-----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, K7pwnRE+keKZIHWUlgn66b7o/QW/VsY0Sidtdrpswai2fDh7CtLO7aZ53r1MqoGc z3Kbmh/KjuzMC7prdMU48Q== 0000950152-96-005100.txt : 19961008 0000950152-96-005100.hdr.sgml : 19961008 ACCESSION NUMBER: 0000950152-96-005100 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961007 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST UNION REAL ESTATE EQUITY & MORTGAGE INVESTMENTS CENTRAL INDEX KEY: 0000037008 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 346513657 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06249 FILM NUMBER: 96639992 BUSINESS ADDRESS: STREET 1: 55 PUBLIC SQUARE STREET 2: STE 1900 CITY: CLEVELAND STATE: OH ZIP: 44113 BUSINESS PHONE: 2167814030 MAIL ADDRESS: STREET 1: 55 PUBLIC SQUARE SUITE 1910 CITY: CLEVELAND STATE: OH ZIP: 44113 FORMER COMPANY: FORMER CONFORMED NAME: FIRST UNION REALTY DATE OF NAME CHANGE: 19691012 10-Q 1 FIRST UNION 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 --------------- For Quarter Ended September 30, 1996 Commission File Number 1-6249 ------------------ ------ First Union Real Estate Equity and Mortgage Investments - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Ohio 34-6513657 - -------------------------------- ------------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No. Suite 1900, 55 Public Square Cleveland, Ohio 44113-1937 - --------------------------------------- ------------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (216) 781-4030 ------------------------ - -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. 17,459,144 Shares of Beneficial Interest outstanding as of September 30, 1996 - -------------------------------------------------------------------------------- ============================================================================== Total number of pages contained in this report: 13 2 PART I - FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements. - ------- --------------------- The combined financial statements included herein have been prepared by the registrant, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the registrant believes that the disclosures contained herein are adequate to make the information presented not misleading. It is suggested that these combined financial statements be read in conjunction with the combined financial statements and the notes thereto included in the registrant's latest annual report on Form 10-K. The unaudited "Combined Balance Sheets" as of September 30, 1996 and December 31, 1995 and "Combined Statements of Income and Combined Statements of Changes in Cash" for the periods ended September 30, 1996 and 1995, of the registrant, and "Notes to Combined Financial Statements," are included herein. These financial statements reflect, in the opinion of the registrant, all adjustments (consisting of normal recurring accruals) necessary to present fairly the combined financial position and results of operations for the respective periods in conformity with generally accepted accounting principles consistently applied. Item 2. Management's Discussion and Analysis of Financial Condition and Results - ------- ----------------------------------------------------------------------- of Operations. -------------- Financial Condition - ------------------- In February 1996, the registrant sold two office buildings and a parking garage in Cleveland, OH for $1.8 million in cash and a $7 million, 8% note secured by the properties. This sale resulted in a capital loss of $5.6 million which was previously provided for by the registrant as part of a $14 million noncash unrealized loss on the carrying value of certain assets recorded in December 1995. The registrant obtained a $12.5 million mortgage loan in January 1996. The mortgage loan is secured by an apartment complex in Durham, NC and is at an interest rate of 6.875%. In April 1996, the registrant obtained two mortgage loans secured by apartment complexes in Indianapolis, IN and Cincinnati, OH. The loans for $15 million and $9 million are at interest rates of 7.65% and 7.395%, respectively. In late September 1996, the registrant obtained a $12 million mortgage loan at 7.75% secured by the Woodland Commons Shopping Center in Buffalo Grove, Ill. Proceeds from these four mortgage loans totaling $48.5 million were used to repay short-term bank loans. In June 1996, the registrant received repayment of its $7 million mortgage investment. The mortgage investment had been part of the consideration received in the registrant's sale in February 1996, of the two office buildings and a parking garage discussed above. The proceeds of this mortgage investment were used to repay short-term bank loans and the $5 million, 8.6% medium term note which was due in July 1996. The registrant, in September 1996, renegotiated, restructured, and expanded its revolving credit agreements. The new $96 million credit agreement is secured by the same collateral that secured the former $80 million facilities. The new agreement is at a variable interest rate and requires defined levels of funds from operations, net worth and interest coverage. The term of the $96 million credit agreement is two years and can be extended thereafter each year upon request of the registrant and consent of the bank group. Also in late September 1996, the registrant invested $30 million, from its bank credit facility, in a joint venture. The joint venture acquired nine regional shopping malls totaling 5,800,000 square feet of gross leasable area. These shopping malls are the dominant retail facilities located primarily in regional markets in Louisiana, Arkansas, Texas, Oklahoma and New Mexico. The purchase price paid by the joint venture was $311.7 million which includes the assumption of $50 million in existing mortgage debt. The registrant's property management affiliate will manage the properties for the joint venture. The registrant has recorded this joint venture investment using the equity method of accounting, as the registrant owns 26% of the joint venture. The joint venture had no effect on net income during the third quarter of 1996 since the transaction occurred at the end of the quarter. Except as noted above, there has been no material change in the registrant's financial condition from December 31, 1995. 2 3 Liquidity and Capital Resources - ------------------------------- Net cash provided by operations for the nine months ended September 30, 1996 of $14 million was approximately $2 million greater than the same period in the prior year. This increase in cash provided by operations during 1996 is primarily attributed to the increase in accrued liabilities when comparing the nine months ended September 30, 1996 to the same period in the prior year. Dividends paid in 1996 of $5.9 million represented 42% of net cash from operating activities. Net cash used for investing of $38 million for the first nine months of 1996 included $8.8 million in proceeds received from the sale of two office buildings and a parking garage, which was offset by upgrading and reinvesting $16.6 million in building and tenant improvements and a $30 million investment in a joint venture as discussed previously. The capital expenditures and tenant improvements were primarily made to complete the renovations of two retail properties and a retail anchor tenant expansion which began in 1995. Also, a 56,500 square foot office space was built for a tenant that took occupancy in April 1996 at North Valley Center which is being converted from a retail mall to a business and commerce center. Net cash provided by financing of $22 million during the first nine months of 1996 included $48.5 million from four new mortgage loans secured by three apartment complexes and a shopping mall. Also, the registrant purchased 950,000 of its shares of beneficial interest for $7.1 million using funds available under its bank credit facilities. This purchase was part of a settlement agreement with a minority shareholder. The registrant purchased the shares at the average share price for the time period beginning January 1, 1995 and ending December 8, 1995. Additionally, in July 1996 the registrant repaid the $5 million, 8.6% medium term note with cash received from the repayment of a mortgage investment. During the remaining three months of 1996, the registrant has approximately $1 million in mortgage principal payments due and an estimated $4 million in tenant and building improvements. The registrant intends to fund the debt repayments and investments in capital expenditures through its residual funds from operations and credit facility. Results of Operations - --------------------- Net income was $1 million and $.3 million for the three months ended September 30, 1996 and 1995, respectively. Net income for the three months ended September 30, 1995 included $.3 million in litigation and proxy expenses. Net income for the first nine months of 1996 was $1.1 million as compared to $27.7 million in 1995. Net income for 1995 included a capital gain of $29.9 million, a $4.3 million non-cash charge for the cumulative effect of a change in accounting method and $1.4 million of litigation and proxy expenses. Net income for 1996 included two non-recurring, non-cash charges totaling $1.3 million for the write-off of a tenant allowance and the termination of an employment contract. The $29.9 million capital gain in 1995 resulted from the sale of the registrant's 50% interests in two malls in Wilkes-Barre, PA and Fairmount, WV for $29.5 million in cash, a $6 million mortgage at an interest rate of 9% secured by one of the malls and also secured by partnership units of Crown American Properties L.P., and the assumption by the purchaser of $4.7 million of mortgage debt. The proceeds from this sale were invested in short-term securities until properties were acquired in 1995 in a tax-free exchange. In 1995, the registrant recorded a non-cash charge of $4.3 million for the cumulative effect of the change in accounting method for leasing costs. Previously, the registrant deferred internal leasing costs and amortized these costs over the lives of the consummated leases. This practice is the normal method used in the industry, however the registrant exercised prudence in adopting a more conservative expensing practive. This change in the method of accounting was made retroactive to January 1995 and, consequently, 1995 amounts have been restated to reflect this change. Income before capital gains and cumulative effect of accounting change was $1.0 million for the three months ended September 30, 1996 as compared to $.3 million for the same period in 1995. For the nine months of 1996, income before capital gains and cumulative effect of accounting change was $1.1 million compared to $2.2 million in 1995. Property net operating income, which is calculated as revenue generated from rents and mortgage investment interest less property operating expenses and real estate taxes, was $11.3 million and $10.8 million for the three months ended September 30, 1996 and 1995, respectively. Property net operating income for properties in the portfolio for both 1996 and 1995 increased by $.8 million over 1995. This increase is partially offset by the loss of property net operating income from three office buildings and a parking garage that were sold in December 1995 and February 1996, thereby resulting in a net increase of $.4 million for the entire portfolio. 3 4 Property net operating income was $33.3 million and $32.6 when comparing the first nine months of 1996 to 1995. However, property net operating income when comparing the first nine months of 1996 to the same period of 1995 increased by $.9 million for properties in the portfolio for both 1996 and 1995. The portfolio included non-comparable properties and mortgage investments during 1996 and 1995 due to the acquisition of a shopping mall and an apartment complex in 1995, and the sale of two shopping malls, three office buildings and a parking garage in 1995 and 1996. During the first half of 1995, the registrant had an average of $13 million in short-term investments from the proceeds of the January 1995 sale of its 50% interest in two malls. These funds were used to purchase a shopping mall and an apartment complex in April and June of 1995, respectively. Mortgage interest expense increased when comparing 1996 to 1995 due to the three new mortgage loans totaling $36.5 million obtained in January and April of 1996. However, the registrant's refinancing in the fourth quarter of 1995 of four mortgage loans at an average interest rate of 9.25% for one mortgage loan at 7.49% partially offsets the full effect of the increase in mortgage interest expense from the addition of the three mortgage loans in 1996. Bank loans increased when comparing 1996 to 1995 due to increased borrowings on the bank credit facilities during the last half of 1995 and first nine months of 1996. The borrowings were used to fund in part the registrant's investment in its capital improvement program, to purchase 950,000 shares of beneficial interest in January 1996, and to invest $30 million in a joint venture to acquire nine shopping malls. For the nine months ended September 30, 1996, the registrant had an average of $56 million of bank lines of credit outstanding as compared to an average of $46 million in 1995. Depreciation and amortization expense for the first nine months of 1996 increased over the same period in 1995 by approximately $1.2 million. This increase was caused by a non-recurring, non-cash $680,000 write-off of a tenant allowance due to the registrant replacing an anchor tenant at one of its malls. Additionally, the remaining increase in depreciation expense, when comparing 1996 to 1995, was attributable to the registrant's capital improvement program during the last half of 1995 and continuing in 1996. General and administrative expenses in the first nine months of 1996 included a non-recurring, non-cash charge of $650,000 for the termination of an employment contract of a former executive. Additionally, litigation and proxy expenses of $.3 million and $1.4 million were included in general and administrative expenses in the third quarter and nine months ended September 1995, respectively. PART II - OTHER INFORMATION - --------------------------- Item 1. Legal Proceedings. - ------- ------------------ None. Item 2. Changes in Securities. - ------- ---------------------- None. Item 3. Defaults Upon Senior Securities. - ------- -------------------------------- None. Item 4. Submission of Matters to a Vote of Security Holders. - ------- ---------------------------------------------------- None. Item 5. Other Information. - ------- ------------------ None. 4 5 Item 6. Exhibits and Reports on Form 8-K and Form 8-K/A. - ------- ------------------------------------------------ (a) Exhibits: -------- Exhibit (10a) - Bank Credit Agreement dated September 19, 1996. Exhibit (10b) - First Union Management, Inc. Declaration of Trust dated October 1, 1996. Exhibit (11) - Statements Re: Computation of Per Share Earnings. Exhibit (12) - Statements Re: Ratios of Combined Income from Operations and Combined Net Income to Fixed Charges Exhibit (20) - Financial Statements (Unaudited) Combined Balance Sheets as of September 30, 1996 and December 31, 1995 Combined Statements of Income for the Three and Nine Months ended September 30, 1996 and 1995 Combined Statements of Changes in Cash for the Three and Nine Months ended September 30, 1996 and 1995 Notes to Combined Financial Statements Exhibit (27) - Financial Data Schedule (b) Reports on Form 8-K and Form 8-K/A. ------------------------------------- (1) Form 8-K -------- None. (2) Form 8-K/A ---------- Report dated June 12, 1996 regarding investment in retail properties through a joint venture and filed on October 7, 1996. 5 6 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. First Union Real Estate Equity and Mortgage Investments ---------------------------------- (Registrant) Date: October 7, 1996 By: /s/ James C. Mastandrea ---------------------------------- James C. Mastandrea, Chairman President, Chief Executive Officer and Chief Financial Officer Date: October 7, 1996 By: /s/ John J. Dee ---------------------------------- John J. Dee, Senior Vice President, Chief Accounting Officer 6 7 Index to Exhibits -----------------
Page Number ------ Exhibit (10a) - Bank Credit Agreement dated September 19, 1996................. 8 Exhibit (10b) - First Union Management, Inc. Declaration of Trust dated October 1, 1996.................................... 9 Exhibit (11) - Statements Re: Computation of Per Share Earnings .............................................. 10 Exhibit (12) - Statements Re: Ratios of Combined Income from Operations and Combined Net Income to Fixed Charges............... 11 Exhibit (20) - Financial Statements (unaudited)............................... 12 Combined Balance Sheets as of September 30, 1996 and December 31, 1995 Combined Statements of Income for the Three and Nine Months ended September 30, 1996 and 1995 Combined Statements of Changes in Cash for the Three and Nine Months ended September 30, 1996 and 1995 Notes to Combined Financial Statements Exhibit (27) - Financial Data Schedule........................................ 13
7 EX-10.A 2 EXHIBIT 10(A) 1 Exhibit 10(a) U.S.$96,000,000 CREDIT AGREEMENT DATED AS OF SEPTEMBER 19, 1996 AMONG FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS AS BORROWER FIRST UNION MANAGEMENT, INC. AS MANAGEMENT COMPANY THE LENDING INSTITUTIONS NAMED THEREIN AS LENDERS AND NATIONAL CITY BANK AS ADMINISTRATIVE AGENT 2 TABLE OF CONTENTS PAGE ---- SECTION 1. AMOUNT AND TERMS OF CREDIT................................... 1 1.1. COMMITMENTS............................................ 1 1.2. MINIMUM BORROWING AMOUNTS, ETC......................... 2 1.3. NOTICE OF BORROWING.................................... 2 1.4. DISBURSEMENT OF FUNDS.................................. 3 1.5. NOTES.................................................. 3 1.6. CONVERSIONS............................................ 4 1.7. PRO RATA BORROWINGS.................................... 4 1.8. INTEREST............................................... 4 1.9. INTEREST PERIODS....................................... 4 1.10. INCREASED COSTS, ILLEGALITY, ETC....................... 5 1.11. COMPENSATION........................................... 7 1.12. CHANGE OF LENDING OFFICE; REPLACEMENT OF LENDERS....... 7 SECTION 2. LETTERS OF CREDIT...................................... 8 2.1. LETTERS OF CREDIT...................................... 8 2.2. LETTER OF CREDIT REQUESTS: NOTICES OF ISSUANCE......... 8 2.3. AGREEMENT TO REPAY LETTER OF CREDIT DRAWINGS........... 9 2.4. LETTER OF CREDIT PARTICIPATIONS........................ 9 2.5. INCREASED COSTS........................................ 11 2.6. OBLIGATIONS ABSOLUTE................................... 11 SECTION 3. FEES; COMMITMENTS...................................... 12 3.1. FEES................................................... 12 3.2. VOLUNTARY REDUCTION OF COMMITMENTS..................... 13 3.3. MANDATORY ADJUSTMENTS OF COMMITMENTS, ETC.............. 13 3.4. EXTENSION OF MATURITY DATES............................ 13 SECTION 4. PAYMENTS............................................... 14 4.1. VOLUNTARY PREPAYMENTS.................................. 14 4.2. MANDATORY PREPAYMENTS.................................. 14 4.3. METHOD AND PLACE OF PAYMENT............................ 16 4.4. NET PAYMENTS........................................... 16 SECTION 5. CONDITIONS PRECEDENT................................... 18 5.1. CONDITIONS PRECEDENT AT INITIAL BORROWING DATE......... 18 5.2. CONDITIONS PRECEDENT TO ALL CREDIT EVENTS.............. 22 SECTION 6. REPRESENTATIONS AND WARRANTIES......................... 22 6.1. ORGANIZATION, EXISTENCE................................ 23 6.2. DUE AUTHORIZATION...................................... 23 6.3. ENFORCEABILITY OF DOCUMENTS............................ 24 6.4. NO DEFAULT............................................. 24 6.5. FINANCIAL STATEMENTS................................... 25 6.6. NO ADVERSE CHANGES..................................... 25 6.7. TITLE TO ASSETS........................................ 25 6.8. LITIGATION............................................. 25 6.9. NO MATERIALLY ADVERSE CONTRACTS........................ 25 6.10. TAX RETURNS............................................ 25 3 Page ---- 6.11. CONTRACTS WITH AFFILIATES OR SUBSIDIARIES................. 26 6.12. EMPLOYEE BENEFIT PLANS.................................... 26 6.13. GOVERNMENTAL REGULATION................................... 26 6.14. MARGIN STOCK; USE OF PROCEEDS............................. 26 6.15. DISCLOSURE................................................ 26 6.16. NO MATERIAL DEFAULT....................................... 26 6.17. ENVIRONMENTAL CONDITIONS.................................. 27 6.18. LICENSES AND PERMITS...................................... 27 SECTION 7. AFFIRMATIVE COVENANTS..................................... 28 7.1. REPORTS AND OTHER INFORMATION............................. 28 7.2. MAINTENANCE OF PROPERTY; INSURANCE........................ 29 7.3. PRIORITY OF MORTGAGES..................................... 29 7.4. SECURITY INTERESTS........................................ 30 7.5. MAINTENANCE OF EXISTENCE.................................. 30 7.6. COMPLIANCE WITH LAWS...................................... 30 7.7. NOTICE OF LITIGATION; JUDGMENTS........................... 31 7.8. NOTICE OF OTHER EVENTS.................................... 31 7.9. INSPECTIONS............................................... 31 7.10. PAYMENT OF TAXES AND OTHER CLAIMS......................... 32 7.11. PAYMENT OF INDEBTEDNESS................................... 32 7.12. PERFORMANCE OF OBLIGATIONS UNDER THE LOAN DOCUMENTS....... 32 7.13. GOVERNMENTAL CONSENTS AND APPROVALS....................... 32 7.14. EMPLOYEE BENEFIT PLANS AND GUARANTEED PENSION PLANS....... 32 7.15. FURTHER ASSURANCES........................................ 33 7.16. FINANCIAL COVENANTS....................................... 33 7.17. ADDITIONAL MORTGAGED PROPERTIES; SUBSTITUTE MORTGAGED PROPERTIES...................................... 34 7.18. INTEREST RATE HEDGING..................................... 36 SECTION 8. NEGATIVE COVENANTS........................................ 37 8.1. LIMITATION ON NATURE OF BUSINESS.......................... 37 8.2. LIMITATION ON CONSOLIDATION AND MERGER.................... 37 8.3. LIMITATION ON DISTRIBUTIONS, DIVIDENDS AND RETURN OF CAPITAL................................................ 38 8.4. ACQUISITION OF MARGIN SECURITIES.......................... 38 8.5. LIMITATION ON INDEBTEDNESS................................ 39 8.6. GUARANTEES................................................ 41 8.7. LIENS..................................................... 41 8.8. SALES OF ASSETS, ETC...................................... 42 8.9. LEASING OF ELIGIBLE REAL ESTATE........................... 43 8.10. TRANSACTIONS WITH AFFILIATES.............................. 43 8.11. LIMITATION ON CERTAIN ACTIONS............................. 43 SECTION 9. EVENTS OF DEFAULT......................................... 44 9.1. EVENTS OF DEFAULT......................................... 44 9.2. ACCELERATION, ETC......................................... 45 9.3. REMEDIES.................................................. 46 9.4. APPLICATION OF LIQUIDATION PROCEEDS....................... 46 SECTION 10. DEFINITIONS............................................... 47 SECTION 11. THE ADMINISTRATIVE AGENT.................................. 61 ii 4 Page ---- 11.1. APPOINTMENT............................................... 61 11.2. DELEGATION OF DUTIES...................................... 61 11.3. EXCULPATORY PROVISIONS.................................... 61 11.4. RELIANCE BY ADMINISTRATIVE AGENT.......................... 61 11.5. NOTICE OF DEFAULT......................................... 62 11.6. NON-RELIANCE.............................................. 62 11.7. INDEMNIFICATION........................................... 62 11.8. THE ADMINISTRATIVE AGENT IN INDIVIDUAL CAPACITY........... 63 11.9. SUCCESSOR ADMINISTRATIVE AGENT............................ 63 11.10. OTHER AGENTS.............................................. 63 SECTION 12. MISCELLANEOUS............................................. 63 12.1. PAYMENT OF EXPENSES ETC................................... 63 12.2. RIGHT OF SETOFF........................................... 64 12.3. NOTICES................................................... 64 12.4. BENEFIT OF AGREEMENT...................................... 64 12.5. NO WAIVER: REMEDIES CUMULATIVE............................ 65 12.6. PAYMENTS PRO RATA......................................... 66 12.7. CALCULATIONS: COMPUTATIONS................................ 66 12.8. GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL...................................... 66 12.9. COUNTERPARTS.............................................. 67 12.10. EFFECTIVENESS............................................. 67 12.11. HEADINGS DESCRIPTIVE...................................... 67 12.12. AMENDMENT OR WAIVER....................................... 67 12.13. SURVIVAL.................................................. 68 12.14. DOMICILE OF LOANS......................................... 68 12.15. CONFIDENTIALITY........................................... 68 12.16. LENDER REGISTER........................................... 68 12.17. LIMITATIONS ON LIABILITY OF THE LETTER OF CREDIT ISSUERS................................................... 68 12.18. GENERAL LIMITATION OF LIABILITY........................... 69 12.19. NO DUTY................................................... 69 12.20. LENDERS AND AGENT NOT FIDUCIARY TO CREDIT PARTIES, ETC....................................................... 69 12.21. SURVIVAL OF REPRESENTATIONS AND WARRANTIES................ 69 12.22. LIMITATION ON ENFORCEMENT OF SECURITY DOCUMENTS........... 69 12.23. LIABILITY OF BORROWER'S TRUSTEES, ETC..................... 69 iii 5 ANNEX I - INFORMATION AS TO LENDERS ANNEX II - INFORMATION AS TO SUBSIDIARIES ANNEX III - LIST OF INITIAL MORTGAGED PROPERTIES, MARKET CONSTANTS AND COVERAGE FACTORS ANNEX IV - DESCRIPTION OF CERTAIN PROPERTY DISPOSITIONS ANNEX V - DESCRIPTION OF CERTAIN LITIGATION ANNEX VI - LIST OF CERTAIN EMPLOYEE BENEFIT PLANS AND GUARANTEED PENSION PLANS ANNEX VII - DESCRIPTION OF CERTAIN MATERIAL AGREEMENTS ANNEX VIII - DESCRIPTION OF INDEBTEDNESS FOR BORROWED MONEY, INCLUDING THAT OWED TO THE BORROWER BY AFFILIATES EXHIBIT A-1 - FORM OF NOTICE OF BORROWING EXHIBIT A-2 - FORM OF LETTER OF CREDIT REQUEST EXHIBIT B - FORM OF NOTE EXHIBIT C - FORM OF OPINION OF SPECIAL COUNSEL TO THE BORROWER EXHIBIT D-1 - FORM OF MORTGAGE (READING MALL, READING, PENNSYLVANIA) EXHIBIT D-2 - FORM OF MORTGAGE (55 PUBLIC SQUARE, CLEVELAND, OHIO) EXHIBIT D-3 - FORM OF MORTGAGE (KANDI MALL, WILLMAR, MINNESOTA) EXHIBIT D-4 - FORM OF MORTGAGE (CROSSROADS MALL, FT. DODGE, IOWA) EXHIBIT D-5 - FORM OF MORTGAGE (WALDEN VILLAGE APARTMENTS, CLARKSTON, GEORGIA) EXHIBIT D-6 - FORM OF MORTGAGE (BRIARWOOD APARTMENTS, FAYETTVILLE, NORTH CAROLINA) EXHIBIT E-1 - FORM OF LEASE ASSIGNMENT (READING MALL, READING, PENNSYLVANIA) EXHIBIT E-2 - FORM OF LEASE ASSIGNMENT (55 PUBLIC SQUARE, CLEVELAND, OHIO) EXHIBIT E-3 - FORM OF LEASE ASSIGNMENT (KANDI MALL, WILLMAR, MINNESOTA) EXHIBIT E-4 - FORM OF LEASE ASSIGNMENT (CROSSROADS MALL, FT. DODGE, IOWA) EXHIBIT E-5 - FORM OF LEASE ASSIGNMENT (WALDEN VILLAGE APARTMENTS, CLARKSTON, GEORGIA) EXHIBIT E-6 - FORM OF LEASE ASSIGNMENT (BRIARWOOD APARTMENTS, FAYETTVILLE, NORTH CAROLINA) EXHIBIT F - FORM OF PLEDGE AGREEMENT EXHIBIT G - FORM OF ENVIRONMENTAL INDEMNITY AGREEMENT EXHIBIT H - FORM OF ASSIGNMENT AGREEMENT EXHIBIT I - FORM OF SOLVENCY CERTIFICATE EXHIBIT J - FORM OF SECTION 4.4(B)(II) CERTIFICATE EXHIBIT K - FORM OF COMPLIANCE CERTIFICATE iv 6 CREDIT AGREEMENT, dated as of September 19, 1996, among the following: (i) FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS, a real estate investment trust organized under the laws of the State of Ohio (herein, together with its successors and assigns, the "BORROWER"); (ii) FIRST UNION MANAGEMENT, INC., a Delaware corporation (herein, together with its successors and assigns, the "MANAGEMENT COMPANY"); (iii) the lending institutions listed in Annex I hereto (each a "LENDER" and collectively, the "LENDERS"); and (iv) NATIONAL CITY BANK, a national banking association, as administrative agent (the "ADMINISTRATIVE AGENT"): PRELIMINARY STATEMENTS: (1) Unless otherwise defined herein, all capitalized terms used herein and defined in section 10 are used herein as so defined. (2) The Borrower has applied to the Lenders for credit facilities in order to refinance certain indebtedness of the Borrower and in order to provide working capital and funds for acquisitions and other lawful purposes. (3) The Management Company acts as manager of the properties and investments of the Borrower. (4) Subject to and upon the terms and conditions set forth herein, the Lenders are willing to make available to the Borrower the credit facilities provided for herein. NOW, THEREFORE, it is agreed: SECTION 1. AMOUNT AND TERMS OF CREDIT. 1.1. COMMITMENTS. Subject to and upon the terms and conditions herein set forth, each Lender severally agrees to make a loan or loans (each a "LOAN" and, collectively, the "LOANS") to the Borrower, which Loans shall be drawn, to the extent such Lender has a commitment under such Facility, under the Primary Facility or the Secondary Facility, as set forth below: (a) Loans under the Primary Facility (each a "PF LOAN" and, collectively, the "PF LOANS"): (i) may be made at any time and from time to time on and after the Initial Borrowing Date and prior to the PF Maturity Date; (ii) except as hereinafter provided, may, at the option of the Borrower, be incurred and maintained as, and/or converted into, PF Loans which are Base Rate Loans or Eurodollar Loans, PROVIDED that all PF Loans made as part of the same Borrowing shall, unless otherwise specifically provided herein, consist of PF Loans of the same Type; (iii) may be repaid and reborrowed in accordance with the provisions hereof; and (iv) shall not for any Lender at any time outstanding exceed that aggregate principal amount which, when added to the product at such time of (A) such Lender's PF Percentage and (B) the sum of the Letter of Credit Outstandings, equals the PF Commitment of such Lender at such time. In addition, no PF Loans shall be made at any time if after giving effect thereto the sum of the aggregate outstanding principal amount of the PF Loans and the SF Loans, PLUS the Letter of Credit Outstandings, PLUS the Aggregate Measured Swap Credit Risk (if any) of all Designated Interest Rate Agreements, 7 would exceed the lesser of (I) the sum of (x) 65% of the fair market value of the Eligible Real Estate constituting a part of the Mortgaged Property hereunder on the Initial Borrowing Date, as determined on the basis of the appraisals referred to in section 5.1(v), and (y) 65% of the Appraised Value of any Additional Property or Substitute Property, determined for any such Property as of the date such Property becomes a Mortgaged Property hereunder in compliance with section 7.17, as determined on the basis of the appraisal with respect thereto referred to in section 7.17, and (II) the Aggregate Borrowing Base as of the most recently completed fiscal quarter for which financial information necessary to determine the Aggregate Borrowing Base shall have been furnished by the Borrower as contemplated by this Agreement. (b) Loans under the Secondary Facility (each an "SF LOAN" and, collectively, the "SF LOANS"): (i) may be made at any time and from time to time on and after the Initial Borrowing Date and prior to the SF Maturity Date, but only if at such time and after giving effect thereto not less than $80,000,000 aggregate principal amount of PF Loans are outstanding (EXPLANATORY NOTE: this number has been determined as a rough method of determining full usage of the Total PF Commitment for PF Loans, leaving $10,000,000 of the Total PF Commitment available for Letters of Credit issued or which may be issued pursuant to section 2 hereof); (ii) except as hereinafter provided, may, at the option of the Borrower, be incurred and maintained as, and/or converted into, SF Loans which are Base Rate Loans or Eurodollar Loans, PROVIDED that all SF Loans made as part of the same Borrowing shall, unless otherwise specifically provided herein, consist of SF Loans of the same Type; (iii) may be repaid and reborrowed in accordance with the provisions hereof; and (iv) shall not for any Lender at any time outstanding exceed the SF Commitment of such Lender at such time. In addition, no SF Loans shall be made at any time if after giving effect thereto the sum of the aggregate outstanding principal amount of the PF Loans and the SF Loans, PLUS the Letter of Credit Outstandings, PLUS the Aggregate Measured Swap Credit Risk (if any) of all Designated Interest Rate Agreements, would exceed the lesser of (I) the sum of (x) 65% of the fair market value of the Eligible Real Estate constituting a part of the Mortgaged Property hereunder on the Initial Borrowing Date, as determined on the basis of the appraisals referred to in section 5.1(v), and (y) 65% of the Appraised Value of any Additional Property or Substitute Property, determined for any such Property as of the date such Property becomes a Mortgaged Property hereunder in compliance with section 7.17, as determined on the basis of the appraisal with respect thereto referred to in section 7.17, and (II) the Aggregate Borrowing Base as of the most recently completed fiscal quarter for which financial information necessary to determine the Aggregate Borrowing Base shall have been furnished by the Borrower as contemplated by this Agreement. 1.2. MINIMUM BORROWING AMOUNTS, ETC. The aggregate principal amount of each Borrowing shall not be less than the Minimum Borrowing Amount for such Borrowing. More than one Borrowing may be incurred on any day, PROVIDED that at no time shall there be outstanding more than six Borrowings of Eurodollar Loans. 1.3. NOTICE OF BORROWING. (a) Whenever the Borrower desires to incur Loans, it shall give the Administrative Agent at its Notice Office, prior to 1:00 P.M. (Cleveland, Ohio time), at least three Business Days' prior written notice (or telephonic notice promptly confirmed in writing) of each Borrowing of Eurodollar Loans and at least one Business Day's prior written notice (or telephonic notice promptly confirmed in writing) of each Borrowing of Base Rate Loans to be made hereunder. Each such notice (each such notice, a "NOTICE OF BORROWING") (or the written confirmation) shall be in the form of Exhibit A-1 and shall be irrevocable and shall specify: (i) the Facility pursuant to which such Borrowing is to be made; (ii) the aggregate principal amount of the Loans to be made pursuant to such Borrowing; (iii) the date of Borrowing (which shall be a Business Day); and (iv) whether the respective Borrowing shall consist of Base Rate Loans or Eurodollar Loans and, if Eurodollar Loans, the Interest Period to be initially applicable thereto. The Administrative Agent shall promptly give each Lender written notice (or telephonic notice promptly confirmed in writing) of each proposed Borrowing, of such Lender's proportionate share thereof and of the other matters covered by the Notice of Borrowing. 2 8 (b) Without in any way limiting the obligation of the Borrower to confirm in writing any telephonic notice permitted to be given hereunder, the Administrative Agent may act prior to receipt of written confirmation without liability upon the basis of such telephonic notice believed by the Administrative Agent in good faith to be from an Authorized Officer of the Borrower entitled to give telephonic notices under this Agreement on behalf of the Borrower. In each such case, the Administrative Agent's record of the terms of such telephonic notice shall be conclusive absent manifest error. 1.4. DISBURSEMENT OF FUNDS. (a) No later than 1:00 P.M. (Cleveland, Ohio time) on the date specified in each Notice of Borrowing, each Lender will make available its PRO RATA share, if any, of each Borrowing requested to be made on such date in the manner provided below. All amounts shall be made available to the Administrative Agent in U.S. dollars and immediately available funds at the Payment Office and the Administrative Agent promptly will make available to the Borrower by depositing to its account at the Payment Office the aggregate of the amounts so made available in the type of funds received. Unless the Administrative Agent shall have been notified by any Lender prior to the date of Borrowing that such Lender does not intend to make available to the Administrative Agent its portion of the Borrowing or Borrowings to be made on such date, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on such date of Borrowing, and the Administrative Agent, in reliance upon such assumption, may (in its sole discretion and without any obligation to do so) make available to the Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent by such Lender and the Administrative Agent has made available same to the Borrower, the Administrative Agent shall be entitled to recover such corresponding amount from such Lender. If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent shall promptly notify the Borrower, and the Borrower shall immediately pay such corresponding amount to the Administrative Agent. The Administrative Agent shall also be entitled to recover from such Lender or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent to the Borrower to the date such corresponding amount is recovered by the Administrative Agent, at a rate per annum equal to (x) if paid by such Lender, the overnight Federal Funds Effective Rate or (y) if paid by the Borrower, the then applicable rate of interest, calculated in accordance with section 1.8, for the respective Loans (but without any requirement to pay any amounts in respect thereof pursuant to section 1.11). (b) Nothing herein shall be deemed to relieve any Lender from its obligation to fulfill its commitments hereunder or to prejudice any rights which the Borrower may have against any Lender as a result of any default by such Lender hereunder. 1.5. NOTES. (a) The Borrower's obligation to pay the principal of, and interest on, the Loans made to it by each Lender shall be evidenced by a promissory note substantially in the form of Exhibit B with blanks appropriately completed in conformity herewith (each a "NOTE" and, collectively, the "NOTES"). (b) The Note issued to a Lender shall: (i) be executed by the Borrower; (ii) be payable to the order of such Lender and be dated on or prior to the Initial Borrowing Date; (iii) be in a stated principal amount equal to the Commitment of such Lender and be payable in the principal amount of Loans evidenced thereby; (iv) mature, in the case of PF Loans, on the PF Maturity Date, and in the case of SF Loans, on the SF Maturity Date; (v) bear interest as provided in the appropriate clause of section 1.8 in respect of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby; (vi) be subject to mandatory prepayment as provided in section 4.2: and (vii) be entitled to the benefits of this Agreement and the other Loan Documents. (c) Each Lender will note on its internal records the amount of each Loan made by it and each payment in respect thereof and will, prior to any transfer of its Note, endorse on the reverse side thereof the outstanding principal amount of Loans evidenced thereby. Failure to make any such notation or any error in any such notation shall not affect the Borrower's obligations in respect of such Loans. 3 9 1.6. CONVERSIONS. The Borrower shall have the option to convert on any Business Day all or a portion at least equal to the applicable Minimum Borrowing Amount of the outstanding principal amount of the Loans owing pursuant to a single Facility into a Borrowing or Borrowings pursuant to such Facility of the other Type of Loan, PROVIDED that: (i) no conversion of PF Loans into SF Loans, or vice versa, may be made; (ii) no partial conversion of a Borrowing of Eurodollar Loans shall reduce the outstanding principal amount of the Eurodollar Loans made pursuant to such Borrowing to less than the Minimum Borrowing Amount applicable thereto; (iii) Base Rate Loans may only be converted into Eurodollar Loans if no Default under section 9.1(a) or Event of Default is in existence on the date of the conversion unless the Required Lenders otherwise agree; and (iv) Borrowings of Eurodollar Loans resulting from this section 1.6 shall be limited in numbers as provided in section 1.2. Each such conversion shall be effected by the Borrower giving the Administrative Agent at its Notice Office, prior to 1:00 P.M. (Cleveland, Ohio time), at least three Business Days' (or one Business Day's, in the case of a conversion into Base Rate Loans) prior written notice (or telephonic notice promptly confirmed in writing) (each a "NOTICE OF CONVERSION") specifying the Loans to be so converted, the Type of Loans to be converted into and, if to be converted into a Borrowing of Eurodollar Loans, the Interest Period to be initially applicable thereto. The Administrative Agent shall give each Lender prompt notice of any such proposed conversion affecting any of its Loans. 1.7. PRO RATA BORROWINGS. All Borrowings of PF Loans or SF Loans shall be made by the Lenders PRO RATA on the basis of their PF Commitments or SF Commitments, as the case may be. It is understood that no Lender shall be responsible for any default by any other Lender in its obligation to make Loans hereunder and that each Lender shall be obligated to make the Loans provided to be made by it hereunder, regardless of the failure of any other Lender to fulfill its commitments hereunder. 1.8. INTEREST. (a) The unpaid principal amount of each Loan which is a Base Rate Loan shall bear interest from the date of the Borrowing thereof until maturity (whether by acceleration or otherwise) at a fluctuating rate per annum equal to the Base Rate in effect from time to time. (b) The unpaid principal amount of each Loan which is a Eurodollar Loan shall bear interest from the date of the Borrowing thereof until maturity (whether by acceleration or otherwise) at a rate per annum which shall at all times be the Applicable Percentage PLUS the relevant Eurodollar Rate. (c) Notwithstanding the above provisions, if a Default under section 9.1(a) or Event of Default is in existence, all outstanding amounts of principal and, to the extent permitted by law, all overdue interest, in respect of each Loan shall bear interest at a rate per annum equal to the Base Rate in effect from time to time PLUS 2.25% per annum. (d) Interest shall accrue from and including the date of any Borrowing to but excluding the date of any repayment thereof and shall be payable (i) in respect of each Base Rate Loan, monthly in arrears on the last Business Day of each month, (ii) in respect of each Eurodollar Loan, on the last day of each Interest Period applicable thereto and, in the case of an Interest Period in excess of three months, on the dates which are successively three months after the commencement of such Interest Period, and (iii) in respect of each Loan, on any prepayment or conversion (on the amount prepaid or converted), at maturity (whether by acceleration or otherwise) and, after such maturity, on demand. (e) All computations of interest hereunder shall be made in accordance with section 12.7(b). (f) The Administrative Agent upon determining the interest rate for any Borrowing shall promptly notify the Borrower and the Lenders thereof. 1.9. INTEREST PERIODS. (a) At the time the Borrower gives a Notice of Borrowing or Notice of Conversion in respect of the making of, or conversion into, a Borrowing of Eurodollar Loans (in the case of the initial Interest Period applicable thereto) or prior to 1:00 P.M. (Cleveland, Ohio time) on the third Business Day prior to the expiration of an Interest Period applicable to a Borrowing of Eurodollar Loans, it shall have the right to elect by giving the Administrative Agent written notice (or telephonic notice promptly confirmed in writing) of 4 10 the Interest Period applicable to such Borrowing, which Interest Period shall, at the option of the Borrower, be a one, two, three, six, nine or twelve month period. Notwithstanding anything to the contrary contained above: (i) the initial Interest Period for any Borrowing of Eurodollar Loans shall commence on the date of such Borrowing (including the date of any conversion from a Borrowing of Base Rate Loans) and each Interest Period occurring thereafter in respect of such Borrowing shall commence on the day on which the next preceding Interest Period expires; (ii) if any Interest Period begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period, such Interest Period shall end on the last Business Day of such calendar month; (iii) if any Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the next succeeding Business Day, PROVIDED that if any Interest Period would otherwise expire on a day which is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (iv) no Interest Period may be elected at any time when a Default under section 9.1(a) or an Event of Default is then in existence unless the Required Lenders otherwise agree; and (v) in order to facilitate a possible assignment by National City Bank of a portion of its PF Commitment, during the two week period commencing on the date of the initial Borrowing hereunder the Borrower will not elect any Interest Period for any Borrowing of Eurodollar Loans which exceeds one month. (b) If upon the expiration of any Interest Period the Borrower has failed to (or may not) elect a new interest Period to be applicable to the respective Borrowing of Eurodollar Loans as provided above, the Borrower shall be deemed to have elected to convert such Borrowing to Base Rate Loans effective as of the expiration date of such current Interest Period. 1.10. INCREASED COSTS, ILLEGALITY, ETC. (a) In the event that (x) in the case of clause (i) below, the Administrative Agent or (y) in the case of clauses (ii) and (iii) below, any Lender, shall have determined on a reasonable basis (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto): (i) on any date for determining the Eurodollar Rate for any Interest Period that, by reason of any changes arising after the Effective Date affecting the interbank Eurodollar market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of Eurodollar Rate; or (ii) at any time, that such Lender shall incur increased costs or reductions in the amounts received or receivable hereunder in an amount which such Lender deems material with respect to any Eurodollar Loans (other than any increased cost or reduction in the amount received or receivable resulting from the imposition of or a change in the rate of taxes or similar charges) because of (x) any change since the Effective Date in any applicable law, governmental rule, regulation, guideline, order or request (whether or not having the force of law), or in the interpretation or administration thereof and including the introduction of any new law or governmental rule, regulation, guideline, order or request (such as, for example, but not limited to, a change in official reserve requirements, but, in all events, excluding reserves includable in the Eurodollar Rate pursuant to the definition thereof) and/or (y) other circumstances adversely affecting the interbank Eurodollar market or the position of such Lender in such market; or 5 11 (iii) at any time, that the making or continuance of any Eurodollar Loan has become unlawful by compliance by such Lender in good faith with any change since the Effective Date in any law, governmental rule, regulation, guideline or order, or the interpretation or application thereof, or would conflict with any thereof not having the force of law but with which such Lender customarily complies or has become impracticable as a result of a contingency occurring after the Effective Date which materially adversely affects the interbank Eurodollar market; THEN, and in any such event, such Lender (or the Administrative Agent in the case of clause (i) above) shall (x) on such date and (y) within 10 Business Days of the date on which such event no longer exists give notice (by telephone confirmed in writing) to the Borrower and to the Administrative Agent of such determination (which notice the Administrative Agent shall promptly transmit to each of the other Lenders). Thereafter (x) in the case of clause (i) above, Eurodollar Loans shall no longer be available until such time as the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice by the Administrative Agent no longer exist, and any Notice of Borrowing or Notice of Conversion given by the Borrower with respect to Eurodollar Loans which have not yet been incurred shall be deemed rescinded by the Borrower or, in the case of a Notice of Borrowing, shall, at the option of the Borrower, be deemed converted into a Notice of Borrowing for Base Rate Loans to be made on the date of Borrowing contained in such Notice of Borrowing, (y) in the case of clause (ii) above, the Borrower shall pay to such Lender, upon written demand therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender shall determine) as shall be required to compensate such Lender, for such increased costs or reductions in amounts receivable hereunder (a written notice as to the additional amounts owed to such Lender, showing the basis for the calculation thereof, which basis must be reasonable, submitted to the Borrower by such Lender shall, absent manifest error, be final and conclusive and binding upon all parties hereto) and (z) in the case of clause (iii) above, the Borrower shall take one of the actions specified in section 1.10(b) as promptly as possible and, in any event, within the time period required by law. (b) At any time that any Eurodollar Loan is affected by the circumstances described in section 1.10(a)(ii) or (iii), the Borrower may (and in the case of a Eurodollar Loan affected pursuant to section 1.10(a)(iii) the Borrower shall) either (i) if the affected Eurodollar Loan is then being made pursuant to a Borrowing, by giving the Administrative Agent telephonic notice (confirmed promptly in writing) thereof on the same date that the Borrower was notified by a Lender pursuant to section 1.10(a)(ii) or (iii), cancel said Borrowing, convert the related Notice of Borrowing into one requesting a Borrowing of Base Rate Loans or require the affected Lender to make its requested Loan as a Base Rate Loan, or (ii) if the affected Eurodollar Loan is then outstanding, upon at least one Business Day's notice to the Administrative Agent, require the affected Lender to convert each such Eurodollar Loan into a Base Rate Loan, PROVIDED that if more than one Lender is affected at any time, then all affected Lenders must be treated the same pursuant to this section 1.10(b). (c) If any Lender shall have determined that after the Effective Date, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged by law with the interpretation or administration thereof, or compliance by such Lender or its parent corporation with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, in each case made subsequent to the Effective Date, has or would have the effect of reducing by an amount reasonably deemed by such Lender to be material the rate of return on such Lender's or its parent corporation's capital or assets as a consequence of such Lender's commitments or obligations hereunder to a level below that which such Lender or its parent corporation could have achieved but for such adoption, effectiveness, change or compliance (taking into consideration such Lender's or its parent corporation's policies with respect to capital adequacy), then from time to time, within 15 days after demand by such Lender (with a copy to the Administrative Agent), the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or its parent corporation for such reduction. Each Lender, upon determining in good faith that any additional amounts will be payable pursuant to this section 1.10(c), will give prompt written notice thereof to the Borrower, which notice shall set forth, in reasonable detail, the basis of the calculation of such additional amounts, which basis must be reasonable, although the failure to give any such notice shall not release or diminish any of 6 12 the Borrower's obligations to pay additional amounts pursuant to this section 1.10(c) upon the subsequent receipt of such notice. (d) Notwithstanding anything in this Agreement to the contrary, (i) no Lender shall be entitled to compensation or payment or reimbursement of other amounts under section 1.10, 2.5 or 4.4 for any amounts incurred or accruing more than 120 days prior to the giving of notice to the Borrower of additional costs or other amounts of the nature described in such sections, and (ii) no Lender shall demand compensation for any reduction referred to in section 1.10(c) or payment or reimbursement of other amounts under section 2.5 or 4.4 if it shall not at the time be the general policy or practice of such Lender to demand such compensation, payment or reimbursement in similar circumstances under comparable provisions of other credit agreements. 1.11. COMPENSATION. The Borrower shall compensate each Lender, upon its written request (which request shall set forth the detailed basis for requesting and the method of calculating such compensation), for all reasonable losses, expenses and liabilities (including, without limitation, any loss, expense or liability incurred by reason of the liquidation or reemployment of deposits or other funds required by such Lender to fund its Eurodollar Loans) which such Lender may sustain: (i) if for any reason (other than a default by such Lender or the Administrative Agent) a Borrowing of Eurodollar Loans does not occur on a date specified therefor in a Notice of Borrowing or Notice of Conversion (whether or not withdrawn by the Borrower or deemed withdrawn pursuant to section 1.10(a)); (ii) if any repayment, prepayment or conversion of any of its Eurodollar Loans occurs on a date which is not the last day of an Interest Period applicable thereto (other than any repayment or prepayment pursuant to the last two sentences of section 1.4 hereof); (iii) if any prepayment of any of its Eurodollar Loans is not made on any date specified in a notice of prepayment given by the Borrower; or (iv) as a consequence of (x) any other default by the Borrower to repay its Eurodollar Loans when required by the terms of this Agreement or (y) an election made pursuant to section 1.10(b). 1.12. CHANGE OF LENDING OFFICE; REPLACEMENT OF LENDERS. (a) Each Lender agrees that, upon the occurrence of any event giving rise to the operation of section 1.10(a)(ii) or (iii), 1.10(c), 2.5 or 4.4 with respect to such Lender, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans or Commitment affected by such event, PROVIDED that such designation is made on such terms that such Lender and its lending office suffer no economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of any such section. (b) If any Lender requests any compensation, reimbursement or other payment under section 1.10(a)(ii) or (iii), 1.10(c) or 2.5 with respect to such Lender, or if the Borrower is required to pay any additional amount to any Lender or Governmental Authority pursuant to section 4.4, or if any Lender is a Defaulting Lender, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with the restrictions contained in section 12.4(b)), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); PROVIDED that (i) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not be unreasonably withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts), and (iii) in the case of any such assignment resulting from a claim for compensation, reimbursement or other payments required to be made under section 1.10(a)(ii) or (iii), 1.10(c) or 2.5 with respect to such Lender, or resulting from any required payments to any Lender or Governmental Authority pursuant to section 4.4, such assignment will result in a reduction in such compensation, reimbursement or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. (c) Nothing in this section 1.12 shall affect or postpone any of the obligations of the Borrower or the right of any Lender provided in section 1.10, 2.5 or 4.4. 7 13 SECTION 2. LETTERS OF CREDIT. 2.1. LETTERS OF CREDIT. (a) Subject to and upon the terms and conditions herein set forth, the Borrower may request a Letter of Credit Issuer at any time and from time to time on or after the Initial Borrowing Date and prior to the PF Maturity Date to issue, for the account of the Borrower and in support of (x) trade obligations, worker's compensation and other obligations of the Borrower incurred in the ordinary course of its business and/or (y) such other obligations of the Borrower to any other person that are acceptable to the Administrative Agent and such Letter of Credit Issuer, and subject to and upon the terms and conditions herein set forth such Letter of Credit Issuer agrees to issue from time to time, irrevocable letters of credit in such form as may be approved by such Letter of Credit Issuer and the Administrative Agent (each such letter of credit, a "LETTER OF CREDIT" and collectively, the "LETTERS OF CREDIT"). (b) Notwithstanding the foregoing, (i) no Letter of Credit shall be issued the Stated Amount of which, when added to the Letter of Credit Outstandings at such time, would exceed either (x) $10,000,000 or (y) when added to the aggregate principal amount of all PF Loans then outstanding, an amount equal to the Total PF Commitment at such time, and (ii) each Letter of Credit shall have an expiry date occurring not later than one year after such Letter of Credit's date of issuance, although any Letter of Credit may be renewable for successive periods of up to 12 months, but not beyond the Business Day next preceding the PF Maturity Date, on terms acceptable to the Administrative Agent and the relevant Letter of Credit Issuer. (c) Notwithstanding the foregoing, in the event a Lender Default exists, no Letter of Credit Issuer shall be required to issue any Letter of Credit unless such Letter of Credit Issuer has entered into arrangements satisfactory to it and the Borrower to eliminate such Letter of Credit Issuer's risk with respect to the participation in Letters of Credit of the Defaulting Lender or Lenders, including by cash collateralizing such Defaulting Lender's or Lenders' Percentage of the Letter of Credit Outstandings. (d) The only Letter of Credit Issuer hereunder will be NCB. 2.2. LETTER OF CREDIT REQUESTS: NOTICES OF ISSUANCE. (a) Whenever it desires that a Letter of Credit be issued, the Borrower shall give the Administrative Agent and the Letter of Credit Issuer written notice (including by way of telecopier) in the form of Exhibit A-2 hereto prior to 1:00 P.M. (Cleveland, Ohio time) at least five Business Days (or such shorter period as may be acceptable to the relevant Letter of Credit Issuer) prior to the proposed date of issuance (which shall be a Business Day) (each a "LETTER OF CREDIT REQUEST"), which Letter of Credit Request shall include such supporting documents that such Letter of Credit Issuer customarily requires in connection therewith (including, in the case of a Letter of Credit for an account party other than the Borrower, an application for, and if applicable, a reimbursement agreement with respect to, such Letter of Credit). Any such documents executed in connection with the issuance of a Letter of Credit, including the Letter of Credit itself, are herein referred to as "LETTER OF CREDIT DOCUMENTS". In the event of any inconsistency between any of the terms or provisions of any Letter of Credit Document and the terms and provisions of this Agreement respecting Letters of Credit, the terms and provisions of this Agreement shall control. The Administrative Agent shall promptly notify each Lender of each Letter of Credit Request. (b) Each Letter of Credit Issuer shall, on the date of each issuance of a Letter of Credit by it, give the Administrative Agent, each Lender and the Borrower written notice of the issuance of such Letter of Credit, accompanied by a copy to the Administrative Agent of the Letter of Credit or Letters of Credit issued by it. Each Letter of Credit Issuer shall provide to the Administrative Agent a monthly summary describing each Letter of Credit issued by such Letter of Credit Issuer and then outstanding. 8 14 2.3. AGREEMENT TO REPAY LETTER OF CREDIT DRAWINGS. (a) The Borrower hereby agrees to reimburse each Letter of Credit Issuer, by making payment to the Administrative Agent in immediately available funds at the Payment Office, for any payment or disbursement made by such Letter of Credit Issuer under any Letter of Credit (each such amount so paid or disbursed until reimbursed, an "UNPAID DRAWING") immediately after, and in any event on the date on which, such Letter of Credit Issuer notifies the Administrative Agent and the Borrower of such payment or disbursement (which notice to the Borrower shall be delivered reasonably promptly after any such payment or disbursement), with interest on the amount so paid or disbursed by such Letter of Credit Issuer, to the extent not reimbursed prior to 1:00 P.M. (Cleveland, Ohio time) on the date of such payment or disbursement, from and including the date paid or disbursed to but not including the date such Letter of Credit Issuer is reimbursed therefor at a rate per annum which shall be the rate then applicable to Base Rate Loans (plus an additional 2.25% per annum if not reimbursed by the third Business Day after the date of such payment or disbursement), such interest also to be payable on demand. (b) The Borrower's obligation under this section 2.3 to reimburse each Letter of Credit Issuer with respect to Unpaid Drawings (including, in each case, interest thereon) shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower may have or have had against such Letter of Credit Issuer, the Administrative Agent, any other Letter of Credit Issuer or any Lender, including, without limitation, any defense based upon the failure of any drawing under a Letter of Credit to conform to the terms of the Letter of Credit or any non-application or misapplication by the beneficiary of the proceeds of such drawing, PROVIDED, HOWEVER that the Borrower shall not be obligated to reimburse a Letter of Credit Issuer for any wrongful payment made by such Letter of Credit Issuer under a Letter of Credit as a result of acts or omissions constituting willful misconduct or gross negligence on the part of such Letter of Credit Issuer. 2.4. LETTER OF CREDIT PARTICIPATIONS. (a) Immediately upon the issuance by a Letter of Credit Issuer of any Letter of Credit, such Letter of Credit Issuer shall be deemed to have sold and transferred to each Lender, and each Lender (each a "PARTICIPANT") shall be deemed irrevocably and unconditionally to have purchased and received from such Letter of Credit Issuer, without recourse or warranty, an undivided interest and participation, to the extent of such Lender's PF Percentage, in such Letter of Credit, each substitute letter of credit, each drawing made thereunder and the obligations of the Borrower under this Agreement with respect thereto (although Letter of Credit Fees shall be payable directly to the Administrative Agent for the account of the Lenders as provided in section 3.1(b) and the Participants shall have no right to receive any portion of any Facing Fees) and any security therefor or guaranty pertaining thereto. Upon any change in the PF Commitments of the Lenders pursuant to section 12.4(b), it is hereby agreed that, with respect to all outstanding Letters of Credit and Unpaid Drawings, there shall be an automatic adjustment to the participations pursuant to this section 2.4 to reflect the new PF Percentages of the assigning and assignee Lender. (b) In determining whether to pay under any Letter of Credit, a Letter of Credit Issuer shall not have any obligation relative to the Participants other than to determine that any documents required to be delivered under such Letter of Credit have been delivered and that they appear to comply on their face with the requirements of such Letter of Credit. Any action taken or omitted to be taken by a Letter of Credit Issuer under or in connection with any Letter of Credit if taken or omitted in the absence of gross negligence or willful misconduct, shall not create for such Letter of Credit Issuer any resulting liability. (c) In the event that a Letter of Credit Issuer makes any payment under any Letter of Credit and the Borrower shall not have reimbursed such amount in full to such Letter of Credit Issuer pursuant to section 2.3(a), such Letter of Credit Issuer shall promptly notify the Administrative Agent, and the Administrative Agent shall promptly notify each Participant of such failure, and each Participant shall promptly and unconditionally pay to the Administrative Agent for the account of such Letter of Credit Issuer, the amount of such Participant's PF Percentage of such payment in U.S. dollars and in same day funds, PROVIDED, HOWEVER, that no Participant shall be obligated to pay to the Administrative Agent its Percentage of such unreimbursed amount for any wrongful payment made by such Letter of Credit Issuer under a Letter of Credit as a result of acts or omissions constituting willful misconduct or gross negligence on the part of such Letter of Credit Issuer. If the Administrative Agent so notifies any Participant required to fund a payment under a Letter of Credit prior to 11:00 A.M. (Cleveland, Ohio time) on any Business Day, such Participant shall make available to the Administrative Agent for the account of the 9 15 relevant Letter of Credit Issuer such Participant's PF Percentage of the amount of such payment on such Business Day in same day funds. If and to the extent such Participant shall not have so made its PF Percentage of the amount of such payment available to the Administrative Agent for the account of the relevant Letter of Credit Issuer, such Participant agrees to pay to the Administrative Agent for the account of such Letter of Credit Issuer, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Administrative Agent for the account of such Letter of Credit Issuer at the Federal Funds Effective Rate. The failure of any Participant to make available to the Administrative Agent for the account of the relevant Letter of Credit Issuer its PF Percentage of any payment under any Letter of Credit shall not relieve any other Participant of its obligation hereunder to make available to the Administrative Agent for the account of such Letter of Credit Issuer its PF Percentage of any payment under any Letter of Credit on the date required, as specified above, but no Participant shall be responsible for the failure of any other Participant to make available to the Administrative Agent for the account of such Letter of Credit Issuer such other Participant's PF Percentage of any such payment. (d) Whenever a Letter of Credit Issuer receives a payment of a reimbursement obligation as to which the Administrative Agent has received for the account of such Letter of Credit Issuer any payments from the Participants pursuant to section 2.4(c) above, such Letter of Credit Issuer shall pay to the Administrative Agent and the Administrative Agent shall promptly pay to each Participant which has paid its PF Percentage thereof, in U.S. dollars and in same day funds, an amount equal to such Participant's PF Percentage of the principal amount thereof and interest thereon accruing after the purchase of the respective participations, as and to the extent so received. (e) The obligations of the Participants to make payments to the Administrative Agent for the account of each Letter of Credit Issuer with respect to Letters of Credit shall be irrevocable and not subject to counterclaim, set-off or other defense or any other qualification or exception whatsoever and shall be made in accordance with the terms and conditions of this Agreement under all circumstances, including, without limitation, any of the following circumstances: (i) any lack of validity or enforceability of this Agreement or any of the other Loan Documents; (ii) the existence of any claim, set-off, defense or other right which the Borrower may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any person for whom any such transferee may be acting), the Administrative Agent, any Letter of Credit Issuer, any Lender, or other person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transaction between the Borrower and the beneficiary named in any such Letter of Credit), other than any claim which the Borrower (or any Subsidiary which is the account party with respect to a Letter of Credit) may have against any applicable Letter of Credit Issuer for gross negligence or wilful misconduct of such Letter of Credit Issuer in making payment under any applicable Letter of Credit; (iii) any draft, certificate or other document presented under the Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Loan Documents: or (v) the occurrence of any Default or Event of Default. 10 16 2.5. INCREASED COSTS. If after the Effective Date, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Letter of Credit Issuer or any Lender with any request or directive (whether or not having the force of law) by any such authority, central bank or comparable agency (in each case made subsequent to the Effective Date) shall either (i) impose, modify or make applicable any reserve, deposit, capital adequacy or similar requirement against Letters of Credit issued by such Letter of Credit Issuer or such Lender's participation therein, or (ii) shall impose on such Letter of Credit Issuer or any Lender any other conditions affecting this Agreement, any Letter of Credit or such Lender's participation therein; and the result of any of the foregoing is to increase the cost to such Letter of Credit Issuer or such Lender of issuing, maintaining or participating in any Letter of Credit, or to reduce the amount of any sum received or receivable by such Letter of Credit Issuer or such Lender hereunder (other than any increased cost or reduction in the amount received or receivable resulting from the imposition of or a change in the rate of taxes or similar charges), then, upon demand to the Borrower by such Letter of Credit Issuer or such Lender (a copy of which notice shall be sent by such Letter of Credit Issuer or such Lender to the Administrative Agent), the Borrower shall pay to such Letter of Credit Issuer or such Lender such additional amount or amounts as will compensate any such Letter of Credit Issuer or such Lender for such increased cost or reduction. A certificate submitted to the Borrower by any Letter of Credit Issuer or any Lender, as the case may be (a copy of which certificate shall be sent by such Letter of Credit Issuer or such Lender to the Administrative Agent), setting forth, in reasonable detail, the basis for the determination of such additional amount or amounts necessary to compensate any Letter of Credit Issuer or such Lender as aforesaid shall be conclusive and binding on the Borrower absent manifest error, although the failure to deliver any such certificate shall not release or diminish any of the Borrower's obligations to pay additional amounts pursuant to this section 2.5. Reference is hereby made to the provisions of section 1.10(d) for certain limitations upon the rights of a Letter of Credit Issuer or Lender under this section. 2.6. OBLIGATIONS ABSOLUTE. The obligations of the Borrower under this Agreement in respect of any Letter of Credit shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement (as the same may be amended from time to time) under all circumstances, including, without limitation, to the extent permitted by law, the following circumstances: (i) any lack of validity or enforceability of any agreement or instrument the obligations under which are supported by a Letter of Credit; (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the obligations of the Borrower in respect of the Letters of Credit or any other amendment or waiver of or any consent to departure from all or any of the Letter of Credit Documents or any other Loan Document; (iii) any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any guaranty, for all or any of the obligations of the Borrower in respect of the Letters of Credit; (iv) the existence of any claim, set-off, defense or other right that the Borrower may have at any time against any beneficiary or any transferee of a Letter of Credit (or any persons for whom any such beneficiary or any such transferee may be acting), the Letter of Credit Issuer, or any other person, whether in connection with the Loan Documents, the transactions contemplated hereby or by the Letter of Credit Documents or any unrelated transaction, other than any claim which the Borrower (or any Subsidiary which is the account party with respect to a Letter of Credit) may have against any applicable Letter of Credit Issuer for gross negligence or wilful misconduct of such Letter of Credit Issuer in making payment under any applicable Letter of Credit; (v) any statement or any other document presented under or in connection with any Letter of Credit or other Loan Document proving to be forged, fraudulent, invalid or insufficient 11 17 in any respect or any statement therein being untrue or inaccurate in any respect, PROVIDED that payment by a Letter of Credit Issuer under such Letter of Credit against presentation of such statement or document shall not have constituted gross negligence or willful misconduct; (vi) payment by a Letter of Credit Issuer under a Letter of Credit against presentation of a draft or certificate that does not comply with the terms of the Letter or Credit, except any such payment resulting solely from the gross negligence or willful misconduct of the Letter of Credit Issuer; and (vii) any other circumstance or happening whatsoever other than the payment in full of all obligations hereunder in respect of any Letter of Credit or any agreement or instrument relating to any Letter of Credit, whether or not similar to any of the foregoing, that might otherwise constitute a defense available to, or a discharge of, the Borrower, other than any claim which the Borrower (or any Subsidiary which is the account party with respect to a Letter of Credit) may have against any applicable Letter of Credit Issuer for gross negligence or wilful misconduct of such Letter of Credit Issuer in making payment under any applicable Letter of Credit. SECTION 3. FEES; COMMITMENTS. 3.1. FEES. (a) The Borrower agrees to pay to the Administrative Agent a Commitment Commission ("COMMITMENT COMMISSION") for the account of each Non-Defaulting Lender for the period from and including the Effective Date to but not including, in the case of the PF Commitments, the date the Total PF Commitment has been terminated, and in the case of the SF Commitments, the date the Total SF Commitment has been terminated, computed at a rate equal to 3/8 of 1% per annum on the average daily Unutilized Commitment of such Lender under the Primary Facility and/or the Secondary Facility, as the case may be . Such Commitment Commission shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December of each year, commencing September, 1996, and on the date upon which the Total Commitment is terminated. (b) The Borrower agrees to pay to the Administrative Agent, for the account of each Non-Defaulting Lender, PRO RATA on the basis of its PF Percentage, a fee in respect of each Letter of Credit (the "LETTER OF CREDIT FEE") computed at the rate of 2.00% per annum on the average daily Stated Amount of such Letter of Credit. Accrued Letter of Credit Fees shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December of each year, commencing September, 1996, and on the date upon which the Total PF Commitment is terminated. (c) The Borrower agrees to pay to the Administrative Agent for the account of each Letter of Credit Issuer a fee in respect of each Letter of Credit issued by it (the "FACING FEE") computed at the rate of 1/4 of 1% per annum on the average daily Stated Amount of such Letter of Credit. Accrued Facing Fees shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December of each year, commencing September, 1996, and on the date upon which the Total PF Commitment is terminated. (d) The Borrower agrees to pay directly to each Letter of Credit Issuer upon each drawing under and/or amendment of a Letter of Credit issued by it such amount as shall at the time of such drawing or amendment be the administrative charge which such Letter of Credit Issuer is customarily charging for drawings under or amendments of, letters of credit issued by it. (e) The Borrower shall pay to the Administrative Agent on the Initial Borrowing Date and thereafter for its own account and/or for distribution to the Lenders such fees as heretofore agreed by the Borrower and the Administrative Agent. (f) All computations of Fees shall be made in accordance with section 12.7(b). 12 18 3.2. VOLUNTARY REDUCTION OF COMMITMENTS. Upon at least three Business Days' prior written notice (or telephonic notice confirmed in writing) to the Administrative Agent at its Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Lenders), the Borrower shall have the right, without premium or penalty, to terminate or partially reduce the Unutilized Total PF Commitment or the Unutilized Total SF Commitment, PROVIDED that (i) no such reduction of the Unutilized Total PF Commitment shall be made prior to the termination of the Total SF Commitment, (ii) any such termination shall apply to proportionately and permanently reduce the PF Commitment or SF Commitment, as the case may be, if any, of each of the Lenders, and (iii) any partial reduction pursuant to this section 3.2 shall be in the amount of at least $10,000,000 (or, if greater, in integral multiples of $1,000,000), in the case of the Primary Facility, or in the amount of at least $5,000,000 (or, if greater, in integral multiples of $1,000,000), in the case of the Secondary Facility. 3.3. MANDATORY ADJUSTMENTS OF COMMITMENTS, ETC. (a) The Commitment of each Lender shall terminate on the Expiration Date unless the Initial Borrowing Date has occurred on or before such date. (b) On each date upon which a mandatory prepayment of SF Loans pursuant to section 4.2(c) or (d) is required, or would be required if SF Loans were outstanding in an amount in excess of the prepayment which is called for by such provisions, the Total SF Commitment shall be permanently reduced by an amount equivalent to the principal amount of the SF Loans so required, or which would be so required, to be prepaid. (c) The Total PF Commitment (and the PF Commitment of each Lender) shall terminate on the earlier of (x) the PF Maturity Date and (y) the date on which a Change of Control occurs. (d) The Total SF Commitment (and the SF Commitment of each Lender) shall terminate on the earlier of (x) the SF Maturity Date and (y) the date on which a Change of Control occurs. (e) Each partial reduction of the PF Total Commitment or the SF Total Commitment provided for in this section 3.3 shall apply PRO RATA to the PF Commitment or SF Commitment of each Lender, as the case may be. 3.4. EXTENSION OF MATURITY DATES; EXPANSION OF PRIMARY FACILITY. (a) At any time during the 30 day period following delivery by the Borrower pursuant to section 7.1(b) of its combined financial statements for its fiscal year then most recently ended after the date hereof, and annually thereafter during the 30 day period following delivery by the Borrower of its combined financial statements pursuant to section 7.1(b), the Borrower may, by written notice to the Administrative Agent, request the Administrative Agent to determine if all of the Lenders are then willing to extend the PF Maturity Date and (if the Total SF Commitment has not previously been terminated) the SF Maturity Date for an additional year. If the Borrower so requests, the Administrative Agent will so advise the Lenders. If the Lenders in their sole discretion are all willing to so extend the PF Maturity Date and (if the Total SF Commitment has not previously been terminated) the SF Maturity Date, the Borrower, the Administrative Agent and all of the Lenders (including each Letter of Credit Issuer) shall execute and deliver a definitive written instrument so extending the PF Maturity Date and (if the Total SF Commitment has not previously been terminated) the SF Maturity Date. No such extension of the PF Maturity Date or the SF Maturity Date shall be valid or effective for any purpose unless such definitive written instrument is so signed and delivered within 60 days following the giving by the Administrative Agent of notice to the Lenders that the Borrower has requested such an extension. (b) If following the termination of the Total SF Commitment the Total PF Commitment remains in effect without any reduction in the original amount thereof, the Borrower may propose in writing to the Administrative Agent that the Total PF Commitment be increased by $6,000,000, with such increase to be provided by an additional lending institution identified by the Borrower and acceptable to the Administrative Agent. At the time of and as a condition to the right of the Borrower to make any such proposal, the Borrower shall provide to the Administrative Agent current appraisals setting forth the Appraised Value of all Eligible Real Estate. Any such increase shall be effected only pursuant to (i) a definitive amendment to this Agreement executed by the Borrower, the Management Company, all of the Lenders and the Administrative Agent (each of such parties hereby agreeing to enter into such an amendment provided the same is satisfactory in form and substance to the Borrower and the 13 19 Administrative Agent), and (ii) such assignments by the Lenders to the new lending institution, effected in accordance with section 12.4(b) hereof (but without compliance with the $5,000,000 minimum amount provided therein), of portions of their outstanding Loans and Commitments, effective upon payment by the new lending institution to the assigning Lenders of a cash purchase price, payable in immediately available funds, equal to 100% of the principal of and all interest and Fees accrued in respect of the assigned Loans, as may be necessary to give effect to the PRO RATA participation of the new lending institution in the increased Total PF Commitment (each Lender with a PF Commitment hereby agreeing to enter into an appropriate assignment necessary to accomplish such participation by the new lending institution). The Administrative Agent agrees to waive the assignment fee provided in section 12.4(b) in connection with any such assignments. SECTION 4. PAYMENTS. 4.1. VOLUNTARY PREPAYMENTS. The Borrower shall have the right to prepay Loans, in whole or in part, without premium or penalty, from time to time on the following terms and conditions: (i) no PF Loans may be prepaid at any time if after giving effect thereto any SF Loans are outstanding; (ii) the Borrower shall give the Administrative Agent at the Payment Office written notice (or telephonic notice promptly confirmed in writing) of its intent to prepay the Loans, whether such Loans are PF Loans or SF Loans, the amount of such prepayment and (in the case of Eurodollar Loans) the specific Borrowing(s) pursuant to which made, which notice shall be received by the Administrative Agent by 1:00 P.M. (Cleveland, Ohio time) one Business Day prior to the date of such prepayment (and which notice shall promptly be transmitted by the Administrative Agent to each of the Lenders); (iii) each partial prepayment of any Borrowing shall be in an aggregate principal of at least $5,000,000 or an integral multiple of $1,000,000 in excess thereof, in the case of a Borrowing consisting of Eurodollar Loans, and at least $500,000 or an integral multiple of $100,000 in excess thereof, in the case of a Borrowing consisting of Base Rate Loans, PROVIDED that no partial prepayment of Eurodollar Loans made pursuant to a Borrowing shall reduce the aggregate principal amount of the Loans outstanding pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount applicable thereto; (iv) each prepayment in respect of any Loans made pursuant to a Borrowing shall be applied PRO RATA among such Loans; and (v) each prepayment of Eurodollar Loans pursuant to this section 4.1 on any date other than the last day of the Interest period applicable thereto shall be accompanied by any amounts payable in respect thereof under section 1.11. 4.2. MANDATORY PREPAYMENTS. (a) If on any date (after giving effect to any other payments on such date) the sum of (i) the aggregate outstanding principal amount of PF Loans PLUS (ii) the aggregate amount of Letter of Credit Outstandings, exceeds the Total PF Commitment as then in effect, the Borrower shall prepay on such date that principal amount of PF Loans and, after PF Loans have been paid in full, Unpaid Drawings, in an aggregate amount equal to such excess. If, after giving effect to the prepayment of PF Loans and Unpaid Drawings, the aggregate amount of Letter of Credit Outstandings exceeds the Total PF Commitment as then in effect, the Borrower shall pay to the Administrative Agent an amount in cash and/or Cash Equivalents equal to such excess and the Administrative Agent shall hold such payment as security for the obligations of the Borrower hereunder pursuant to a cash collateral agreement to be entered into in form and substance reasonably satisfactory to the Administrative Agent and the Borrower (which shall permit certain investments in Cash Equivalents satisfactory to the Administrative Agent and the Borrower until the proceeds are applied to the secured obligations). (b) If on any date (after giving effect to any other payments on such date) the sum of (i) the aggregate outstanding principal amount of Loans, PLUS (ii) the Letter of Credit Outstandings, PLUS (iii) the Aggregate Measured Swap Credit Risk (if any) of all Designated Interest Rate Agreements, EXCEEDS the lesser of (A) the Aggregate Borrowing Base then in effect, or (B) the sum of (x) 65% of the fair market value of the Eligible Real Estate constituting a part of the Mortgaged Property hereunder on the Initial Borrowing Date, as determined on the basis of the appraisals referred to in section 5.1(v), and (y) 65% of the Appraised Value of any Additional Property or Substitute Property, determined for any such Property as of the date such Property becomes a Mortgaged Property hereunder in compliance with section 7.17, as determined on the basis of the appraisal with respect thereto referred to in section 7.17, the Borrower shall prepay on such date that principal amount of Loans and, after all Loans have been paid in full, Unpaid Drawings, in an aggregate amount equal to such excess. Any such prepayment of Loans shall be so applied as a mandatory prepayment of principal of (x) FIRST, the then outstanding SF Loans and (y) 14 20 SECOND, once no SF Loans remain outstanding, the then outstanding PF Loans. If, after giving effect to the prepayment of Loans and Unpaid Drawings, the aggregate amount of Letter of Credit Outstandings exceeds the Total PF Commitment as then in effect, the Borrower shall pay to the Administrative Agent an amount in cash and/or Cash Equivalents equal to such excess and the Administrative Agent shall hold such payment as security for the obligations of the Borrower hereunder pursuant to a cash collateral agreement to be entered into in form and substance reasonably satisfactory to the Administrative Agent and the Borrower (which shall permit certain investments in Cash Equivalents satisfactory to the Administrative Agent and the Borrower until the proceeds are applied to the secured obligations). (c) Promptly, and in any event not later than the third Business Day following the date of receipt thereof by the Borrower of the cash proceeds from any payment or prepayment of the principal of, or other realization upon the principal of, the Pledged Note, an amount not in excess of the amount so received, up to a cumulative aggregate amount of $6,000,000, shall be applied as a mandatory prepayment of principal of the then outstanding SF Loans. After the SF Loans are no longer outstanding and the Total SF Commitment has been terminated, the Borrower may retain any such amounts so received if the Pledge Agreement has been terminated in accordance with its terms. (d) On the date of the receipt thereof by the Borrower, the Borrower shall apply, as a mandatory prepayment of principal of the then outstanding SF Loans, such portion (but not in excess of 100%) of each amount of the cash proceeds received by the Borrower (net of underwriting discounts and commissions, placement and advisory fees, and other customary fees, costs and expenses associated therewith) from any sale or issuance of equity by the Borrower after the Initial Borrowing Date in an underwritten public offering or private placement with investors (other than any sale or issuance to management or employees). After the SF Loans are no longer outstanding and the Total SF Commitment has been terminated, the Borrower may retain any such amounts so received. (e) On the date of which a Change of Control occurs the then outstanding principal amount of all Loans, if any, shall become due and payable and shall be prepaid in full, and the Borrower shall contemporaneously either (i) cause all outstanding Letters of Credit to be surrendered for cancellation (any such Letters of Credit to be replaced by letters of credit issued by other financial institutions), or (ii) the Borrower shall pay to the Administrative Agent an amount in cash and/or Cash Equivalents equal to 100% of the Letter of Credit Outstandings and the Administrative Agent shall hold such payment as security for the obligations of the Borrower hereunder pursuant to a cash collateral agreement to be entered into in form and substance reasonably satisfactory to the Administrative Agent and the Borrower (which shall permit certain investments in Cash Equivalents satisfactory to the Administrative Agent and the Borrower until the proceeds are applied to the secured obligations). (f) With respect to each prepayment of Loans required by this section 4.2, the Borrower shall designate the Types of Loans which are to be prepaid and the specific Borrowing(s) pursuant to which such prepayment is to be made, PROVIDED that (i) the Borrower shall first so designate all Loans that are Base Rate Loans and Eurodollar Loans with Interest Periods ending on the date of prepayment prior to designating any other Eurodollar Loans for prepayment, (ii) if the outstanding principal amount of Eurodollar Loans made pursuant to a Borrowing is reduced below the applicable Minimum Borrowing Amount as a result of any such prepayment, then all the Loans outstanding pursuant to such Borrowing shall be converted into Base Rate Loans, and (iii) each prepayment of any Loans made pursuant to a Borrowing shall be applied PRO RATA among such Loans. In the absence of a designation by the Borrower as described in the preceding sentence, the Administrative Agent shall, subject to the above, make such designation in its sole discretion with a view, but no obligation, to minimize breakage costs owing under section 1.11. 15 21 4.3. METHOD AND PLACE OF PAYMENT. Except as otherwise specifically provided herein, all payments under this Agreement shall be made to the Administrative Agent for the ratable (based on its PRO RATA share) account of the Lenders entitled thereto, not later than 1:00 P.M. (Cleveland, Ohio time) on the date when due and shall be made in immediately available funds and in lawful money of the United States of America at the Payment Office, it being understood that written notice by the Borrower to the Administrative Agent to make a payment from the funds in the Borrower's account at the Payment Office shall constitute the making of such payment to the extent of such funds held in such account. Any payments under this Agreement which are made later than 1:00 P.M. (Cleveland, Ohio time) shall be deemed to have been made on the next succeeding Business Day. Whenever any payment to be made hereunder shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest shall be payable during such extension at the applicable rate in effect immediately prior to such extension. 4.4. NET PAYMENTS. (a) All payments made by the Borrower hereunder, under any Note or any other Loan Document, will be made without setoff, counterclaim or other defense. Except as provided for in section 4.4(b), all such payments will be made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein with respect to such payments (but excluding, except as provided in the second succeeding sentence, any tax, imposed on or measured by the net income or net profits of a Lender pursuant to the laws of the jurisdiction under which such Lender is organized or the jurisdiction in which the principal office or applicable lending office of such Lender is located or any subdivision thereof or therein) and all interest, penalties or similar liabilities with respect to such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges (all such nonexcluded taxes levies, imposts, duties, fees assessments or other charges being referred to collectively as "TAXES"). If any Taxes are so levied or imposed, the Borrower agrees to pay the full amount of such Taxes and such additional amounts as may be necessary so that every payment of all amounts due hereunder, under any Note or under any other Loan Document, after withholding or deduction for or on account of any Taxes will not be less than the amount provided for herein or in such Note or in such other Loan Document. If any amounts are payable in respect of Taxes pursuant to the preceding sentence, the Borrower agrees to reimburse each Lender, upon the written request of such Lender for taxes imposed on or measured by the net income or profits of such Lender pursuant to the laws of the jurisdiction in which such Lender is organized or in which the principal office or applicable lending office of such Lender is located or under the laws of any political subdivision or taxing authority of any such jurisdiction in which the principal office or applicable lending office of such Lender is located and for any withholding of income or similar taxes imposed by the United States of America as such Lender shall determine are payable by, or withheld from, such Lender in respect of such amounts so paid to or on behalf of such Lender pursuant to the preceding sentence and in respect of any amounts paid to or on behalf of such Lender pursuant to this sentence, which request shall be accompanied by a statement from such Lender setting forth, in reasonable detail, the computations used in determining such amounts. The Borrower will furnish to the Administrative Agent within 45 days after the date the payment of any Taxes, or any withholding or deduction on account thereof, is due pursuant to applicable law certified copies of tax receipts, or other evidence satisfactory to the Lender, evidencing such payment by the Borrower. The Borrower will indemnify and hold harmless the Administrative Agent and each Lender, and reimburse the Administrative Agent or such Lender upon its written request, for the amount of any Taxes so levied or imposed and paid or withheld by such Lender. (b) Each Lender that is not a United States person (as such term is defined in section 7701(a)(30) of the Code) for Federal income tax purposes agrees to provide to the Borrower and the Administrative Agent on or prior to the Effective Date, or in the cases of a Lender that is an assignee or transferee of an interest under this Agreement pursuant to section 12.4 (unless the respective Lender was already a Lender hereunder immediately prior to such assignment or transfer and such Lender is in compliance with the provisions of this section 4.4(b)), on the date of such assignment or transfer to such Lender, (i) two accurate and complete original signed copies of Internal Revenue Service Form 4224 or 1001 (or successor forms) certifying to such Lender's entitlement to a complete exemption from United States withholding tax with respect to payments to be made under this Agreement, any Note or any other Loan Document, or (ii) if the Lender is not a "bank" within the meaning of section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue Service Form 1001 or 4224 pursuant to clause (i) above, (x) a certificate substantially in the form of Exhibit J (any such certificate, a "SECTION 4.4(B)(II) CERTIFICATE") and (y) 16 22 two accurate and complete original signed copies of Internal Revenue Service Form W-8 (or successor form) certifying to such Lender's entitlement to a complete exemption from United States withholding tax with respect to payments of interest to be made under this Agreement, any Note or any other Loan Document. In addition, each Lender agrees that from time to time after the Effective Date, when a lapse in time or change in circumstances renders the previous certification obsolete or inaccurate in any material respect, it will deliver to the Borrower and the Administrative Agent two new accurate and complete original signed copies of Internal Revenue Service Form 4224 or 1001, or Form W-8 and a section 4.4(b)(ii) Certificate, as the case may be, and such other forms as may be required in order to confirm or establish the entitlement of such Lender to a continued exemption from or reduction in United States withholding tax with respect to payments under this Agreement, any Note or any other Loan Document, or it shall immediately notify the Borrower and the Administrative Agent of its inability to deliver any such Form or Certificate, in which case such Lender shall not be required to deliver any such Form or Certificate pursuant to this section 4.4(b). Notwithstanding anything to the contrary contained in section 4.4(a), but subject to section 12.4(b) and the immediately succeeding sentence, (x) the Borrower shall be entitled, to the extent it is required to do so by law, to deduct or withhold income or other similar taxes imposed by the United States (or any political subdivision or taxing authority thereof or therein) from interest, fees or other amounts payable hereunder for the account of any Lender which is not a United States person (as such term is defined in section 7701(a)(30) of the Code) for United States federal income tax purposes and which has not provided to the Borrower such forms that establish a complete exemption from such deduction or withholding and (y) the Borrower shall not be obligated pursuant to section 4.4(a) hereof to gross-up payments to be made to a Lender in respect of income or similar taxes imposed by the United States or any additional amounts with respect thereto (I) if such Lender has not provided to the Borrower the Internal Revenue Service forms required to be provided to the Borrower pursuant to this section 4.4(b) or (II) in the case of a payment other than interest, to a Lender described in clause (ii) above, to the extent that such forms do not establish a complete exemption from withholding of such taxes. Notwithstanding anything to the contrary contained in the preceding sentence or elsewhere in this section 4.4 and except as specifically provided for in section 12.4(b), the Borrower agrees to pay additional amounts and indemnify each Lender in the manner set forth in section 4.4(a) (without regard to the identity of the jurisdiction requiring the deduction or withholding) in respect of any Taxes deducted or withheld by it as described in the previous sentence as a result of any changes after the Effective Date in any applicable law, treaty, governmental rule, regulation, guideline or order, or in the interpretation thereof, relating to the deducting or withholding of income or similar Taxes. (c) If any Lender, in its sole opinion, determines that it has finally and irrevocably received or been granted a refund in respect of any Taxes paid as to which indemnification has been paid by the Borrower pursuant to this section, it shall promptly remit such refund (including any interest received in respect thereof), net of all out-of-pocket costs and expenses; provided, that the Borrower agrees to promptly return any such refund (plus interest) to such Lender in the event such Lender is required to repay such refund to the relevant taxing authority. Any such Lender shall provide the Borrower with a copy of any notice of assessment from the relevant taxing authority (redacting any unrelated confidential information contained therein) requiring repayment of such refund. Nothing contained herein shall impose an obligation on any Lender to apply for any such refund. (d) Reference is hereby made to the provisions of section 1.10(d) for certain limitations upon the rights of a Lender under this section. 17 23 SECTION 5. CONDITIONS PRECEDENT. 5.1. CONDITIONS PRECEDENT AT INITIAL BORROWING DATE. The obligation of the Lenders to make Loans, and of any Letter of Credit Issuer to issue Letters of Credit, is subject to the satisfaction of each of the following conditions on or prior to the Initial Borrowing Date as indicated below: (A) EFFECTIVENESS; NOTES. On or prior to the Initial Borrowing Date, (i) the Effective Date shall have occurred and (ii) there shall have been delivered to the Administrative Agent for the account of each Lender the appropriate Note executed by the Borrower, in each case, in the amount, maturity and as otherwise provided herein. (B) OPINIONS OF COUNSEL. On or prior to the Initial Borrowing Date, the Administrative Agent shall have received opinions, addressed to the Administrative Agent and each of the Lenders and dated the Initial Borrowing Date, from (i) Thompson Hine & Flory P.L.L., special counsel to the Borrower and the Management Company, substantially in the form of Exhibit C hereto and covering such other matters incident to the transactions contemplated hereby as the Administrative Agent may reasonably request, and (ii) local counsel to the Borrower in Pennsylvania, Minnesota, Iowa, Georgia and North Carolina, covering such matters in such jurisdictions incident to the transactions contemplated hereby as the Administrative Agent may reasonably request, all such opinions to be in form and substance satisfactory to the Administrative Agent. (C) CERTIFIED COPIES OF CHARTER DOCUMENTS AND BYLAWS. On or prior to the Initial Borrowing Date the Administrative Agent shall have received from the Borrower, in sufficient quantities for the Lenders, (i) a copy, certified by a duly authorized officer of the Borrower to be true and complete on and as of the Initial Borrowing Date, of the Borrower's Declaration of Trust and by-laws or code of regulations as in effect on the Initial Borrowing Date (together with any and all amendments thereto); (ii) a copy, certified by a duly authorized officer of the Management Company, of the Management Company's Articles of Incorporation and by-laws as in effect on the Initial Borrowing Date (together with any and all amendments thereto); (iii) the charter or other organizational documents of the Management Company, certified by the Delaware Secretary of State, together with a certificate of good standing for the Management Company issued by the Delaware Secretary of State as of a recent date; (iv) the organizational documents of the Borrower, certified as of a recent date by the Ohio Secretary of State as being validly registered and in full force and effect; (v) a Certificate of Good Standing for each of the Borrower and the Management Company, each issued by the Ohio Secretary of State as of a recent date; and (vi) certificates, issued by the Secretary of State in each other jurisdiction in which a Mortgaged Property is located and the Borrower or the Management Company is qualified to do business, each dated as of a recent date, confirming that the Borrower and the Management Company are duly qualified and in good standing in each such jurisdiction. (D) AUTHORIZATION. On or prior to the Initial Borrowing Date the Administrative Agent shall have received from the Borrower, in sufficient quantities for the Lenders, copies, certified by a duly authorized officer of each such party to be true and complete on and as of the date thereof, of records of all organizational action taken by the Borrower and the Management Company, respectively, to authorize (i) the execution and delivery of this Agreement and the other Loan Documents to which it is or is to become a party as contemplated or required by this Agreement; (ii) its performance of all of its obligations under each of such documents; and (iii) the making by the Borrower of the borrowings contemplated hereby. (E) INCUMBENCY CERTIFICATES. On or prior to the Initial Borrowing Date the Administrative Agent shall have received from each of the Borrower and the Management Company, in sufficient quantities for the Lenders, an incumbency certificate, dated the date of delivery thereof, signed by a duly authorized officer of such respective party and giving the name 18 24 and bearing a specimen signature of each individual who shall be authorized (i) to sign, in the name and on behalf of each such party, each of the Loan Documents to which it is to become a party on or prior to the Initial Borrowing Date; and (ii) to give notices and to take other action on behalf of the Borrower or the Management Company, as the case may be, under the Loan Documents. (F) LOAN DOCUMENTS. The Notes and all of the other Loan Documents and Security Documents shall have been duly and properly authorized, executed and delivered by the Borrower and, where appropriate, by the Management Company, and all such documents shall be in full force and effect on and as of the Initial Borrowing Date. Executed originals of each of the Loan Documents (other than the Notes, which shall have been delivered as provided above) shall have been delivered to the Administrative Agent in sufficient quantities for the Lenders. (G) PLEDGED NOTE. The Pledged Note, accompanied by an instrument of assignment in favor of the Administrative Agent, shall have been delivered to the Administrative Agent to be held as part of the Collateral pursuant to the Pledge Agreement. All such other actions shall have been taken as may be necessary or, in the opinion of the Administrative Agent, desirable to perfect the security interest purported to be created by the Pledge Agreement in the Pledged Note and the security therefor, and the Administrative Agent shall have received (i) an original loan policy of title insurance (ALTA 1970 Form B) issued by a title insurance company satisfactory to the Administrative Agent, insuring that the mortgage securing the Pledged Note has been assigned to the Administrative Agent and creates the lien it purports to create, (ii) assignments of all notes or other securities securing the Pledged Note, and (iii) such other evidence as it may reasonably require to confirm that this condition has been satisfied. (H) MORTGAGED PROPERTIES. The Borrower and the Management Company shall have taken and completed all of the following actions with respect to each location which is a Mortgaged Property as of the Initial Borrowing Date: (i) duly executed and caused to be filed for record in the real property records of the county in which the affected real property encumbered thereby is located its Mortgage, its Lease Assignment and such Uniform Commercial Code financing statements as the Administrative Agent may deem necessary or appropriate to create and/or to perfect the first and paramount lien and security interest in favor of the Administrative Agent in the real and personal property described therein; (ii) furnished to the Administrative Agent an original loan policy of title insurance (ALTA 1970 Form B) issued by a title insurance company satisfactory to the Administrative Agent (the "TITLE COMPANY"), insuring, in amounts (taking into account the Appraised Values of the respective Mortgaged Properties and the terms of the Mortgage covering the Kandi Mall), on terms and with such affirmative coverages or endorsements as the Administrative Agent may require (including but not limited to the so-called "revolving credit" and "variable rate" endorsements and such facultative direct-access reinsurance treaties as the Administrative Agent may require), that each such Mortgage is a valid first lien upon the real property encumbered thereby, subject only to such exceptions or matters affecting title as the Administrative Agent may approve in writing; (iii) furnished to the Administrative Agent a current as-built survey showing such matters as may be required by the Administrative Agent, which survey shall be: (A) acceptable in form and content to the Administrative Agent; (B) certified to the Administrative Agent and the Title Company; and (C) 19 25 prepared by a registered surveyor acceptable to the Administrative Agent in accordance with the minimum standard detail requirements for ALTA/ACSM Title Surveys, so as to eliminate any and all "survey exceptions" from the title insurance policies described above, and containing (1) a note as to the zoning classification of the subject property; and (2) a statement of whether the subject property is located in a flood hazard zone and, if applicable, the Flood Map panel number, suffix, map date and zone for the subject property; (iv) provided to the Administrative Agent such estoppel certificates and tenant subordination agreements, acceptable in form and content to the Administrative Agent, as the Administrative Agent may require with respect to any tenant whose lease of any portion of any of the Mortgaged Properties exceeds 40,000 square feet; and (v) provided to the Administrative Agent a current rent-roll for each Mortgaged Property. In addition, the Borrower shall have paid all costs and expenses payable in connection with all of the actions taken pursuant to this section 5.1(h), including but not limited to (x) all mortgage, intangibles or similar taxes or fees, however characterized, payable in respect of this Agreement, the execution and delivery of the Notes, any of the Mortgages or any of the other Loan Documents or the recording of any of the same; and (y) all expenses and premiums of the Title Company in connection with the issuance of such policies of title insurance and to all costs and expenses required for the recording of the Mortgages or any other Loan Documents in the appropriate public records. (I) LEGALITY OF TRANSACTIONS. No change in applicable law shall have occurred as a consequence of which it shall have become and continue to be unlawful (i) for the Administrative Agent or any Lender to perform any of its agreements or obligations under any of the Loan Documents to which it is a party on the Initial Borrowing Date; or (ii) for the Borrower or the Management Company to perform any of its agreements or obligations under any of the Loan Documents to which it is a party on the Initial Borrowing Date. (J) COMPLIANCE WITH LAWS. All of the borrowings made or to be made, and the other financial accommodations to be provided, under this Agreement are and shall be in compliance with the requirements of all applicable laws, regulations, rules and orders, including without limitation the Environmental Laws and the requirements imposed by the SEC or by the Board of Governors of the Federal Reserve System under Regulations U, G and X. (K) FEES AND EXPENSES. The Borrower shall have paid all fees required under this Agreement to be paid by the Borrower on or prior to the Initial Borrowing Date; and the Borrower shall have reimbursed the Administrative Agent for all reasonable out-of-pocket costs and expenses, including without limitation all appraisal, environmental and other fees incurred by the Administrative Agent, and all fees and disbursements of special counsel to the Administrative Agent, in each case to the extent invoiced on or prior to the Initial Borrowing Date. (L) EXISTING CREDIT AGREEMENTS. The Borrower shall have, contemporaneously with the making of the initial Borrowing hereunder, (i) paid or prepaid all outstanding borrowings under its Credit Agreement, dated as of December 5, 1994, with National City Bank, and its Credit Agreement, dated as of March 4, 1996, with KeyBank National Association, each as heretofore in effect, (ii) arranged, as contemplated hereby, for all letters of credit issued for the account of the Borrower pursuant thereto, to be deemed issued hereunder, and (iii) terminated the commitment of the lender or lenders thereunder. 20 26 (M) CHANGES; NONE ADVERSE. From the date of the most recent balance sheets referred to in section 6.5 of this Agreement to the Initial Borrowing Date, no changes shall have occurred in the assets, liabilities, financial condition, business, operations or prospects of the Borrower or the Borrower and its Subsidiaries taken as a whole which, individually or in the aggregate, are materially adverse to the Borrower or the Borrower and its Subsidiaries taken as a whole. (N) OFFICER'S CERTIFICATES. The Administrative Agent shall have received from each of the Borrower and the Management Company, in sufficient quantities for the Lenders, a certificate, dated the date of delivery thereof, signed by such party's respective duly authorized officers and certifying, on terms acceptable to the Administrative Agent and the Lenders, that each of the representations and warranties of such party in this Agreement and in the other Loan Documents was true and correct when made, and is true and correct on and as of the date thereof. (O) COMPLIANCE CERTIFICATE. The Administrative Agent shall have received, in sufficient quantities for the Lenders, a Compliance Certificate, dated as of a recent date on or prior to the Initial Borrowing Date, the required calculations under which shall demonstrate the compliance by the Borrower with the covenants of this Agreement required to be measured in such Certificate. (P) FINANCIAL STATEMENTS. The Administrative Agent and the Lenders shall have received the financial statements referred to in section 6.5, certified by an officer of the Borrower, and shall have been satisfied that such financial statements accurately reflect the financial status and condition of the Borrower and its Subsidiaries and the Management Company. (Q) OTHER APPROVALS, ETC. The Administrative Agent shall have received, in sufficient quantities for the Lenders, copies of such other approvals, opinions, certificates, instruments and documents with respect to the Mortgaged Properties or the transactions described herein as it may reasonably request. (R) INSURANCE POLICIES. The Administrative Agent shall have received evidence of insurance complying with the requirements of the Mortgages, in form and substance satisfactory to the Administrative Agent and with respect to all casualty insurance, naming the Administrative Agent as an additional insured and loss payee. (S) SOLVENCY. The Administrative Agent shall have received from the chief financial officer of the Borrower a certificate in the form of Exhibit I hereto, expressing opinions of value and other appropriate facts or information regarding the solvency of the Borrower and its Subsidiaries taken as a whole. (T) ENVIRONMENTAL REPORTS. The Administrative Agent shall have received Phase I environmental assessments from PSI (or such other firm satisfactory to the Administrative Agent) and in form and substance satisfactory to the Administrative Agent, and covering each of the Mortgaged Properties. (U) APPRAISALS. The Administrative Agent shall have received appraisals, satisfactory in form and substance to the Administrative Agent, dated not more than 60 days prior to the Initial Borrowing Date, from one or more nationally recognized appraisal firms, satisfactory to the Administrative Agent, covering each of the Mortgaged Properties, which appraisals shall set forth for each Mortgaged Property the "fair market value" thereof (i.e., the amount at which such Mortgaged Property would equitably exchange between a willing buyer and a willing seller, neither being under a compulsion and both having reasonable knowledge of all relevant facts on the premise that such Mortgaged Property will continue in its present use as part of an ongoing business enterprise), in each case as determined in accordance with sound appraisal standards. 21 27 (V) PROCEEDINGS AND DOCUMENTS. All corporate and legal proceedings and all instruments and agreements in connection with the transactions contemplated by this Agreement and the other Loan Documents shall be reasonably satisfactory in form and substance to the Administrative Agent, and the Administrative Agent shall have received all information and copies of all certificates, documents, and papers, including good standing certificates and any other records of corporate proceedings and governmental approvals, if any, which the Administrative Agent or any Lender may have reasonably requested in connection therewith, such documents and papers, where appropriate, to be certified by proper corporate or Governmental Authorities. 5.2. CONDITIONS PRECEDENT TO ALL CREDIT EVENTS. The obligations of the Lenders to make each Loan and/or of a Letter of Credit Issuer to issue each Letter of Credit is subject, at the time thereof, to the satisfaction of the following conditions: (A) NOTICE OF BORROWING, ETC. The Administrative Agent shall have received a Notice of Borrowing meeting the requirements of section 1.3 with respect to the incurrence of Loans or a Letter of Credit Request meeting the requirement of section 2.2 with respect to the issuance of a Letter of Credit. (B) NO DEFAULT; REPRESENTATIONS AND WARRANTIES. At the time of each Credit Event and also after giving effect thereto, (i) there shall exist no Default or Event of Default and (ii) all representations and warranties contained herein or in the other Loan Documents shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of such Credit Event, except to the extent that such representations and warranties expressly relate to an earlier date. (C) BORROWING BASE LIMIT MATTERS. At the time of such Credit Event, the Administrative Agent shall have received such Compliance Certificates and rent rolls referred to in section 7.1(e) as are required to be delivered to the Administrative Agent on or prior to the date of such Credit Event, and such other evidence as the Administrative Agent may reasonably require, in order for the Administrative Agent to establish that such Credit Event complies with the Aggregate Borrowing Base limitations contained herein. The acceptance of the benefits of each Credit Event shall constitute a representation and warranty by the Borrower to each of the Lenders that all of the applicable conditions specified in section 5.1 and/or 5.2, as the case may be, are satisfied as of that time. All of the certificates, legal opinions and other documents and papers referred to in this section 5, unless otherwise specified, shall be delivered to the Administrative Agent for the account of each of the Lenders and, except for the Notes, in sufficient counterparts for each of the Lenders. SECTION 6. REPRESENTATIONS AND WARRANTIES. In order to induce the Lenders to enter into this Agreement and to make the Loans, and/or to issue and/or to participate in the Letters of Credit provided for herein, the Borrower and the Management Company, each as to itself, each makes the following representations and warranties to, and agreements with, the Lenders, all of which shall survive the execution and delivery of this Agreement and each Credit Event: 22 28 6.1. ORGANIZATION, EXISTENCE. (a) The Borrower is duly organized, validly existing and in good standing as a real estate investment trust organized under Chapter 1747 of the Ohio Revised Code, has full power and authority and full legal right to own or to hold under lease its Property and to carry on its businesses and is qualified and self-administered as a REIT under sections 856 through 860 of the Code. The Management Company is duly organized, validly existing and in good standing as a corporation under the laws of the State of Delaware, and has full corporate power and authority and full legal right to own or hold under lease its Property and to carry on its business. Each of the Borrower and the Management Company is qualified and licensed, admitted or approved to do business in each jurisdiction wherein the character of its Property or the nature of its business make such qualification necessary or advisable and where the failure so to qualify would have a material and adverse effect on the Borrower. (b) Each of the Borrower and the Management Company has the requisite power and authority, and full legal right, to enter into this Agreement and each of the other Loan Documents to which it is a party, and to perform, observe and comply with all of its agreements and obligations hereunder and under each and all of the Loan Documents to which it is a party. (c) Except as set forth on Annex II, the Borrower does not, as of the date hereof, own or hold of record (whether directly or indirectly) more than one percent (1.0%) of any shares of any class in the capital of any corporation, nor does the Borrower own or hold (whether directly or indirectly) more than one percent (1.0%) of any legal and/or beneficial equity interest in any partnership, business trust or joint venture or in any other unincorporated trade or business enterprise. The representation and warranty set forth in this section 6.1(c) is made upon and as of the date hereof, and shall not (notwithstanding any other provision of this Agreement to the contrary) be deemed to be repeated on any other date. (d) The Borrower is duly qualified as a REIT under the Code, and has not incurred any liability for excise taxes pursuant to section 4981 of the Code. 6.2. DUE AUTHORIZATION. (a) The execution and delivery by the Borrower of each of the Loan Documents, the performance by the Borrower of all of its agreements and obligations under such Loan Documents, and the making by the Borrower of the borrowings contemplated by this Agreement have been duly authorized by all appropriate action on the part of the Borrower and do not and will not (i) contravene any provision of its Declaration of Trust or any other organizational or constituent document of the Borrower as in effect from time to time; (ii) conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, or (except as expressly contemplated by the terms of this Agreement with respect to the liens and interests to be created in favor of the Administrative Agent under the Security Documents) result in the creation of any Lien upon any of the Property of the Borrower under any agreement, trust deed, indenture, mortgage or other instrument to which the Borrower is a party or by which the Borrower or any other Property of the Borrower is bound or affected; (iii) violate or contravene any provision of any law, rule or regulation (including, without limitation, Regulations G, T, U or X of the Board of Governors of the Federal Reserve System) or any order, ruling or interpretation thereunder or any decree, order or judgment of any court or governmental or regulatory authority, bureau, agency or official (all as from time to time in effect and applicable to the Borrower); or (iv) require any waivers, consents or approvals by any of the creditors or trustees for creditors of the Borrower or any other person. (b) The execution and delivery by the Management Company of each of the Loan Documents to which it is a party and the performance by the Management Company of all of its agreements and obligations under such Loan Documents has been duly authorized by all corporate action on the part of the Management Company, and do not and will not (i) contravene the Articles of Incorporation or any other organizational or constituent document of the Management Company as in effect from time to time; (ii) conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, or (except as contemplated by this Agreement) result in the creation of a Lien upon any Property of the Management Company under any agreement, trust deed, indenture, mortgage or other instrument to which the Management Company is a party or by which its Property is bound or 23 29 affected; (iii) violate or contravene any provision of any law, rule or regulation or any order, ruling or interpretation thereunder or any decree, order or judgment of any court or governmental or regulatory authority, bureau, agency or official (all from time to time in effect and applicable to the Management Company); or (iv) require any waivers, consents or approvals of any other person. (c) Except as to matters which the Borrower has procured, obtained or performed prior to or concurrently with its execution and delivery of this Agreement, no approval, consent, order, authorization or license by, or giving notice to, or taking any other action with respect to, any governmental or regulatory authority or agency is required under any provision of any applicable law: (i) for the execution and delivery by the Borrower or the Management Company, as the case may be, of this Agreement, the Notes, and the other Loan Documents, for the performance by the Borrower or the Management Company of any of the agreements and obligations hereunder or thereunder or for the making by the Borrower of the borrowings contemplated by this Agreement, or for the conduct by the Borrower of its business; or (ii) to ensure the continuing legality, validity, binding effect, enforceability or admissibility in evidence of this Agreement, the Notes and the other Loan Documents; other than the filings and recordings to which reference is made in section 5.1(h). 6.3. ENFORCEABILITY OF DOCUMENTS. (a) On or before the Initial Borrowing Date, the Borrower and the Management Company will have duly executed and delivered each of the Loan Documents required of it by this Agreement, and each such Loan Document will be in full force and effect. Each Loan Document shall constitute the legal, valid and binding obligation of the Borrower and/or the Management Company, as the case may be, enforceable against the Borrower or the Management Company, as the case may be, in accordance with its respective terms. (b) The representations and warranties made by the Borrower and the Management Company in this section 6.3 are subject to the following qualifications: (i) the enforceability of any rights and remedies provided in any of the Loan Documents or against any particular party thereto is subject to applicable bankruptcy, reorganization, moratorium or other similar laws affecting generally the enforcement of creditors' rights; and (ii) the availability of equitable remedies for the enforcement of any provision of any of the Loan Documents may be subject to the discretion of the court before which any proceeding for the enforcement of any provision may be brought. 6.4. NO DEFAULT. (a) No event has occurred and is continuing, and no condition exists, which constitutes a Default or an Event of Default. (b) No default by the Borrower or the Management Company and no accrued right of rescission, cancellation or termination on the part of the Borrower or the Management Company, exists under this Agreement or any of the other Loan Documents. 24 30 6.5. FINANCIAL STATEMENTS. The Borrower has furnished the Lenders with true, correct and complete copies of (a) the combined annual financial statements for the Borrower and the Management Company for the most recent fiscal year of the Borrower, including the combined balance sheet of the Borrower and the Management Company as of the end of such fiscal year and combined statements of income and changes in cash for the Borrower and the Management Company and a statement of shareholder's equity, prepared on a consistent basis in accordance with GAAP (except as specifically disclosed therein) and in the form included with the Borrower's Form 10-K as filed with the SEC for such fiscal year, certified without qualification by the Borrower's Accountants; (b) the combined quarterly financial statements for the Borrower and the Management Company for each fiscal quarter elapsed since the expiration of the Borrower's most recent fiscal year, including a combined balance sheet and combined statements of income and change in cash of the Borrower and the Management Company, prepared on a consistent basis with the prior fiscal year's financial statements in accordance with GAAP (except as specifically disclosed therein), and in the form included with the Borrower's Form 10-Q, as filed with the SEC for any such fiscal quarter; and (c) a certificate of the chief financial officer, principal accounting officer or chief executive officer of the Borrower, stating that to his best knowledge after due inquiry the foregoing statements present fairly in all material respects the combined financial position of the Borrower and the Management Company and the results of their combined operations, subject, solely with respect to the materials described in clause (b), to routine year-end audit adjustments. 6.6. NO ADVERSE CHANGES. No changes have occurred in the assets, liabilities or financial condition of the Borrower or the Management Company from those reflected in the most recent balance sheets referred to in section 6.5 which, individually or in the aggregate, have been materially adverse. Since the date of such most recent balance sheet, there has been no material and adverse development in the business or in the operations or prospects of the Borrower or the Management Company. 6.7. TITLE TO ASSETS. Except as set forth in Annex IV, the Borrower and its Subsidiaries have good, sufficient and legal title to, or a valid and subsisting ground leasehold interest in, all the Property and assets reflected in the most recent balance sheet referred to in section 6.5, except for assets disposed of since the date of such balance sheet in the ordinary course of business. As of the Initial Borrowing Date, the Borrower is the owner of the Pledged Note, the unpaid principal amount of the Pledged Note is $6,000,000, and the Pledged Note is secured by the security identified in the Pledge Agreement. 6.8. LITIGATION. Except as disclosed in Annex V, or (with respect to subsequent reiterations of this warranty and representation) as disclosed in documents filed with the SEC and provided to the Lenders as required by this Agreement, there is no pending action, suit, proceeding or investigation pending, or, to Borrower's knowledge, threatened, before any court, governmental or regulatory authority, agency, commission or official, board of arbitration or arbitrator against the Borrower or the Management Company in which Borrower or the Management Company is a participant which could, if determined adversely to the Borrower or the Management Company, reasonably be expected to affect, in any material or adverse way, the financial position, assets, business, operations or prospects of the Borrower. There are no proceedings pending or, to the Borrower's knowledge, threatened against the Borrower or the Management Company which call into question the validity or enforceability of any of the Loan Documents. 6.9. NO MATERIALLY ADVERSE CONTRACTS. The Borrower is not a party to or bound by any contracts, agreements or instruments (whether written or oral) which, either individually or in the aggregate, materially and adversely affect the financial position, business, operations or prospects of the Borrower. 6.10. TAX RETURNS. The Borrower has filed all federal, state and other tax returns required to be filed by it and has made reasonable provisions, in accordance with GAAP, for the payment of all taxes (if any) which have or may become due and payable pursuant to any of the said returns, pursuant to any matters raised by audits or for other reasons. In addition, the Borrower has paid or caused to be paid all real and personal property taxes and assessments and other governmental charges lawfully levied or imposed on or against it or its Property, other than those presently payable without payment of interest or penalty and those which are subject to contests initiated by the Borrower in good faith and diligently prosecuted, in each case as permitted by and subject to the requirements of, section 7.10 below. 25 31 6.11. CONTRACTS WITH AFFILIATES OR SUBSIDIARIES. (a) Except as permitted by section 8.6 hereof and as otherwise set forth on Annex VII hereto, the Borrower is not a party to or otherwise bound by any material agreements, instruments or contracts (whether written or oral) with any Affiliate or Subsidiary. (b) Except as permitted by section 8.6 below, and as otherwise set forth on Annex VIII hereto, there is no Indebtedness for Borrowed Money owing by the Borrower to any Affiliate nor is there Indebtedness for Borrowed Money owing by any Affiliate to the Borrower. 6.12. EMPLOYEE BENEFIT PLANS. Except as shown on Annex VI hereto, the Borrower does not maintain any Employee Benefit Plans or Guaranteed Pension Plans. 6.13. GOVERNMENTAL REGULATION. The Borrower is not a "public utility company", a "holding company" or a "subsidiary" or an "affiliate" of a "holding company," as such terms are defined in the federal Public Utility Holding Company Act of 1935, as amended. The Borrower is not an "investment company" or a company "controlled" by an "investment company," as such terms are defined in the federal Investment Company Act of 1940, as amended. The Borrower is not subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or the Investment Company Act of 1940 or under any federal or state statute or regulation limiting its ability to incur Indebtedness for Borrowed Money. 6.14. MARGIN STOCK; USE OF PROCEEDS. The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying any Margin Stock. At no time would more than 25% of the value of the assets of the Borrower or of the Borrower and its combined Subsidiaries that are subject to any "arrangement" (as such term is used in section 221.2(g) of such Regulation U) hereunder be represented by Margin Stock. The proceeds of all Loans shall be utilized (i) to finance the acquisition of a minority interest in a joint venture to be formed to acquire nine regional shopping malls from Marathon U.S. Realties, Inc., the principal terms of which joint venture, acquisition transaction and associated financing have previously been disclosed to the Lenders, (ii) to finance other acquisitions and investments, (iii) to retire the Indebtedness referred to in section 5.1(l), and (iv) for general corporate purposes, in each case in a manner not inconsistent with the requirements of this Agreement. 6.15. DISCLOSURE. Neither this Agreement nor any other Loan Document, or any other document, certificate or written statement furnished to the Lenders by or on behalf of the Borrower 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 necessary in order to make the statements contained therein not misleading as of the date of such document, certificate or other statement. 6.16. NO MATERIAL DEFAULT. The Borrower is not in default under any order, writ, judgment, injunction, decree, statute or governmental rule, indenture, agreement, contract, lease or other instrument or contract applicable to it, which default would have a material and adverse effect on the business, assets, Properties or conditions, financial or otherwise, of the Borrower or in the performance of any covenants or conditions respecting any of its Indebtedness, and no holder of any Indebtedness of the Borrower has given notice of any asserted default thereunder, and no liquidation or dissolution of Borrower and no receivership, insolvency, bankruptcy, reorganization or other similar proceedings relative to the Borrower or its Property is pending or threatened. 26 32 6.17. ENVIRONMENTAL CONDITIONS. (a) The Borrower has obtained all necessary permits, licenses, variances, satisfactory clearances and all other necessary approvals (collectively the "EPA PERMITS") in respect of its Property and for the operation and conduct of the Borrower's business, from all applicable federal, state, and local Governmental Authorities, utility companies or development-related entities including, but not limited to, any and all appropriate Federal or State environmental protection agencies and other departments, public water works and public utilities in regard to the use of all such real property and the operation and conduct of its business, and for any handling, transporting, treating, storage, disposal, discharge, or Release (as defined in CERCLA) of Hazardous Substances or any wastes, liquids or other emissions, if any, into, on or from the environment (including, but not limited to, any air, water, or soil). All EPA Permits are in full force and effect; no such EPA Permit has expired or been suspended, denied or revoked, or is under challenge by any person. The Borrower is in compliance with each EPA Permit, and has no knowledge or information concerning any condition or fact which might or could cause a suspension, denial or revocation of any of the Borrower's EPA Permits. (b) Neither the Borrower, the Mortgaged Property, nor any other Property owned by or leased to the Borrower is (i) subject to any material private or governmental litigation, Lien or judicial or administrative notice, order or action, or, to the Borrower's knowledge, threatened litigation or administration action, relating to Hazardous Substances or environmental problems, impairments or liabilities; or (ii) with any applicable notice or lapse of time (or both), and/or failure to take certain curative or remedial actions, in direct or indirect violation of any Environmental Laws. (c) To the best of the Borrower's knowledge, there has been no Release (as defined in CERCLA) into, on or from any Mortgaged Property or any other Property owned by or leased to the Borrower, and no Hazardous Substances (except for (x) "Household Waste" as that term is defined at 40 C.F.R. 261.4(b)(l) (1990), and (y) DE MINIMIS amounts of Hazardous Substances which neither violate any Environmental Laws nor require any affirmative remediation or corrective action) are located on or have been treated, stored, processed, disposed of, handled, transported to or from, disposed of upon or into, upon or from any such Property including, but not limited to, any air, water, or soil. The Borrower shall not allow any Hazardous Substance to exist or be treated, stored, disposed, Released, located, discharged, possessed, managed, processed, or otherwise handled on any Mortgaged Property or any other Property owned by or leased to the Borrower except in compliance with all applicable requirements of all or in the operation or conduct of its business Environmental Laws, and shall comply with all Environmental Laws affecting all of the Borrower's Property. (d) The Borrower and its Affiliates do not and shall not transport or engage in the business of transporting, in any manner, any Hazardous Substances. (e) The Borrower is not aware of any circumstances which would result in any material obligation under any Environmental Law to investigate or remediate any Hazardous Substances in, on or under the Mortgaged Properties or in, on or under any other Property owned by or leased to the Borrower. (f) Reference is hereby made to the Environmental Indemnity Agreement, dated of even date herewith, executed and delivered by the Borrower to the Administrative Agent as one of the Loan Documents. The parties acknowledge and agree that it is their intention that this section 6.17 and the Environmental Indemnity Agreement be interpreted as being consistent and harmonious. Nevertheless, the parties further agree that, solely with respect to matters which are covered both by this section 6.17 and by the Environmental Indemnity Agreement, the latter shall govern in the event of any inconsistency. 6.18. LICENSES AND PERMITS. The Borrower owns or possesses all material Licenses and Permits and rights with respect thereto necessary for the lawful and proper conduct of its business as presently conducted and proposed to be conducted, without any known conflict with the rights of others, free of any Lien not permitted by this Agreement. All such Licenses and Permits are in full force and effect, and the Borrower is in compliance with the requirements imposed by, or in respect of, all such Licenses and Permits without any known conflict with the valid rights of others which could affect or impair in any material manner the business, assets or condition, financial 27 33 or otherwise, of the Borrower or the Collateral. No event has occurred and is continuing which permits, or after notice or lapse of time or both would permit, the revocation or termination of any such License or Permit, or would conversely affect the rights of the Borrower thereunder. There is no litigation or other proceeding or dispute with respect to any such Licenses and Permits which has, or is reasonably likely to have, any material adverse effect on the validity or continued availability of any such Licenses and Permits. SECTION 7. AFFIRMATIVE COVENANTS. The Borrower and the Management Company each hereby covenants and agrees that so long as this Agreement is in effect and until such time as the Total PF Commitment and the Total SF Commitment have been terminated, no Notes are outstanding and the Loans, together with interest, Fees and all other Obligations hereunder, have been paid in full, it shall comply with, observe, perform or fulfill all of the covenants set forth below in this section 7 which are to be performed by the Borrower or the Management Company, as the case may be, as follows: 7.1. REPORTS AND OTHER INFORMATION. (a) The Borrower shall provide to the Lenders, as soon as the same are available, and in any event within 45 days after the close of each of the first three quarters of each fiscal year of the Borrower, a combined balance sheet of the Borrower and the Management Company and any Subsidiaries of the Borrower as of the end of such quarter, together with combined statements of income, changes in cash and shareholders' equity for the Borrower and the Management Company and such Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter. All such statements shall be prepared on a consistent basis with the prior year's statements, in accordance with GAAP (except as may be expressly disclosed therein) in the form included in the Borrower's Form 10-Q as filed with the SEC, shall be certified by the Borrower's chief financial officer, principal accounting officer or chief executive officer, and shall be accompanied by a certificate of such officer stating that as of the date of such certificate and to the best of his knowledge, after reasonable inquiry: (i) such financial statements present fairly, in all material respects, the combined financial position of the Borrower and the Management Company and the results of their combined operations for such quarter and for the Borrower's fiscal year-to-date in accordance with GAAP, subject to routine year-end audit adjustments; and (ii) no event has occurred which constitutes an Event of Default or would constitute an Event of Default with the giving of notice or the lapse of time or both, or, if an Event of Default or such an event has occurred and is continuing, a statement as to the nature thereof and the action which the Borrower has taken or proposes to take with respect thereto. Concurrently with the delivery of the foregoing materials, the Borrower shall furnish, in such detail as is reasonably required by the Administrative Agent (x) a Compliance Certificate, documenting the Borrower's compliance with the requirements of sections 7.16 and section 8 of this Agreement, (y) a borrowing report, certified by a duly authorized officer of the Borrower, and (z) such other information as may reasonably be requested by the Administrative Agent with respect to the Borrower or the Borrower's business or Property. (b) The Borrower shall provide to the Lenders, as soon as the same are available and in any event within 90 days after the end of each fiscal year of the Borrower, a copy of the combined annual financial statements of the Borrower and the Management Company and any Subsidiaries of the Borrower for such year, including therein a copy of the combined balance sheet of the Borrower and the Management Company and any such Subsidiaries as of the end of such fiscal year and combined statements of income and changes in cash and statements of shareholders' equity. All of the foregoing shall be prepared on a consistent basis with the prior year's statements, in accordance with GAAP (except as may be expressly disclosed therein) in the form included in the Borrower's Form 10-K as filed with the SEC. The foregoing statements shall be certified without qualification by Borrower's Accountants, and shall be accompanied by a certificate of the chief financial officer, principal accounting officer or chief executive officer of the Borrower stating that, as of the date of such certificate, to the best of his knowledge, after reasonable inquiry: (i) such financial statements reflect all adjustments (consisting of normal, recurring accruals) necessary to present fairly the combined financial position of the Borrower and the Management Company for such fiscal year in accordance with GAAP, and (ii) no event has occurred which constitutes an Event of Default or would constitute an Event of Default with the giving of notice or the lapse of time or both, or, if an Event of Default or such an event has occurred and is continuing, a statement as to the nature thereof and the action which the Borrower has taken or proposes to take with respect thereto. Concurrently with the delivery of the 28 34 foregoing materials, the Borrower shall furnish, in such detail as is reasonably required by the Administrative Agent (x) a Compliance Certificate, (y) a borrowing report, certified by a duly authorized officer of the Borrower, and (z) such other information as may be reasonably requested by the Administrative Agent with respect to the Borrower or the Borrower's business or Property. (c) The Borrower shall provide to the Lenders, promptly after sending or filing thereof, copies of all reports which the Borrower sends to holders of beneficial interests in the Borrower, and copies of all reports and registration statements which the Borrower files with the SEC. (d) The Borrower shall provide to the Lenders, concurrently with its delivery to the Lenders of the Borrower's quarterly financial reports in accordance with section 7.1(a), above, and in any event within 45 days after the end of each calendar quarter of the Borrower, a report as to each Mortgaged Property setting forth for such Mortgaged Property a statement showing, in such detail as the Administrative Agent may reasonably request, the Property NOI for such Mortgaged Property for such quarter. (e) The Borrower shall also provide the Lenders with such other information relating to the Borrower (including, without limitation, any business plan of the Borrower) as any Lender may from time to time reasonably request. Without limiting the generality of the foregoing, the Borrower shall provide the Lenders, semi-annually, within 45 days after the end of the second and fourth fiscal quarters of the Borrower in each fiscal year during the pendency of this Agreement, a current rent-roll for each Mortgaged Property. 7.2. MAINTENANCE OF PROPERTY; INSURANCE. (a) The Borrower covenants and agrees to keep and maintain all of its Property in good repair, working order and condition, reasonable wear and tear excepted, and from time to time to make, or use all reasonable legal remedies to cause to be made, all proper repairs, renewals or replacements, betterments and improvements thereto so that the business carried on in connection therewith may be properly and advantageously conducted at all times. (b) The Borrower covenants and agrees to keep all of its Property insured against loss or damage by theft, fire, smoke, sprinklers, riot and explosion, such insurance (the "INSURANCE") to be in such form, in such amounts and against such other risks and hazards as are currently carried by the Borrower or are customarily maintained by other persons operating similar businesses and having similar properties in the same general areas, including but not limited to liability coverage and to flood insurance for real property or real property interests located in an area designated as flood-prone, with an insurer or insurers which are financially sound and reputable and which have been accorded a rating by A.M. Best Company, Inc. (or any successor rating agency) of A-/X (or any replacement rating of equivalent stature) or better (or A-/VII or better in the case of insurers whose parent companies are rated A-/X or better); insurance companies satisfying the foregoing requirements are referred to herein as "QUALIFIED INSURERS". In the event that an insurer ceases to be a Qualified Insurer during the term of any Insurance policy, the Borrower shall replace such coverage, at the end of the then current policy term, by a policy issued by a Qualified Insurer. The specific requirements for the insurance to be maintained in respect of the Mortgaged Properties shall be set forth in the respective Mortgages; to the extent that the requirements set forth in the respective Mortgages shall conflict with those which are contained in this Agreement, the requirements of the respective Mortgages shall govern. The Borrower shall, in addition, require that the insurer with respect to each such Insurance policy provide for at least 30 days' advance written notice to the Administrative Agent of any cancellation or termination of, or other change of any nature whatsoever in, the coverage provided under any such policy, PROVIDED, that if the Borrower's insurers will not provide more than 10 days' prior notice of cancellation for nonpayment of premiums, such notice will be adequate in such event. 7.3. PRIORITY OF MORTGAGES. The Borrower shall at all times maintain and preserve the first and best priority of the Mortgages with respect to each of the Mortgaged Properties, and shall not at any time create or suffer to be created any other Lien or security interest in any of the Collateral, excepting only Liens securing the payment of current and non-delinquent taxes and assessments, both general and special, the effect of building, land use and zoning laws, Permitted Encumbrances and other matters affecting title to the Mortgaged Properties or any of the other Collateral as may be approved or accepted by the Administrative Agent. 29 35 7.4. SECURITY INTERESTS. The Borrower will defend the Collateral against all claims and demands of all persons at any time claiming the same or any interest therein. The Borrower shall comply with the requirements of all applicable laws and regulations in order to grant to the Administrative Agent valid and perfected first mortgage liens encumbering all of the Mortgaged Properties and first priority, perfected security interests in the balance of the Collateral. The Administrative Agent is hereby authorized by the Borrower (and the Management Company, as appropriate) to file any financing statements covering the Collateral, whether or not the Borrower's (or the Management Company's) signature appears thereon. The Borrower and the Management Company each agrees to do whatever the Administrative Agent may reasonably request, from time to time, by way of: (i) filing notices of liens, financing statements, fixture filings and amendments, renewals and continuations thereof; (ii) cooperating with the Administrative Agent's representatives; (iii) keeping stock records; (iv) obtaining waivers from landlords and mortgagees and from warehousemen and their landlords and mortgagees; (v) paying claims which might, if unpaid, become a Lien on the Collateral or any portion or component thereof; and (vi) performing such further acts as the Administrative Agent may reasonably require in order to effect the purposes of this Agreement and the other Loan Documents (excluding, however, any such matters as to which the Borrower or the Management Company shall have caused to be bonded or otherwise discharged, or shall have properly initiated and duly prosecuted a dispute with the claimant or the party seeking to compel the Borrower's or the Management Company's performance, all subject to and in compliance with the provisions of the applicable Mortgage relative to the prosecution of the contests and disputes permitted thereunder). Any and all fees, costs and expenses (including any taxes, reasonable attorneys' fees, or costs for insurance of any kind), which the Administrative Agent may incur with respect to the Collateral or the Obligations; in filing public notices; in preparing or filing documents; making title examinations or rendering opinions; in protecting, maintaining, or preserving the Collateral or its interest therein; in enforcing or foreclosing the Liens under any of the Loan Documents, whether through judicial procedures or otherwise; or in defending or prosecuting any actions or proceedings arising out of or relating to its transactions with the Borrower and/or the Management Company under this Agreement or any other Loan Document, shall be borne and paid by the Borrower promptly after the Administrative Agent's written demand therefor. If any such costs or expenses are not promptly paid by the Borrower, the Administrative Agent may pay the same on the Borrower's behalf, and the amount so paid shall thereupon comprise Obligations hereunder, evidenced by the Notes and secured by the other Loan Documents, and shall bear interest from the date of such payment until the date the same are paid in full, at the interest rate provided in section 1.8(c). 7.5. MAINTENANCE OF EXISTENCE. (a) The Borrower shall make all filings under the Code necessary to preserve and maintain (i) its qualifications as a REIT under the Code and (ii) the applicability to the Borrower and its shareholders of the method of taxation provided for in section 857(b) of the Code (and any successor provision thereto). (b) The Borrower shall preserve and maintain its existence and all of its rights, franchises and privileges as an Ohio real estate investment trust, and its qualification to do business in each jurisdiction in which the character of the Borrower's Property or the nature of the Borrower's business makes such qualification necessary. (c) The Management Company will preserve and maintain its existence and all of its rights, franchises and privileges as a Delaware corporation, and its qualification to do business in any other jurisdiction in which the character of its Property or the nature of its business makes such qualification necessary. 7.6. COMPLIANCE WITH LAWS. (a) The Borrower and the Management Company shall, and each hereby covenants and agrees to, comply with all acts, rules, regulations, orders, directions and ordinances of any legislative, administrative or judicial body or official (including, without limitation, all Environmental Laws and the Americans with Disabilities Act (the "ADA")) applicable to the Borrower's Property or any part thereof, or to the operation of the Borrower's business. (b) The Borrower will promptly notify the Lenders in the event that the Borrower receives any notice, claim or demand from any governmental agency which alleges that the Borrower or the Management Company is in violation of any of the terms of, or has failed to comply with any applicable order issued pursuant to any Federal, 30 36 state or local statute regulating its operation and business with respect to any Mortgaged Property, including, but not limited to, the Occupational Safety and Health Act, the ADA and all Environmental Laws. 7.7. NOTICE OF LITIGATION; JUDGMENTS. The Borrower shall furnish or cause to be furnished to the Lenders, promptly (and, in any event, within five Business Days) after the Borrower shall have first become aware of the same, a written notice describing, in detail acceptable to the Required Lenders: (a) any final judgment in an amount exceeding $500,000 rendered against the Borrower or any Affiliate of the Borrower; (b) the commencement or institution of any legal or administrative action, suit, proceeding or investigation by or against the Borrower or any Affiliate of the Borrower in or before any court, governmental or regulatory body, agency, commission or official, board of arbitration or arbitrator, the outcome of which could materially and adversely affect the Borrower's current or future financial position, assets, business, operations or prospects, or could prevent or impede the implementation or completion, observance or performance of any of the arrangements or transactions contemplated by any of the Loan Documents; or (c) the occurrence of any adverse development, not previously disclosed by the Borrower to the Lenders in writing, in any such action, suit, proceeding or investigation. In addition, as promptly as possible after sending the notice of any such event or events, the Borrower shall provide the Lenders with a supplemental notice relating to the event described in such initial notice. Such supplemental notice shall include the Borrower's description of the action that the Borrower has taken or proposed to take with respect to such event. 7.8. NOTICE OF OTHER EVENTS. (a) If (and on each occasion that) any event shall occur or any condition shall develop which constitutes a Default or an Event of Default, then, promptly (and, in any event, within five Business Days) after the Borrower shall have first become aware of the same, the Borrower will furnish or cause to be furnished to the Lenders a written notice specifying the nature and the date of the occurrence of such event or (as the case may be), the nature and the period of existence of such condition and what action the Borrower is taking or proposes to take with respect thereto. (b) Immediately upon the Borrower's first becoming aware of any of the following occurrences, the Borrower will furnish or cause to be furnished to the Lenders written notice with full particulars of (i) the business failure, insolvency or bankruptcy of the Borrower; and (ii) any defaults or events of default under any material agreement of the Borrower or any material violations of any laws, regulations, rules or ordinances of any governmental or regulatory body by the Borrower with respect to any Mortgaged Property. (c) If (and on each occasion that) any of the following events shall occur: (i) the Declaration of Trust or other organizational documents of the Borrower shall at any time be modified or amended in any respect whatever; or (ii) the by-laws or code of regulations of the Borrower shall at any time be modified or amended in any respect whatever; then promptly (and, in any event, within five Business Days) after the occurrence of any such event, the Borrower shall furnish the Lenders with a true and complete copy of each such modification, amendment or supplement. 7.9. INSPECTIONS. The Borrower and the Management Company shall permit any officer, employee, consultant or other representative or agent of the Administrative Agent or any Lender to visit and inspect, from time to time and at any reasonable time, after prior notice to the Borrower, any of the assets or Property owned or held under lease by the Borrower or the Management Company and to examine the books of account, records, reports and the papers (and to make copies thereof and to take extracts therefrom) of the Borrower and the Management Company and to discuss the affairs, finances and accounts of the Borrower with the trustees and executive officers of the Borrower and the executive officers of the Management Company, and with the Borrower's independent accountants. 31 37 7.10. PAYMENT OF TAXES AND OTHER CLAIMS. The Borrower and the Management Company shall pay and discharge promptly all taxes, assessments and other governmental charges or levies at any time imposed upon it or upon its income, revenues or Property, as well as all claims of any kind (including claims for labor, material or supplies) which, if unpaid, might by law become a Lien or charge upon all or any part of its income, revenues or Property. Notwithstanding the foregoing to the contrary, the Borrower or the Management Company may, PROVIDED that there is not then an Event of Default hereunder, contest the propriety or amount of any such taxes, assessments or governmental charges, or of any such claims, if (a) such contest is instituted in good faith and prosecuted with reasonable diligence; (b) such contest shall preclude the sale or forfeiture of the affected Property (or the Borrower or the Management Company shall discharge, by bonding or otherwise, the claim giving rise to the contest or shall provide the Administrative Agent with such reasonable security or other assurances as may be requested by the Administrative Agent in connection with such contest); and (c) the Borrower shall indemnify the Administrative Agent and the Lenders of and from any and all liability, loss, cost or expense incurred by or asserted against the Administrative Agent or any of the Lenders in connection with, or in consequence of, any such contest. 7.11. PAYMENT OF INDEBTEDNESS. The Borrower will duly and punctually pay or cause to be paid the principal and interest on the Loans, all draws and disbursements under the Letters of Credit and all fees and other amounts payable hereunder or under the Loan Documents promptly as and when required by this Agreement and/or the other Loan Documents. The Borrower shall pay all other Indebtedness (whether existing on the date hereof or arising at any time thereafter) promptly as and when the same is due and payable. 7.12. PERFORMANCE OF OBLIGATIONS UNDER THE LOAN DOCUMENTS. The Borrower and the Management Company each will duly and properly perform, observe and comply with all of its agreements, covenants and obligations under this Agreement and each of the other Loan Documents. 7.13. GOVERNMENTAL CONSENTS AND APPROVALS. (a) The Borrower or the Management Company, as the case may be, will obtain or cause to be obtained all such approvals, consents, orders, authorizations and licenses from, give all such notices promptly to, register, enroll or file all such agreements, instruments or documents promptly with, and promptly take all such other action with respect to, any governmental or regulatory authority, agency or official, or any central bank or other fiscal or monetary authority, agency or official, as may be required from time to time under any provision of any applicable law: (i) for the performance by the Borrower or the Management Company of any of its agreements or obligations under the Notes, this Agreement or any of the other Loan Documents or for the payment by the Borrower to the Administrative Agent or any Lender or Letter of Credit Issuer of any sums which shall become due and payable by the Borrower hereunder or thereunder; (ii) to ensure the continuing legality, validity, binding effect or enforceability of the Notes or any of the other Loan Documents or of any of the agreements or obligations thereunder of the Borrower or the Management Company; or (iii) to continue the proper operation of the business and operations of the Borrower or the Management Company, as the case may be. (b) The Borrower or the Management Company, as the case may be, shall duly perform and comply with the terms and conditions of all such approvals, consents, orders, authorizations and Licenses and Permits from time to time granted to or made upon the Borrower or the Management Company, as the case may be. 7.14. EMPLOYEE BENEFIT PLANS AND GUARANTEED PENSION PLANS. The Borrower (a) will not establish any Guaranteed Pension Plans or Employee Benefit Plans without the prior written consent of the Required Lenders (which will not be unreasonably withheld or delayed), (b) will make full payment when due of all amounts which, under the provisions of Employee Benefit Plans or under applicable law, are required to be paid as contributions 32 38 thereto, (c) will not permit to exist any accumulated funding deficiency, whether or not waived, (d) will file on a timely basis all reports, notices and other filings required by any governmental agency with respect to any of its Employee Benefit Plans, (e) will make any payments to Multiemployer Plans required to be made under any agreement relating to such Multiemployer Plans, or under any law pertaining thereto, (f) will not permit any amount of unfunded guarantied benefits to occur with respect to any Guaranteed Pension Plan, (g) will furnish to all participants, beneficiaries and employees under any of the Employee Benefit Plans, within the periods prescribed by law, all reports, notices and other information to which they are entitled under applicable law, and (h) will take no action which would cause any of the Employee Benefit Plans to fail to meet any qualification requirement imposed by the Code, as amended. As used in this section, the term "ACCUMULATED FUNDING DEFICIENCY" has the meaning specified in section 302 of ERISA and section 412 of the Code, and the term "UNFUNDED GUARANTIED BENEFITS" has the meaning specified in section 4001 of ERISA. 7.15. FURTHER ASSURANCES. The Borrower and the Management Company, as the case may be, will each execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, any and all such further assurances and other agreements or instruments, and take or cause to be taken all such other action, as shall be reasonably requested by the Administrative Agent from time to time in order to give full effect to any of the Loan Documents. 7.16. FINANCIAL COVENANTS. The Borrower will at all times comply with the following financial covenants: (A) LEVERAGE RATIO. The Borrower shall at all times maintain a ratio, determined as of the most recently ended fiscal quarter of the Borrower, of (i) Total Liabilities TO (ii) EBITDA for the four consecutive fiscal quarters of the Borrower ended with such fiscal quarter, of not more than 8.00 to 1.00. (B) DEBT SERVICE COVERAGE RATIO. The Borrower shall at all times maintain a ratio, on a combined basis for the Borrower, its Subsidiaries and the Management Company, determined as of the most recently ended fiscal quarter of the Borrower, of (i) EBITDA for such fiscal quarter TO (ii) the aggregate amount of all regularly scheduled payments of principal (other than balloon payments) and interest on Indebtedness for Borrowed Money for such fiscal quarter, of not less than (A) 1.30 to 1.00 for any fiscal quarter ending on or prior to September 30, 1997, and (B) 1.50 to 1.00 for any fiscal quarter thereafter. (C) INTEREST COVERAGE RATIO. The Borrower shall at all times maintain a ratio, on a combined basis for the Borrower, its Subsidiaries and the Management Company, determined as of the most recently ended fiscal quarter of the Borrower, of (i) EBITDA for such fiscal quarter TO (ii) the aggregate amount of all interest for such fiscal quarter on Indebtedness for Borrowed Money, of not less than 1.50 to 1.00. (D) ADJUSTED NET WORTH. The Borrower shall at all times maintain an Adjusted Net Worth of at least $90,000,000; PROVIDED that the foregoing amount (as it may be increased from time to time as provided herein) shall be increased by (i) an amount equal to 100% of the net cash proceeds (i.e., net of underwriting discounts and commissions, placement and advisory fees, and other customary fees, costs and expenses associated therewith) from the sale or issuance by the Borrower, any of its Subsidiaries or the Management Company of its equity securities to any person other than an Affiliate in an underwritten public offering or private placement with investors which is completed after June 30, 1996 (specifically excluding from this clause (i) any sale or issuance to management or employees pursuant to a stock option plan, stock savings plan or similar employee benefit arrangement); (ii) an amount equal to 100% of the increase in shareholders' equity attributable to other issuances of equity by the Borrower, any of its Subsidiaries or the Management Company (specifically excluding from this clause (ii) any sale or issuance to management or employees pursuant to a stock option plan, stock savings plan or similar employee benefit arrangement); and (iii) all capital gains recognized by the Borrower, its 33 39 Subsidiaries and the Management Company, on a combined basis, for financial reporting purposes, subsequent to June 30, 1996, on any transaction involving the sale or other disposition of assets or investments (other than dispositions of obsolete or surplus equipment, made in the ordinary course of business), net of any capital losses on any items comprising a portion of any such transaction, except to the extent such capital gains are distributed by the Borrower to the holders of shares of beneficial interest in the Borrower, and except to the extent that during the period ending on June 30, 1997 any such capital gains are offset by aggregate capital losses not in excess of $7,000,000 on transactions involving the sale or other disposition of assets or investments (other than dispositions of obsolete or surplus equipment, made in the ordinary course of business). (E) FUNDS FROM OPERATIONS. The Borrower shall at all times maintain its Funds from Operations, determined as of the most recently ended fiscal quarter of the Borrower, of not less than (i) $15,000,000 for any four consecutive fiscal quarter period ending on or prior to September 30, 1997, (ii) $4,750,000 for the fiscal quarter ended December 31, 1997, (iii) $9,500,000 for the two consecutive fiscal quarter period ending March 31, 1998, (iv) $14,250,000 for the three consecutive fiscal quarter period ending June 30, 1998, and (v) $19,000,000 for any four consecutive fiscal quarter period ending thereafter. (F) MINIMUM AGGREGATE BORROWING BASE. The Borrower shall at all times maintain an Aggregate Borrowing Base not less than the sum of the aggregate outstanding principal amount of Loans, PLUS the Letter of Credit Outstandings, PLUS the Aggregate Measured Swap Credit Risk (if any) of all Designated Interest Rate Agreements. (G) TOTAL COMMITMENT TO APPRAISED LOAN VALUE RATIO. The Borrower shall at all times maintain a ratio of (i) the Total Commitment, PLUS the Aggregate Measured Swap Credit Risk (if any) of all Designated Interest Rate Agreements, TO (ii) the Appraised Loan Value of the Eligible Real Estate, expressed as a percentage, of not more than 65%. As used herein, the term "APPRAISED LOAN VALUE OF THE ELIGIBLE REAL ESTATE" means the sum of (A) the fair market value of the Eligible Real Estate constituting a part of the Mortgaged Property hereunder on the Initial Borrowing Date, as determined on the basis of the appraisals referred to in section 5.1(v), and (B) the Appraised Value of any Additional Property or Substitute Property, determined for any such Property as of the date such Property becomes a Mortgaged Property hereunder in compliance with section 7.17. For the purpose of determining compliance with the foregoing financial covenants, the Borrower's interest in the joint venture referred to in section 6.14 shall be accounted for using the equity method of accounting, regardless of the Borrower's ownership interest in such joint venture. 7.17. ADDITIONAL MORTGAGED PROPERTIES; SUBSTITUTE MORTGAGED PROPERTIES. Subject to the terms and conditions set forth in this section 7.17, the Borrower may, from time to time, supplement the collateral for the Loans by causing certain real property owned by the Borrower to become additional Mortgaged Properties, in accordance with the following provisions: (a) If the Borrower shall desire to cause certain real property owned by the Borrower to become a Mortgaged Property hereunder, the Borrower shall so notify the Administrative Agent and the Lenders. Such notice shall include: (i) a description of the property which the Borrower would propose to become a Mortgaged Property (the "ADDITIONAL PROPERTY"), including historical operating results and occupancy levels of such Additional Property; (ii) an appraisal establishing the fair market value of such Additional Property, prepared by an appraiser who is a Member of the American Institute of Real Estate Appraisers (or has a corresponding professional designation acceptable to the Administrative Agent), conforming to all requirements applicable to the Lenders with respect to real estate collateral, and otherwise acceptable to the Administrative Agent and the Required Lenders; (iii) a commitment for the issuance of a loan 34 40 policy of title insurance (ALTA Form B, 1970 Form), issued by a title insurer acceptable to the Administrative Agent and showing that (A) such Additional Property is owned by the Borrower (or will be, prior to the execution and delivery of the Mortgage encumbering such Additional Property), and (B) that, if such Additional Property were to become a Mortgaged Property, the Mortgage encumbering such Additional Property would be the first and best lien upon such property, subject only to Permitted Encumbrances and the Lien of taxes and assessments, both general and special, which are a Lien but are not then delinquent or due and payable; (iv) a survey, prepared and certified to the Administrative Agent (and the title company providing the loan policy referred to below) in accordance with ALTA/ACSM standards, showing the boundaries of the Additional Property, the location of all improvements, required set-backs and such other information as may be required pursuant to the foregoing standards, acceptable to the Administrative Agent and sufficient to permit the issuance of a loan policy of title insurance without exception for any matter which would be revealed by a survey and physical inspection of the Additional Property; (v) a Phase I environmental report, addressed to the Administrative Agent and the Lenders (or accompanied by a letter of reliance for their benefit) and acceptable to the Administrative Agent and the Required Lenders, showing that such Additional Property is free of Hazardous Substances and from violations of Environmental Laws, and otherwise in compliance with the requirements set forth in this Agreement with respect to the Mortgaged Properties and (vi) a statement, showing in detail and with substantiating information reasonably acceptable to the Required Lenders, the Property NOI for the Additional Property for not less than one full calendar year prior to the date of the notice with which such information is furnished. If the Administrative Agent and the Required Lenders shall approve the addition of the Additional Property as a Mortgaged Property, the Administrative Agent shall so notify the Borrower, shall assign a Coverage Factor and an initial Market Constant to such Additional Property and shall, on the basis of the same, determine the Borrowing Base for such property. Promptly after its receipt of such notice, the Borrower will execute a Mortgage and such other Security Documents with respect to such Additional Property as the Administrative Agent may require in order to cause such Additional Property to comply with the requirements of this Agreement and the other Loan Documents as Collateral for the Obligations, shall cause all such Security Documents to be duly delivered to the Administrative Agent and recorded in the appropriate public records, and will cause the title company which issued the title commitment described above to issue a loan policy of title insurance to the Administrative Agent, containing such coverages and endorsements as the Administrative Agent may require. Concurrently therewith, the Borrower will, if so required by the Administrative Agent or the Required Lenders, enter into an amendment or supplement to this Agreement to reflect inclusion of such Additional Property as a Mortgaged Property and a component of the Eligible Real Estate, to reflect the resulting changes in the Borrowing Base and to make such other changes to this Agreement as may be necessary or appropriate in view of the addition of such Additional Property to the Collateral. (b) If the Borrower shall desire to cause certain real property owned by the Borrower to become a Mortgaged Property in substitution for a property which is then a Mortgaged Property hereunder, the Borrower shall so notify the Administrative Agent and the Lenders. Such notice shall include: (i) the identity of the Mortgaged Property for which the Borrower intends to make such substitution, and a description of the property which the Borrower would propose to become a Mortgaged Property (the "SUBSTITUTE PROPERTY"), including historical operating results and occupancy levels of such Substitute Property; (ii) an appraisal establishing the fair market value of such Substitute Property, prepared by an appraiser who is a Member of the American Institute of Real Estate Appraisers (or has a corresponding professional designation acceptable to the Administrative Agent), conforming to all requirements applicable to the Lenders with respect to real estate collateral and otherwise acceptable to the Administrative Agent and the Required Lenders; (iii) a commitment for the issuance of a loan policy of title insurance (ALTA Form B, 1970 Form), issued by a title insurer acceptable to the Administrative Agent and showing that (A) the Substitute Property is owned by the Borrower (or will be, prior to the execution and delivery of the Mortgage encumbering such Substitute Property), and (B) that, if such Substitute 35 41 Property were to become a Substitute Property, the Mortgage encumbering such Substitute Property would be the first and best lien upon such property, subject only to Permitted Encumbrances and the Lien of taxes and assessments, both general and special, which are a Lien but are not then delinquent or due and payable; (iv) a survey, prepared and certified to the Administrative Agent (and the title company providing the loan policy referred to below) in accordance with ALTA/ACSM standards, showing the boundaries of the Substitute Property, the location of all improvements, required set-backs and such other information as may be required pursuant to the foregoing standards, acceptable to the Administrative Agent and sufficient to permit the issuance of a loan policy of title insurance without exception for any matter which would be revealed by a survey and physical inspection of the Substitute Property; (v) a Phase I environmental report, addressed to the Administrative Agent and the Lenders (or accompanied by a letter of reliance for their benefit) and acceptable to the Administrative Agent and the Required Lenders, showing that such Substitute Property is free of Hazardous Substances and from violations of Environmental Laws, and is otherwise in compliance with the requirements set forth in this Agreement with respect to the Mortgaged Properties and (vi) a statement, showing in detail and with substantiating information reasonably acceptable to the Required Lenders, the Property NOI for the Substitute Property for not less than one full calendar year prior to the date of the notice with which such information is furnished. If the Administrative Agent and the Required Lenders shall approve the proposed substitution of the Substitute Property as a Mortgaged Property, the Administrative Agent shall so notify the Borrower, shall assign a Coverage Factor and an initial Market Constant to such Substitute Property and shall, on the basis of the same, determine the Borrowing Base for such property. Promptly after its receipt of such notice, the Borrower shall execute a Mortgage and such other Security Documents with respect to such Substitute Property as the Administrative Agent may require in order to cause such property to comply with the requirements of this Agreement and the other Loan Documents as Collateral for the Obligations, shall cause all such Security Documents to be duly delivered to the Administrative Agent and or recorded in the appropriate public records, and will cause the title company which issued the title commitment described above to issue a loan policy of title insurance to the Administrative Agent, containing such coverages and endorsements as the Administrative Agent may require. Concurrently therewith, the Administrative Agent shall execute and deliver to the Borrower a release of the Mortgage encumbering the Mortgaged Property for which such substitution was made, together with a release of all other Security Documents in favor of the Administrative Agent which pertain to such property (without thereby releasing or affecting any Mortgage or Security Document affecting any other Mortgaged Property), and the Borrower will, if so required by the Administrative Agent or the Required Lenders, enter into an amendment or supplement to this Agreement to reflect the inclusion of such Substitute Property as a Mortgaged Property and a component of the Eligible Real Estate, to reflect the resulting changes in the Aggregate Borrowing Base and to make such other changes to this Agreement as may be necessary or appropriate to reflect the transactions effected pursuant to this section 7.17(b). (c) All costs and expenses incurred or payable by the Administrative Agent or any Lender with respect to or in connection with the Borrower's exercise of its options under this section 7.17 (including, without limitation, reasonable attorney's fees and further including any and all taxes, costs, fees and recording expenses in connection with the implementation of the rights set forth in this provision) shall be paid by the Borrower on demand. 7.18. INTEREST RATE HEDGING. Within 60 days following the Initial Borrowing Date, the Borrower will enter into one or more Interest Rate Agreements which shall, collectively, have the effect of fixing or "capping" the rate of interest on a notional amount of debt of at least $45,000,000 for a period of at least two years, and which, collectively, shall not under any circumstances involve an actual or potential Aggregate Measured Swap Credit Risk in excess of $3,000,000. Each such Interest Rate Agreement shall (i) be embodied in a standard ISDA form of agreement which is acceptable to the Administrative Agent with respect to any intercreditor issues, and (ii) involve a counterparty who is a Lender or another financial institution acceptable to the Administrative Agent. The Borrower will promptly provide to the Administrative Agent a true and complete copy of each such Interest Rate 36 42 Agreement. At or following the effective date of any such Interest Rate Agreement which involves any Aggregate Measured Swap Credit Risk, the Administrative Agent may, upon written notification to the Borrower, the Lenders and such counterparty, designate the credit exposure of such counterparty under such Interest Rate Agreement as an obligation entitled to share, PARI PASSU with the Obligations, in respect of the benefits provided by the Collateral under the Security Documents, in accordance with the applicable provisions of this Agreement and the Security Documents, and if the Administrative Agent so designates such credit exposure, the applicable Interest Rate Agreement of such counterparty shall be considered a "DESIGNATED INTEREST RATE AGREEMENT"; PROVIDED that the Administrative Agent shall not so designate any Interest Rate Agreement except pursuant to instructions from, or with the consent of, the Required Lenders, unless the counterparty is a Lender or an Affiliate of a Lender. SECTION 8. NEGATIVE COVENANTS. The Borrower and the Management Company each hereby covenants and agrees that so long as this Agreement is in effect and until such time as the Total PF Commitment and the Total SF Commitment have been terminated, no Notes are outstanding and the Loans, together with interest, Fees and all other Obligations hereunder, have been paid in full, it shall comply with, observe, perform or fulfill all of the covenants set forth below in this section 8 which are to be performed by the Borrower or the Management Company, as the case may be, as follows: 8.1. LIMITATION ON NATURE OF BUSINESS. Neither the Borrower nor the Management Company nor any Subsidiary of the Borrower will at any time make any material alterations in the nature or character of the business of the Borrower, the Management Company and any such Subsidiaries, taken as a whole, as carried on at the date hereof, or undertake, conduct or transact any business in a manner prohibited by applicable law. 8.2. LIMITATION ON CONSOLIDATION AND MERGER. The Borrower shall not merge or consolidate with or into (unless the Borrower is the surviving person of such merger or consolidation), or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to, any person, or permit any of its Subsidiaries to do so, and the Management Company will not do so, EXCEPT THAT, if no Change of Control would result therefrom, (i) any person may merge with and into the Borrower, (ii) the Management Company or any Subsidiary of the Borrower may merge into the Borrower, (iii) any Subsidiary of the Borrower may merge with or into any other person and (iv) any Subsidiary of the Borrower may sell or otherwise dispose of all or substantially all of its assets, PROVIDED that (A) immediately after giving effect to any such merger or sale or other disposition of assets referred to in clause (i), (ii), (iii) or (iv), no Default (including, without limitation, any Default under section 8.8) would exist, (B) the surviving corporation of any such merger referred to in clause (i) is, immediately after giving effect to such merger, the Borrower, (C) if the surviving corporation of any merger referred to in clause (iii) is not, immediately after giving effect to such merger, a Subsidiary of the Borrower, the Borrower and/or its Subsidiaries shall have received as consideration for such merger cash, property or securities representing the fair market value of the Borrower's and its Subsidiaries' interest in such Subsidiary immediately prior to such merger (as determined by the trustees of the Borrower), and (D) in the case of any sale or other disposition referred to in clause (iv), the Borrower and/or its Subsidiaries shall have (except as otherwise permitted under section 8.8 hereof) received as consideration for such sale or other disposition cash, property or securities representing the fair market value of such assets immediately prior to such sale or other disposition (as determined by the trustees of the Borrower). 37 43 8.3. LIMITATION ON DISTRIBUTIONS, DIVIDENDS AND RETURN OF CAPITAL. (a) The Borrower shall not, after the occurrence and during the continuance of an Event of Default hereunder or under any Loan Document, or if after giving effect thereto there would exist any Default or Event of Default involving section 7.16(d) hereof: (i) declare or pay any Distribution or cash dividends of any kind on any Securities of any class in its capital; or (ii) make any payments on account of the purchase or other acquisition or redemption or other retirement of any Securities of any class in its capital. (b) The Borrower shall not, directly or indirectly, at any time while any Default or Event of Default exists hereunder, make any voluntary prepayment or voluntary redemption of any kind on any Indebtedness for Borrowed Money (other than the Obligations), or purchase or otherwise acquire any such Indebtedness for Borrowed Money. (c) The Borrower shall not at any time make (whether directly or indirectly) any payments or other distributions of any kind to any Affiliate, or transfer or assign (whether directly or indirectly) any Property or assets of any kind to any Affiliate; EXCLUDING, HOWEVER, from the operation of the foregoing provisions of this provision: (i) capital contributions or payments to any Subsidiary or to the joint venture referred to in section 6.14 hereof, which are used to purchase from GMAC or other persons not controlled by the Borrower equity interests in such joint venture pursuant to put, call or other contractual provisions applicable to the formation and continuation of the Borrower's direct or indirect participation in such joint venture; (ii) payments on other transactions or contracts which are not prohibited by section 8.6; (iii) remuneration payable by the Borrower to its employees, trustees or officers in amounts approved by its board of trustees; (iv) reimbursements by the Borrower of the reasonable business expenses of its employees, trustees and officers incurred in the ordinary course of business; and (v) payments, distributions or transfers which are consolidated or combined on the Borrower's financial statements and are not prohibited by any other provision of this Agreement. (d) Notwithstanding any provision of this section 8.3 to the contrary, the Borrower may make such Distributions as may be necessary to preserve the Borrower's status and qualification as a REIT, PROVIDED that if, but for this section 8.3(d) such Distribution would otherwise be prohibited by the terms of this Agreement, the Borrower shall, prior to making any such Distribution, provide the Administrative Agent with an opinion of counsel or other evidence acceptable to the Administrative Agent confirming the necessity of such Distribution to the preservation of the Borrower's status and qualification as a REIT. The making of any Distribution under the circumstances described in this section 8.3(d) shall not excuse any Default or Event of Default hereunder, or constitute a waiver by the Administrative Agent or any Lender of any rights or remedies which may be available to it hereunder or under any of the Loan Documents in the event of a Default or an Event of Default hereunder. 8.4. ACQUISITION OF MARGIN SECURITIES. The Borrower shall not own, purchase or acquire (or enter into any contract to purchase or acquire) any "margin security" as defined by any regulation of the Federal Reserve Board as now in effect or as the same may hereafter be in effect UNLESS, prior to any such purchase or acquisition, the Administrative Agent shall have received a satisfactory opinion of counsel to the effect that such purchase or acquisition will not cause this Agreement or the Notes to be in violation of Regulations G, T, U, X or any other regulation of the Federal Reserve Board then in effect. 38 44 8.5. LIMITATION ON INDEBTEDNESS. (a) The Borrower will not, and will not permit any Subsidiary of the Borrower to, and the Management Company will not, create, assume or have outstanding at any time any Indebtedness for Borrowed Money, OTHER THAN: (i) Indebtedness under the Loan Documents; (ii) the existing Indebtedness described on Annex VIII hereto (other than any such Indebtedness refinanced hereunder as contemplated by section 5.1(l)), and any refinancing, extension, renewal or refunding of any such existing Indebtedness not involving an increase in the aggregate outstanding principal amount of the Indebtedness so refinanced, extended, renewed or refunded; (iii) if at the time of the creation or assumption thereof no Event of Default shall have occurred and be continuing, or would result therefrom, additional Indebtedness of the Borrower not otherwise permitted pursuant to the other clauses of this section 8.5(a), consisting of short term unsecured borrowings obtained by the Borrower from a bank or other institutional lender, or in the commercial paper market, PROVIDED that (A) the outstanding principal balance of all such borrowings shall not exceed $100,000,000 at any time, and (B) the aggregate outstanding balance of the Borrower's borrowings in the commercial paper market shall not exceed at any time the aggregate unused portions of lines of credit made available to the Borrower for the purpose of supporting such commercial paper borrowings by banks and other institutional lenders, together with the amount of any unused balance of the Total Commitment available hereunder and any unused portion of any other credit facility otherwise permitted hereunder which may then be available to the Borrower; (iv) if at the time of the creation or assumption thereof no Event of Default shall have occurred and be continuing, or would result therefrom, additional Indebtedness of the Borrower, any Subsidiary or the Management Company not otherwise permitted pursuant to the other clauses of this section 8.5(a), consisting of Indebtedness ("NON-RECOURSE DEBT"), without limitation as to aggregate principal amount, incurred to finance or refinance the ownership or acquisition of real property or interests in real property; PROVIDED (A) such Non-Recourse Debt is secured by mortgages, deeds of trust or deeds to secure debt encumbering only the real property or real property interests financed or refinanced thereby, (B) such Non-Recourse Debt is not guaranteed or otherwise supported, directly or indirectly by the Borrower or any Subsidiary of the Borrower or the Management Company (subject to customary guaranties and indemnities for fraud, misuse of proceeds and environmental matters or such other matters as are reasonably acceptable to the Administrative Agent under the circumstances), and (C) the recourse of the applicable lender or lenders in connection with any such Non-Recourse Debt is limited to the real property or interests in real property financed or refinanced thereby (subject to customary exceptions for fraud, misuse of proceeds and environmental matters or such other matters as are reasonably acceptable to the Administrative Agent under the circumstances); (v) if at the time of the creation or assumption thereof no Event of Default shall have occurred and be continuing, or would result therefrom, additional Indebtedness of the Borrower not otherwise permitted pursuant to the other clauses of this section 8.5(a), consisting of Indebtedness incurred to finance or refinance the ownership or acquisition of real property or interests in real property; PROVIDED (A) such Indebtedness is secured by mortgages, deeds of trust or deeds to secure debt encumbering only the real property or interests in real property interests so financed or refinanced, (B) the Indebtedness secured by any such real property or real property interests does not exceed 100% of the fair value thereof (as determined by the Borrower in good faith), and (C) the aggregate principal amount of all Indebtedness referred to in this clause (v) outstanding at any time does not exceed $40,000,000 (the foregoing amount shall be increased, but not above $65,000,000, to the extent the proceeds of any Indebtedness referred to in this clause (v) are used to purchase from GMAC or other persons (other than the Borrower and 39 45 persons controlled by the Borrower) equity interests in the joint venture referred to in section 6.14 hereof, or are used to make capital contributions to such joint venture to fund any such purchase by the joint venture); (vi) if the joint venture referred to in section 6.14 ever becomes a Subsidiary of the Borrower, the Indebtedness of such joint venture outstanding at the time it becomes a Subsidiary of the Borrower, and any refinancing, extension, renewal or refunding of any such Indebtedness not involving an increase in the aggregate outstanding principal amount of the Indebtedness so refinanced, extended, renewed or refunded, PROVIDED that such Indebtedness is not guaranteed or otherwise supported, directly or indirectly by the Borrower or any other Subsidiary of the Borrower or the Management Company (subject to customary guaranties and indemnities for fraud, misuse of proceeds and environmental matters or such other matters as are reasonably acceptable to the Administrative Agent under the circumstances); (vii) Indebtedness of any Subsidiary of the Borrower owed to the Borrower or to another Subsidiary of the Borrower; any Indebtedness owed by the Management Company to the Borrower and its Subsidiaries and arising out of normal working capital requirements of the Management Company incident to its management activities relating to Property of the Borrower and its Subsidiaries; and Indebtedness of the Borrower owed to its Subsidiaries and the management Company, PROVIDED such Indebtedness has been subordinated to the Obligations pursuant to subordination provisions satisfactory in form and substance to the Required Lenders; (viii) Indebtedness under Interest Rate Agreements not constituting Loan Documents, entered into as contemplated by section 7.18 hereof; (ix) if at the time of the creation or assumption thereof no Event of Default shall have occurred and be continuing, or would result therefrom, additional Indebtedness of the Borrower not otherwise permitted pursuant to the other clauses of this section 8.5(a), consisting of Indebtedness secured by Liens permitted by clause (k) of section 8.7 hereof, PROVIDED that the aggregate outstanding principal amount thereof does not exceed $1,000,000 at any time; (x) if approved in writing by the Required Lenders prior to the time of the creation or assumption thereof, additional Indebtedness of the Borrower and its Subsidiaries not otherwise permitted pursuant to the other clauses of this section 8.5(a), consisting of Capitalized Lease Obligations or other Contingent Obligations; and (xi) if at the time of the creation or assumption thereof no Event of Default shall have occurred and be continuing, or would result therefrom, additional unsecured Indebtedness of the Borrower not otherwise permitted pursuant to the foregoing clauses of this section 8.5(a), consisting of Subordinated Indebtedness; PROVIDED, that if any such Indebtedness referred to in clause (iv), (v) or (vi) above is incurred, created, assumed or becomes outstanding in connection with the acquisition of any Property having a fair value in excess of $10,000,000, the Borrower shall have delivered to the Administrative Agent at least two Business Days prior to such incurrence, creation or assumption a certificate of a responsible financial officer of the Borrower demonstrating that the Borrower's PRO FORMA projected ratios to which reference is made in section 7.16(a), (b) and (c), for the succeeding four fiscal quarters and giving effect to such acquisition and such Indebtedness and assuming an occupancy rate with respect to rental property equal to the lesser of 90% occupancy or the actual rate of occupancy, will, based on the assumptions contained in such PRO FORMA projections (which shall in all events be reasonable), meet the requirements of such section 7.16(a), (b) and (c) as of the end of each of such fiscal quarters. (b) The Borrower shall provide the Lenders with written notice, quarterly within 45 days after the end of each fiscal quarter of the Borrower during the pendency of this Agreement, showing in detail acceptable to the Required Lenders the amount, nature, purpose and material terms of the Borrower's Indebtedness for Borrowed 40 46 Money (other than the Indebtedness represented by the Loan Documents). Such notice shall be accompanied by a statement in detail and content acceptable to the Required Lenders demonstrating compliance with all of the requirements established by this Agreement, including without limitation those which are contained in section 8.5(a), and in section 7.16. 8.6. GUARANTEES. The Borrower shall not, or permit any of its Subsidiaries to, and the Management Company shall not, guarantee, directly or indirectly, any Indebtedness for Borrowed Money of any other person, except by endorsement of negotiable instruments for deposit or collection in the ordinary course of business; PROVIDED that nothing in this covenant shall be deemed to restrict the Borrower, any Subsidiary or the Management Company from entering into any customary guaranty or indemnity for fraud, misuse of proceeds or environmental or other matters of the nature referred to in clause (iv) of section 8.5(a) hereof. 8.7. LIENS. The Borrower will not, and will not permit any of its Subsidiaries to, and the Management Company will not, create, incur, assume or suffer to exist any Lien upon or with respect to any Property or assets of any kind (real or personal, tangible or intangible) of the Borrower or any such Subsidiary or the Management Company whether now owned or hereafter acquired, or sell any such Property or assets subject to an understanding or agreement, contingent or otherwise, to repurchase such Property or assets (including sales of accounts or rents receivable or notes with recourse to the Borrower or any of its Subsidiaries or the Management Company, other than for purposes of collection in the ordinary course of business) or assign any right to receive income, or file or permit the filing of any financing statement under the UCC or any other similar notice of Lien under any similar recording or notice statute, EXCEPT: (a) Liens for taxes not yet delinquent or Liens for taxes being contested in good faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Borrower) have been established; (b) Liens in respect of Property or assets imposed by law which were incurred in the ordinary course of business, such as carriers', warehousemen's, materialmen's and mechanics' Liens and other similar Liens arising in the ordinary course of business, which do not in the aggregate materially detract from the value of such Property or assets or materially impair the use thereof in the operation of the business of the Borrower or any Subsidiary or the Management Company; (c) Liens created by this Agreement or the other Loan Documents; (d) Liens securing Indebtedness permitted by clause (ii), (iv), (v) or (vi) of section 8.5(a), PROVIDED any such Lien attaches only to the Property or assets financed or refinanced by such Indebtedness; (e) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under section 9.1(j); (f) Liens (other than any Lien imposed by ERISA) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations incurred in the ordinary course of business (exclusive of obligations in respect of the payment for borrowed money); (g) Leases or subleases granted to others not interfering in any material respect with the business of the Borrower or any of its Subsidiaries and not otherwise prohibited by the terms of any Loan Document; 41 47 (h) easements, rights-of-way, restrictions, minor defects or irregularities in title and other similar charges or encumbrances not interfering in any material respect with the ordinary conduct of the business of the Borrower or any of its Subsidiaries; (i) Liens arising from financing statements regarding leases not in violation of this Agreement; (j) Liens created by virtue of Capitalized Lease Obligations or other lease obligations not prohibited by the terms of this Agreement, PROVIDED that such Liens are only in respect of the Property or assets subject to, and secure only, the respective Capital Lease or other lease obligation; (k) Liens (i) placed upon equipment or machinery used in the ordinary course of business of the Borrower or any Subsidiary at the time of (or within 180 days after) the acquisition thereof by the Borrower or any such Subsidiary to secure Indebtedness incurred to pay all or a portion of the purchase price thereof, PROVIDED that the Lien encumbering the equipment or machinery so acquired does not encumber any other asset of the Borrower or any Subsidiary; or (ii) existing on specific tangible assets at the time acquired by the Borrower or any such Subsidiary or on assets of a person at the time such person first becomes a Subsidiary of the Borrower, PROVIDED that (A) any such Liens were not created at the time of or in contemplation of the acquisition of such assets or person by the Borrower or any of its Subsidiaries, (B) in the case of any such acquisition of a person, any such Lien attaches only to specific tangible assets of such person and not assets of such person generally, (C) the Indebtedness secured by any such Lien does not exceed 100% of the fair market value of the asset to which such lien attaches, determined at the time of the acquisition of such asset or the time at which such person becomes a Subsidiary of the Borrower (except in the circumstances described in clause (ii) above to the extent such Liens constituted customary purchase money Liens at the time of incurrence entered into in the ordinary course of business), and (D) the Indebtedness secured thereby is permitted by section 8.5(a); (l) Liens on the Property of any person at the time such person becomes a Subsidiary of the Borrower, PROVIDED that no such Lien is created in anticipation of such person becoming a Subsidiary of the Borrower; and Liens securing any Indebtedness incurred to refinance any Indebtedness secured by any such Lien, PROVIDED any such Lien attaches only to the Property or assets secured by the Indebtedness which is so refinanced; (m) Liens, not securing Indebtedness for Borrowed Money, granted to (i) partners or participants in joint venture arrangements (or any of their Affiliates), securing performance by the Borrower or a Subsidiary of obligations to make capital contributions or perform other obligations associated with participation in such partnership or joint venture, or (ii) persons with whom the Borrower or a Subsidiary has agreed to exchange any Property, to secure the Borrower's or such Subsidiary's obligations in connection therewith; and (n) Permitted Encumbrances. 8.8. SALES OF ASSETS, ETC. The Borrower shall not sell or otherwise transfer, or permit any Subsidiary to sell or otherwise transfer, directly or indirectly (by merger or otherwise), any assets or other Property (including, without limitation, any shares of capital stock of any Subsidiary) outside of the ordinary course of business, EXCEPT THAT (i) the foregoing restriction shall not apply to transfers by a Subsidiary of the Borrower to the Borrower or to a Wholly-Owned Subsidiary of the Borrower, or by the Borrower to a Wholly-Owned Subsidiary of the Borrower; (ii) if no Event of Default shall have occurred and be continuing or would result therefrom, the Borrower or any Subsidiary may sell or otherwise transfer, outside of the ordinary course of business, any Mortgaged Property for consideration consisting of cash, stock, securities or other Property having a fair value at least equal to the Mortgaged Property so sold or otherwise transferred, in connection with the addition or substitution of an Additional 42 48 Property or Substitute Property in compliance with the requirements of section 7.17; and (iii) if no Event of Default shall have occurred and be continuing or would result therefrom, the Borrower or any Subsidiary may sell or otherwise transfer, outside of the ordinary course of business, assets or other Property, other than any Mortgaged Property, for consideration consisting of cash, stock, securities or other Property having a fair value at least equal to the assets or other Property so sold or otherwise transferred (as determined by the Borrower in good faith), PROVIDED that the net cash proceeds of any such sale or transfer are (A) reinvested in the business of the Borrower and its Subsidiaries within six months following receipt thereof, or (B) applied to the repayment, prepayment or other retirement of Indebtedness for Borrowed Money, or (C) to the extent not so reinvested or applied, are paid as a Distribution in accordance with section 8.3 hereof. Notwithstanding the foregoing, any sale or other transfer of equity interests in the joint venture referred to in section 6.14 hereof which is made for nominal or below market value consideration pursuant to contractual provisions governing the formation or operation of such joint venture as a consequence of the failure to make capital contributions to such joint venture, shall not be prohibited by the terms of this section 8.8. 8.9. LEASING OF ELIGIBLE REAL ESTATE. Neither the Borrower nor the Management Company will enter into, or permit to exist, any lease of all or any portion of any of the Eligible Real Estate, OTHER THAN: (a) presently existing occupancy leases of portions of any Property constituting a Mortgaged Property, and renewals of any thereof entered into in the ordinary course of business at lease rates and other terms which are consistent with prevailing market conditions in the area at the time of execution or renewal thereof, PROVIDED any such lease which covers more than 40,000 square feet is subject and subordinate to the Lien of the Mortgage covering such Mortgaged Property or the tenant has entered into a subordination and non-disturbance agreement with respect thereto which is satisfactory in form and substance to the Administrative Agent; (b) occupancy leases of portions of any Property constituting a Mortgaged Property, entered into or renewed after the Initial Borrowing Date in the ordinary course of business at lease rates and other terms which are consistent with prevailing market conditions in the area at the time of execution or renewal thereof, PROVIDED any such lease is subject and subordinate to the Lien of the Mortgage covering such Mortgaged Property or the tenant has entered into a subordination and non-disturbance agreement with respect thereto which is satisfactory in form and substance to the Administrative Agent, and, PROVIDED, FURTHER, that in the case of any such lease which (i) covers more than 40,000 square feet of space, or (ii) has a basic term, including any renewals at the option of the tenant at fixed rental rates, in excess of 15 years, the Borrower shall have provided to the Administrative Agent at least 10 days prior to the execution of any commitment therefor a notice describing in reasonable detail the principal terms thereof. 8.10. TRANSACTIONS WITH AFFILIATES. The Borrower shall not enter into or participate in any agreements or transactions of any kind with any Affiliates of the Borrower, EXCEPT: (i) agreements or transactions that individually produce annual payments of less than $50,000; (ii) agreements or transactions entered into in the ordinary course of business on an arms-length basis; or (iii) agreements, including but not limited to net-lease arrangements with the Management Company which are permitted pursuant to section 8.3(c)(v). 8.11. LIMITATION ON CERTAIN ACTIONS. In the event of any conflict between the provisions of this section 8 and the financial covenants set forth in section 7.16, the latter shall control. The Borrower shall not take any action otherwise permitted by any provision of this section 8 if such action would result in a violation of any one or more, or all, of the financial covenants set forth in section 7.16. 43 49 SECTION 9. EVENTS OF DEFAULT; REMEDIES. 9.1. EVENTS OF DEFAULT. The occurrence of any of the following specified events (each an "EVENT OF DEFAULT") shall constitute an Event of Default: (A) PRINCIPAL AND INTEREST: any principal, interest or any other sum payable under this Agreement or the Notes shall not be paid within five days of when due; (B) REPRESENTATION AND WARRANTIES: any representation or warranty at any time made by or on behalf of the Borrower or the Management Company in this Agreement, any Loan Document or in any certificate, written report or statement furnished to the Administrative Agent or the Lenders in connection therewith shall prove to have been untrue, incorrect or breached in any material respect on or as of the date on which the same was made or was deemed to have been made or repeated; (C) CERTAIN COVENANTS: the Borrower or the Management Company shall fail to comply with any of the covenants set forth in sections 7.2(b), 7.5(a), 7.8(a), 7.16, 8.2, 8.3, 8.5, 8.6, 8.7, 8.8 or 8.9; (D) OTHER COVENANTS: the Borrower or the Management Company shall fail to perform, comply with or observe any other covenant or agreement contained in this Agreement and such failure or breach shall continue for more than 30 days after the earlier of the date on which the Borrower shall have first become aware of such failure or breach or the Administrative Agent or any Lender shall have first notified the Borrower of such failure or breach (PROVIDED, HOWEVER, that solely with respect to defaults of the nature described in this section 9.1(d) which cannot be cured by the payment of money and cannot using appropriate diligence be cured within such 30-day period, the Borrower shall not be deemed to have defaulted hereunder, PROVIDED that the Borrower shall commence reasonable curative action with respect to such matter within such 30-day period and shall thereafter diligently and continuously prosecute the same to a timely completion); (E) LOAN DOCUMENTS: the Borrower or the Management Company shall fail to observe or perform in any material fashion any of its obligations or undertakings under any Loan Document other than this Agreement, and such failure shall continue beyond the applicable period of grace (if any) provided therein, or any Loan Document shall cease, except as specifically provided herein, to be legal, valid, binding or enforceable in accordance with its terms; (F) LITIGATION: any action at law, suit in equity or other legal or administrative proceeding to amend, cancel, revoke or rescind any Loan Document shall be commenced by or on behalf of the Borrower or the Management Company or by any court or any other Governmental Authority, or any court or any other Governmental Authority shall make a determination, or issue a judgment, order, decree or ruling to the effect that, any one or more of the covenants, agreements or obligations of the Borrower or the Management Company hereunder or under any one or more of the other Loan Documents are illegal, invalid or unenforceable in accordance with the terms thereof; (G) ACCELERATION OF OTHER INDEBTEDNESS: the Borrower or any Subsidiary shall default under any agreement, instrument or contract relating to any Indebtedness of the Borrower or any such Subsidiary or by which any of its assets or Property is bound, other than any Non- Recourse Debt, and such default shall result in any such Indebtedness of the Borrower or any such Subsidiary having an outstanding principal balance, immediately prior to the occurrence of such default, of $1,000,000 or more becoming or being declared due and payable prior to the date on which such Indebtedness or any part thereof would otherwise have become due and payable; 44 50 (H) INSOLVENCY-VOLUNTARY: if the Borrower or the Management Company shall: (1) take any action for the termination, winding up, liquidation or dissolution of the Borrower or the Management Company, as the case may be; (2) make a general assignment for the benefit of creditors, become insolvent or be unable to pay its debts as they mature; (3) file a petition in voluntary liquidation or bankruptcy; (4) file a petition or answer or consent seeking the reorganization of the Borrower or the Management Company, as the case may be, or the readjustment of any of the Indebtedness of the Borrower or the Management Company, as the case may be; (5) commence any case or proceeding under applicable insolvency or bankruptcy laws now or hereafter existing; (6) consent to the appointment of any receiver, administrator, custodian, liquidator or trustee of all or any part of its assets or Property; (7) take any corporate or other organizational action for the purpose of effecting any of the foregoing; or (8) be adjudicated as bankrupt or insolvent; (I) INSOLVENCY-INVOLUNTARY: if any petition for any proceedings in bankruptcy or liquidation or for the reorganization or readjustment of Indebtedness of the Borrower or the Management Company, as the case may be, shall be filed, or any case or proceeding shall be commenced, under any applicable bankruptcy or insolvency laws now or hereafter existing, against the Borrower or the Management Company, as the case may be, or any receiver, administrator, custodian, liquidator or trustee shall be appointed for the Borrower or the Management Company, as the case may be, or for all or any part of the Borrower's or the Management Company's, as the case may be, assets or Property, or any order for relief shall be entered in a proceeding with respect to the Borrower or the Management Company, as the case may be, under the provisions of the United States Bankruptcy Code, as amended, and such proceeding or such appointment shall not be dismissed or discharged, as the case may be, within 45 days after the filing or appointment thereof; (J) JUDGMENTS, ETC.: any final and non-appealable judgment, order or decree for the payment of money in excess of $500,000 shall be rendered against the Borrower or the Management Company, as the case may be, and shall not be discharged within 30 days after the date of the entry thereof; (K) ERISA: any Termination Event shall occur and, as of the date thereof or any subsequent date, the sum of the various liabilities of the Borrower and its ERISA Affiliates including, without limitation, any liability to the Pension Benefit Guaranty Corporation or its successor or to any other party under sections 4062, 4063, or 4064 of ERISA or any other provision of law resulting from or otherwise associated with such event exceeds $50,000; or the Borrower or any of its ERISA Affiliates as an employer under any Multiemployer Plan shall have made a complete or partial withdrawal from such Multiemployer Plans and the plan sponsors of such Multiemployer Plans shall have notified such withdrawing employer that such employer has incurred a withdrawal liability requiring a payment in an amount exceeding $50,000; or (L) LOSS OF LICENSES OR PERMITS: any of the Licenses and Permits now held or hereafter acquired by the Borrower shall be revoked or terminated and not renewed and the absence of any such Licenses and Permits would have a material adverse impact on the business, Property, prospects, profits or condition (financial or otherwise) of the Borrower. 9.2. ACCELERATION, ETC. Upon the occurrence of any Event of Default, and at any time thereafter, if any Event of Default shall then be continuing, the Administrative Agent shall, upon the written request of the Required Lenders, by written notice to the Borrower, take any or all of the following actions, without prejudice to the rights of the Administrative Agent or any Lender to enforce its claims against the Borrower, except as otherwise specifically provided for in this Agreement (PROVIDED that, if an Event of Default specified in section 9.1(h) or (i) shall occur with respect to the Borrower, the result which would occur upon the giving of written notice by the Administrative Agent as specified in clauses (i) and (ii) below shall occur automatically without the giving of any such notice): (i) declare the Total Commitment terminated, whereupon the Commitment of each Lender shall 45 51 forthwith terminate immediately and any Commitment Commission shall forthwith become due and payable without any other notice of any kind; (ii) declare the principal of and any accrued interest in respect of all Loans, all Unpaid Drawings and all obligations owing hereunder and thereunder to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; (iii) enforce, as Administrative Agent (or direct the Administrative Agent to enforce), any or all of the Liens and security interests created pursuant to the Security Documents; (iv) terminate any Letter of Credit which may be terminated in accordance with its terms; and (v) direct the Borrower to pay (and the Borrower hereby agrees that on receipt of such notice or upon the occurrence of an Event of Default with respect to the Borrower under section 9.1(e), it will pay) to the Administrative Agent an amount of cash equal to the aggregate Stated Amount of all Letters of Credit then outstanding (such amount to be held as security after the Borrower's reimbursement obligations in respect thereof). 9.3. REMEDIES. Upon and during the continuance of an Event of Default, the Administrative Agent and each Lender may proceed to protect and enforce all or any of its rights, remedies, powers and privileges under this Agreement, the Notes or any of the other Loan Documents by action at law, suit in equity or other appropriate proceedings, whether for specific performance of any covenant contained in this Agreement, the Notes or any of the other Loan Documents, or in aid of the exercise of any power granted to the Administrative Agent or any Lender herein or therein. 9.4. APPLICATION OF LIQUIDATION PROCEEDS. All monies received by the Administrative Agent or any Lender from the exercise of remedies hereunder or under the Security Documents, the other Loan Documents or under any other documents relating to this Agreement shall, unless otherwise required by the terms of the Security Documents, the other Loan Documents or by applicable law, be applied as follows: (I) FIRST, to the payment of all expenses (to the extent not paid by the Borrower) incurred by the Administrative Agent and the Lenders in connection with the exercise of such remedies, including, without limitation, all costs and expenses of collection, reasonable attorneys' fees, court costs and foreclosure expenses; (II) SECOND, to the payment PRO RATA of interest then accrued on the outstanding Loans; (III) THIRD, to the payment PRO RATA of any fees then accrued and payable to the Administrative Agent, any Letter of Credit Issuer or any Lender under this Agreement in respect of the Loans or the Letter of Credit Outstandings; (IV) FOURTH, to the payment PRO RATA of (A) the principal balance then owing on the outstanding Loans, (B) the Stated Amount of the Letter of Credit Outstandings (to be held and applied by the Administrative Agent as security for the reimbursement obligations in respect thereof), and (C) the amounts owing in respect of any termination of any of the Designated Interest Rate Agreements; (V) FIFTH, to the payment to the Lenders of any amounts then accrued and unpaid under sections 1.10, 1.11, 2.5 and 4.4 hereof, and if such proceeds are insufficient to pay such amounts in full, to the payment of such amounts PRO RATA; (VI) SIXTH, to the payment PRO RATA of all other amounts owed by the Borrower or the Management Company to the Administrative Agent, to any Letter of Credit Issuer or any Lender under this Agreement, any Security Document, or any other Loan Document, and if such proceeds are insufficient to pay such amounts in full, to the payment of such amounts PRO RATA; and (VII) FINALLY, any remaining surplus after all of the Obligations have been paid in full, to the Borrower or to whomsoever shall be entitled thereto. 46 52 SECTION 10. DEFINITIONS. As used herein, the following terms shall have the meanings herein specified unless the context otherwise requires. Defined terms in this Agreement shall include in the singular number the plural and in the plural the singular: "ACCOUNTANTS" means Arthur Andersen LLP, or another "Big Six" firm of certified public accountants selected by the Borrower from time to time as its auditing and accounting firm. "ADMINISTRATIVE AGENT" shall have the meaning provided in the first paragraph of this Agreement and shall include any successor to the Administrative Agent appointed pursuant to section 11.9. "ADJUSTED NET WORTH" means combined shareholders' equity, as determined for the Borrower and its Subsidiaries and the Management Company on a combined basis in accordance with GAAP, REDUCED by the sum of (i) any revaluation in the book value of any asset resulting in the write-up thereof which is reflected in the financial statements of the Borrower subsequent to June 30, 1996, other than write-ups permitted under GAAP, (ii) goodwill, (iii) organizational expenses and other items treated as intangibles in accordance with GAAP, to the extent in excess of the aggregate amount thereof at June 30, 1996 (which was $9,008,000), as such aggregate amount may be amortized in accordance with GAAP, (iv) all unamortized debt discount and expense (exclusive of $3,926,000 thereof as of June 30, 1996, as such amount is amortized in accordance with GAAP), and (v) the aggregate amount of all deferred charges (exclusive of $5,082,000 thereof as of June 30, 1996, as such amount is amortized in accordance with GAAP). "AFFILIATE" means, in relation to any person (herein, an "AFFILIATED PERSON"), any person (other than a Subsidiary) which (directly or indirectly) controls or is controlled by or is under common control with such Affiliated Person. For the purposes of this definition, the term "control" shall mean the possession (directly or indirectly) of the power to direct or to cause the direction of the management or the policies of a person, whether through the ownership of shares of any class in the capital or any other voting securities of such person, by contract or otherwise. "AGGREGATE BORROWING BASE" means, as at any time during the pendency of this Agreement, the sum of the Borrowing Bases for each Mortgaged Property then included in the Eligible Real Estate. "AGGREGATE MEASURED SWAP CREDIT RISK" means, as at any time during the pendency of this Agreement that an Interest Rate Agreement is in effect, the amount determined by the Administrative Agent in accordance with the terms of such Interest Rate Agreement as being the Borrower's measured credit risk thereunder to the counterparty at such time. "AGREEMENT" shall mean this Credit Agreement, including all the Schedules and Exhibits hereto, as the same may be from time to time further modified, amended and/or supplemented. "APPLICABLE PERCENTAGE" shall mean in the case of Loans maintained as Eurodollar Loans, 215 basis points per annum; PROVIDED that if the Borrower does not receive net cash proceeds (i.e., net of underwriting discounts and commissions, placement and advisory fees, and other customary fees, costs and expenses associated therewith) of at least $45,000,000 from the sale or issuance of its shares of beneficial interest (or its preferred equity securities not subject to mandatory redemption, other than as a result of a change of control, prior to the PF Maturity Date) in an underwritten public offering or private placement with investors (other than any sale or issuance to management or employees) which is completed after the Initial Borrowing Date and on or prior to October 1, 1997, the Applicable Percentage shall increase to 240 basis points per 47 53 annum, effective October 1, 1997; and, PROVIDED, FURTHER, that if after the Initial Borrowing Date the Borrower receives net cash proceeds of at least $45,000,000 from such an underwritten equity offering or private placement of such shares of beneficial interest or such preferred equity securities, and so notifies the Administrative Agent thereof in writing, the Applicable Margin will decrease to 200 basis points per annum, effective on the first Business Day of the month next succeeding the month in which such net cash proceeds are so received and the Administrative Agent is so notified thereof. "APPRAISED VALUE" means, as to each Additional Property or Substitute Property, the fair market value of such property as determined by an appraiser who is a member of the American Institute of Real Estate Appraisers (or has a corresponding professional designation acceptable to the Administrative Agent), pursuant to an appraisal acceptable to the Administrative Agent and the Required Lenders prepared and delivered in conformity with any and all regulations and legal requirements applicable to the Lenders with respect to real property collateral. "ASSIGNMENT AGREEMENT" shall mean an Assignment Agreement substantially in the form of Exhibit H hereto. "AUTHORIZED OFFICER" shall mean any executive officer or employee of the Borrower or the Management Company designated as such in writing to the Administrative Agent by the Borrower or the Management Company. "BASE RATE" shall mean, for any period, a fluctuating interest rate per annum as shall be in effect from time to time which rate per annum shall at all times be equal to the greater of (i) the rate of interest established by National City Bank in Cleveland, Ohio, from time to time, as its prime rate, whether or not publicly announced, which interest rate may or may not be the lowest rate charged by it for commercial loans or other extensions of credit; and (ii) the Federal Funds Effective Rate in effect from time to time PLUS 1/2 of 1% per annum. "BASE RATE LOAN" shall mean each Loan bearing interest at the rates provided in section 1.8(a). "BORROWER" shall have the meaning provided in the first paragraph of this Agreement. "BORROWING" shall mean the incurrence of PF Loans or SF Loans, as the case may be, consisting of one Type of Loan, by the Borrower from all of the Lenders having Commitments in respect of the Primary Facility or the Secondary Facility, as the case may be, on a PRO RATA basis on a given date (or resulting from conversions on a given date), having in the case of Eurodollar Loans the same Interest Period. "BORROWING BASE" shall mean, with respect to each Mortgaged Property comprised within the Eligible Real Estate, the value ascribed to such Mortgaged Property for certain purposes in respect of the transactions contemplated by this Agreement, and shall be calculated and reported, quarterly, by dividing such Mortgaged Property's Property NOI by the product resulting from the multiplication of such Mortgaged Property's Coverage Factor by its Market Constant, to-wit: Property NOI ------------------------------------- Borrowing Base = (Coverage Factor) x (Market Constant) As of the date hereof, the initial Borrowing Base has been determined to be $90,500,000. "BUSINESS DAY" shall mean (i) for all purposes other than as covered by clause (ii) below, any day excluding Saturday, Sunday and any day which shall be in Cleveland, Ohio a legal 48 54 holiday or a day on which banking institutions are authorized by law or other governmental actions to close and (ii) with respect to all notices and determinations in connection with, and payments of principal and interest on, Eurodollar Loans, any day which is a Business Day described in clause (i) and which is also a day for trading by and between banks in U.S. dollar deposits in the interbank Eurodollar market. "CAPITAL LEASE" as applied to any person shall mean any lease of any property (whether real, personal or mixed) by that person as lessee which, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that person. "CAPITALIZED LEASE OBLIGATIONS" shall mean all obligations under Capital Leases of the Borrower or any of its Subsidiaries in each case taken at the amount thereof accounted for as liabilities in accordance with GAAP. "CASH EQUIVALENTS" shall mean (i) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (PROVIDED that the full faith and credit of the United States of America is pledged in support thereof) having maturities of not more than one year from the date of acquisition, (ii) U.S. dollar denominated time deposits, certificates of deposit and bankers' acceptances of (x) any Lender or (y) any bank whose short-term commercial paper rating from S&P is at least A-1 or the equivalent thereof or from Moody's is at least P-1 or the equivalent thereof (any such bank, an "APPROVED LENDER"), in each case with maturities of not more than one year from the date of acquisition, (iii) commercial paper issued by any Lender or Approved Lender or by the parent company of any Lender or Approved Lender and commercial paper issued by, or guaranteed by, any industrial or financial company with a short-term commercial paper rating of at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's, or guaranteed by any industrial company with a long term unsecured debt rating of at least A or A2, or the equivalent of each thereof, from S&P or Moody's, as the case may be, and in each case maturing within one year after the date of acquisition and (iv) investments in money market funds substantially all the assets of which are comprised of securities of the types described in clauses (i) through (iii) above. "CHANGE OF CONTROL" shall mean and include (i) during any period of two consecutive calendar years, individuals who at the beginning of such period constituted the Borrower's trustees (together with any new trustees whose election by the Borrower's trustees or whose nomination for election by the Borrower's shareholders was approved by a vote of at least two-thirds of the trustees then still in office who either were trustees at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the trustees then in office; (ii) any person or group (as such term is defined in section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "1934 ACT")), shall acquire, directly or indirectly, beneficial ownership (within the meaning of Rule 13d-3 and 13d-5 of the 1934 Act) of more than 35%, on a fully diluted basis, of the economic or voting interest in the Borrower's shares of beneficial interest (or other equity securities equivalent thereto); and/or (iii) any "change in control" or any similar term as defined in any of the indentures, credit agreements or other instruments governing any Indebtedness of the Borrower or any of its Subsidiaries, in circumstances where the holders of such securities or indebtedness (or an agent or trustee therefor) exercise rights upon the occurrence of a "change in control" to require prepayment, redemption or repurchase by the Borrower involving an aggregate payment by the Borrower in excess of $1,000,000, or the Borrower otherwise becomes obligated upon the occurrence of such a "change in control" to make any such payment. "CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and the rulings issued thereunder. Section references to the Code are to the Code, as in effect at the Effective Date and any subsequent provisions of the Code, amendatory thereof, supplemental thereto or substituted therefor. 49 55 "COLLATERAL" means any and all rights and interests in or to property now or hereafter pledged, given or granted as security for the Obligations pursuant to any of the Loan Documents, including, without limitation, those Mortgaged Properties which are more particularly described in the forms of Mortgages attached as Exhibits hereto. "COMMITMENT" shall mean for each Lender its PF Commitment or its SF Commitment, or both if such Lender shall have both a PF Commitment and an SF Commitment. "COMMITMENT COMMISSION" shall have the meaning provided in section 3.1(a). "CREDIT EVENT" shall mean the making of any Loans and/or the issuance of any Letter of Credit. "COMPLIANCE CERTIFICATE" means a certificate, substantially in the form of Exhibit K, evidencing the Borrower's compliance with the requirements imposed upon it by this Agreement, to be furnished to the Lenders quarterly. "CONTINGENT OBLIGATION" means any direct or indirect liability, contingent or otherwise, with respect to any Indebtedness, lease, dividend, letter of credit, banker's acceptance or other obligation of another person incurred to provide assurance to the obligee of such obligation that such obligation will be paid or discharged, that any agreements relating thereto will be complied with, or that the holders of such obligation will be protected (in whole or in part) against loss in respect thereof. Contingent Obligations shall include, without limitation, (i) the direct or indirect guaranty, endorsement (otherwise than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by any person of the obligation of another person; (ii) any liability for the obligations of another person through any agreement (contingent or otherwise) (A) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise), (B) to maintain the solvency of any balance sheet item, level of income or financial condition of another, or (C) to make take-or-pay, pay-or-play or similar payments if required regardless of nonperformance by any other party or parties to an agreement, if in the case of any agreement described under subclauses (A), (B) or (C) of this sentence the purpose or intent thereof is to provide the assurance described above. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported. "COVERAGE FACTOR" shall mean the factor, determined by the Administrative Agent from time to time on not less than 30 days' prior written notice to the Borrower and the Lenders, with respect to each respective Mortgaged Property included as Eligible Real Estate, by which the Market Constant for such Mortgaged Property shall be multiplied to determine the denominator used to calculate the Borrowing Base attributable to such Mortgaged Property. In determining any Coverage Factor for any Mortgaged Property or any changes therein (i) the Administrative Agent shall make such determinations (other than the initial determinations set forth on Annex III) only pursuant to instructions from, or with the consent of, the Required Lenders, and (ii) no Coverage Factor shall ever be less than 1.2X nor greater than 1.3X. The initial Coverage Factor for each initial Mortgaged Property is set forth on Annex III. "CREDIT PARTY" means the Borrower, the Management Company and any Affiliate of either which shall have executed and delivered any Loan Document. "DECLARATION OF TRUST" means the Borrower's Amended Declaration of Trust, dated July 25, 1986, as the same may hereafter be amended from time to time. 50 56 "DEFAULT" shall mean any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. "DEFAULTING LENDER" shall mean any Lender with respect to which a Lender Default is in effect. "DISTRIBUTION" means: (i) the declaration or payment of any dividends or other distributions on or in respect of capital stock or other equity interests, including but not limited to certificates of beneficial interest (except distributions in such equity interests); or (ii) the redemption, acquisition or other retirement of Securities, except such redemptions, acquisitions or other retirements made as a part of the same transaction from the net proceeds of the sale of such Securities. "EBITDA" means, for any fiscal quarter or other fiscal period of the Borrower, on a combined basis for the Borrower and its Subsidiaries and the Management Company, the Borrower's Net Income for such fiscal quarter or other fiscal period, increased by the sum for such quarter or period of interest expense, income and franchise tax expense, and amortization and depreciation (in each case as determined in accordance with GAAP) deducted in determining Net Income for such quarter or period. "EFFECTIVE DATE" shall have the meaning provided in section 12.10. "ELIGIBLE REAL ESTATE" means all of the Mortgaged Properties. "ELIGIBLE TRANSFEREE" shall mean and include a commercial bank, financial institution or other "accredited investor" (as defined in SEC Regulation D), in each case which is not a direct competitor of the Borrower or engaged in the same or similar business as the Borrower, or any of its respective Subsidiaries or is not an Affiliate of any such competitors of the Borrower or any of its respective Subsidiaries. "EMPLOYEE BENEFIT PLAN" means an "employee benefit plan" as defined in Section 3(3) of ERISA. "ENVIRONMENTAL INDEMNITY AGREEMENTS" means the environmental indemnity agreements now or hereafter executed and delivered by the Borrower to the Administrative Agent, substantially in the form of Exhibit G hereto. "ENVIRONMENTAL LAWS" means all present and future laws, statutes, ordinances, rules, regulations, orders, and determinations of any Federal, state or local governmental authority pertaining to health, protection of the environment, natural resources, conservation, wildlife, waste management, regulation of activities involving Hazardous Substances, and pollution, including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act ("SUPERFUND" or "CERCLA"), 42 U.S.C. sec. 9601 ET SEQ., the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), 42 U.S.C. sec. 9601(20)(D), the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. sec. 6901 ET SEQ., the Federal Water Pollution Control Act, as amended by the Clean Water Act (the "CLEAN WATER ACT"), 33 U.S.C. sec. 1251 ET SEQ., the Clean Air Act ("CAA"), 42 U.S.C. sec. 7401 ET SEQ., and the Toxic Substances Control Act, 15 U.S.C. sec. 2601 ET SEQ., together with any and all applicable licenses, permits or governmental approvals pertaining to, or establishing standards with respect to, any of the foregoing matters, as any of the foregoing may be amended or supplemented. 51 57 "ENVIRONMENTAL CLAIMS" shall mean any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, Liens, notices of non-compliance or violation, investigations or proceedings relating in any way to any Environmental Law or any permit issued under any such law (hereafter "CLAIMS"), including, without limitation, (a) any and all Claims by governmental or regulatory authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law, and (b) any and all Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from the storage, treatment or Release (as defined in CERCLA) of any Hazardous Substances or arising from alleged injury or threat of injury to health, safety or the environment. "ERISA" means the Employee Retirement Income Security Act of 1974 and the rules and regulations issued thereunder, as the same may be amended from time to time, and including any successor statute. "ERISA AFFILIATE" means, in relation to any person, any trade or business (whether or not incorporated) which is a member of a group of which that person is a member and which is under common control with such person within the meaning of the regulations promulgated under Section 414 of the Code, as amended. "ERISA LIABILITIES" means the aggregate of all unfunded vested benefits under any plan of the Borrower or any ERISA Affiliate of the Borrower under any Plan covered by ERISA that is not a Multi-employer Plan, and all potential withdrawal liabilities of any thereof under all Multiemployer Plans. "EURODOLLAR LOANS" shall mean each Loan bearing interest at the rates provided in section 1.8(b). "EURODOLLAR RATE" shall mean with respect to each Interest Period for a Eurodollar Loan, (A) the offered quotation to first-class banks in the interbank Eurodollar market, as determined by the Administrative Agent for dollar deposits of amounts in same day funds comparable to the outstanding principal amount of the Eurodollar Loan of the Administrative Agent for which an interest rate is then being determined with maturities comparable to the Interest Period to be applicable to such Eurodollar Loan, determined as of 11:00 A.M. (London time) on the date which is two Business Days prior to the commencement of such Interest Period, in each case divided (and rounded upward to the next whole multiple of 1/16 of 1%) by (B) a percentage equal to 100% minus the then stated maximum rate of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves) applicable to any member bank of the Federal Reserve System in respect of Eurocurrency liabilities as defined in Regulation D (or any successor category of liabilities under Regulation D). "EVENT OF DEFAULT" shall have the meaning provided in section 9.1. "EXPIRATION DATE" shall mean September 30, 1996. "FACILITY" shall mean either the Primary Facility or the Secondary Facility, or both if the context so requires. "FACING FEE" shall have the meaning provided in section 3.1(c) "FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any period, a fluctuating interest rate equal for each day during such period to the weighted average of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding 52 58 Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal Funds brokers of recognized standing selected by the Administrative Agent. "FEES" shall mean all amounts payable pursuant to, or referred to in, section 3.1. "FUNDS FROM OPERATIONS" means, for any fiscal period of the Borrower, on a combined basis for the Borrower and its Subsidiaries and the Management Company, the Borrower's Net Income PLUS depreciation and amortization expenses for such period. "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" or "GAAP" means generally accepted accounting principles in effect from time to time in the United States, consistently applied as regards any specific fiscal period. "GOVERNMENTAL AUTHORITY" shall mean any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "GUARANTEED PENSION PLAN" means any pension plan maintained by the Borrower or any ERISA Affiliate of the Borrower, or to which the Borrower or any ERISA Affiliate contributes, some or all of the benefits under which are guaranteed by the Pension Benefit Guaranty Corporation within the U.S. Department of Labor. "HAZARDOUS SUBSTANCES" means (i) any hazardous wastes and/or toxic chemicals, materials, substances or wastes as defined by or for the purposes of any of the Environmental Laws; (ii) any "oil", as defined by the Clean Water Act, as amended from time to time, and regulations promulgated thereunder (including crude oil or any fraction thereof and any petroleum products or derivatives thereof); (iii) any substance, the presence of which is prohibited, regulated or controlled by any other applicable federal or state or local laws, regulations, statutes or ordinances now in force or hereafter enacted relating to waste disposal or environmental protection with respect to the exposure to, or manufacture, possession, presence, use, generation, storage, transportation, treatment, release, emission, discharge, disposal, abatement, cleanup, removal, remediation or handling of any such substances; (iv) any asbestos or asbestos-containing materials, polychlorinated biphenyls ("PCBs") in the form of electrical equipment, fluorescent light fixtures with ballasts, cooling oils or any other form, urea formaldehyde, atmospheric radon at levels over four picocuries per cubic liter; (v) any solid, liquid, gaseous or thermal irritant or contaminant, such as smoke, vapor, soot, fumes, alkalis, acids, chemicals, pesticides, herbicides, sewage, industrial sludge or other similar wastes; (iv) industrial, nuclear or medical by-products; and (vii) any underground storage tank(s). "INDEBTEDNESS" means, in relation to any person, at any particular time, all of the obligations of such person which, in accordance with GAAP, would be classified as indebtedness upon a balance sheet (including any footnote thereto) of such person prepared at such time, and in any event shall include, without limitation: (i) all indebtedness of such person arising or incurred under or in respect of (A) any guaranties (whether direct or indirect) by such person of the indebtedness, obligations or liabilities of any other person, or (B) any endorsement by such person of any of the indebtedness, obligations or liabilities of any other person (otherwise than as an endorser of negotiable instruments received in the ordinary course of business and presented to commercial banks for collection of deposit), or (C) the discount by such person, with recourse to 53 59 such person, of any of the indebtedness, obligations or liabilities of any other person; (ii) all indebtedness of such person arising or incurred under or in respect of any agreement, contingent or otherwise made by such person (A) to purchase any indebtedness of any other person or to advance or supply funds for the payment or purchase of any indebtedness of any other person or (B) to purchase, sell or lease (as lessee or lessor) any property, products, materials or supplies or to purchase or sell transportation or services, primarily for the purpose of enabling any other person to make payment of any indebtedness of such other person or to assure the owner or holder of such other person's indebtedness against loss, regardless of the delivery or non-delivery of the property, products, materials or supplies or the furnishing or non-furnishing of the transportation or services, or (C) to make any loan, advance, capital contribution or other investment in any other person for the purpose of assuring a minimum equity, asset base, working capital or other balance sheet condition for or as at any date, or to provide funds for the payment of any liability, dividend or stock liquidation payment, or otherwise to supply funds to or in any manner invest in any other person; (iii) all indebtedness, obligations and liabilities secured by or arising under or in respect of any Lien, upon or in Property owned by such person, even though such person has not assumed or become liable for the payment of such indebtedness, obligations and liabilities; (iv) all indebtedness 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 (or lessor) under such agreement in the event of default are limited to repossession or sale of such Property; and (v) all indebtedness arising or incurred under or in respect of any Contingent Obligation. "INDEBTEDNESS FOR BORROWED MONEY" means at any particular time, all Indebtedness (i) in respect of any money borrowed (including pursuant to this Agreement); (ii) under or in respect of any Contingent Obligation (whether direct or indirect) of any money borrowed; (iii) evidenced by any loan or credit agreement, promissory note, debenture, bond, guaranty or other similar written obligation to pay money; or (iv) arising under leases which, in accordance with GAAP, should be reflected as indebtedness on a balance sheet. "INTEREST EXPENSE" means, for any period, the aggregate interest expense of the Borrower and all of the Borrower's Subsidiaries and the Management Company during such period, determined on a combined basis in accordance with GAAP. "INITIAL BORROWING DATE" shall mean the date, on or after the Effective Date, upon which the conditions specified in section 5.1 are satisfied. "INTEREST PERIOD" with respect to any Loan shall mean the interest period applicable thereto, as determined pursuant to section 1.9. "INTEREST RATE AGREEMENT" shall mean any interest rate swap agreement, any interest rate cap agreement, any interest rate collar agreement or other similar agreement or arrangement 54 60 designed to protect against fluctuations in interest rates, and all amendments, extensions, renewals and modifications thereof and any agreements in replacement thereof or in substitution therefor. "INVESTMENT" means any investment in any other person by stock purchase, capital contribution, loan, advance, guaranty of any Indebtedness or creation or assumption of any other liability in respect of any Indebtedness of such person (including, without limitation, any liability of any kind described in clause (i) or (ii) of the definition of the term "Indebtedness" set forth in this section), or the transfer or sale of Property (otherwise than in the ordinary course of the business) to any other person for less than payment in full in cash of the transfer or sale price or the fair value thereof (whichever of such price or value is higher). "LEASE ASSIGNMENTS" mean, collectively, the Assignments of Rents and Leases now or hereafter executed and delivered by the Borrower and the Management Company to the Administrative Agent, substantially in the form of Exhibits E-1 through E-6 hereto. "LEGAL REQUIREMENTS" means all applicable laws, rules, regulations, ordinances, judgments, orders, decrees, injunctions, arbitral awards, permits, licenses, authorizations, directions and requirements of all governments, departments, commissions, boards, courts, authorities, agencies, and officials and officers thereof, that are in effect now or at any time in the future. "LENDER" shall have the meaning provided in the first paragraph of this Agreement. "LENDER DEFAULT" shall mean (i) the refusal (which has not been retracted) of a Lender, in violation of the requirements of this Agreement, to make available its portion of any incurrence of Loans or to fund its portion of any unreimbursed payment under section 2.4(c) or (ii) a Lender having notified the Administrative Agent and/or the Borrower that it does not intend to comply with the obligations under section 1.1 and/or section 2.4(c), in the case of either (i) or (ii) as a result of the appointment of a receiver or conservator with respect to such Lender at the direction or request of any regulatory agency or authority. "LETTER OF CREDIT" shall have the meaning provided in section 2.1(a). "LETTER OF CREDIT FEE" shall have the meaning provided in section 3.1(b). "LETTER OF CREDIT ISSUER" shall mean (i) NCB and/or (ii) such other Lender that is requested, and agrees, to so act by the Borrower and is acceptable to the Administrative Agent. "LETTER OF CREDIT OUTSTANDINGS" shall mean, at anytime, the sum, without duplication, of (i) the aggregate Stated Amount of all outstanding Letters of Credit and (ii) the aggregate amount of all Unpaid Drawings. "LETTER OF CREDIT REQUEST" shall have the meaning provided in section 2.2(a). "LIABILITIES" means, on a combined basis, all indebtedness, obligations and other liabilities of the Borrower and the Borrower's Subsidiaries and the Management Company, whether matured or unmatured, liquidated or unliquidated, direct or indirect, absolute or contingent, joint or several, secured or unsecured, arising by contract, operation of law or otherwise, which are classified as liabilities in accordance with GAAP on a combined balance sheet of the Borrower and its Subsidiaries and the Management Company. "LICENSES AND PERMITS" means all licenses, permits, registrations and recordings thereof and all applications for such licenses, permits and registrations now owned or hereafter acquired by the Borrower and required or necessary for the business operations of the Borrower. 55 61 "LIEN" means any lien, mortgage, pledge, security interest, charge or other encumbrance of any kind, including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest. "LOAN" shall have the meaning provided in section 1.1. Loans shall be classified as either PF Loans or SF Loans and may be Base Rate Loans or Eurodollar Loans. "LOAN DOCUMENTS" mean this Agreement, the Notes, the Lease Assignments, the Mortgages, the Pledge Agreement, the Environmental Indemnity Agreement, any Designated Interest Rate Agreement and any other agreement, instrument, certificate or document now or hereafter executed in connection with or pursuant to this Agreement. "MARGIN STOCK" shall have the meaning provided in Regulation U. "MARKET CONSTANT" means the factor, determined by the Administrative Agent from time to time on not less than 30 days' prior written notice to the Borrower and the Lenders, by reference to a standard level constant payment table for a fully amortizing loan with a maturity of at least 20 years' (but not more than 25 years') duration, for use in calculating the Borrowing Base with reference to Eligible Real Estate. In determining any Market Constant for any Mortgaged Property or any changes therein (i) the Administrative Agent shall make such determinations (other than the initial determinations set forth on Annex III) only pursuant to instructions from, or with the consent of, the Required Lenders, and (ii) no Market Constant shall ever be less than 8% nor greater than 12%. The initial Market Constant factors for the respective Mortgaged Properties comprising the Eligible Real Estate as of the date hereof are set forth on Annex III. Market Constant factors for the respective Mortgaged Properties comprising Eligible Real Estate may be redetermined as of May 1 and as of November 1 of each subsequent full or partial calendar year during the pendency of this Agreement. "MINIMUM BORROWING AMOUNT" shall mean (i) for Base Rate Loans, $500,000, with minimum increments thereafter of $100,000 and (ii) for Eurodollar Loans, $5,000,000, with minimum increments thereafter of $1,000,000. "MOODY'S" shall mean Moody's Investors Service, Inc. and its successors. "MORTGAGE" means each of the mortgages in the form of Exhibit D-1 through D-6 hereto, dated as of the date hereof or such later date as the property subject thereto becomes a Mortgaged Property and part of the Collateral, granted by the Borrower and the Management Company to the Administrative Agent, and any other mortgages which may hereafter be granted to the Administrative Agent to secure the Obligations together with any and all amendments, modifications or supplements thereto. "MORTGAGED PROPERTIES" means those properties which are now or hereafter encumbered by Mortgages, but only during the period in which such properties are so encumbered. The Mortgaged Properties which exist as of the date of this Agreement are identified on Annex III. "MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section 4001(a) (3) of ERISA which is maintained for employees of the Borrower, or any ERISA Affiliate of the Borrower. "NCB" means National City Bank, a national banking association, and its successors and assigns. "NET INCOME" or the "BORROWER'S NET INCOME" means the net income of the Borrower and the Borrower's Subsidiaries and the Management Company, as computed on a combined basis 56 62 in accordance with GAAP, as reported in the Borrower's most recent combined financial statements included in the report on Form 10-Q or 10-K, as filed with the SEC; PROVIDED that there shall be excluded from such net income all items of gain or loss which are properly classified as extraordinary in accordance with GAAP. "NON-DEFAULTING LENDER" shall mean each Lender other than a Defaulting Lender. "NON-RECOURSE DEBT" shall have the meaning provided in section 8.5(a)(iv). "NOTE" shall have the meaning provided in section 1.5(a). "NOTICE OF BORROWING" shall have the meaning provided in section 1.3(a). "NOTICE OF CONVERSION" shall have the meaning provided in section 1.6. "NOTICE OFFICE" shall mean the office of the Administrative Agent at National City Center, 1900 East Ninth Street, Cleveland, Ohio 44114, or such other office as the Administrative Agent may designate to the Borrower from time to time. "OBLIGATIONS" shall mean all amounts, direct or indirect, contingent or absolute, of every type or description, and at any time existing, owing to the Administrative Agent or any Lender pursuant to the terms of this Agreement or any other Loan Document. "PARTICIPANT" shall have the meaning provided in section 2.4(a). "PAYMENT OFFICE" shall mean the office of the Administrative Agent at National City Center, 1900 East Ninth Street, Cleveland, Ohio 44114, or such other office as the Administrative Agent may designate to the Borrower from time to time. "PERCENTAGE" shall mean, at any time for each Lender with a Commitment, the percentage obtained by dividing such Lender's Commitment by the Total Commitment, PROVIDED that if the Total Commitment has been terminated, the Percentage of each Lender shall be determined by dividing such Lender's Commitment immediately prior to such termination by the Total Commitment immediately prior to such termination. "PERMITTED ENCUMBRANCES" means those encumbrances affecting any Mortgaged Property which are permitted by the Mortgage pertaining thereto. "PERSON" shall mean any individual, partnership, joint venture, firm, corporation, association, trust or other enterprise or any government or political subdivision or any agency, department or instrumentality thereof. "PF COMMITMENT" shall mean, with respect to each Lender, the amount set forth opposite such Lender's name in Annex I as its "Primary Facility Commitment" as the same may be reduced from time to time pursuant to section 3.2, 3.3 and/or 9 or adjusted from time to time as a result of assignments to or from such Lender pursuant to section 12.4. "PF LOAN" shall have the meaning provided in section 1.1. "PF MATURITY DATE" means the second anniversary of the Initial Borrowing Date, unless extended as provided in section 3.4, or sooner terminated as herein provided. "PF PERCENTAGE" shall mean at any time for any Lender with a PF Commitment, the percentage obtained by dividing such Lender's PF Commitment by the Total PF Commitment, 57 63 PROVIDED, that if the Total PF Commitment has been terminated, the PF Percentage for each Lender shall be determined by dividing such Lender's PF Commitment immediately prior to such termination by the Total PF Commitment immediately prior to such termination. "PLEDGED NOTE" means the Promissory Note dated January 27, 1995 in the original principal amount of $6,000,000, made by Crown Investments Trust and Crown American Investment Company, to the order of the Borrower, and any promissory notes or other securities issued in exchange therefor or in replacement thereof. "PRIMARY FACILITY" means the Facility evidenced by the Total PF Commitment. "PROPERTY" means all types of real, personal, tangible, intangible or mixed property. "PROPERTY NOI" means, as to each Mortgaged Property included within the Eligible Real Estate, the annual income produced by the operation of such Mortgaged Property, LESS normal operating expenses for such Mortgaged Property for such period. For the purposes of calculating Property NOI, amortization, depreciation and capital expenditures for property improvements or tenant alterations for any Mortgaged Property shall not be considered to be "normal operating expenses" in respect of such Mortgaged Property. "REGULATION D" shall mean Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing reserve requirements. "REGULATION U" shall mean Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing margin requirements. "REIT" means a qualified real estate investment trust, as defined in the Code. "REQUIRED LENDERS" shall mean Non-Defaulting Lenders whose outstanding Loans and Unutilized Commitments constitute at least 75% of the sum of the total outstanding Loans and Unutilized Commitments of Non-Defaulting Lenders. "S&P" shall mean Standard & Poor's Ratings Group, a division of McGraw Hill, Inc., and its successors. "SEC" shall mean the United States Securities and Exchange Commission or any successor agency. "SECONDARY FACILITY" means the Facility evidenced by the Total SF Commitment. "SEC REGULATION D" shall mean Regulation D as promulgated under the Securities Act of 1933, as amended, as the same may be in effect from time to time. "SECTION 4.4(B)(II) CERTIFICATE" shall have the meaning provided in section 4.4(b)(ii). "SECURITIES" means any stock, shares, voting trust certificates, certificates of beneficial interest bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participation in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. 58 64 "SECURITY DOCUMENTS" shall mean, collectively, any Lease Assignments, any Mortgages, the Environmental Indemnity Agreement, the Pledge Agreement and each other agreement, assignment or instrument creating or purporting to create a Lien or establish or create any rights in favor of the Administrative Agent as security for the Obligations. "SF COMMITMENT" shall mean, with respect to each Lender, the amount set forth opposite such Lender's name in Annex I as its "Secondary Facility Commitment" as the same may be reduced from time to time pursuant to section 3.2, 3.3 and/or 9 or adjusted from time to time as a result of assignments to or from such Lender pursuant to section 12.4. "SF LOAN" shall have the meaning provided in section 1.1. "SF MATURITY DATE" means the second anniversary of the Initial Borrowing Date, unless extended as provided in section 3.4, or sooner terminated as herein provided. "SF PERCENTAGE" shall mean at any time for any Lender with a SF Commitment, the percentage obtained by dividing such Lender's SF Commitment by the Total SF Commitment, PROVIDED, that if the Total SF Commitment has been terminated, the SF Percentage for each Lender shall be determined by dividing such Lender's SF Commitment immediately prior to such termination by the Total SF Commitment immediately prior to such termination. "STATED AMOUNT" of each Letter of Credit shall mean the maximum available to be drawn thereunder (regardless of whether any conditions or other requirements for drawing could then be met). "SUBSIDIARY" of any person shall mean and include (i) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such person directly or indirectly through Subsidiaries and (ii) any partnership, association, joint venture or other entity in which such person directly or indirectly through Subsidiaries, has more than a 50% equity interest at the time. Unless otherwise expressly provided, all references herein to "Subsidiary" shall mean a Subsidiary of the Borrower. "SUBORDINATED INDEBTEDNESS" means Indebtedness which has been subordinated to the prior payment in full of the Obligations pursuant to subordination provisions satisfactory in form and substance to the Required Lenders. "TAXES" shall have the meaning provided in section 4.4. "TOTAL COMMITMENT" shall mean the sum of the Commitments of the Lenders. "TOTAL INTEREST EXPENSE" shall mean, for any period, total interest expense (including that which is capitalized and that which is attributable to Capital Leases, in accordance with GAAP) of the Borrower and its Subsidiaries and the Management Company on a combined basis with respect to all outstanding Indebtedness of the Borrower and its Subsidiaries and the Management Company including, without limitation, all commissions, discounts and other fees and charges owed with respect to letters of credit and net costs under Interest Rate Agreements, but excluding, however, any amortization of deferred financing costs, all as determined in accordance with GAAP. "TOTAL PF COMMITMENT" means the sum of the PF Commitments of each of the Lenders. 59 65 "TOTAL SF COMMITMENT" means the sum of the SF Commitments of each of the Lenders. "TYPE" shall mean any type of Loan determined with respect to the interest option applicable thereto, I.E., a Base Rate Loan or Eurodollar Loan. "UNPAID DRAWING" shall have the meaning provided in section 2.3(a). "UNUTILIZED COMMITMENT" for any Lender at any time shall mean the excess of (i) such Lender's Commitment at such time over (ii) the sum of (x) the principal amount of Loans made by such Lender and outstanding at such time and (y) such Lender's Percentage of Letter of Credit Outstandings at such time. "UNUTILIZED TOTAL COMMITMENT" shall mean, at any time, the excess of (i) the Total Commitment at such time over (ii) the sum of (x) the aggregate principal amount of all Loans then outstanding plus (y) the aggregate Letter of Credit Outstandings at such time. "UNUTILIZED TOTAL PF COMMITMENT" shall mean, at any time, the excess of (i) the Total PF Commitment at such time over (ii) the sum of (x) the aggregate principal amount of all PF Loans then outstanding plus (y) the aggregate Letter of Credit Outstandings at such time. "UNUTILIZED TOTAL SF COMMITMENT" shall mean, at any time, the excess of (i) the Total SF Commitment at such time over (ii) the aggregate principal amount of all SF Loans then outstanding. "WHOLLY-OWNED SUBSIDIARY" shall mean each Subsidiary of the Borrower all of whose capital stock, equity interests and partnership interests are owned directly or indirectly by the Borrower, its officers, stockholders and affiliates but excluding any Subsidiary primarily engaged in the business of issuing insurance and/or insurance policies. "WRITTEN", "WRITTEN" or "IN WRITING" shall mean any form of written communication or a communication by means of telex, facsimile transmission, telegraph or cable. 60 66 SECTION 11. THE ADMINISTRATIVE AGENT. 11.1. APPOINTMENT. Each Lender hereby irrevocably designates and appoints NCB as Administrative Agent to act as specified herein and in the other Loan Documents, and each such Lender hereby irrevocably authorizes NCB as the Administrative Agent for such Lender, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. The Administrative Agent agrees to act as such upon the express conditions contained in this section 11. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein or in the other Loan Documents, nor any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Administrative Agent. The provisions of this section 11 are solely for the benefit of the Administrative Agent, and the Lenders, and no Credit Party shall have any rights as a third party beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement, the Administrative Agent shall act solely as agent of the Lenders and does not assume and shall not be deemed to have assumed any obligation or relationship of agency or trust with or for any Credit Party. 11.2. DELEGATION OF DUTIES. The Administrative Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care except to the extent otherwise required by section 11.3. 11.3. EXCULPATORY PROVISIONS. Neither the Administrative Agent nor any of its respective officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such person under or in connection with this Agreement (except for its or such person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower or any other Credit Party or any of their respective officers contained in this Agreement, any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Loan Document or for any failure of the Borrower or any other Credit Party or any of their respective officers to perform its obligations hereunder or thereunder. The Administrative Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement, or to inspect the properties, books or records of the Borrower or any other Credit Party. The Administrative Agent shall not be responsible to any Lender for the effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Agreement or any Loan Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statement or in any financial or other statements, instruments, reports, certificates or any other documents in connection herewith or therewith furnished or made by the Administrative Agent to the Lenders or by or on behalf of the Borrower or any other Credit Party to the Administrative Agent or any Lender or be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained herein or therein or as to the use of the proceeds of the Loans or of the existence or possible existence of any Default or Event of Default. 11.4. RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, facsimile transmission, telex or teletype message, statement, order or other document or conversation believed by it, in good faith, 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 (including, without limitation, counsel to the Borrower or any other Credit Party), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all 61 67 liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders. 11.5. NOTICE OF DEFAULT. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Administrative Agent has received notice from a Lender or the Borrower or any other Credit Party referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default." In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give prompt notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders, PROVIDED that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. 11.6. NON-RELIANCE. Each Lender expressly acknowledges that neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates have made any representations or warranties to it and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of the Borrower or other Credit Party, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent, or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, assets, operations, property, financial and other conditions, prospects and creditworthiness of the Borrower and the other Credit Parties and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent, or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement, and to make such investigation as it deems necessary to inform itself as to the business, assets, operations, property, financial and other conditions, prospects and creditworthiness of the Borrower and the other Credit Parties. The Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, assets, property, financial and other conditions, prospects or creditworthiness of the Borrower or any other Credit Party which may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. 11.7. INDEMNIFICATION. The Lenders agree to indemnify the Administrative Agent in its capacity as such ratably according to their respective Loans and unutilized Commitments, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, reasonable expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Obligations) be imposed on, incurred by or asserted against the Administrative Agent in its capacity as such in any way relating to or arising out of this Agreement or any other Loan Document, or any documents contemplated by or referred to herein or the transactions contemplated hereby or any action taken or omitted to be taken by the Administrative Agent under or in connection with any of the foregoing, but only to the extent that any of the foregoing is not paid by the Borrower or another Credit Party, PROVIDED that no Lender shall be liable to the Administrative Agent for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements to the extent resulting solely from the Administrative Agent's gross negligence or willful misconduct. If any indemnity furnished to the Administrative Agent for any purpose shall, in the opinion of the Administrative Agent, be insufficient or become impaired, the Administrative Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. The agreements in this section 11.7 shall survive the payment of all Obligations. 62 68 11.8. THE ADMINISTRATIVE AGENT IN INDIVIDUAL CAPACITY. The Administrative Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower, the other Credit Parties and their Affiliates as though not acting as Administrative Agent hereunder. With respect to the Loans made by it and all Obligations owing to it, the Administrative Agent shall have the same rights and powers under this Agreement as any Lender and may exercise the same as though it were not the Administrative Agent, and the terms "Lender" and "Lenders" shall include the Administrative Agent in its individual capacity. 11.9. SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may resign as the Administrative Agent upon 20 days' notice to the Lenders and the Borrower. The Required Lenders shall appoint from among the Lenders a successor Administrative Agent for the Lenders subject to prior approval by the Borrowers (such approval not to be unreasonably withheld or delayed), whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term "Administrative Agent" shall include such successor agent effective upon its appointment, and the resigning Administrative Agent's rights, powers and duties as the Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement. After the retiring Administrative Agent's resignation hereunder as the Administrative Agent, the provisions of this section 11 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. 11.10. OTHER AGENTS. Any Lender identified herein as a Documentation Agent, Managing Agent, Co-Agent, Syndication Agent or any other corresponding title, other than "Administrative Agent", shall have no right, power, obligation, liability, responsibility or duty under this Agreement or any other Loan Document except those applicable to all Lenders as such. Each Lender acknowledges that it has not relied, and will not rely, on any Lender so identified in deciding to enter into this Agreement or in taking or not taking any action hereunder. SECTION 12. MISCELLANEOUS. 12.1. PAYMENT OF EXPENSES ETC. The Borrower agrees to: (i) whether or not the transactions herein contemplated are consummated, pay all reasonable out-of-pocket costs and expenses of the Administrative Agent in connection with the negotiation, preparation, execution and delivery of the Loan Documents and the documents and instruments referred to therein and any amendment, waiver or consent relating thereto (including, without limitation, the reasonable fees and disbursements of Jones, Day, Reavis & Pogue, in connection with the preparation of the Loan Documents and the consummation of the transactions contemplated hereby, and of the Administrative Agent and each of the Lenders in connection with the enforcement of the Loan Documents and the documents and instruments referred to therein (including, without limitation, the reasonable fees and disbursements of counsel for the Administrative Agent and for each of the Lenders); (ii) in the event (x) that any of the Mortgages are foreclosed in whole or in part or that any of the Mortgages are put into the hands of an attorney for collection, suit, action or foreclosure, (y) of the foreclosure of any mortgage prior to or subsequent to any of the Mortgages in which proceeding the Administrative Agent is made a party, or (z) of the bankruptcy, insolvency, rehabilitation or other similar proceeding in respect of the Borrower or any of its Subsidiaries, 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; (iii) pay and hold the Administrative Agent and each of the Lenders harmless from and against any and all present and future stamp and other similar taxes with respect to the foregoing matters and save each of the Lenders harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Lender) to pay such taxes; and (iv) indemnify each Lender and the Administrative Agent, its officers, directors, employees, representatives and agents (collectively, "INDEMNITEES") from and hold each of them harmless against any and all losses, liabilities, claims, damages or expenses incurred by any of them as a result of, or arising out of, or in any way related to, or by reason of (a) any Environmental Claims, as provided in the Environmental Indemnity Agreement, (b) any investigation, litigation or other proceeding (whether or not the Administrative Agent or any Lender is a party thereto) related to the entering into and/or performance of any Loan Document or the use of the proceeds of any Loans hereunder or the consummation of any transactions contemplated in any Loan Document, including, in each case, without limitation, the reasonable fees and disbursements of counsel incurred in connection with any such investigation, litigation or other proceeding (but excluding any such losses, 63 69 liabilities, claims, damages or expenses to the extent incurred by reason of the gross negligence or willful misconduct of the person to be indemnified or of any other Indemnitee who is such person or an Affiliate of such person). To the extent that the undertaking to indemnify, pay or hold harmless any person set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, the Borrower shall make the maximum contribution to the payment and satisfaction of each of the indemnified liabilities which is permissible under applicable law. 12.2. RIGHT OF SETOFF. In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence of an Event of Default, each Lender is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to the Borrower or to any other person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other Indebtedness at any time held or owing by such Lender (including, without limitation, by branches and agencies of such Lender wherever located) to or for the credit or the account of the Borrower against and on account of the Obligations and liabilities of the Borrower to such Lender under this Agreement or under any of the other Loan Documents, including, without limitation, all interests in Obligations the Borrower purchased by such Lender pursuant to section 12.4(b), and all other claims of any nature or description arising out of or connected with this Agreement or any other Loan Document, irrespective of whether or not such Lender shall have made any demand hereunder and although said Obligations, liabilities or claims, or any of them, shall be contingent or unmatured. 12.3. NOTICES. Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including telegraphic, telex, facsimile transmission or cable communication) and mailed, telegraphed, telexed, transmitted, cabled or delivered, if to the Borrower, at Suite 1900, 55 Public Square, Cleveland, Ohio 44113, attention: Senior Vice President & Treasurer (facsimile: (216) 781-7467); if to any Lender at its address specified for such Lender on Annex I hereto; if to the Administrative Agent, at its Notice Address; or, at such other address as shall be designated by any party in a written notice to the other parties hereto. All such notices and communications shall be mailed, telegraphed, telexed, telecopied, or cabled or sent by overnight courier, and shall be effective when received. 12.4. BENEFIT OF AGREEMENT. (a) This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto, PROVIDED that no Credit Party may assign or transfer any of its rights or obligations hereunder without the prior written consent of all the Lenders. Each Lender may at any time grant participations in any of its rights hereunder or under any of the Notes to another financial institution, PROVIDED that in the case of any such participation, (i) the participant shall not have any rights under this Agreement or any of the other Loan Documents, including rights of consent, approval or waiver (the participant's rights against such Lender in respect of such participation to be those set forth in the agreement executed by such Lender in favor of the participant relating thereto), (ii) such Lender's obligations under this Agreement (including, without limitation, its Commitment hereunder) shall remain unchanged, (iii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iv) such Lender shall remain the holder of any Note for all purposes of this Agreement and (v) the Borrower, the Administrative Agent, and the other Lenders shall continue to deal solely and directly with the selling Lender in connection with such Lender's rights and obligations under this Agreement, and all amounts payable by the Borrower hereunder shall be determined as if such Lender had not sold such participation, except that the participant shall be entitled to the benefits of sections 1.10, 1.11 and 4.4 of this Agreement to the extent that such Lender would be entitled to such benefits if the participation had not been entered into or sold, and, PROVIDED FURTHER, that no Lender shall transfer, grant or sell any participation under which the participant shall have rights to approve any amendment to or waiver of this Agreement or any other Loan Document except to the extent such amendment or waiver would (x) extend the final scheduled maturity of the Loans in which such participant is participating (it being understood that any waiver of the making of, or the application of any amortization payment or other prepayment or the method of any application of any prepayment to the amortization of the Loans shall not constitute an extension of the final maturity date thereof), or reduce the rate or extend the time of payment of interest or Fees thereon (except in connection with a waiver of the applicability of any post-default increase in interest rates), or reduce the principal amount thereof, or increase such participant's participating interest in any Commitment over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of any mandatory prepayment or a mandatory 64 70 reduction in the Total Commitment, or a mandatory prepayment, shall not constitute a change in the terms of any Commitment), (y) release all or substantially all of the Collateral (in each case except as expressly provided in the Loan Documents) or (z) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement. (b) Notwithstanding the foregoing, (x) any Lender may assign all or a portion of its Loans and/or Commitment, and its rights and obligations hereunder to an Affiliate of such Lender or to another Lender that is not a Defaulting Lender, and (y) any Lender may assign all, or if less than all, a portion equal to at least $5,000,000 in the aggregate for the assigning Lender or assigning Lenders, of its Loans and/or Commitment and its rights and obligations hereunder, to one or more Eligible Transferees, each of which assignees shall become a party to this Agreement as a Lender by execution of an Assignment Agreement, PROVIDED that, (i) at such time Annex I shall be deemed modified to reflect the Commitment of such new Lender and of the existing Lenders, (ii) upon surrender of the old Notes, new Notes will be issued, at the Borrower's expense for the cost of preparation thereof, to such new Lender and to the assigning Lender, such new Notes to be in conformity with the requirements of section 1.5 (with appropriate modifications) to the extent needed to reflect the revised Commitments, (iii) in the case of clause (y) only, the consent of the Administrative Agent shall be required in connection with any such assignment, and (iv) the Administrative Agent shall receive at the time of each such assignment, from the assigning or assignee Lender, the payment of a non-refundable assignment fee of $2,000 and, PROVIDED FURTHER, that such transfer or assignment will not be effective until notice thereof is given to the Borrower and such transfer or assignment is recorded by the Administrative Agent on the Lender Register (as hereinafter defined in section 12.16) maintained by it. To the extent of any assignment pursuant to this section 12.4(b) the assigning Lender shall be relieved of its obligations hereunder with respect to its assigned Commitments. At the time of each assignment pursuant to this section 12.4(b) to a person which is not already a Lender hereunder and which is not a United States person (as such term is defined in section 7701(a)(30) of the Code) for Federal income tax purposes, the respective assignee Lender shall provide to the Borrower and the Administrative Agent the appropriate Internal Revenue Service Forms (and, if applicable a section 4.04(b)(ii) Certificate) described in section 4.4(b). To the extent that an assignment of all or any portion of a Lender's Commitment and related outstanding Obligations pursuant to this section 12.4(b) would, at the time of such assignment, result in increased costs under section 1.10 from those (if any) being charged by the respective assigning bank prior to such assignment, then the Borrower shall not be obligated to pay such increased costs (although the Borrower shall be obligated to any other increased costs of the type described above resulting from changes after the date of the respective assignment). Nothing in this section 12.4(b) shall prevent or prohibit any Lender from pledging its Notes or Loans to a Federal Reserve Bank in support of borrowings made by such Lender from such Federal Reserve Bank. (c) Notwithstanding any other provisions of this section 12.4, no transfer or assignment of the interests or obligations of any Lender hereunder or any grant of participation therein shall be permitted if such transfer, assignment or grant would require the Borrower to file a registration statement with the SEC or to qualify the Loans under the "Blue Sky" laws of any State. (d) Each Lender initially party to this Agreement hereby represents, and each person that became a Lender pursuant to an assignment permitted by this section 12.4 will, upon its becoming party to this Agreement, represent that it is a commercial lender, other financial institution or other "accredited" investor (as defined in SEC Regulation D) which makes or acquires loans in the ordinary course of its business and that it will make or acquire Loans for its own account in the ordinary course of such business, PROVIDED that subject to the preceding sections 12.4(a) and (b), the disposition of any promissory notes or other evidences of or interests in Indebtedness held by such Lender shall at all times be within its exclusive control. 12.5. NO WAIVER: REMEDIES CUMULATIVE. No failure or delay on the part of the Administrative Agent or any Lender in exercising any right, power or privilege hereunder or under any other Loan Document and no course of dealing between the Borrower and the Administrative Agent or any Lender shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Loan Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies which the Administrative Agent or any Lender would otherwise have. No notice to or 65 71 demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Administrative Agent or the Lenders to any other or further action in any circumstances without notice or demand. 12.6. PAYMENTS PRO RATA. (a) The Administrative Agent agrees that promptly after its receipt of each payment from or on behalf of the Borrower in respect of any Obligations, it shall distribute such payment to the Lenders (other than any Lender that has expressly waived its right to receive its PRO RATA share thereof) PRO RATA based upon their respective shares, if any, of the Obligations with respect to which such payment was received. (b) Each of the Lenders agrees that, if it should receive any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of setoff or banker's lien, by counterclaim or cross action, by the enforcement of any right under the Loan Documents, or otherwise) which is applicable to the payment of the principal of, or interest on, the Loans or Fees, of a sum which with respect to the related sum or sums received by other Lenders is in a greater proportion than the total of such Obligation then owed and due to such Lender bears to the total of such Obligation then owed and due to all of the Lenders immediately prior to such receipt, then such Lender receiving such excess payment shall purchase for cash without recourse or warranty from the other Lenders an interest in the Obligations to such Lenders in such amount as shall result in a proportional participation by all of the Lenders in such amount, PROVIDED that if all or any portion of such excess amount is thereafter recovered from such Lender, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. 12.7. CALCULATIONS: COMPUTATIONS. (a) The financial statements to be furnished to the Lenders pursuant hereto shall be made and prepared in accordance with GAAP consistently applied throughout the periods involved (except as set forth in the notes thereto or as otherwise disclosed in writing by the Borrower to the Lenders); PROVIDED, that except as otherwise specifically provided herein, all computations determining compliance with sections 4.2, 7.16 and 8, including definitions used therein, shall utilize accounting principles and policies in effect at the time of the preparation of, and in conformity with those used to prepare, the December 31, 1995 financial statements delivered to the Lenders pursuant to section 6.5. (b) All computations of interest on Base Rate Loans hereunder shall be made on the actual number of days elapsed over a year of 365 or 366 days, as applicable, and all computations of interest on Eurodollar Loans and Fees hereunder shall be made on the actual number of days elapsed over a year of 360 days. 12.8. GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL. (a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF OHIO, EXCEPT THAT THE PROVISIONS FOR THE CREATION, PERFECTION, AND ENFORCEMENT OF THE LIENS CREATED PURSUANT TO THE MORTGAGES SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE APPLICABLE REAL PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF OHIO SHALL GOVERN THE VALIDITY AND ENFORCEABILITY OF ALL LOAN DOCUMENTS, INCLUDING ALL MORTGAGES, AND ALL OF THE OBLIGATIONS ARISING HEREUNDER OR THEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW, THE BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY JURISDICTION OTHER THAN THE STATE OF OHIO GOVERNS THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, EXCEPT TO THE EXTENT AFORESAID WITH RESPECT TO THE LIENS CREATED BY THE MORTGAGES. Any legal action or proceeding with respect to this Agreement or any other Loan Document may be brought in the courts of the State of Ohio or of the United States for the Northern District of Ohio, and, by execution and delivery of this Agreement, the Borrower hereby irrevocably accepts for itself and in respect of its Property, generally and unconditionally, the jurisdiction of the aforesaid courts. The Borrower hereby further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the Borrower at its address for notices pursuant to section 12.3, such service to become effective 30 days after such mailing or at such 66 72 earlier time as may be provided under applicable law. Nothing herein shall affect the right of the Administrative Agent or any Lender to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Borrower in any other jurisdiction. (b) The Borrower hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement or any other Loan Document brought in the courts specifically referred to in section 12.8(a) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. (c) Each of the parties to this Agreement hereby irrevocably waives all right to a trial by jury in any action, proceeding or counterclaim arising out of or relating to this Agreement, the other Loan Documents or the transactions contemplated hereby or thereby. 12.9. COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same agreement. A set of counterparts executed by all the parties hereto shall be lodged with the Borrower and the Administrative Agent. 12.10. EFFECTIVENESS. This Agreement shall become effective on the date (the "EFFECTIVE DATE") on which the Borrower and each of the Lenders shall have signed a copy hereof (whether the same or different copies) and shall have delivered the same to the Administrative Agent at the Notice Office of the Administrative Agent or, in the case of the Lenders, shall have given to the Administrative Agent telephonic (confirmed in writing), written telex or facsimile transmission notice (actually received) at such office that the same has been signed and mailed to it. 12.11. HEADINGS DESCRIPTIVE. The headings of the several sections and other portions of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 12.12. AMENDMENT OR WAIVER. Neither this Agreement nor any terms hereof or thereof may be changed, waived, discharged or terminated UNLESS such change, waiver, discharge or termination is in writing signed by the Borrower and the Required Lenders, PROVIDED that no such change, waiver, discharge or termination shall, without the consent of each Lender (other than a Defaulting Lender) affected thereby, (i) extend the final maturity date applicable to a Loan or a Commitment (it being understood that any waiver of the making of, or application of any prepayment of or the method of application of any amortization payment or other prepayment to, the amortization of, the Loans shall not constitute an extension of such final maturity thereof), reduce the rate or extend the time of payment of interest (other than as a result of waiving the applicability of any post-default increase in interest rates) or Fees thereon, or reduce the principal amount thereof, or increase the Commitment of any Lender over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of any mandatory prepayment or a mandatory reduction in the Total Commitment shall not constitute a change in the terms of any Commitment of any Lender), (ii) release all or substantially all of the Collateral (in each case except as expressly provided in the Loan Documents), (iii) change the definition of the term "Change of Control", (iv) amend, modify or waive any provision of this section 12.12, or section 11.7, 12.1, 12.4, 12.6 or 12.7(b), (v) reduce the percentage specified in, or otherwise modify, the definition of Required Lenders, or (vi) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement. No provision of section 2 or 11 may be amended without the consent of (x) any Letter of Credit Issuer adversely affected thereby or (y) the Administrative Agent, respectively. 67 73 12.13. SURVIVAL. All indemnities set forth herein including, without limitation, in section 1.10, 1.11, 2.5, 4.4, 11.7 or 12.1 shall survive the execution and delivery of this Agreement and the making and repayment of Loans. 12.14. DOMICILE OF LOANS. Each Lender may transfer and carry its Loans at, to or for the account of any branch office, subsidiary or affiliate of such Lender, PROVIDED that the Borrower shall not be responsible for costs arising under section 1.10 or 4.4 resulting from any such transfer (other than a transfer pursuant to section 1.12) to the extent not otherwise applicable to such Lender prior to such transfer. 12.15. CONFIDENTIALITY. Subject to section 12.4, the Lenders shall hold all non-public information obtained pursuant to the requirements of this Agreement which has been identified as such by the Borrower in accordance with its customary procedure for handling confidential information of this nature and in accordance with safe and sound banking practices and in any event may make disclosure reasonably required by any BONA FIDE transferee or participant in connection with the contemplated transfer of any Loans or Commitment or participation therein (PROVIDED that each such prospective transferee and/or participant shall execute an agreement for the benefit of the Borrower with such prospective transferor Lender containing provisions substantially identical to those contained in this section 12.15), to its auditors, attorneys or as required or requested by any governmental agency or representative thereof or pursuant to legal process, PROVIDED that, unless specifically prohibited by applicable law or court order, each Lender shall notify the Borrower of any request by any governmental agency or representative thereof (other than any such request in connection with an examination of the financial condition of such Lender by such governmental agency) for disclosure of any such non-public information prior to disclosure of such information, and PROVIDED FURTHER that in no event shall any Lender be obligated or required to return any materials furnished by or on behalf of the Borrower or any other Credit Party. The Borrower hereby agrees that the failure of a Lender to comply with the provisions of this section 12.15 shall not relieve the Borrower of any of the obligations to such Lender under this Agreement and the other Loan Documents. 12.16. LENDER REGISTER. The Borrower hereby designates the Administrative Agent to serve as its agent, solely for purposes of this section 12.16, to maintain a register (the "LENDER REGISTER") on which it will record the Commitments from time to time of each of the Lenders, the Loans made by each of the Lenders and each repayment in respect of the principal amount of the Loans of each Lender. Failure to make any such recordation, or any error in such recordation, shall not affect the Borrower's obligations in respect of such Loans. With respect to any Lender, the transfer of the Commitments of such Lender and the rights to the principal of, and interest on, any Loan made pursuant to such Commitments shall not be effective until such transfer is recorded on the Lender Register maintained by the Administrative Agent with respect to ownership of such Commitments and Loans and prior to such recordation all amounts owing to the transferor with respect to such Commitments and Loans shall remain owing to the transferor. The registration of assignment or transfer of all or part of any Commitments and Loans shall be recorded by the Administrative Agent on the Lender Register only upon the acceptance by the Administrative Agent of a properly executed and delivered Assignment Agreement pursuant to section 12.4(b). The Borrower agrees to indemnify the Administrative Agent from and against any and all losses, claims, damages and liabilities of whatsoever nature which may be imposed on, asserted against or incurred by the Administrative Agent in performing its duties under this section 12.16. 12.17. LIMITATIONS ON LIABILITY OF THE LETTER OF CREDIT ISSUERS. The Borrower assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letters of Credit. Neither any Letter of Credit Issuer nor any of its officers or directors shall be liable or responsible for: (a) the use which may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; (c) payment by a Letter of Credit Issuer against presentation of documents that do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to such Letter of Credit; or (d) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit, EXCEPT that such Borrower shall have a claim against a Letter of Credit Issuer, and a Letter of Credit Issuer shall be liable to the Borrower, to the extent of any direct, but not consequential, damages suffered by the Borrower which the Borrower proves were caused by (i) such Letter of Credit Issuer's willful misconduct or gross negligence 68 74 or (ii) such Letter of Credit Issuer's willful failure to make lawful payment under any Letter of Credit after the presentation to it of documentation strictly complying with the terms and conditions of such Letter of Credit. In furtherance and not in limitation of the foregoing, a Letter of Credit Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation. 12.18. GENERAL LIMITATION OF LIABILITY. No claim may be made by the Borrower, any Lender, the Administrative Agent, any Letter of Credit Issuer or any other person against the Administrative Agent, any Letter of Credit Issuer, or any other Lender or the Affiliates, directors, officers, employees, attorneys or agents of any of them for any special, consequential or punitive damages in respect of any claim for breach of contract or any other theory of liability arising out of or related to the transactions contemplated by this Agreement or any of the other Loan Documents, or any act, omission or event occurring in connection therewith; and each of the Borrower, each Lender, the Administrative Agent and each Letter of Credit Issuer hereby waives, releases and agrees not to sue or counterclaim upon any such claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. 12.19. NO DUTY. All attorneys, accountants, appraisers, consultants and other professional persons (including the firms or other entities on behalf of which any such person may act) retained by the Administrative Agent or any Lender with respect to the transactions contemplated by the Loan Documents shall have the right to act exclusively in the interest of the Administrative Agent or such Lender, as the case may be, and shall have no duty of disclosure, duty of loyalty, duty of care, or other duty or obligation of any type or nature whatsoever to the Borrower, to any of the other Credit Parties, to any of their Subsidiaries, or to any other person, with respect to any matters within the scope of such representation or related to their activities in connection with such representation. 12.20. LENDERS AND AGENT NOT FIDUCIARY TO CREDIT PARTIES, ETC. The relationship among the Credit Parties and their Subsidiaries, on the one hand, and the Administrative Agent, each Letter of Credit Issuer and the Lenders, on the other hand, is solely that of debtor and creditor, and the Administrative Agent, each Letter of Credit Issuer and the Lenders have no fiduciary or other special relationship with the Credit Parties and their Subsidiaries, and no term or provision of any Loan Document, no course of dealing, no written or oral communication, or other action, shall be construed so as to deem such relationship to be other than that of debtor and creditor. 12.21. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties herein shall survive the making of Loans and the issuance of Letters of Credit hereunder, the execution and delivery of this Agreement and the other documents the forms of which are attached as Exhibits hereto, the issue and delivery of the Notes, any disposition thereof by any holder thereof, and any investigation made by the Administrative Agent or any Lender or any other holder of any of the Notes or on its behalf. All statements contained in any certificate or other document delivered to the Administrative Agent or any Lender or any holder of any Notes by or on behalf of the Borrower or any other Credit Party pursuant hereto or otherwise specifically for use in connection with the transactions contemplated hereby shall constitute representations and warranties by the Borrower hereunder, made as of the respective dates specified therein or, if no date is specified, as of the respective dates furnished to the Administrative Agent or any Lender. 12.22. LIMITATION ON ENFORCEMENT OF SECURITY DOCUMENTS. The Lenders agree that the Security Documents may be enforced by the action of the Administrative Agent, in each case acting upon the instructions of the Required Lenders and that no Lender shall have any right individually to seek to enforce or to enforce any Security Document or to realize upon the security to be granted by any Security Document, it being understood and agreed that such rights and remedies may be exercised by the Administrative Agent for the benefit of the Lenders upon the terms of this Agreement and any Security Document. 12.23. LIABILITY OF BORROWER'S TRUSTEES, ETC. Notwithstanding any provision of this Agreement to the contrary, this Agreement has been executed and delivered by a duly authorized officer of the Borrower, for and on behalf of the Borrower's trustees. The Administrative Agent and each Lender each acknowledges that neither the trustees of the Borrower, nor any additional or successor trustees of the Borrower, nor any beneficiary, officer, employee or agent of the Borrower, shall have any personal, individual liability hereunder or under any of the Loan 69 75 Documents. The Administrative Agent and each Lender agrees to look solely to the Property and assets of the Borrower (and, where so provided herein or in any of the Loan Documents, to the Property and assets of the Management Company) for the satisfaction of all claims of any nature arising under or in connection with this Agreement. [The balance of this page is intentionally blank.] 70 76 IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Agreement to be duly executed and delivered as of the date first above written. FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS BY: /S/ THOMAS KMIECIK --------------------------------------- SENIOR VICE PRESIDENT & TREASURER FIRST UNION MANAGEMENT, INC. BY: /S/ LANA TIESZEN --------------------------------------- VICE PRESIDENT NATIONAL CITY BANK, INDIVIDUALLY AND AS ADMINISTRATIVE AGENT BY: /S/ ANTHONY DIMARE --------------------------------------- VICE PRESIDENT KEYBANK NATIONAL ASSOCIATION BY: /S/ MARK MAZZOLINI --------------------------------------- VICE PRESIDENT THE HUNTINGTON NATIONAL BANK BY: /S/ GERALD BUCK --------------------------------------- VICE PRESIDENT FIRST MERIT BANK BY: /S/ JOHN NEUMANN --------------------------------------- VICE PRESIDENT 71 EX-10.B 3 EXHIBIT 10(B) 1 Exhibit 10(b) AMENDED AND RESTATED DECLARATION OF TRUST Amending and Restating Amended and Restated Declaration of Trust DATED AS OF JUNE 5, 1980 THIS AMENDED AND RESTATED DECLARATION OF TRUST made as of this first day of October, 1996, at Cleveland, Ohio, by Adolph Posnick, Trustee, and hereafter by such persons as may from time to time be appointed additional Trustees and successors to such Trustees; the person or persons from time to time constituting Trustees hereunder being referred to as the "Trustees" where the context so permits, W I T N E S S E T H: WHEREAS, the Trustees desire to confirm the creation of a trust for the purposes hereinafter mentioned and to clarify certain provisions relating to beneficial interests hereunder, NOW, THEREFORE, the Trustees hereby confirm the declaration of themselves to be Trustees hereunder of One Hundred (100) shares of common stock of First Union Management, Inc., a Delaware corporation, and of all property which they may hereafter acquire as such Trustees, together with the proceeds thereof and the dividends and other income therefrom, IN TRUST, on the terms and conditions set forth in this Declaration. ARTICLE I DISTRIBUTION OF INCOME The net income of the trust estate shall be paid at such time or times as the Trustees in their discretion shall determine to the holders of record of certificates representing shares of beneficial interest in First Union Real Estate Equity and Mortgage Investments, a business trust organized as of October 1, 1961 (hereinafter referred to as "First Union"), as of a date designated by the Trustees (hereinafter referred to as the "Record Date") not earlier than sixty (60) days preceding the date fixed by the Trustees for payment, and each such holder shall be entitled to receive the same proportion of such net income as the number of shares of First Union held by him bears to the total number of shares of First Union outstanding on the Record Date whose holders are entitled to participate in the distribution; provided, however, that such payment to each holder is contingent upon such holder demonstrating by certification to the Trustees, or otherwise, to the Trustees' satisfaction, that the total shares of First Union owned by him together with shares 9 2 of First Union, ownership of which is attributed to him pursuant to Section 318(a) of the Internal Revenue Code, do not exceed 5% of the then outstanding shares of First Union. No person shall have any beneficial interest in the Trust so long as such person owns, directly or indirectly by attribution pursuant to the Internal Revenue Code or otherwise, more than 5% of the then outstanding shares of First Union; however, upon such person's transfer of any shares of First Union, any transferee who becomes a holder of record of such shares shall become a beneficiary of the Trust to the extent provided herein. ARTICLE II DURATION OF THE TRUST - TERMINATION Section 2.01. DURATION OF THE TRUST. This Trust shall continue without limitation of time except that, in the event that any applicable statute or rule of law shall require that this trust not continue perpetually, then the trust shall continue for the longest period of time permitted by law, and, to the extent that measuring lives in being are required to determine the term of the trust, such measuring lives in being shall be the persons designated in Section 12.1 of the Declaration of Trust of First Union. Section 2.02. EFFECT OF TERMINATION. Upon termination of this trust, the Trustees shall make provision for the payment of all outstanding obligations, taxes and other liabilities, accrued or contingent of the trust estate, shall sell the remaining assets of the trust estate and shall, at such time or times as the Trustees in their discretion shall determine, distribute the proceeds derived from the sale of such remaining assets to the holders of record of certificates representing shares of beneficial interest in First Union as of a date fixed by the Trustee (the Record Date) not earlier than 60 days preceding the date fixed by the Trustees for the distribution, and each such holder shall be entitled to receive the same proportion of such proceeds as the number of shares held by him on the Record Date bears to the total number of shares of First Union outstanding on the Record Date whose holders are entitled to participate in the distribution; provided, however, that such payment to each holder is contingent upon such holder demonstrating by certification to the Trustees, or otherwise, to the Trustees' satisfaction, that the total shares of First Union owned by him together with shares of First Union, ownership of which is attributed to him pursuant to Section 318(a) of the Internal Revenue Code, do not exceed 5% of the then outstanding shares of First Union. For purposes of such distribution on termination and for all other purposes, no person shall have any beneficial interest in the Trust so long as such person owns, directly or indirectly by attribution pursuant -2- 3 to the Internal Revenue Code or otherwise, more than 5% of the then outstanding shares of First Union; however, upon such person's transfer of any shares of First Union, any transferee who becomes a holder of record of such shares shall become a beneficiary of the Trust to the extent provided herein. ARTICLE III POWERS AND DUTIES OF TRUSTEES - COMPENSATION Section 3.01. POWERS AND DUTIES. The Trustees shall have the following powers, in addition to any powers conferred upon the Trustees by law or other Articles of this Declaration of Trust, all of which powers shall be exercised in a fiduciary capacity: (a) To retain the assets initially comprising the trust estate and any share dividends and distributions (subject to Section 2.01 above) in respect of such assets, regardless of the proportionate value any investment or any class or type of investment may bear to the total value of the trust estate, and without being limited to the classes of investment which a trustee is authorized by law or any rule of court to make; (b) To receive and retain additions to the trust estate from any source whatsoever, such additions to be held hereunder as though the same had initially constituted a part of the trust estate; (c) To exercise voting rights and issue proxies upon or in connection with any stock or other securities in the trust estate as the Trustee shall determine; (d) To participate in reorganizations, recapitalizations, reincorporations, consolidations, mergers, exchanges, liquidations and creditors' and bondholders' agreements; (e) To compromise, compound, release and discharge all debts and claims of every kind, nature or description owing to or by the trust estate; (f) To employ accountants, agents and attorneys; and (g) To dispose of the assets of the trust estate upon the termination of this trust and to distribute -3- 4 the proceeds derived therefrom in accordance with the provisions of Article II hereof. The approval of a majority of the Trustees shall be necessary for the exercise of any power granted hereunder. The powers of the Trustees hereunder may be exercised without order of any court, but the Trustees are authorized, in the event they deem it advisable, to apply to any court of competent jurisdiction for any interpretation of any of the provisions of this instrument or for instructions with respect to their administration of the trust created hereunder. Notwithstanding anything to the contrary herein contained, the Trustees by virtue of their status as Trustees hereunder shall have no power to issue certificates representing shares of beneficial interest in the trust estate or to direct the affairs of First Union Management, Inc. Section 3.02. COMPENSATION. Each person serving as a Trustee hereunder shall receive such compensation as shall be reasonable and adequate for the services rendered as determined by Arthur Andersen & Co. or any other national accounting firm chosen by the Directors of First Union Management, Inc. All compensation for ordinary services provided for hereunder shall be charged against and paid from income at such times as the Trustees may determine. Section 3.03. TRUST RECORDS. The Trustees shall at all times keep, or cause to be kept, accurate books with respect to the trust, and shall render at least annually to each beneficiary who received income during the year of the account a statement of account which shall include all the information necessary to enable such beneficiary to prepare federal and state tax returns. Section 3.04. TRUSTEE LIABILITY. No Trustee shall be personally liable for any act or omission of any other Trustee (including without limitation the failure to compel in any way any former or acting or future Trustee to redress any breach of Trust), and no Trustee shall be personally liable to any beneficiary, except for such of his own acts as constitute bad faith, wilful misfeasance, gross negligence, or wilful disregard of his duties. Except as aforesaid, each Trustee shall be entitled to reimbursement out of the trust estate for his reasonable expenses and outlays and to be exonerated and indemnified from time to time from or against any and all loss, expense and liability arising out of or in connection with the management of the trust estate or which he may suffer because he is or becomes or consented to become a Trustee. ARTICLE IV -4- 5 SUCCESSOR AND ADDITIONAL TRUSTEES - RESIGNATION - QUALIFICATION Section 4.01. QUALIFICATION OF TRUSTEES. No person may be designated as Trustee, and no person may continue to serve as Trustee, if such designation or service would be contrary to the terms of the Internal Revenue Service Ruling, dated February 8, 1971, a copy of which is attached hereto as Exhibit A, or if he, or any affiliate of his, is or becomes a trustee, officer, employee, or the beneficial owner of shares of First Union. Section 4.02. RESIGNATION. Any Trustee may resign by written notice to the Directors of First Union Management, Inc. Section 4.03. ADDITIONAL AND SUCCESSOR TRUSTEES. The Trustees may at any time and from time to time designate additional Trustees to serve hereunder. In the event of the death, resignation, disqualification, or incapacity of a Trustee, a successor Trustee shall be designated by the remaining Trustees and, in the event there are no remaining Trustees, such successor Trustee shall be as designated by the last remaining Trustee in writing filed with the Secretary of First Union Management, Inc. at or before the termination of his trusteeship. In the event the trusteeship is vacant and no successor Trustee shall have been designated pursuant to the foregoing, the trusteeship shall be filled by the Probate Court of Cuyahoga County, Ohio. Any additional or successor Trustee designated as hereinbefore provided shall have and enjoy all of the powers, duties, discretions and immunities herein conferred upon the Trustees hereunder and shall not be required to furnish bond. ARTICLE V AMENDMENT The Trustees may amend this Declaration of Trust with the approval of a majority of the then members of the Board of Directors of First Union Management, Inc. in writing; provided, however, that the Trustees shall not exercise such power of amendment without prior written advice from counsel for First Union Management, Inc. that in such counsel's opinion the proposed exercise would not be contrary to the terms of the Internal Revenue Service Ruling attached hereto as Exhibit A. -5- 6 ARTICLE VI RECORD DATE In determining the holders of shares of First Union as of any Record Date or as of the Termination Date and their addresses, the Trustees shall rely conclusively upon the records of First Union's Cleveland Transfer Agent. ARTICLE VII GOVERNING LAW The trust created hereby is an Ohio trust and is to be governed, construed and administered according to the laws of Ohio and shall continue to be so governed, construed and administered, even though the situs of the trust is elsewhere in the United States or abroad. ARTICLE VIII GENERAL Anything herein to the contrary notwithstanding, the shareholders of First Union shall have no rights to become the owners of the shares of First Union Management, Inc., nor shall they have any right to control the vote of such shares by the Trustees and their sole interest will consist of the rights to income from, and proceeds of liquidation of, the trust estate provided in Article I and Section 2.02, which rights are contingent on satisfying the provisos in said Article I and said Section 2.02 above. The Trustees will act independently in exercising the rights as shareholders of First Union Management, Inc., and in particular will exercise independent control of the selection of the directors, officers and policies of First Union Management, Inc. In exercising their rights and powers as shareholders of First Union Management, Inc., the Trustees shall act only in a manner consistent with the provisions of the Internal Revenue Service Ruling attached hereto as Exhibit A. Anything herein to the contrary notwithstanding, for all purposes of this Declaration of Trust the term "shares of beneficial interest" or "shares" in or with reference to First Union and all of the references to "shares of First Union" shall refer only to shares of beneficial interest, $1 par value, of -6- 7 First Union and to no other kind, type or class of shares or securities of First Union (whether common, preferred or otherwise). IN WITNESS WHEREOF, Adolph Posnick has hereunto set his hand as of the day and year first above written. Executed in the presence of: /S/ ADOLPH POSNICK - ----------------------------- --------------------------- Adolph Posnick - ----------------------------- Witnesses -7- 8 APPROVAL The undersigned does hereby certify that he is a Director of First Union Management, Inc. and does hereby grant his approval of amendments to the Amended and Restated Declaration of Trust dated June 5, 1980 by adoption by the sole trustee thereunder of an Amended and Restated Declaration of Trust substantially in the form attached hereto as Exhibit A. This approval shall be effective upon receipt by such sole trustee of approvals from a majority of the Directors of First Union Management, Inc. duly elected, qualified and serving at the time of such adoption. Executed in Cleveland, Ohio, this 16th of July, 1996. /S/ HENRY G. PIPER --------------------------- Henry G. Piper 9 APPROVAL The undersigned does hereby certify that he is a Director of First Union Management, Inc. and does hereby grant his approval of amendments to the Amended and Restated Declaration of Trust dated June 5, 1980 by adoption by the sole trustee thereunder of an Amended and Restated Declaration of Trust substantially in the form attached hereto as Exhibit A. This approval shall be effective upon receipt by such sole trustee of approvals from a majority of the Directors of First Union Management, Inc. duly elected, qualified and serving at the time of such adoption. Executed in Cleveland, Ohio, this 16th of July, 1996. /S/ ADOLPH POSNICK ------------------------------- Adolph Posnick 10 APPROVAL The undersigned does hereby certify that he is a Director of First Union Management, Inc. and does hereby grant his approval of amendments to the Amended and Restated Declaration of Trust dated June 5, 1980 by adoption by the sole trustee thereunder of an Amended and Restated Declaration of Trust substantially in the form attached hereto as Exhibit A. This approval shall be effective upon receipt by such sole trustee of approvals from a majority of the Directors of First Union Management, Inc. duly elected, qualified and serving at the time of such adoption. Executed in Cleveland, Ohio, this 16th of July, 1996. /S/ RENOLD D. THOMPSON ----------------------------- Renold D. Thompson EX-11 4 EXHIBIT 11 1 EXHIBIT 11 FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS ------------------------------------------------------- Statements Re: Computation of Per Share Earnings ------------------------------------------------ (In thousands, except per share data) -------------------------------------
Three Months Ended Nine Months Ended September 30 September 30 ------------ ------------ 1996 1995 1996 1995 ---- ---- ---- ---- Shares Outstanding For computation of primary net income per share - Weighted average 17,224 18,163 17,237 18,160 ====== ====== ====== ====== For computation of fully diluted net income per share - Weighted average, without regard to exercise of shares under share option, restricted stock or employee incentive plans 17,168 18,110 17,160 18,100 Weighted average of outstanding shares issued under restricted stock plan 56 53 69 52 Weighted average of shares issued under employee incentive plan -- -- 8 8 ------ ------ ------ ------ Adjusted shares outstanding 17,224 18,163 17,237 18,160 ====== ====== ====== ====== Net income(1) Net income applicable to shares of beneficial interest (used for computing primary and fully diluted net income per share) $ 1,044 $ 325 $ 1,140 $ 27,749 ======== ======== ======== ======== Net income per share of beneficial interest -- primary and fully diluted: Income before cumulative effect of accounting change .06 .02 .07 1.76 Cumulative effect of change in accounting for internal leasing costs -- -- -- (.24) -------- -------- -------- -------- Net income $ .06 $ .02 $ .07 $ 1.52 ======== ======== ======== ======== (1) Net income for 1995 has been restated to reflect the change in accounting method for internal leasing costs which was adopted retroactively to the first quarter of 1995.
10 EX-12 5 EXHIBIT 12 1 EXHIBIT 12 FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS ------------------------------------------------------- Statements of Ratios of Combined Income from Operations ------------------------------------------------------- and Combined Net Income to Fixed Charges ---------------------------------------- (In thousands, except ratios)
Nine Months Ended September 30, Years Ended December 31, ------------- ------------------------ 1996 1995 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- ---- ---- Income before capital gain or loss, extraordinary loss and cumulative effect of accounting change $ 1,140 $ 2,204 $ 3,256 $ 6,485 $10,276 $12,657 $13,330 Add fixed charges, exclusive of construction interest capitalized 17,997 17,064 22,987 21,865 19,103 19,469 21,513 ------ ------ ------ ------ ------ ------ ------ Income from operations, as defined 19,137 19,268 26,243 28,350 29,379 32,126 34,843 Capital gains --- 29,870 29,870 --- 4,948 5,775 4,906 Reduction for unrealized loss on carrying value of assets identified for disposition --- --- 14,000 --- --- --- --- ------- -------- ------- ------- ------- ------- ------- Net income, as defined $19,137 $ 49,138 $42,113 $28,350 $34,327 $37,901 $39,749 ======= ======== ======= ======= ======= ======= ======= Fixed charges: Interest - Mortgage loans $ 6,368 $ 5,836 $ 7,670 $ 7,335 $ 5,777 $ 6,182 $ 6,493 - Senior notes 6,871 6,979 9,305 9,305 5,779 4,199 4,199 - 10.25% debentures --- --- --- --- 3,214 3,858 3,858 - Bank loans and other 4,274 3,810 5,422 4,640 3,747 4,694 6,221 - Capitalized interest 107 51 169 --- --- --- --- Amortization of debt issue costs 148 137 184 168 162 122 95 Rents (1) 336 302 406 417 424 414 647 -------- -------- ------- ------- ------- ------- ------- Fixed charges, as defined $ 18,104 $ 17,115 $23,156 $21,865 $19,103 $19,469 $21,513 ======== ======== ======= ======= ======= ======= ======= Ratio of income from operations, as defined, to fixed charges 1.06 1.13 1.13 1.30 1.54 1.65 1.62 ======== ======== ======= ======= ======= ======= ======= Ratio of net income, as defined, to fixed charges 1.06 2.87 1.82 1.30 1.80 1.95 1.85 ======= ======== ======= ====== ======= ======= ======= - -------------------------------- (1) The interest portion of rentals is assumed to be one-third of all ground rental and net lease payments.
11 EX-20 6 EXHIBIT 20 1
FIRST UNION REAL ESTATE EQUITY and MORTGAGE INVESTMENTS Exhibit 20 - ------------------------------------------------------- ---------------- Combined Balance Sheets Unaudited (In thousands, except shares) September 30, December 31, 1996 1995 ------------- ---------- ASSETS Investments in real estate Land $ 51,772 $ 54,403 Buildings and improvements 398,616 395,157 --------- --------- 450,388 449,560 Less - Accumulated depreciation (109,673) (107,701) --------- --------- Total investments in real estate 340,715 341,859 Investment in joint venture 30,000 Mortgage loans receivable 42,206 42,042 Other assets Cash and cash equivalents 1,852 3,402 Accounts receivable and prepayments 5,917 4,536 Deferred charges and other, net 5,251 4,873 Unamortized debt issue costs 4,326 4,287 --------- --------- $ 430,267 $ 400,999 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Mortgage loans $ 129,985 $ 83,854 Senior notes 100,000 105,000 Bank loans 63,940 69,600 Accounts payable and accrued liabilities 19,828 21,779 Deferred obligations 10,796 10,670 Deferred capital gains and other deferred income 7,737 7,741 Shareholders' equity, including shares of beneficial interest, $1 par, unlimited authorization, outstanding 1996--17,459,144; 1995--17,485,057 97,981 102,355 --------- --------- $ 430,267 $ 400,999 ========= =========
2
FIRST UNION REAL ESTATE EQUITY and MORTGAGE INVESTMENTS Exhibit 20 - ------------------------------------------------------- ------------ Combined Statements of Income Unaudited (In thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, ------------------------ ----------------------- 1996 1995 1996 1995 --------- --------- --------- -------- Revenues Rents $ 18,606 $ 18,745 $ 55,386 $ 55,068 Interest - Mortgage loans 1,129 1,126 3,600 3,319 - Short-term investments 9 407 -------- -------- -------- -------- 19,735 19,871 58,995 58,794 -------- -------- -------- -------- Expenses Property operating 6,341 6,845 19,517 19,402 Real estate taxes 2,132 2,216 6,198 6,344 Depreciation and amortization 3,092 3,022 9,858 8,688 Interest - Mortgage loans 2,303 1,922 6,368 5,836 - Senior notes 2,219 2,326 6,871 6,979 - Bank loans and other 1,358 1,408 4,274 3,810 General and administrative 1,246 1,807 4,769 5,531 -------- -------- -------- -------- 18,691 19,546 57,855 56,590 -------- -------- -------- -------- Income before capital gains and cumulative effect of accounting change 1,044 325 1,140 2,204 Capital gains 29,870 -------- -------- -------- -------- Income before cumulative effect of accounting change for internal leasing costs 1,044 325 1,140 32,074 Cumulative effect of change in accounting for internal leasing costs (4,325) -------- -------- -------- -------- Net income $ 1,044 $ 325 $ 1,140 $ 27,749 ======== ======== ======== ======== Per share Income before cumulative effect of accounting change $ .06 $ .02 $ .07 $ 1.76 Cumulative effect of change in accounting for internal leasing costs (.24) -------- -------- -------- -------- Net income $ .06 $ .02 $ .07 $ 1.52 ======== ======== ======== ======== Adjusted shares of beneficial interest 17,224 18,163 17,237 18,160 ====== ====== ====== ======
3
FIRST UNION REAL ESTATE EQUITY and MORTGAGE INVESTMENTS Exhibit 20 - ------------------------------------------------------- ---------- Combined Statements of Changes in Cash Unaudited (In thousands) Three Months Nine Months Ended September 30, Ended September 30, ------------------------- ----------------------- 1996 1995 1996 1995 ---------- ---------- --------- --------- Cash provided by (used for) operations Net Income $ 1,044 $ 325 $ 1,140 $ 27,749 Adjustments to reconcile net income to net cash provided by operations -- Depreciation and amortization 3,092 3,022 9,858 8,688 Cumulative effect of change in accounting for internal leasing costs 4,325 Capital gains (29,870) Increase in deferred charges, net (280) (386) (854) (1,595) Increase in deferred interest on mortgage investments, net (102) (103) (295) (289) Increase in deferred obligations 44 37 126 108 Net changes in other assets and liabilities 7,772 1,167 3,833 2,522 -------- -------- -------- -------- Net cash provided by operations 11,570 4,062 13,808 11,638 -------- -------- -------- -------- Cash provided by (used for) investing Repayment of mortgage investment 7,000 Principal received from mortgage investments 45 41 131 119 Proceeds from sale of properties 1,825 27,500 Investment in joint venture (30,000) (30,000) Investment in properties (664) (33,508) Investment in capital and tenant improvements (3,132) (8,184) (16,578) (15,615) -------- -------- -------- -------- Net cash used for investing (33,087) (8,807) (37,622) (21,504) -------- -------- -------- -------- Cash provided by (used for) financing Increase in mortgage loans 12,000 48,500 Increase (decrease) in short-term loans 12,270 7,480 (5,660) 16,050 Repayment of mortgage loans (847) (919) (2,369) (2,764) Sale of First Union shares 81 75 Dividends paid (1,921) (1,843) (5,869) (5,497) Debt issue costs paid (536) (128) (1,313) (166) Purchase of First Union shares (7,125) Sale of interest rate protection agreement 1,025 Repayment of Medium Term Notes (5,000) (5,000) Other (6) (6) (10) -------- -------- -------- -------- Net cash provided by financing 15,966 4,584 22,264 7,688 -------- -------- -------- -------- Decrease in cash and cash equivalents (5,551) (161) (1,550) (2,178) Cash and cash equivalents at beginning of period 7,403 958 3,402 2,975 -------- -------- -------- -------- Cash and cash equivalents at end of period $ 1,852 $ 797 $ 1,852 $ 797 ======== ======== ======== ========
Notes to Combined Financial Statements 1. Income per share of beneficial interest has been computed on weighted average shares and share equivalents outstanding for the applicable periods. 2. In 1995, the Trust changed its accounting method to directly expense internal leasing costs and recorded a $4.3 million charge for the cumulative effect of the accounting change retroactive to January 1, 1995. Previously, the Trust deferred and amortized these costs over the lives of consummated lease transactions. Depreciation and amortization, general and administrative expenses, income before capital gains and cumulative effect of accounting change, net income and earnings per share on the 1995 Combined Statements of Income and investment in properties on the 1995 Combined Statements of Changes in Cash have been restated to reflect the change in accounting. 3. In February 1996, the Trust sold two office buildings in Cleveland, Ohio for $1.8 million in cash and a $7 million mortgage note resulting in a loss of $5.6 million. This loss had been previously recognized during the fourth quarter of 1995. In January 1995, the Trust sold its 50% interests in two malls in Wilkes-Barre, Pennsylvania and Fairmount, West Virginia for a $2 million payment which was received in 1994, a tax-free exchange of these properties for $27.5 million of cash that was deposited into a tax intermediary escrow account, a $6 million mortgage note receivable and the assumption by the purchaser of $4.7 million in mortgage debt, resulting in a capital gain for financial reporting purposes of approximately $29.9 million. 4. In late September 1996, the Trust invested $30 million in a joint venture which acquired nine regional shopping malls located in Louisiana, Arkansas, Texas, Oklahoma and New Mexico. The purchase price paid by the joint venture was $311.7 million which included the assumption of $50 million in existing mortgage debt. The Trust owns 26% of the joint venture and is recording this investment using the equity method of accounting. The joint venture had no effect on net income during the third quarter of 1996 since the transaction occurred at the end of the quarter. EX-27 7 EXHIBIT 27 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 0000037008 FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS 1 DOLLARS 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 1 1,852,000 0 5,917,000 0 0 7,769,000 450,388,000 (109,673,000) 430,267,000 19,828,000 293,925,000 97,981,000 0 0 0 430,267,000 58,995,000 0 25,715,000 14,627,000 0 17,513,000 0 0 1,140,000 0 0 0 1,140,000 .07 .07
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