment not to disburse such Insurance Proceeds or Condemnation Proceeds to the Issuer, the following provisions shall apply: (A) The Insurance Proceeds or Condemnation Proceeds shall be applied in the following order and priority: (1) first, to the payment of all costs and expenses (regardless of the particular nature thereof and whether incurred with or without suit), including reasonable attorneys' fees, incurred by Servicer or the Indenture Trustee in connection with the adjustment of the loss and the collection of such proceeds; (2) second, to the payment of all amounts of interest at the time due and payable in respect of the Notes (whether at maturity or by declaration or acceleration or otherwise); (3) third, to the redemption of the outstanding principal amount of the Notes at such time, together with all Yield Maintenance Premiums required to be paid in connection therewith; (4) fourth, to the payment of all other Obligations then due and payable hereunder; and (5) fifth, Servicer shall deliver the balance, if any, to Issuer or to the Person legally entitled thereto. (B) All Insurance Proceeds and Condemnation Proceeds shall be payable to Servicer, and with respect to Insurance Proceeds, Issuer hereby authorizes and directs any affected insurance company to make payment of such Insurance Proceeds directly to Servicer. (v) In the event of any Casualty at or Condemnation of the Mortgaged Properties or any part thereof which is not described in clauses (x) or (y) of Section 1101(a)(iv) above or as to which Servicer has determined, as provided in Section 1101(a)(iv) above, to disburse the relevant Insurance Proceeds or Condemnation Proceeds to Issuer in accordance with the terms of the Mortgage, the provisions of the Mortgage relating to restoration of the relevant Mortgaged Properties shall apply. In connection with any such restoration of the Mortgaged Properties, the Servicer shall be obligated to request, pursuant to Section -127- 136 2.1(e)(iv)(B) of the Mortgage, that all Insurance Proceeds or Condemnation Proceeds, together with any and all additional sums required to complete the restoration of the related Mortgaged Property in accordance with the terms of the Mortgage, be deposited with the Servicer for subsequent disbursement by the Servicer in accordance with the provisions of the Mortgage. Any Insurance Proceeds, Condemnation Proceeds or additional sums so deposited with the Servicer and remaining in the possession of the Servicer at the time of the Issuer's delivery to the Servicer of a written certification that the related restoration has been completed in accordance with all the terms and provisions of the Mortgage, shall be paid to the Issuer. Notwithstanding any provision contained herein or in the Mortgage, the Issuer shall not have any obligation to restore any Mortgaged Property following a Casualty or Condemnation in respect thereof to the extent the Insurance Proceeds or Condemnation Proceeds received in respect thereof are applied pursuant to clause (A) of Section 1101(a)(iv) above. (vi) In the event that Insurance Proceeds or Condemnation Proceeds in respect of a Mortgaged Property are applied to the payment of the Notes in accordance with Section 1101(a)(iv)(A) above and the aggregate amount of such proceeds available to be applied to the redemption of the outstanding principal amount of the Notes pursuant to Section 1101(a)(iv)(A)(3) above is less than 125% of the Allocated Note Amount for the related Mortgaged Property, the Issuer may elect, but shall not be obligated, to deposit with the Indenture Trustee such additional funds as shall, when taken together with the Insurance Proceeds or Condemnation Proceeds available to be applied to the redemption of the outstanding principal amount of the Notes (and after giving effect to the payment of all Yield Maintenance Charges due in connection with such redemption), permit the redemption of Notes in an outstanding principal amount equal to 125% of the Allocated Note Amount for the related Mortgaged Property. Any funds so deposited by the Issuer with the Indenture Trustee shall be applied, together with the related Insurance Proceeds or Condemnation Proceeds, as provided in Section 1101(a)(iv)(A) and, in connection therewith, the Issuer may, subject to all of the terms and provisions of Section 1109 hereof, obtain the release of the related Mortgaged Property. (vii) In the event of any conflict or inconsistency between the provisions of the Mortgage and -128- 137 the provisions of this Section 1101(a) with respect to the matters that are the subject of this Section 1101(a), the provisions of this Section 1101(a) shall control. (b) In addition to the redemption of the Notes required to be made pursuant to Section 1101(a), the Issuer may make optional redemptions of the Notes, in whole or in part, on any Interest Payment Date after September 30, 1997, without any premium, but with the payment of Yield Maintenance Charges as provided for hereunder. (c) All redemptions in respect of the Notes, whether mandatory or optional, may only be made if (i) the Issuer shall have given the Indenture Trustee not less than 30 days' prior written notice of such redemption and (ii) such redemption is accompanied by (1) interest on the principal amount being redeemed through the end of the Interest Period in which such redemption occurs and (2) the Yield Maintenance Charge with respect to the principal amount of such redemption. Each notice of redemption shall be irrevocable and shall specify (i) the redemption date (the "REDEMPTION DATE"), (ii) the principal amount of such redemption, (iii) whether such redemption is a mandatory redemption or an optional redemption, (iv) the amount of the Yield Maintenance Charge that is payable in connection with such redemption, and (v) whether the Issuer intends to obtain a release of the Encumbrance of the Mortgage in respect of any Mortgaged Property in connection with such redemption, and if so, such notice shall be accompanied by an Officer's Certificate described in paragraph (b) of Section 1102. SECTION 1102. REDEMPTION PROCEEDS. All principal in respect of a redemption (in whole or in part, mandatory or optional) and accrued and unpaid interest to (and including) the Redemption Date in respect of all Outstanding Notes shall be paid in full on the Redemption Date, together with all applicable Yield Maintenance Charges due in connection with such redemption (such principal, interest and Yield Maintenance Charge, collectively, the "REDEMPTION PRICE"). Upon receipt by the Indenture Trustee of amounts corresponding to the Redemption Price owing on the Notes on the Redemption Date, the Indenture Trustee shall deposit such monies into the Payment Account and apply such monies as provided in Section 306. -129- 138 SECTION 1103. Election to Redeem; Notice to Indenture --------------------------------------- Trustee. - ------- The redemption by the Issuer of any Notes pursuant to Section 1101(a) or 1101(b) shall be evidenced by an Officer's Certificate delivered to the Indenture Trustee, at least five Banking Days prior to the Redemption Date (copies of which Officer's Certificate shall be forwarded promptly by the Indenture Trustee to each Holder of Notes to be redeemed) (i) stating that the Issuer is entitled or obligated to effect such redemption and the Redemption Date, (ii) setting forth in reasonable detail a statement of facts showing that the conditions precedent to the right or obligation of the Issuer to redeem the Notes have occurred, and (iii) stating the aggregate principal amount of the Notes to be redeemed, the accrued interest to be paid in connection therewith and the amount of the Yield Maintenance Charge to be paid in connection therewith. Any Officer's Certificate delivered by the Issuer stating that the Issuer has elected to redeem Notes shall be irrevocable. SECTION 1104. Partial Redemption. ------------------ Whenever less than all the Notes at any time Outstanding are to be redeemed at the option or obligation of the Issuer, the particular Notes (or portions thereof) to be redeemed shall be selected not more than 30 days prior to the Redemption Date by random selection from the Outstanding Notes not previously called for redemption; PROVIDED that the unredeemed portion of the principal amount of any Note shall be in an authorized denomination (which shall not be less than the minimum authorized denomination) for such Note. If the Outstanding Notes are to be redeemed in part, the Notes shall be redeemed on a PRO RATA basis to the greatest extent practicable. If and to the extent the Notes cannot practicably be redeemed on a proportionate basis, the Indenture Trustee shall select Notes (but only to such extent) to be redeemed by lot or in such other manner as the Indenture Trustee deems fair and reasonable. The Indenture Trustee shall promptly notify the Issuer in writing of any Notes selected for partial redemption, and the principal amount thereof to be redeemed. -130- 139 For purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Notes shall relate, in the case of any Notes redeemed or to be redeemed only in part, to the portion of the principal amount of such Notes which has been or is to be redeemed. SECTION 1105. Notice of Redemption. -------------------- Notice of redemption shall be given in the manner provided in Section 106 to the Holders of the Notes to be redeemed, not less than one Business Day prior to the Redemption Date. All notices of redemption shall state: (1) the Redemption Date; (2) the Redemption Price; (3) if less than all the Outstanding Notes are to be redeemed, the principal amount of Notes to be redeemed; (4) that on the Redemption Date the Redemption Price will become due and payable upon each Note to be redeemed and that interest thereon will cease to accrue on and after said date (or in the case of a partial redemption, that interest thereon will cease to accrue on and after such date with respect to the principal amount that is being redeemed); (5) whether such redemption is pursuant to Section 1101(a) or (b); and (6) the place or places where such Notes are to be surrendered or exchanged for payment of the Redemption Price. Notice of redemption of Notes shall be given by the Issuer or, at the Issuer's request, by the Indenture Trustee in the name and at the expense of the Issuer. SECTION 1106. Notes Redeemed in Part. ---------------------- Any Note which is to be redeemed only in part shall be surrendered at an office or agency of the Issuer designated for that purpose pursuant to Section 1003 (with, if the Issuer or the Indenture Trustee so requires, due -131- 140 endorsement by, or a written instrument of transfer in form satisfactory to the Issuer and the Indenture Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Issuer shall execute, and the Indenture Trustee shall authenticate and deliver to the Holder of such Note without service charge, a Note or Notes, of any authorized denomination as requested by such Holder, in an aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Note so surrendered. SECTION 1107. Notes Payable on Redemption Date. -------------------------------- If notice of redemption shall have been given as aforesaid, the Notes so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Issuer shall default in the payment of the Redemption Price) the principal amount being redeemed shall cease to bear interest. Upon surrender or exchange of any such Note for redemption in accordance with said notice, such Note shall be paid by the Issuer at the Redemption Price. If any Note called for redemption shall not be so paid upon surrender or exchange thereof for redemption, the principal shall, until paid, bear interest from the Redemption Date at the Default Rate. SECTION 1108. Deposit of Redemption Price. --------------------------- On or before the second Banking Day next preceding the Redemption Date, the Issuer shall deposit with the Indenture Trustee an amount of Cash sufficient to pay the Redemption Price of all the Notes (or portions thereof) which are to be redeemed on the Redemption Date. SECTION 1109. LIEN RELEASES. Except as set forth in this Section 1109 and Section 401, no repayment or redemption of principal of any Note shall cause, give rise to a right to require or otherwise result in, the release of the Encumbrance of the Mortgage on any Mortgaged Property. The Issuer may obtain the release (in whole but not in part) of one or more Mortgaged Properties from the Encumbrance of the related Mortgage (and the other Security Documents) following a repayment or redemption of a portion of the Notes pursuant to the provisions of this Article Eleven (including, but not limited to, a redemption result- -132- 141 ing from a Casualty or Condemnation), upon satisfaction of each of the following conditions: (a) All payments of principal of, interest on and Yield Maintenance Charge in respect of the Notes theretofore or at such time required to be paid (including but not limited to any such amounts required to be paid to the Indenture Trustee or the Servicer in connection with any related redemption) shall have been paid and all other amounts theretofore or at such time required to be paid under the Transaction Documents shall have been received by the Indenture Trustee or the Servicer, including, without limitation, all costs and expenses incurred by the Indenture Trustee or the Servicer in connection with such release; (b) The Issuer shall have delivered an Officer's Certificate to the Servicer (i) at least 30 days prior to the date the Mortgaged Property is to be released from the lien of the Mortgage, and (ii) on the date of such release, certifying in each case that the conditions in this Section 1109 have been satisfied (or will be satisfied on or prior to the date of such release), with detailed calculations indicating the derivation of the amount of the Yield Maintenance Charge then payable and the amounts then payable pursuant to paragraph (d) of this Section; (c) After giving effect to the proposed release, no Default or Event of Default shall have occurred and be continuing; (d) The Issuer shall, prior to or simultaneous with such release, have made aggregate principal payments in respect of the Notes pursuant to Section 1101(a) or otherwise in an amount at least equal to 125% of the Allocated Note Amounts for (i) the Mortgaged Property or Mortgaged Properties to be released on such date and (ii) any Mortgaged Properties theretofore released from the Encumbrance of the Mortgage; (e) After giving effect to such release and to the related repayment or redemption, the Debt Service Coverage Ratio with respect to the Calculation Period ended most recently preceding the date of such release shall be not less than the greater of (i) 2.45:1.0 and (ii) the Debt Service Coverage Ratio with respect to -133- 142 the Calculation Period ended most recently preceding the date of such release as determined without giving effect to either such release or the related repayment or redemption; and (f) Delivery of any certificate, opinion or other document required pursuant to Section 705. In addition, the Encumbrance of the Mortgage shall be released, upon the written request and at the expense of the Issuer, upon payment in full of all principal of, interest on and Yield Maintenance Charge, if any, in respect of the Notes and all other amounts then due and payable under the Transaction Documents. ARTICLE TWELVE -------------- RESERVES -------- SECTION 1201. Reserves. -------- The Issuer shall establish, and thereafter shall maintain, in accordance with the terms and provisions of this Section 1201, an initial repair reserve (the "INITIAL REPAIR RESERVE"), a maintenance and capital improvement reserve (the "MAINTENANCE AND CAPITAL IMPROVEMENT RESERVE"), a credit enhancement reserve (the "CREDIT ENHANCEMENT RESERVE") and a reserve in respect of the Arthur Andersen Space (the "ARTHUR ANDERSEN RESERVE"), in each case in accordance with the following terms and conditions: SECTION 1202. Initial Repair Reserve. ---------------------- The Initial Repair Reserve was established on the Original Closing Date in the amount of $1,227,227 and shall consist of Cash or Eligible Investments on deposit in an Eligible Account (the "INITIAL REPAIR RESERVE ACCOUNT") established with and in the name of the Indenture Trustee in the State of New York or the State of California. The Issuer may withdraw funds from the Initial Repair Reserve Account from time to time upon delivery to the Servicer of an Officer's Certificate stating that such funds are to be applied to Initial Repair Work, identifying in reasonable detail the specific Initial Repair Work (and the cost thereof) to which such funds are being applied, attaching all relevant invoices and/or bills and certifying that such funds shall not be used for any other purpose. Upon -134- 143 delivery to the Servicer of an Officer's Certificate accompanied by (i) a report of a Qualified Engineering Consultant certifying that the Initial Repair Work listed under the heading "Engineering" on Schedule 6 hereto has been completed in a competent and professional manner and (ii) a report of a Qualified Environmental Consultant certifying that the Initial Repair Work listed under the heading "Environmental" on Schedule 6 hereto has been completed in a competent and professional manner, the Indenture Trustee shall release to the Issuer from the Initial Repair Reserve Account any amounts then remaining on deposit therein. SECTION 1203. Maintenance and Capital Improvement Reserve. ------------------------------------------- The Maintenance and Capital Improvement Reserve was established on the Original Closing Date in an initial amount of $778,386 and shall consist of Cash or Eligible Investments on deposit in an Eligible Account (the "MAINTENANCE AND CAPITAL IMPROVEMENT RESERVE ACCOUNT") established with and in the name of the Indenture Trustee in the State of New York or the State of California. On or prior to September 30 of each year from 1994 through the Maturity Date, the Issuer shall make additional deposits to the Maintenance and Capital Improvement Reserve Account in such amounts as shall be sufficient to cause the balance in the Maintenance and Capital Improvement Reserve Account to be not less than $778,386 at the close of business on September 30 in each of the years 1994 through the Maturity Date excluding, however, the Maturity Date, if such date is the Stated Maturity. The Issuer may withdraw funds from the Maintenance and Capital Improvement Reserve Account from time to time upon presentation to the Servicer of an Officer's Certificate stating that such funds are to be applied to Maintenance and Capital Improvement Expenditures, identifying in reasonable detail the specific Maintenance and Capital Improvement Expenditures (and the cost thereof) to which such funds are to be applied, attaching all relevant invoices and/or bills and certifying that such funds shall not be used for any other purpose. On the Maturity Date, all amounts then on deposit in the Maintenance and Capital Improvement Reserve Account shall be applied to the principal amount then due and owing on the Notes and/or to any other amounts then due and owing to the Indenture Trustee under this Indenture or any other Transaction Document and, upon payment in full of all such amounts, any remaining balance shall be paid to the Issuer. -135- 144 SECTION 1204. Credit Enhancement Reserve. -------------------------- The Credit Enhancement Reserve shall be established on the Issuance Date in an initial amount of $994,387 and shall consist of Cash or Eligible Investments on deposit in an Eligible Account (the "CREDIT ENHANCEMENT RESERVE ACCOUNT") established with and in the name of the Indenture Trustee in the State of New York or the State of California. On each of December 31, 1998, March 31, 1999, June 30, 1999 and September 30, 1999, the Issuer shall deposit an additional $200,000 into the Credit Enhancement Reserve Account. In the event that a Credit Enhancement Event occurs, the Issuer shall deposit into the Credit Enhancement Reserve Account, on each Interest Payment Date commencing with the Interest Payment Date occurring in October 1999, the amount by which the balance in the Rent Collection Account on such Interest Payment Date exceeds the sum of (i) the interest then due and owing under the Notes, (ii) any other amounts then due and owing to the Indenture Trustee or the Servicer under this Indenture or any other Transaction Document and (iii) the Operating Expenses for the related Interest Period; PROVIDED, HOWEVER, that the aggregate amount of all deposits made to the Credit Enhancement Reserve Account pursuant to this sentence on all such Interest Payment Dates shall not exceed $2,250,000; PROVIDED FURTHER, that upon the occurrence of a Credit Enhancement Event, the Issuer may elect to satisfy its obligation to make deposits to the Credit Enhancement Reserve Account pursuant to this sentence by making one or more lump sum deposits to the Credit Enhancement Reserve Account on or prior to October 30, 1999 in an aggregate amount equal to $2,250,000. On the Maturity Date, all amounts then on deposit in the Credit Enhancement Reserve Account shall be applied to the principal amount then due and owing on the Notes and/or to any other amounts then due and owing to the Indenture Trustee or the Servicer under this Indenture or any other Transaction Document and, upon payment in full of all such amounts, any remaining balance shall be paid to the Issuer. SECTION 1205. Arthur Andersen Reserve Account. ------------------------------- In the event that Arthur Andersen & Co. elects to exercise its right to terminate its Lease with respect to office space at the One North State Street Mortgaged Property (the "ARTHUR ANDERSEN SPACE") effective as of a date prior to the expiration of such Lease, the Arthur Andersen Reserve shall be established in an aggregate amount equal to the amount of the cancellation fee paid by Arthur -136- 145 Andersen & Co. to the Issuer under its Lease in connection with such termination and shall consist of Cash or Eligible Investments on deposit in an Eligible Account (the "ARTHUR ANDERSEN RESERVE ACCOUNT") established with and in the name of the Indenture Trustee in the State of New York or the State of California. The Issuer may withdraw funds from the Arthur Andersen Reserve Account from time to time upon presentation to the Servicer of an Officer's Certificate stating that such funds are to be applied to costs (including but not limited to tenant alterations, leasing commissions and other lease inducements) directly related to releasing the Arthur Anderson Space, identifying in reasonable detail the specific costs to which such funds are to be applied, attaching all relevant invoices and/or bills and certifying that such funds will not be used for any other purpose. In the event that any balance remains in the Arthur Andersen Reserve Account after completion of the releasing of all of the Arthur Andersen Space, such amount shall be applied to the principal amount of the Notes on the Maturity Date or on such earlier date on which the Issuer elects to apply such funds to make an optional redemption of the Notes in accordance with Section 1101. SECTION 1206. Security Interest. ----------------- As collateral security for the Obligations, the Issuer hereby pledges and assigns to the Indenture Trustee for the benefit of the Holders of the Notes, and grants to the Indenture Trustee for the benefit of the Holders of the Notes a continuing security interest in each Reserve, each Reserve Account and all funds on deposit therein from time to time, subject to the provisions of this Article Twelve. SECTION 1207. Investment. ---------- The funds on deposit in each Reserve Account from time to time shall be invested in Eligible Investments (and with maturity dates) as designated from time to time in writing by Issuer to the Servicer and the Indenture Trustee; PROVIDED, HOWEVER, that each such Eligible Investment shall mature not later than 60 days following the acquisition of such Eligible Investment and shall be maintained in the possession of the Indenture Trustee or in such other manner as shall cause the Indenture Trustee to have a first priority perfected security interest in each such Eligible Investment. None of the Servicer, the Indenture Trustee, or the commercial bank or trust company maintaining any Reserve Account shall have any liability for any Eligible Investment made in accordance with this -137- 146 Section 1207. So long as no Default or Event of Default has occurred and is continuing, all income earned on the funds from time to time on deposit in the Reserve Accounts shall be released from the respective Reserve Account and paid to the Issuer on a quarterly basis. ARTICLE THIRTEEN ---------------- EXPENSES AND INDEMNITY ---------------------- SECTION 1301. Expenses; Indemnity. ------------------- (a) The provisions of this Section are supplemental to, not duplicative of, Section 605. (b) (EXPENSES.) Whether or not the transactions contemplated hereby are consummated, the Issuer shall reimburse the Indenture Trustee, the Servicer, KPMCC, Kidder, any Affiliate of Kidder, the Pass-Through Trustee and the Originator (each a "REIMBURSEMENT PARTY") upon receipt of written notice from such Reimbursement Party for all reasonable costs and expenses (including reasonable attorneys' fees and disbursements) incurred by such Reimbursement Party in connection with: (i) the preparation, negotiation, execution and delivery of this Indenture, the other Transaction Documents and the Related Documents and the consummation of the transactions contemplated hereby and thereby (including the issuance and sale of the Notes) and all the costs of furnishing all opinions by counsel for the Issuer (including, without limitation, any opinions requested by the Indenture Trustee or any Rating Agency as to any legal matters arising under this Indenture, the other Transaction Documents or the Related Documents or with respect to any Mortgaged Property); PROVIDED, HOWEVER, that the maximum amount payable by the Issuer for all of the amounts referred to in this clause (i) (other than any such amounts payable to counsel for the Issuer) shall not exceed $1,275,000 (which amount has previously been paid by the Issuer to KPMCC); (ii) Issuer's ongoing performance of and compliance with all agreements and covenants contained in this Indenture, the other Transaction Documents and the Related Documents on its part to be performed or complied with after the Issuance Date, including, without limitation, confirming compliance with environmental and insurance requirements; (iii) the negotiation, preparation, execution, delivery and administration of any consents, amendments, waivers or other modifications to this Indenture, the other Transac- -138- 147 tion Documents or the Related Documents and any other documents or matters requested by the Issuer; (iv) the filing and recording fees and expenses, title insurance and reasonable fees and expenses of the Issuer's counsel for providing the opinions delivered pursuant to this Indenture, and other similar expenses incurred in creating and perfecting Encumbrances in favor of the Indenture Trustee pursuant to this Indenture, the other Transaction Documents and/or the Related Documents; (v) enforcing or preserving any rights, in response to third party claims or prosecuting or defending of any action or proceeding or other litigation, in each case against, under or affecting the Issuer, this Indenture, the other Transaction Documents, the Related Documents, any party (other than the Issuer) to any Related Document, any Mortgaged Property or any other security given for the Notes; and (vi) enforcing any obligations of or collecting any payments due from the Issuer under this Indenture, the other Transaction Documents or any Related Document or with respect to the Mortgaged Property or in connection with any refinancing or restructuring of the credit arrangements provided under this Indenture in the nature of a "work-out" or of any insolvency or bankruptcy proceedings. (c) (INDEMNITY.) In addition to, but without duplication of the payment of, expenses pursuant to paragraph (b) above or the indemnification provided for in the Environmental Indemnity, whether or not the transactions contemplated hereby shall be consummated, the Issuer agrees to indemnify, pay and hold harmless each of the Originator, KPMCC, Kidder, the Servicer, the Indenture Trustee, the Pass-Through Trustee and their respective officers, directors, agents, parents and Affiliates (each an "indemnified party"), and each of them, from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such indemnified party in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such indemnified party shall be designated a party thereto), that may be imposed on, incurred by, or asserted against such indemnified party in any manner relating to or arising out of (i) this Indenture, the other Transaction Documents or any Related Document, (ii) the Notes or the use or intended use of the proceeds of the Notes or (iii) the issuance, offering and sale of the Notes (collectively, the "INDEMNIFIED LIABILITIES"); PROVIDED, HOWEVER, that -139- 148 Issuer shall not have any obligation to an indemnified party under this Section 1301 to the extent that such Indemnified Liabilities arise from gross negligence, illegal acts or willful misconduct of such indemnified party or with respect to the principal of, or interest on, the Notes. To the extent that the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it violates any law or public policy, the Issuer shall contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by any indemnified party. (d) The Issuer hereby acknowledges and agrees that each indemnified party is an intended third party beneficiary of this Section 1301 and that each such indemnified party has agreed to enter into the Transaction Documents and the Related Documents to which it is a party, and to perform its obligations thereunder, based on and in reliance upon this Section 1301. (e) The obligations of the Issuer set forth in this Article Thirteen shall not be expanded or increased by any amendment of the Trust and Servicing Agreement. -140- 149 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed, all as of the day and year first above written. BANKERS TRUST COMPANY OF CALIFORNIA, N.A., as Indenture Trustee By /s/ Lynnette Antosh ------------------------------- Name: Lynnette Antosh Title: Vice President TUCKER FINANCING PARTNERSHIP, a Delaware general partnership By: Tucker Financing Corp., as managing general partner By /s/ Richard H. Tucker ----------------------------- Name: Richard H. Tucker Title: Executive Vice President BANKERS TRUST COMPANY, as Servicer By /s/ Lynnette Antosh --------------------------- Name: Lynnette Antosh Title: Vice President -141- 150 STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the 16th day of June, 1994, before me personally came Lynnette Antosh, to me known, who, being by me duly sworn, did depose and say that she is a Vice President of Bankers Trust Company of California, N.A., the banking corporation described in and which executed the foregoing instrument; that she knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that she signed her name thereto by like authority. /s/ Gregory E. Ostling ------------------------------ Notary Public GREGORY E. OSTLING Notary Public, State of New York No. 31-5020668 Qualified in New York County Commission Expires Nov. 22, 1995 151 STATE OF ILLINOIS ) ) ss.: COUNTY OF COOK ) On the 13th day of June 1994, before me personally came Richard H. Tucker, to me known, who, being by me duly sworn, did depose and say that he is the Executive Vice President of Tucker Financing Corp., which corporation is a general partnership of Tucker Financing Partnership, the partnership described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto on behalf of such corporation as general partner of such partnership by like authority. /s/ Kenneth W. Bosworth ----------------------------- Notary Public My Commission Expires: -------------------------------- "OFFICAL SEAL" KENNETH W. BOSWORTH NOTARY PUBLIC, STATE OF ILLINOIS MY COMMISSION EXPIRES 5/17/97 -------------------------------- 152 STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the 16th day of June, 1994, before me personally came Lynnette Antosh, to me known, who, being by me duly sworn, did depose and say that she is a Vice President of Bankers Trust Company, the banking corporation described in and which executed the foregoing instrument; that she knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that she signed her name thereto by like authority. /s/ Gregory E. Ostling ------------------------------ Notary Public GREGORY E. OSTLING Notary Public, State of New York No. 31-5020668 Qualified in New York County Commission Expires Nov. 22, 1995 EX-21.1 5 SUBSIDIARIES 1 EXHIBIT 21.1 ------------ SUBSIDIARIES OF BRADLEY REAL ESTATE, INC. Bradley Real Estate Management, Inc., a Massachusetts corporation Bradley Midwest Management, Inc., a Minnesota corporation Bradley Operating Limited Partnership, a Delaware limited partnership Bradley Financing Corp., a Delaware corporation Bradley Financing Partnership, a Delaware partnership Bradley Management Corp., a Delaware corporation Bradley Management Limited Partnership, a Delaware limited partnership Bradley Properties Investments, Inc., an Illinois corporation Williamson Square Associates Limited Partnership, an Illinois limited partnership EX-23.1 6 CONSENT OF KPMG PEAT MARWICK LLP 1 Exhibit 23.1 ------------ CONSENT OF INDEPENDEDNT AUDITORS The Board of Directors Bradley Real Estate, Inc.: We consent to incorporation by reference in the registration statements (Nos. 33-87084 and 33-62200) on Form S-3 and the registration statements (Nos. 33-34884 and 33-65180) on Form S-8 of Bradley Real Estate, Inc. of our report dated February 19, 1996, except for note 10, which is as of March 15, 1996, relating to the balance sheets and related schedule of Bradley Real Estate, Inc. as of December 31, 1995 and 1994, and the related statements of income, changes in stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1995, which report appears in the December 31, 1995 annual report on Form 10-K of Bradley Real Estate, Inc. KPMG PEAT MARWICK LLP Boston, Massachusetts March 25, 1996 31 EX-27 7 FINANCIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE. EXHIBIT 27.1 ------------
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF BRADLEY REAL ESTATE FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 US DOLLARS YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 1 697,000 0 9,382,000 (711,000) 0 18,034,000 189,405,000 (27,591,000) 180,545,000 6,053,000 39,394,000 112,000 0 0 135,098,000 180,545,000 0 36,572,000 0 16,119,000 7,317,000 0 4,705,000 8,431,000 0 8,431,000 0 0 0 8,431,000 .85 .85
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