-----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, ABha0NjHUBOjXAFAtXmsrTUBPFpprOnTym+NI7EBHtoDkhPvtn7WtjR7C7nykjoK WUyke2lPT6DELfriH3cwWw== 0000916641-97-001087.txt : 19971117 0000916641-97-001087.hdr.sgml : 19971117 ACCESSION NUMBER: 0000916641-97-001087 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED DOMINION REALTY TRUST INC CENTRAL INDEX KEY: 0000074208 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 540857512 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10524 FILM NUMBER: 97720145 BUSINESS ADDRESS: STREET 1: 10 S 6TH ST STE 203 CITY: RICHMOND STATE: VA ZIP: 23219-3802 BUSINESS PHONE: 8047802691 MAIL ADDRESS: STREET 1: 10 SOUTH SIXTH STREET STREET 2: SUITE 203 CITY: RICHMOND STATE: VA ZIP: 23219-3802 FORMER COMPANY: FORMER CONFORMED NAME: OLD DOMINION REAL ESTATE INVESTMENT TRUST DATE OF NAME CHANGE: 19850110 FORMER COMPANY: FORMER CONFORMED NAME: OLD DOMINION REIT ONE DATE OF NAME CHANGE: 19770921 FORMER COMPANY: FORMER CONFORMED NAME: OLD DOMINION REAL ESTATE INVESTMENT TRUS DATE OF NAME CHANGE: 19741216 10-Q 1 UNITED DOMINION REALTY TRUST, INC. 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to _________ Commission file number 1-10524 UNITED DOMINION REALTY TRUST, INC. (Exact name of registrant as specified in its charter) Virginia 54-0857512 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 10 South Sixth Street, Richmond, Virginia 23219-3802 (Address of principal executive offices - zip code) (804) 780-2691 (Registrant's telephone number, including area code) Not Applicable (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, and (2) has been subject to filing requirements for at least the past 90 days. Yes X No ____ APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 88,161,626 shares of common stock outstanding as of November 5, 1997 UNITED DOMINION, REALTY TRUST, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except for share data) (Unaudited)
September 30, December 31, 1997 1996 ------------------- ----------------- Assets Real estate owned: Real estate held for investment (Note 3) $ 2,217,063 $ 2,007,612 Less: accumulated depreciation 200,538 173,291 -------------- ------------ 2,016,525 1,834,321 Real estate under development 33,628 37,855 Real estate held for disposition 131,576 39,556 Cash and cash equivalents 5,383 13,452 Other assets 65,639 41,720 -------------- ------------ Total assets $ 2,252,751 $ 1,966,904 ============== ============ Liabilities and shareholders' equity Notes payable-secured (Note 4) $ 412,624 $ 376,560 Notes payable-unsecured (Note 5) 687,521 668,275 Distributions payable to common shareholders 22,261 19,699 Accounts payable, accrued expenses and other liabilities 62,361 49,962 -------------- ------------ Total liabilities 1,184,767 1,114,496 Minority interest of unitholders in operating partnership 10,482 2,029 Shareholders' equity: Preferred stock, no par value; $25 liquidation preference, 25,000,000 shares authorized; 4,200,000 shares 9.25% Series A Cumulative Redeemable 105,000 105,000 6,000,000 shares 8.60% Series B Cumulative Redeemable 150,000 -- Common stock, $1 par value; 150,000,000 shares authorized 88,161,626 shares issued and outstanding (81,982,551 in 1996) 88,162 81,983 Additional paid-in capital 893,701 814,795 Notes receivable from officer-shareholders (9,168) (5,926) Distributions in excess of net income (170,193) (147,529) Unrealized gain on securities available-for-sale -- 2,056 -------------- ------------ Total shareholders' equity 1,057,502 850,379 ============== ============ Total liabilities and shareholders' equity $ 2,252,751 $ 1,966,904 ============== ============
2 See accompanying notes. UNITED DOMINION REALTY TRUST, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited)
Three Months Ended September 30, Nine Months Ended September 30, -------------------------------- ----------------------------------- 1997 1996 1997 1996 ------- -------- ------- ----- Revenues Rental income $ 98,816 $ 63,083 $ 284,182 $ 175,119 Interest and other non-property income 479 402 867 1,197 --------- --------- --------- ----------- 99,295 63,485 285,049 176,316 Expenses Rental expenses: Utilities 6,166 4,425 18,290 12,810 Repairs and maintenance 14,528 10,711 40,707 29,847 Real estate taxes 8,107 4,509 23,014 12,698 Property management 3,080 1,444 9,154 4,192 Other rental expenses 10,762 6,400 30,051 16,852 Real estate depreciation 19,740 12,346 55,029 33,711 Interest 19,346 13,530 58,265 35,413 General and administrative 1,619 1,260 5,271 4,192 Other depreciation and amortization 494 356 1,339 917 Impairment loss on real estate owned (Note 3) 1,400 -- 1,400 290 --------- --------- --------- ---------- 85,242 54,981 242,520 150,922 Income before gains on sales of investments and minority interest of unitholders in operating partnership 14,053 8,504 42,529 25,394 Gains on sales of investments 9,309 1,339 12,682 2,176 Minority interest of unitholders in operating partnership (53) (25) (112) (26) --------- -------- --------- --------- Net income 23,309 9,818 55,099 27,544 Dividends to preferred shareholders 5,653 2,428 11,692 7,284 --------- --------- --------- ---------- Net income available to common shareholders $ 17,656 $ 7,390 $ 43,407 $ 20,260 ========= ========= ========= ========== Net income per common share $ 0.20 $ 0.13 $ 0.50 $ 0.36 ========= ========= ========= =========== Distributions declared per common share $ .2525 $ .24 $ 0.7575 $ 0.72 ========= ========= ========= =========== Weighted average number of common shares outstanding 87,853 57,793 86,602 56,978
See accompanying notes. 3 UNITED DOMINION REALTY TRUST, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Nine Months Ended September 30, 1997 1996 - ---------------------------------------------------------------- ------------ ------------ Operating Activities Net income $ 55,099 $ 27,544 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 56,368 34,628 Minority interest of unitholders in operating partnership 112 26 Impairment loss on real estate owned 1,400 290 Gains on sales of investments (12,682) (2,176) Amortization of deferred financing costs 1,306 898 Changes in operating assets and liabilities: Increase in operating liabilities 9,837 12,720 Increase in operating assets (349) (1,330) ------------ ------------ Net cash provided by operating activities 111,091 72,600 Investing Activities Acquisition of real estate, net of debt and liabilities assumed (206,205) (165,927) Capital expenditures (70,722) (35,509) Development of real estate assets (37,369) (7,593) Net proceeds from sales of investments 27,044 18,730 Proceeds from interest rate hedge transaction 1,538 -- Other 2,143 (6) ------------ ------------ Net cash used in investing activities (283,571) (190,305) Financing Activities Net proceeds from the issuance of common stock 59,884 23,925 Net proceeds from the sale of preferred stock 145,275 -- Net proceeds from the sale of common stock through the dividend reinvestment and stock purchase plan 26,685 7,975 Gross proceeds from the issuance of unsecured notes payable 125,000 152,962 Net proceeds from the issuance of secured notes payable -- 5,925 Net borrowings (repayments) of short-term bank borrowings (43,250) 30,800 Distributions paid to preferred shareholders (10,617) (7,284) Distributions paid to common shareholders (63,511) (39,879) Distributions paid to minority interest unitholders (102) -- Scheduled mortgage principal payments (4,573) (1,881) Mortgage financing proceeds released from construction funds -- 2,666 Payments on unsecured notes (63,414) (50,697) Non-scheduled payments on secured notes payable (4,350) -- Payment of financing costs (2,616) (1,908) ------------ ------------ Net cash provided by financing activities 164,411 122,604 Net increase (decrease) in cash and cash equivalents (8,069) 4,899 Cash and cash equivalents, beginning of period 13,452 2,904 ------------ ------------ Cash and cash equivalents, end of period $ 5,383 $ 7,803 ============ ============ Supplemental Information Interest paid during the period $ 55,279 $ 33,699 Secured debt assumed through the acquisition of properties 48,380 129,875 Issuance of common stock in connection with acquisitions -- 22,678 Issuance of unsecured notes payable in connection with acquisitions -- 25,000 Issuance of operating partnership units 8,442 2,006 See accompanying notes.
4 UNITED DOMINION REALTY TRUST, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY NINE MONTHS ENDED SEPTEMBER 30, 1997 (In thousands, except share and per share amounts) (unaudited)
Common Stock, $1 Par Value Preferred Stock --------------------------------------------------- Additional Number Number Paid-in of Shares Amount of Shares Amount Capital - ----------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1996 81,982,551 $81,983 4,200,000 $105,000 $814,795 Common stock issued in public offering 4,000,000 4,000 - - 55,420 Preferred stock-Series B issued in public offering - - 6,000,000 150,000 (4,962) Exercise of common stock options 48,197 48 - - 507 Common stock purchased by officers, net of repayments 230,000 230 - - 3,149 Common stock issued through dividend reinvestment and stock purchase plan 1,900,346 1,900 - - 24,785 Common stock issued through employee stock purchase plan 532 1 - - 7 Net income - - - - - Preferred stock-Series A distributions declared ($1.73 per share) - - - - - Preferred stock-Series B distributions declared ($.56 per share) - - - - - Common stock distributions declared ($.7575 per share) - - - - - Realized gain on securities available-for-sale - - - - - --------------- ---------- ----------- ----------- ------------- Balance at September 30, 1997 88,161,626 $88,162 10,200,000 $255,000 $893,701 =============== ========== =========== =========== =============
Unrealized Gain on Receivable Distributions Securities Total from Officer in Excess of Available- Shareholders' Shareholders Net Income for-Sale Equity - ----------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1996 ($5,926) ($147,529) $2,056 $850,379 Common stock issued in public offering - - - 59,420 Preferred stock-Series B issued in public offering - - - 145,038 Exercise of common stock options - - - 555 Common stock purchased by officers, net of repayments (3,242) - - 137 Common stock issued through dividend reinvestment and stock purchase plan - - - 26,685 Common stock issued through employee stock purchase plan - - - 8 Net income - 55,099 - 55,099 Preferred stock-Series A distributions declared ($1.73 per share) - (7,284) - (7,284) Preferred stock-Series B distributions declared ($.56 per share) - (4,408) - (4,408) Common stock distributions declared ($.7575 per share) - (66,071) - (66,071) Realized gain on securities available-for-sale - - (2,056) (2,056) --------------- -------------- ------------ ------------- Balance at September 30, 1997 ($9,168) ($170,193) $0 $1,057,502 =============== ============== ============ =============
5 UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Basis of presentation The accompanying consolidated financial statements include the accounts of United Dominion Realty Trust, Inc. and its subsidiaries, including United Dominion Realty, L.P., its Operating Partnership, (collectively, the "Company"). As of September 30, 1997, United Dominion Realty Trust, Inc. and its wholly-owned subsidiaries had a 92% interest in the Operating Partnership. The financial statements of the Company include the minority interest of unitholders in the operating partnership. All significant inter-company accounts and transactions have been eliminated in consolidation. The consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of financial position at September 30, 1997 and results of operations for the interim periods ended September 30, 1997 and 1996. Such adjustments are normal and recurring in nature. The interim results presented are not necessarily indicative of results that can be expected for a full year. The accompanying consolidated financial statements should be read in conjunction with the audited financial statements and related notes appearing in the Company's December 31, 1996 Annual Report on Form 10-K filed with the Securities and Exchange Commission. 2. Reclassifications Certain previously reported amounts have been reclassified to conform with the current financial statement presentation. 3. Real estate held for investment The following table summarizes real estate held for investment:
September 30, December 31, Dollars in thousands 1997 1996 - ----------------------------------------------------------------------------------- Land and land improvements $ 384,706 $ 353,092 Buildings and improvements 1,694,997 1,537,387 Furniture, fixtures and equipment 131,436 115,308 Construction in progress 5,924 1,825 -------------- --------------- Real estate held for investment $ 2,217,063 $ 2,007,612 ========== ===========
Long-lived investments held and used are periodically evaluated for impairment and provisions for possible losses are made if required. During the third quarter of 1997, the Company recognized a provision for possible loss of $1.4 million relating to two apartment communities included in real estate held for investment. At September 30, 1997, the Company's real estate held for investment is carried at cost less valuation allowance, which is not in excess of fair market value. 4. Notes payable - secured Notes payable-secured, which encumber $899.2 million or 37% of the Company's real estate owned, at cost, ($1.5 billion or 63% of the Company's real estate owned, at cost, is unencumbered) consist of the following at September 30, 1997:
Principal Weighted Average Weighted Average No.Communities Dollars in thousands Balance Interest Rate Years to Maturity Encumbered - --------------------------------------------------------------------------------------------------------------------- Fixed-Rate Mortgage Notes $ 136,330 8.3% 3.4 22 Fixed-Rate Tax-Exempt Notes 127,822 7.0% 19.8 18 Fixed-Rate REMIC Financings 89,304 7.4% 3.2 25 Fixed-Rate Secured Notes (a) 45,000 7.3% 1.9 6 ---------------------------------------------------------------------------------- Total Fixed-Rate Notes 398,456 7.6% 8.6 71 Variable-Rate Secured Notes 11,968 6.3% 2.0 2 Variable-Rate Tax-Exempt Notes 2,200 5.4% 5.2 1 ---------------------------------------------------------------------------------- Total Variable-Rate Notes 14,168 6.2% 2.3 3 ---------------------------------------------------------------------------------- Total Notes Payable - secured $ 412,624 7.5% 8.3 74 ===================================================================================
(a) Variable-rate secured notes payable which have been effectively swapped to a fixed-rate at September 30, 1997 consist of a $39 million variable-rate secured senior credit facility which encumbers six apartment communities and a $6 million variable-rate construction note payable. The interest rate swap agreements have an aggregate notional value of $45 million under which the Company pays a fixed-rate of interest and receives a variable- 6 rate on the notional amounts. The interest rate swap agreements effectively change the Company's interest rate exposure on $45 million from a variable-rate to a weighted average fixed-rate of approximately 7.3%. 5. Notes payable - unsecured A summary of notes payable - unsecured is as follows:
September 30, December 31, Dollars in thousands 1997 1996 ----------------- ---------------------- Commercial Banks Borrowings outstanding under revolving credit facilities and other bank debt $ 82,000 (a) $125,250 Insurance Companies--Senior Unsecured Notes 7.98% due March, 1998-2003 44,571 (b) 52,000 8.72% due November, 1997-1998 (c) 4,000 4,000 --------- --------- 48,571 56,000 Other (d) 6,950 6,040 Senior Unsecured Notes - Other 7.00% Note due January 15, 1997 (e) -- 55,985 7.25% Notes due April 1, 1999 75,000 75,000 8.50% Debentures due September 15, 2024 (f) 150,000 150,000 7.95% Medium-Term Notes due July 12, 2006 125,000 125,000 7.25% Notes due January 15, 2007 125,000 -- 7.07% Medium-Term Notes due November 15, 2006 25,000 25,000 7.02% Medium-Term Notes due November 15, 2005 50,000 50,000 -------- -------- 550,000 480,985 ------- ------- Total Notes Payable - Unsecured $687,521 $668,275 ======== ========
(a) The weighted average balance outstanding for the three months ended September 30, 1997 was $68.4 million and carried a weighted average daily interest rate of 6.1%. The weighted average balance outstanding for the nine months ended September 30, 1997 was $95.4 million and carried a weighted average daily interest rate of 6.1%. The weighted average interest rate at September 30, 1997 was 6.1%. (b) Payable in six equal annual principal installments of $7.4 million. (c) Payable in two equal annual principal installments of $2 million. (d) Includes $6.5 million and $5.6 million at September 30, 1997 and December 31, 1996, respectively, of deferred gains from the termination of interest rate hedge transactions. (e) Represents an unsecured note assumed in connection with the South West Property Trust Inc. statutory merger (the "South West Merger") on December 31, 1996. The note was repaid on January 3, 1997. (f) Debentures include an investor put feature which grants a one time option to redeem debentures in September 2004. 6. Accounting Pronouncements During the first quarter of 1997, the Financial Accounting Standards Board issued SFAS No. 128 "Earnings per Share" (SFAS No. 128) which is effective beginning in the fourth quarter of 1997. Early adoption is prohibited. Under the new statement, primary and fully dilutive earnings per share are replaced with basic and diluted earnings per share. The Company's basic earnings per share and diluted earnings per share for the three month and nine month periods ended September 30, 1997 and 1996 according to the new statements would not change from the reported amounts. In February 1997, the Financial Accounting Standards Board issued SFAS No. 129 "Disclosure Information about Capital Structure" (Statement 129) which is effective for fiscal years beginning after December 15, 1997. Statement 129 established standards for disclosing information about an entity's capital structure. The Company believes that its disclosures already comply with the requirements of Statement 129. 7 In June 1997, the Financial Accounting Standards Board issued SFAS No. 130 "Reporting Comprehensive Income" (Statement 130) and SFAS No. 131 "Disclosure about Segments of an Enterprise and Related Information" (Statement 131) which are effective for fiscal years beginning after December 15, 1997. The Company will adopt Statement 130 and Statement 131 with the fiscal year beginning January 1, 1998. Statement 130 and Statement 131 do not have a material impact on the financial results or financial condition of the Company, but will result in certain changes in required disclosures. Management is evaluating the additional disclosure requirements for the Company upon the implementation of Statement 130 and Statement 131. 8 PART I Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Overview The Company considers portions of the information contained in this Item 2. to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved. The Company is engaged in the ownership, acquisition, development and management of primarily middle income apartment communities across the Sunbelt. The Company's investment strategy focuses on acquiring apartment communities in 23 targeted major markets where it can add value. The Company seeks to be a market leader by operating a sufficiently sized portfolio of apartments within each market. The Company believes this market diversification increases investment opportunity and decreases the risk associated with cyclical local real estate markets and economies. The following table summarizes the Company's apartment market information by market:
Three Months Ended Nine Months Ended As of September 30, 1997 September 30, 1997 September 30, 1997 ------------------------------------ ---------------------- ------------------------ Average Average Number of Number of % of Monthly Monthly Apartment Apartment Apartment Economic Rental Economic Rental Market Communities Homes Homes Occupancy** Rates* Occupancy** Rates* - ---------------------------------------------------- ------------------------------------------------------ Dallas, TX 22 8,257 14% 94.1% $ 551 93.6% $ 544 Columbia, SC 12 3,534 6% 92.6% 502 91.3% 500 Richmond, VA 11 3,518 6% 93.7% 561 91.8% 552 Raleigh, NC 12 3,484 6% 95.1% 636 95.4% 630 Tampa, FL 12 3,209 5% 92.8% 579 93.4% 572 Orlando, FL 10 3,076 5% 95.9% 578 95.5% 571 Charlotte, NC 13 3,009 5% 87.9% 579 86.7% 573 Houston, TX 7 2,847 5% 94.3% 469 93.1% 466 Eastern NC 10 2,530 4% 95.5% 560 95.1% 554 Greensboro, NC 9 2,242 4% 84.0% 548 83.9% 545 Nashville, TN 8 2,116 3% 91.4% 589 91.5% 584 San Antonio, TX 5 1,983 3% 91.8% 619 92.3% 615 Atlanta, GA 7 1,822 3% 90.8% 591 89.5% 588 Baltimore, MD 8 1,746 3% 92.9% 655 92.4% 650 Greenville, SC 8 1,718 3% 88.1% 518 86.6% 515 Hampton Roads, VA 7 1,628 3% 93.9% 545 90.6% 540 Washington, DC 6 1,483 2% 87.8% 687 87.0% 682 Jacksonville, FL 3 1,157 2% 85.9% 598 86.2% 596 Ft. Lauderdale, FL 4 960 2% 93.3% 791 94.0% 786 Memphis, TN 4 935 2% 89.3% 519 90.0% 513 Fayetteville, NC 3 884 1% 90.6% 559 88.3% 556 Austin, TX 3 867 1% 88.1% 533 89.2% 532 Eastern Shore, MD 4 784 1% 98.5% 632 97.3% 624 Phoenix, AZ 3 728 1% 91.2% 645 90.8% 644 Little Rock, AK 2 512 1% 94.5% 573 93.5% 569 Other Florida 7 1,646 3% 91.3% 552 95.8% 547 Other Virginia 6 1,036 2% 92.1% 558 94.0% 550 Other Texas 3 824 1% 93.7% 506 88.6% 509 Other Georgia 2 468 1% 88.8% 638 82.7% 638 Other South Carolina 2 408 1% 91.2% 413 91.6% 409 Nevada 1 384 1% 88.0% 641 91.1% 635 Delaware 2 368 -- 96.0% 605 96.1% 600 Oklahoma 1 316 -- 92.6% 454 92.3% 452 Alabama 1 242 -- 85.6% 514 83.7% 511 New Mexico 1 210 -- 95.6% 550 85.9% 567 Other North Carolina 1 168 -- 95.9% 574 89.7% 573 --------------------------------------------------------------------------------------- Total 220 61,099 100% 92.2% $ 574 91.6% $570 =======================================================================================
9 * Average monthly rental rates represent potential rent collections (gross potential rents less market adjustments), which approximate net effective rents. These figures exclude 1997 acquisitions. ** Economic occupancy is defined as rental income (gross potential rent less vacancy loss, management units, units held out of service, move-in concessions and credit loss) divided by potential collections (gross potential rent less management units, units held out of service and move-in concessions) for the period, expressed as a percentage. Liquidity and Capital Resources As a qualified real estate investment trust ("REIT"), the Company distributes a substantial portion of its cash flow to its shareholders in the form of quarterly distributions. The Company seeks to retain sufficient cash to cover normal operating needs, including routine replacements and to help fund additional acquisitions and development activity. For the nine months ended September 30, 1997, the Company's cash flow from operating activities exceeded cash distributions paid to preferred and common shareholders and operating partnership unitholders by approximately $36.9 million. The Company utilizes a variety of primarily external financing sources to fund portfolio growth, major capital improvement programs and balloon debt payments. The Company's bank lines of credit generally have been used to temporarily finance these expenditures and subsequently this short-term bank debt has been replaced with longer term debt or equity. Operating Activities For the nine months ended September 30, 1997, the Company's cash flow from operating activities increased approximately $38.5 million over the same period last year. This increase was primarily a result of the significant expansion of the Company's portfolio of apartment communities as discussed below and under "Results of Operations". The Company considers its cash provided by operating activities adequate to meet its operating requirements and payments of distributions to both common and preferred shareholders and unitholders in the Operating Partnership. Investing Activities During the nine months ended September 30, 1997, net cash used for investing activities was approximately $283.6 million compared to approximately $190.3 million for the same period last year. The level of investing activities primarily reflects the increased levels of the Company's acquisition, capital expenditure and development programs. During 1997, the Company significantly increased both its development activity and upgrade program which was implemented at its older communities. Acquisitions The Company expects to purchase between 8,000 and 11,000 apartment homes at an aggregate purchase price between $350 million and $450 million during 1997. The Company seeks to acquire apartment communities that can provide returns on investment in excess of the Company's cost of capital. These acquisitions typically are projected to provide first year weighted average returns on investment of approximately 9-9 1/2% with the prospect for future cash flow growth and appreciation. During the first nine months of 1997, the Company acquired 22 apartment communities containing 6,802 apartment homes at a total cost of approximately $266.8 million, including closing costs. Twenty of the apartment communities acquired were located in the Company's major markets. The apartment communities acquired were as follows: 10
Purchase Purchase No. Apt. Year Price Cost Date Name/Location Homes Built (000's) per Home - ------------------------------------------------------------------------------------------------------------------ 02/19/97 Club at Hickory Hollow/Nashville, TN 406 1987 $17,371 $42,800 02/28/97 Stoney Pointe/Charlotte, NC (a) 400 1991 17,355 43,400 02/28/97 Crosswinds/Wilmington, NC 380 1990 19,326 50,900 02/28/97 Dominion Trinity Park/Raleigh, NC (a) 380 1994 22,155 58,300 03/25/97 Anderson Mill/Austin, TX 350 1984 14,305 40,900 03/27/97 Oak Ridge/Dallas, TX 486 1983 17,290 35,600 03/27/97 Breckenridge/Nashville, TN 190 1986 8,480 44,600 04/22/97 Northwinds II/Greensboro, NC (c) 100 1997 4,765 47,700 05/09/97 Green Oaks I/Houston, TX (d) 440 1985 15,260 34,700 05/09/97 Skyhawk/Houston, TX 224 1984 9,456 42,200 06/06/97 Cambridge Woods/Tampa, FL 274 1985 8,957 32,700 06/18/97 Kelly Crossing/Dallas, TX 304 1984 11,653 38,300 06/25/97 Green Oaks II/Houston, TX (d) 272 1985 9,680 35,600 07/01/97 Lotus Landing/Orlando, FL 260 1985 10,725 41,300 07/01/97 Lakeside/Daytona Beach, FL 210 1985 8,744 41,600 07/01/97 Mallards of Brandywine/Deland, FL 168 1985 6,117 36,400 07/01/97 Forest Creek/Largo, FL 104 1984 2,582 24,800 07/01/97 Orange Oaks/Tampa, FL 192 1986 7,832 40,800 09/26/97 Greenhouse Patio/Houston, TX (a) (b) 580 1985 18,814 32,400 09/26/97 Braesridge/Houston, TX (a) (b) 545 1982 14,010 25,700 09/26/97 Breakers/Houston, TX 272 1985 6,825 25,100 09/29/97 Waterside at Ironbridge/Richmond, VA (a) 265 1987 15,082 56,900 ------------------------------------------------ 1997 Total/Weighted Average 6,802 1986 $266,784 $ 39,200 ==================================================
(a) In connection with the acquisition of five apartment communities, the Company assumed four mortgage notes payable and one tax-exempt note payable aggregating $48.4 million with a weighted average interest rate of approximately 8.3%. (b) In connection with the acquisition of two apartment communities, the Company issued approximately 572,000 units in the Operating Partnership with an aggregate value of $8.4 million. (c) Northwinds II is the second phase of an apartment community acquired by the Company in August 1996. (d) These two properties are operated as one apartment community named Green Oaks Apartments. Real estate under development Consistent with the Company's acquisition strategy, development activity is focused primarily in its major markets. Development capability allows the Company to continually upgrade its apartment portfolio. During the first nine months of 1997, the Company invested approximately $37.4 million in development projects at nine apartment communities, including two new apartment communities and seven additional phases to existing apartment communities. The Company expects to spend in excess of $50 million on development activity during 1997. At September 30, 1997, the Company had 916 apartment homes under development as outlined below (dollars in thousands, except cost per home):
Development Estimated Estimated No. Apt. Completed Costs Development Cost Expected Property Location Homes Apt. Homes to Date Cost Per Home Completion Date - ---------------------------------------------------------------------------------------------------------------------------------- New Apartment Communities Dominion Franklin Nashville, TN 360 -- $ 4,673 $23,236 $ 64,500 4Q98 Additional Phases England Run II Fredericksburg, VA 168 48 8,819 10,897 64,900 4Q97 Oak Forest II Dallas, TX 260 164 10,179 13,375 51,400 1Q98 Steeplechase II Greensboro, NC 176 20 7,470 11,784 67,000 4Q97 Greenway Park II Phoenix, AZ 20 16 858 1,282 64,100 4Q97 Mill Creek II Wilmington, NC 180 -- 1,629 12,108 67,300 3Q98 ---------------------------------------------------------------------------------------- 804 248 28,955 49,446 61,500 ------------------------------------------------------------------------- 1,164 248 $33,628 $ 72,682 $ 62,400 =========================================================================
11 During 1997, the Company completed the following development projects (dollars in thousands, except cost per home):
Development Estimated No. Apt. Costs Development Cost Date of % Leased Property Location Homes to Date Cost Per Home Completion at 9/30/97 - --------------------------------------------------------------------------------------------------------------------------- New Apartment Communities Providence Court Charlotte, NC 420 $ 29,715 $ 30,324 $ 72,200 3Q97 68% Additional Phases Brantley Pines II Ft. Myers, FL 96 6,827 6,755 70,400 2Q97 100% Oak Park II Dallas, TX 80 4,358 4,581 57,300 1Q97 100% ------------------------------------------------------ 176 11,185 11,336 64,400 ------------------------------------------------------ 596 $ 40,900 $ 41,660 $ 69,900 ======================================================
During the third quarter, full lease-up at Brantley Pines was achieved. In late September, construction on the 420 home Providence Court community in Charlotte, North Carolina was completed. This community is currently in the lease-up process. These additions did not have a material impact on the Company's financial results for the three or nine months ended September 30, 1997. Capital Expenditures During the nine months ended September 30, 1997, the Company spent approximately $70.7 million on capital improvements to its apartment portfolio. The Company has a policy of capitalizing expenditures related to acquisitions, and the enhancement of the value or the substantial extenuation of the useful life of an existing asset. The Company acquires two types of apartment communities, both of which typically require capital expenditures: (i) near class A properties built since 1980 where the investment (purchase price plus planned improvements) represent a significant discount to replacement cost and (ii) well located, older properties that can be upgraded and repositioned for the longer term. In addition to the Company's capital expenditures on acquisitions, a significant portion of capital expenditures relate to an upgrade program that began in 1996 to modernize certain of the Company's older apartment communities. These upgrades primarily involve updating kitchens and bathrooms and are designed to enhance rent growth and add value to the apartment communities. In addition, several initiatives are underway that either allow the Company to increase rents by more than the inflationary rate or allow the Company to pass expenses along to residents, including: (i) submetering of water and sewer to residents where local and state regulations allow the cost to be passed to the resident, (ii) gating and fencing apartment communities, (iii) installing monitoring devices such as intrusion alarms or controlled access devices, (iv) enlarging fitness centers and (v) adding business centers. Capital expenditures during 1997 are expected to exceed 1996 levels as a result of the upgrade program and initiatives discussed above. Disposition of investments Securities available-for-sale During the first quarter of 1997, the Company sold its investment in the preferred stock of First Washington Realty Trust, Inc. obtained as partial consideration in the 1995 sale of four commercial properties. The Company received approximately $9.9 million in cash proceeds from the sale of the stock and recognized approximately a $2.1 million gain on the sale for financial reporting purposes. Real estate held for disposition The Company continually undertakes portfolio review analyses with the objective of identifying properties that do not meet the Company's long-term investment objectives due to size, location, age, quality and future investment potential. Generally, this will result in the disposition of many of the Company's older apartment communities. The Company may sell approximately 20% of its apartment portfolio although specific properties have not been identified as sales candidates. These sales will allow the Company to reduce the age of its existing portfolio which should result in lower operating expense and capital expenditure growth associated with the older properties. Management has determined that packaging properties in portfolios is more efficient and provides the greatest opportunities for disposition. The Company intends to sell approximately $50-$70 million of properties each quarter through fiscal year 1998. 12 Real estate held for disposition included in the Consolidated Balance Sheet in the aggregate amount of $131.6 million, net of accumulated depreciation and valuation allowance includes: (i) 15 apartment communities containing 4,725 apartment homes aggregating $119.0 million, (ii) two shopping centers aggregating $8.6 million, (iii) three other commercial properties aggregating $2.4 million and (iv) one parcel of land in the amount of $1.6 million. Real estate held for disposition contributed net rental income (rental income less rental expenses and depreciation expense) in the aggregate amount of approximately $4.0 million and $13.7 million for the three and nine months ended September 30, 1997, respectively. The Company expects to dispose of these properties within the next twelve months. During 1997, the Company transferred 19 apartment communities aggregating $135.5 million, net of accumulated depreciation and valuation allowance, from real estate held for investment to real estate held for disposition. Seven properties were subsequently sold, six in a portfolio transaction during the third quarter. In August 1997, the Company executed a contingent contract to sell six apartment communities in a portfolio transaction, all of which are encumbered by tax-exempt notes payable. In October 1997, the Company executed a letter of intent to sell five apartment communities in a portfolio transaction. There is no assurance that either of these portfolio transactions will be consummated. The Company does not anticipate any losses from the sales of any of these properties. During the second quarter of 1997, the Company sold three apartment communities containing 822 apartment homes and one shopping center for an aggregate sales price of $20.8 million and received net cash proceeds of approximately $17.1 million. For financial reporting purposes, the Company recognized an aggregate $1.3 million gain on the sales. One of these dispositions was structured to qualify as a like-kind exchange under Section 1031 of the Internal Revenue Code, so the related capital gain will be deferred for federal income tax purposes. On August 1, 1997, the Company sold a portfolio of six apartment communities containing 1,204 apartment homes which had a weighted average age of 26 years for an aggregate sales price of approximately $34.7 million. Cash proceeds of $34.1 million were held in escrow pending subsequent apartment acquisitions by the Company in order to complete like-kind exchange transactions. For financial reporting purposes, the Company recognized an approximate $9.3 million gain on the sale. Since the transaction was structured to qualify as a like-kind exchange under Section 1031 of the Internal Revenue Code, the related capital gains will be deferred for federal income tax purposes. In addition, the company sold an 80 home apartment community in September 1997 for $1.7 million in a like-kind exchange transaction. On October 23, 1997, the Company sold two apartment communities containing 464 apartment homes with a weighted average age of 24 years for an aggregate sales price of approximately $11.1 million and received net proceeds of approximately $10.9 million. For financial reporting purposes, no significant gain will be recognized on these sales. 13 Financing Activities Financial Structure The following table outlines the Company's financial structure at September 30, 1997: (dollars in thousands)
Balance at Weighted Average Capitalization September 30, 1997 Interest Rate Percentage ------------------- ------------------ -------------- Fixed Rate Secured Debt $ 398,456 7.6% 14.8% Fixed Rate Unsecured Debt 605,521 7.5% 22.5% ---------------- ------ 1,003,977 7.5% 37.3% Variable Rate Secured Debt 14,168 6.2% 0.5% Variable Rate Unsecured Debt 82,000 6.1% 3.1% ----------------- ------ 96,168 6.1% 3.6% ----------------- ------ Total Debt 1,100,145 7.4% 40.9% Preferred stock at market 269,400 8.9%* 10.0% Common stock at market ($15 per share) 1,322,424 49.1% ----------------- -------- Equity capitalization at market 1,591,824 59.1% ----------------- -------- Total market capitalization (debt & equity) $ 2,691,969 100.0% ================= ========
*Represents the weighted average dividend rate. Net cash provided by financing activities during the nine months ended September 30, 1997 was approximately $164.4 million compared to $122.6 million for the same period last year, reflecting the higher debt and equity financing activities that were needed to fund higher acquisitions, development and capital improvements during the first nine months of 1997. Cash provided by financing activities On January 28, 1997, the Company issued 4,000,000 shares of its common stock at $15.75 per share for an aggregate value of approximately $63 million. Net proceeds of approximately $59.7 million were used to repay an unsecured credit facility assumed in connection with the South West Merger. The Company also received approximately $26.7 million under its Dividend Reinvestment and Stock Purchase Plan (the "Plan") during the nine months ended September 30, 1997 which included approximately $19.3 million in optional cash investments and $7.4 million of reinvested dividends. The Company expects to generate approximately $40 million in proceeds from the Plan during 1997. In anticipation of the issuance of unsecured debt in early 1997, the Company entered into a $100 million (notional amount) Treasury rate lock agreement in November 1996. On January 27, 1997, the Company issued $125 million of 7.25% Notes due January 15, 2007 under its $462.5 million shelf registration statement. The Notes were priced to yield 7.31% which was 79 basis points over the 10 year Treasury rate at the time of issuance. The interest rate protection agreement was terminated simultaneously with the $125 million Note issuance and the Company received $1.5 million in cash. This had the economic effect of lowering the interest rate on the Notes to approximately 7.14%. Net proceeds of approximately $124 million were used to curtail bank debt and purchase apartment communities. On May 29, 1997, the Company sold 6,000,000 shares of 8.60% Series B Redeemable Preferred Stock at $25 per share. Net proceeds of approximately $145.3 million were primarily used to repay short-term bank debt. Cash used in financing activities During the first nine months of 1997, the Company paid $74.1 million in distributions to common and preferred shareholders and unitholders in the Operating Partnership. The Company repaid a $56.0 million unsecured note payable on January 3, 1997 which was assumed in connection with the South West Property Trust Inc. acquisition on December 31, 1996. In addition, the Company repaid a $7.4 million principal installment on an unsecured notes payable in March 1997. 14 Derivative Instruments The Company has, from time to time, used derivative instruments to synthetically alter on-balance sheet liabilities or to hedge anticipated financing transactions. Derivative contracts did not have a material impact on the results of operations during the three and nine months ended September 30, 1997 and 1996. On May 1, 1997, the Company terminated an interest rate swap agreement with a commercial lender with notional amounts from $79 million to $83 million which effectively changed the Company's interest exposure from a variable rate to a weighted average fixed rate of 6.45%. No gain or loss was recognized on this termination. Credit facilities On August 4, 1997, the Company closed on a new $200 million three year unsecured revolving credit facility, a $50 million one year unsecured line of credit and a $15 million uncommitted line of credit. Under the new facility, pricing is based upon the higher of the Company's senior unsecured debt ratings from S&P and Moody's which are currently BBB+ and Baa1, respectively. At these rating levels, contractual interest under the new revolving credit facility is LIBOR plus 42 1/2 basis points. The credit facility also includes a $100 million competitive bid option which allows the Company to solicit bids from participating banks at rates below the contractual rate. At September 30, 1997, the Company had the following credit facilities (dollars in thousands):
Three Months Ended September 30, 1997 Nine Months Ended September 30, 1997 -------------------------------------- ------------------------------------- Weighted Average Weighted Average Amount of Amount Weighted Average Amount Weighted Average Credit Facility Facility Outstanding Interest Rate Outstanding Interest Rate - ---------------------------------------------------------------------------------------------------------------------------------- Revolving credit-3 Yr. $ 200,000 $ 42,670 6.1% $14,223 6.1% Line of credit 50,000 -- -- -- -- Uncommitted line 15,000 2,457 6.2% 819 6.2% Revolving credit** N/A 23,284 6.1% 80,335 6.1% ------------------------------------------------------------------------------------------------------- $ 265,000 $ 68,411 6.1% $ 95,377 6.1% ======================================================================================================
** Represents the Company's unsecured revolving credit facilities with four commercial banks which were terminated on August 4, 1997 upon the execution of the $200 million three year unsecured revolving credit facility. The Company's liquidity and capital resources are believed to be more than adequate to meet its cash requirements for the next several years. The Company expects to meet its short- and long-term capital requirements, such as balloon debt maturities, property acquisitions, development activity and significant capital improvements, primarily through the public and private sale of capital stock and the issuance of medium and long-term unsecured notes payable. The Company may also fund its capital requirements through (i) the assumption of mortgage indebtedness, (ii) sales of properties, (iii) common shares sold through the Company's Dividend Reinvestment and Stock Purchase Plan, (iv) retained operating cash flow and (v) the issuance of operating partnership units. The Company's senior debt is currently rated BBB+ by Standard & Poor's and Baa1 by Moody's. As a result of its investment grade debt ratings, the Company expects to use unsecured debt as its primary debt funding source. Depending upon the volume and timing of acquisition activity, the Company anticipates raising additional debt and equity capital during the next twelve months to finance capital requirements while striving to minimize the overall cost of capital. During the second quarter of 1997, the Company filed a shelf registration statement for approximately $675 million of debt and preferred and common equity securities. Funds from Operations Funds from operations ("FFO") is defined as income before gains (losses) on sales of investments, minority interest of unitholders in operating partnership and extraordinary items (computed in accordance with generally accepted accounting principles) plus real estate depreciation, less preferred dividends and after adjustment for significant non-recurring items, if any. The Company computes FFO in accordance with the recommendations set forth by the National Association of Real Estate Investment Trusts ("NAREIT"). The Company considers FFO in evaluating property acquisitions and its operating performance, and believes that FFO should be considered along with, but not as an alternative to, net income and cash flows as a measure of the Company's operating performance and liquidity. 15 FFO does not represent cash generated from operating activities in accordance with generally accepted accounting principles and is not necessarily indicative of cash available to fund cash needs. For the three months ended September 30, 1997, FFO increased 60.3% to $29.5 million, compared with $18.4 million for the same period last year. For the nine months ended September 30, 1997, FFO increased 67.6% to $87.3 million, compared with $52.1 million for the same period last year. The increase in FFO was principally due to the increased net rental income from the Company's 29,220 non-mature apartment homes in 92 apartment communities acquired and developed subsequent to January 1, 1996.
Three Months Ended Nine Months Ended September 30, September 30, (In thousands) (In thousands) ------------------------------------ --------------------------------- 1997 1996 % Change 1997 1996 % Change ------------------------------------ --------------------------------- Calculation of funds from operations: Income before gains on sales of investments and minority interest of unitholders in operating partnership $ 14,053 $ 8,504 65.3% $ 42,529 $ 25,394 67.5% Adjustments: Real estate depreciation 19,740 12,346 59.9% 55,029 33,711 63.2% Dividends to preferred shareholders (5,653) (2,428) 132.8% (11,692) (7,284) 60.5% Impairment loss on real estate owned 1,400 -- -- 1,400 290 -- ---------------------------------------- --------------------------------- Funds from operations $ 29,540 $ 18,422 60.3% $ 87,266 $ 52,111 67.6% ======================================== ===================================== Weighted average number of common and common equivalent shares outstanding 88,014 57,930 51.9% 86,747 57,026 52.1%
Results of Operations The Company's net income is primarily generated from the operations of its apartment communities. For purposes of evaluating the Company's comparative operating performance, the Company categorizes its apartment communities into two categories (i) mature--those communities acquired, developed and stabilized prior to January 1, 1996 and held throughout both 1997 and 1996 and (ii) non-mature--those communities acquired, developed or sold subsequent January 1, 1996. For the three and nine months ended September 30, 1997, the Company reported increases over the same period last year in rental income, income before gains on sales of investments and minority interest of unitholders in operating partnership and net income. For the nine months ended September 30, 1997, net income available to common shareholders increased $23.1 million, with a corresponding increase of $.14 per share compared to the same period last year. For the three months ended September 30, 1997, net income available to common shareholders increased $10.3 million, with a corresponding increase of $.07 per share compared to the same period last year . The large per share increases over last year are primarily attributable to gains recognized on the sales of investments. Net income available to common shareholders for the three and nine months ended September 30, 1997 includes aggregate gains on the sales of investments of $9.3 million ($.11 per share) and $12.7 million ($.15 per share), respectively. In addition, since the beginning of 1996, the Company acquired and developed a total of 29,220 apartment homes in 92 apartment communities (including 14,320 completed apartment homes in 44 apartment communities acquired in the South West Merger) and sold 14 apartment communities containing 2,758 apartment homes, representing a net 76% expansion in the number of apartment homes owned during that period. These non-mature apartment homes provided a substantial portion of the aggregate reported increases. However, these increases were moderated in part due to the Company's financing activities during 1997. During the first nine months of 1997, the Company financed its acquisition and development programs primarily with common and preferred equity and the proceeds from property sales rather than debt which was used to finance much of the 1996 acquisition and development programs. 16 All Apartment Communities The operating performance for the Company's 220 apartment communities containing 61,099 completed apartment homes (and 2,758 apartment homes in 14 apartment communities sold since January 1, 1996) for the three and nine months ended September 30, 1997 and 166 apartment communities containing 41,204 apartment homes for the three and nine months ended September 30, 1996, respectively, is summarized as follows:
Three Months Ended Nine Months Ended September 30, September 30, (In thousands) (In thousands) ----------------------------------- --------------------------------- 1997 1996 % Change 1997 1996 % Change ----------------------------------- --------------------------------- Rental income $ 98,313 $ 62,002 58.6% $ 282,176 $ 170,700 65.3% Rental expenses (42,494) (26,993) 57.4% (120,629) (74,534) 61.8% Real estate depreciation (19,740) (12,346) 59.9% (55,029) (33,616) 63.7% ----------------------------------- --------------------------------- Net rental income (1) $ 36,079 $ 22,663 59.2% $ 106,518 $ 62,550 70.3% =================================== ================================= Weighted average number of apartment homes 60,204 38,697 55.6% 57,803 36,193 59.7% Economic occupancy (2) 92.2% 93.4% (1.2%) 91.6% 93.2% (1.6%) Average monthly rents $ 574 $ 554 3.6% $ 570 $ 549 3.8%
(1) Net rental income for an apartment community is defined as total rental income, less rental expenses, less real estate depreciation. (2) Economic occupancy is defined as rental income (gross potential rent less vacancy loss, management units, units held out of service, move-in concessions and credit loss) divided by potential collections (gross potential rent less management units, units held out of service and move-in concessions) for the period, expressed as a percentage. Due to the acquisition and development of 29,220 apartment homes since January 1, 1996 (the Company also sold 14 apartment communities containing 2,758 apartment homes during this same period), the weighted average number of apartment homes increased 59.7% to 57,803 for the nine months ended September 30, 1997 and 55.6% to 60,204 for the three months ended September 30, 1997. As a result of the increase in the number of apartment homes acquired since January 1, 1996, the Company has experienced significant increases in rental income, rental expenses and real estate depreciation for the three and nine months ended September 30, 1997. Mature Apartment Communities The operating performance for the Company's 128 mature apartment communities containing 31,879 apartment homes for the three and nine months ended September 30, 1997 and 1996 is summarized as follows:
Three Months Ended Nine Months Ended September 30, September 30, (In thousands) (In thousands) 1997 1996 % Change 1997 1996 % Change -------------------------------------------- ----------------------------------- Rental income $ 52,910 $ 51,097 3.5% $155,929 $ 150,573 3.6% Rental expenses (22,642) (22,545) 0.4% (67,227) (65,860) 2.1% Real estate depreciation (11,047) (10,639) 3.8% (31,760) (31,016) 2.4% ------------------------------------------ ---------------------------------- Net rental income $ 19,221 $ 17,913 7.3% $ 56,942 $ 53,697 6.0% =========================================== =================================== Economic occupancy 93.1% 93.3% (0.3%) 92.4% 93.2% (0.8%) Average monthly rents $ 574 $ 554 3.7% $ 569 $ 547 3.9%
For the nine months ended September 30, 1997, the Company's mature communities provided approximately 55% of the Company's apartment rental income and 53% of its net rental income. During the first nine months of 1997, the Company's mature apartment communities continued to generate good rent growth and double digit growth of other income. Compared to the same period last year, total rental income from these apartment homes grew 3.6%, or approximately $5.4 million, reflecting an increase in average monthly rents of 3.9% to $569 per month. In addition, other income, primarily fee income, increased approximately $1.1 million or 20.3%. The rental rate increase was offset by a 0.8% decline in economic occupancy to 92.4%, which resulted primarily from a decrease in physical occupancy of 0.7%. The economic occupancy declined due to the weakening of certain major southeastern markets 17 during the last half of 1996 including Columbia and Greenville, South Carolina, Washington DC, Jacksonville, Florida, Richmond and Hampton Roads, Virginia and Atlanta, Georgia. The Company attributes the market softness primarily to increased home buying, a slowdown in job growth and an oversupply of apartment homes in certain of the southeastern markets. Overall, economic occupancy bottomed out in January 1997 at 90.7% and has grown steadily during the remainder of the year to 93.0% for September 1997, an improvement of 2.3% during the year. The increase in occupancy has been accomplished without sacrificing rent growth which was enhanced by the Company's upgrade program. For the quarter ended September 30, 1997, total rental income from these apartment homes grew 3.5%, or approximately $1.8 million, reflecting an increase in average monthly rents of approximately $2.0 million or 3.7% to $574. Other income increased approximately $304,000 or 15.3%, over the same period last year while economic occupancy declined 0.3% to 93.1%. The Company expects to maintain rent growth in the 3.5% to 4% range and economic occupancy in the 93% range during the remainder of 1997. For the nine months ended September 30, 1997, rental expenses at these communities increased 2.1%, or $1.4 million, resulting in an improvement in the operating margin of 0.6% to 56.9%. The 2.1% increase in operating expenses is attributable to higher personnel costs, marketing and advertising costs and the Company's cost of self-management. Personnel costs increased 8.0% or approximately $1.1 million primarily due to the fact that the Company was understaffed at some of its properties during much of 1996. Marketing and advertising costs increased 43.4% or approximately $794,000 over the same period last year as a direct result of softening in certain major markets as discussed above. The cost of self-management increased 37.8% or approximately $1.4 million as the Company invested heavily in its personnel and technological infrastructure during 1997 in response to the significant growth the Company has experienced during the past year. These additions allow the Company to compete more effectively in the real estate industry. However, these rental expense increases were offset by decreases in repairs and maintenance expense and utility expense. Repairs and maintenance expense decreased 11.5% or approximately $1.4 million primarily as a result of less exterior painting, extraordinary repairs and mechanical repairs. In addition, the Company has taken advantage of economies of scale due to its increased size and centralized purchasing during the 1997 period. Utility expense decreased primarily as a result of submetering water and sewer to residents where local and state regulations allow the cost to be passed to the resident. For the quarter ended September 30, 1997, rental expenses increased only $47,000 or 0.2% over the same period last year for the same reasons discussed above. The Company's objective is to maintain rental expense growth below the 2% range during the remainder of 1997. For the three and nine months ended September 30, 1997, depreciation expense increased partly as a result of the upgrade and improvement process in place at the Company's mature apartment communities discussed under "Capital Expenditures" in Liquidity and Capital Resources. Non-Mature Communities The operating performance for the three and nine months ended September 30, 1997 for the Company's 92 non-mature apartment communities which include: (i) 7,590 apartment homes acquired during 1996, net of one resold, and a 253 home community acquired in 1995 and not stabilized due to significant rehabilitation, (ii) 13,671 apartment homes acquired on December 31, 1996 in connection with the South West Merger, net of one resold, (iii) 6,802 apartment homes acquired since January 1, 1997, (iv) 2,758 apartment homes sold since January 1, 1996 and (v) the 739 apartment homes developed since January 1, 1996 is summarized as follows (dollars in thousands): Three Months Ended September 30, 1997 and 1996:
1997 Acquisitions and Former 1997 and 1996 1996 Acquisitions South West Development & Sales Total Non-Mature ----------------------- ------------ ------------------- -------------------- 1997 1996 1997 1996 1997 1996 1997 1996 ----------------------- ------------ ------------------- -------------------- Rental income $ 12,839 $ 7,941 $ 21,934 $ -- $ 10,630 $ 2,964 $ 45,403 $ 10,905 Rental expenses (5,392) (2,944) (9,726) -- (4,734) (1,504) (19,852) (4,448) Real estate depreciation (3,415) (1,584) (3,518) -- (1,760) (123) (8,693) (1,707) ------------------------- ------------- -------------------- -------------------- Net rental income $ 4,032 $ 3,413 $ 8,690 $ -- $ 4,136 $ 1,337 $ 16,858 $ 4,750 ========================= ============== ==================== ====================
18 Nine Months Ended September 30, 1997 and 1996:
1997 Acquisitions Former 1997 and 1996 1996 Acquisitions South West Development & Sales Total Non-Mature ----------------------- ------------ ------------------- ----------------- 1997 1996 1997 1996 1997 1996 1997 1996 ----------------------- ------------ ------------------- ----------------- Rental income $ 37,906 $ 11,219 $ 64,828 $-- $ 23,513 $ 8,907 $ 126,247 $ 20,126 Rental expenses (15,479) (4,211) (27,699) -- (10,224) (4,461) (53,402) (8,672) Real estate depreciation (8,947) (2,257) (10,960) -- (3,362) (344) (23,269) (2,601) ------------------------ -------------- -------------------- ------------------ Net rental income $ 13,480 $ 4,751 $ 26,169 $-- $ 9,927 $ 4,102 $ 49,576 $ 8,853 ========================= ============= ==================== ==================
For the nine months ended September 30, 1997, the Company's non-mature apartment communities provided approximately 45% of the Company's apartment rental income and 47% of its net rental income. Rental income, rental expenses and real estate depreciation increased from 1996 to 1997 directly as a result of the increase in the weighted average number of apartment homes owned during 1997. For the nine months ended September 30, 1997, average economic occupancy was 90.7% and the operating margin was 57.7% for the non-mature apartment communities. For the quarter ended September 30, 1997, average economic occupancy was 91.2% and the operating margin was 56.3%. 1996 Acquisitions (excluding the South West Merger) The 29 apartment communities containing 7,590 apartment homes that were acquired during 1996, net of one apartment community containing 122 apartment homes resold and a 253 home community acquired in 1995 and not stabilized due to significant rehabilitation provided a significant increase in rental income, rental expenses and depreciation expense for the Company's apartment portfolio for the three and nine months ended September 30, 1997. For the first nine months of 1997, these apartment communities had economic occupancy of 89.3% and an operating margin of 59.2%. For the quarter ended September 30, 1997, these apartment communities had economic occupancy of 90.3% and an operating margin of 58.0%. The first year return on investment for these communities was projected at 9.5%, however, the actual return on investment for the nine months ended September 30, 1997, on an average investment of approximately $324 million, was approximately 9.0% (excluding one community under renovation). This was primarily due to the under-performance of nine apartment communities that were acquired in August 1996 as part of a portfolio transaction which had a concentration of communities in the Greensboro/Winston-Salem, North Carolina market. Occupancy levels in this region peaked in August 1996 when the Company acquired these properties and has subsequently fallen during the first nine months of 1997 reflecting an oversupply of apartment product in this market. The Company believes this market is a good long-term market. South West Property Trust Inc. (SWP) The acquisition of the 43 apartment communities containing 13,791 apartment homes included in the SWP Merger on December 31, 1996, net of one apartment community containing 544 apartment homes resold, provided the largest increases in rental income, rental expenses and depreciation expense for the Company's entire apartment portfolio for the three and nine months ended September 30, 1997. The first year return on investment for the SWP Portfolio was projected to be 9.5% which approximates the 9.4% return on investment posted during the first nine months of 1997. For the nine months ended September 30, 1997, these apartment communities had economic occupancy of 92.5% and an operating margin of 57.3%. For the quarter ended September 30, 1997, these apartment communities had economic occupancy of 93.3% and an operating margin of 55.7%. 1997 Acquisitions, Development and Sales Included in this category are the following: (i) the 22 apartment communities containing 6,802 apartment homes and the second phase of an existing apartment community containing 100 apartment homes acquired by the Company during the first nine months of 1997 which are projected to have a first year return on investment of approximately 9.6%, (ii) the 739 apartment homes developed since January 1, 1996 and (iii) the 14 apartment communities containing 2,758 apartment homes sold since January 1, 1996. Excluding the third quarter acquisitions, the third quarter return on investment for the 1997 acquisitions on an average investment of $220.8 million was 9.1%. These communities provided approximately 8.3% and 9.3% of the Company's rental income and net rental income, respectively, for the nine months ended September 30, 1997. For the quarter ended September 30, 1997, these properties provided 10.8% and 11.5% of the Company's rental income and net rental income, respectively. 19 Commercial Properties Rental income and rental expenses from commercial properties decreased $365,000 and $124,000, respectively during the three months ended September 30, 1997, compared to the same period last year. For the nine month period, rental income, rental expenses and depreciation expense decreased $1.8 million, $647,000 and $94,000 compared to the same period last year. These decreases were directly attributable to the sale of five shopping centers and one industrial park since the beginning of 1996. Interest Expense Interest expense increased $5.8 million and $22.9 million for the three and nine months ended September 30, 1997 over the same periods last year. The weighted average amount of debt employed during the first nine months of 1997 was higher than it was in 1996 ($1.1 billion in 1997 versus $619.1 million in 1996). The weighted average interest rate on this debt was slightly lower than it was during the same period last year, decreasing from 7.6% in 1996 to 7.5% in 1997. For the quarter ended September 30, 1997, the weighted average debt outstanding was higher than the same period last year ($1.1 billion in 1997 versus $763.9 million in 1996). The weighted average interest rate on this debt was slightly lower than it was during the same period last year, decreasing from 7.6% in 1996 to 7.4% in 1997. For the three and nine months ended September 30, 1997, total interest capitalized was $851,000 and $2.1 million, respectively. General and Administrative During the three and nine months ended September 30, 1997, general and administrative expenses increased by $359,000 and $1.1 million over the same periods last year. In 1997, the Company incurred increases in most of its general and administrative expense categories which are directly attributable to the increased size of the Company. The largest increases occurred in payroll and payroll related expenses and investor relations expense. General and administrative expense as a percentage of rental revenues decreased .4% from 2.0% during the third quarter of 1996 period to 1.6% during the third quarter of 1997 primarily due to economies of scale. During the third quarter of 1997, general and administrative expenses grew approximately 28% while rental income grew by approximately 57% over the same period last year. For the nine month period ended September 30, 1997, general and administrative expense as a percentage of rental revenues decreased .5% from 2.4% to 1.9%. During this same period, general and administrative expenses grew by approximately 26% while rental income grew by 63%. Gains on Sales of Investments During the nine months ended September 30, 1997, the Company recognized gains on the sales of investments aggregating $12.7 million as a result of the following transactions: (i) the first quarter sale of the Company's investment in the preferred stock of First Washington Realty Trust, Inc. obtained as partial consideration in the 1995 sale of four commercial properties on which the Company recognized a gain for financial reporting purposes of $2.1 million and (ii) the second and third quarter sales of ten apartment communities containing 2,106 apartment homes and one shopping center for an aggregate sales price of $57.5 million on which the Company recognized aggregate gains for financial reporting purposes of $10.6 million. Dividends to Preferred Shareholders Dividends to preferred shareholders totaled $5.7 million and $11.7 million for the three and nine month periods ended September 30, 1997 compared to $2.4 million and $7.3 million for the same periods last year. The increase in dividends to preferred shareholders is a result of the issuance of six million shares of Series B 8.60% Cumulative Redeemable Preferred Stock on May 29, 1997. Inflation The Company believes that the direct effects of inflation on the Company's operations have been inconsequential. 20 PART II Item 1. LEGAL PROCEEDINGS Neither the Company nor any of its apartment communities is presently subject to any material litigation nor, to the Company=s knowledge, is any litigation threatened against the Company or any of the communities, other than routine actions arising in the ordinary course of business, some of which are expected to be covered by liability insurance and all of which collectively are not expected to have a material adverse effect on the business or financial condition or results of operations of the Company. Item 2. CHANGES IN SECURITIES None Item 3. DEFAULT UPON SENIOR SECURITIES None Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None Item 5. OTHER INFORMATION None Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The exhibits listed on the accompanying index to exhibits are filed as part of this quarterly report. (b) A Form 8-K dated July 1, 1997 was filed with the Securities and Exchange Commission on July 15, 1997. The filing reported the acquisition by the Company of properties which were in the aggregate were "significant". The Form 8-K was subsequently amended by Form 8-K/A No. 1 which was filed with the Securities and Exchange Commission on September 15, 1997. This Form 8-K/A included the statements of rental operations of twelve properties which included Lakeside Apartments, Mallards of Brandywine Apartments, Orange Oaks Apartments, Forest Creek Apartments, Lotus Landing Apartments, Stoneybrooke Apartments, Trinity Place Apartments, Tradewinds Apartments, Anderson Mill Oaks Apartments, Post Oak Ridge Apartments, Pineloch Apartments and Seahawk Apartments. A Form 8-K dated October 21, 1997, was filed with the Securities and Exchange Commission on November 5, 1997. The filing reported the acquisition by the Company of properties, of which, the aggregate number of properties acquired exceeded the majority of properties which were audited. 21 EXHIBIT INDEX Item 6 (a) The exhibits listed below are filed as part of this quarter ly report. References under the caption "Location" to exhibits, forms, or other filings indicate that the form or other filing has been filed, that the inde xed exhibit and the exhibit referred to are the same and that the exhibit referr ed to is incorporated by reference.
Exhibit Description Location - ---------- --------------------------------- ------------------------------- 2(b) Definitive Agreement and Plan of Exhibit 2(b) to the Company's Form S-4 Registration Merger dated as of October 1, 1996, Statement (Registration No. 333-13745) filed with the between the Company, United Sub, Commission on October 9, 1996. Inc. and South West Property Trust Inc. 3(a) Restated Articles of Incorporation Filed herewith. 3(b) Restated By-Laws Exhibit 3(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997. 4(i)(a) Specimen Common Stock Exhibit 4(i) to the Company's Annual Report Certificate on Form 10-K for the year ended December 31, 1993. 4(i)(b) Form of Certificate for Shares Exhibit 1(e) to the Company's Form 8-A of 9 1/4% Series A Cumulative Registration Statement dated April 24, 1995. Redeemable Preferred Stock 4(i)(c) Form of Certificate for Shares Exhibit 1(e) to the Company's Form 8-A of 8.60% Series B Cumulative Registration Statement dated June 11, 1997. Redeemable Preferred Stock 4(ii)(a) Loan Agreement dated as of Exhibit 6(c)(i) to the Company's Form 8-A November 7, 1991, between the Registration Statement dated April 19, 1990. Company and Aid Association for Lutherans 4(ii)(e) Note Purchase Agreement dated Exhibit 6(c)(5) to the Company's Form 8-A as of February 15, 1993, between Registration Statement dated April 19, 1990. the Company and CIGNA Property and Casualty Insurance Company, Connecticut General Life Insurance Company, Connecticut General Life 22 Insurance Company, on behalf of one or more separate accounts, Insurance Company of North America, Principal Mutual Life Insurance Company and Aid Association for Lutherans 4(ii)(f) Credit Agreement dated as of Exhibit 6 (c)(6) to the Company's December 15, 1994 between the Form 8-A Registration Statement Company and First Union National Bank dated April 19, 1990. of Virginia 4(ii)(g) Three Year Credit Agreement dated Filed herewith. As of August 4, 1997, between the Company, United Dominion Realty, L.P., And other subsidiaries and affiliates Of the Company, the Lenders named Therein and NationsBank, N.A., as Administrative Agent 4(ii)(h) 364 day Credit Agreement dated Filed herewith. as of August 4, 1997, between the Company, United Dominion Realty, L.P., And other subsidiaries and affiliates Of the Company, the Lenders named Therein and NationsBank, N.A., as Administrative Agent 10(i) Employment Agreement between Exhibit 10(v)(i) to the Company's Annual Report on the Company and John P. McCann Form 10-K for the year ended December 31, 1982. dated October 29, 1982 10(ii) Employment Agreement between Exhibit 10(v)(ii) to the Company's Annual Report on the Company and James Dolphin Form 10-K for the year ended December 31, 1982. dated October 29, 1982. 10(iii) Employment Agreement between Exhibit 10(iii) to the Company's Annual The Company and Barry M. Kornblau Report on Form 10-K for the year ended dated February 1, 1991. December 31, 1990. 10(iv) Employment Agreement between Exhibit 10(iv) to the Company's Annual. the Company and John S. Schneider Report on Form 10-K for the year ended dated December 14, 1996. December 31, 1996. 10(v) Employment Agreement between Exhibit 10(v) to the Company's Annual. the Company and Robert F. Sherman Report on Form 10-K for the year ended dated December 19, 1996. December 31, 1996. 23 10(vi) Employment Agreement between Exhibit 10(vi) to the Company's Annual the Company and David L. Johnston Report on Form 10-K for the year ended dated December 19, 1996. December 31, 1996. 10(vii) 1985 Stock Option Plan, Exhibit 10(vii) to the Company's Quarterly as amended. Report on Form 10-Q for the quarter ended March 31, 1997. 10(viii) 1991 Stock Purchase and Loan Plan, Exhibit 10(vii) to the Company's Quarterly as amended. Report on Form 10-Q for the quarter ended March 31, 1997. 10(ix) Amended and Restated Agreement Filed herewith. of Limited Partnership of United Dominion Realty, L.P. Dated as of August 30, 1997. 12 Computation of Ratio of Earnings Filed herewith. to Fixed Charges 27 Financial Data Schedule Filed electronically with the Securities and Exchange Commission. 24 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized. United Dominion Realty Trust, Inc. (registrant) Date: November 14, 1997 /s/ James Dolphin - ----------------------- ----------------- James Dolphin Executive Vice President and Chief Financial Officer Date: November 14, 1997 /s/ Jerry A. Davis - ----------------------- ------------------ Jerry A. Davis Vice-President , Corporate Controller and Principal Accounting Officer 25
EX-3.(A) 2 EXHIBIT 3(A) Exhibit 3(a) RESTATED ARTICLES OF INCORPORATION OF UNITED DOMINION REALTY TRUST, INC. 1. The name of the corporation is UNITED DOMINION REALTY TRUST, INC. 2. The purpose for which the corporation is organized is to qualify as a "real estate investment trust," as defined in section 856(a) and related sections of the Internal Revenue Code of 1954, as amended (together with the Treasury Regulations promulgated pursuant thereto, the "Code"). Except as its business may be limited by the purpose set forth above, the corporation may transact any and all lawful business not required to be specifically stated in these Articles for which corporations may be incorporated under the Virginia Stock Corporation Act (the "Act"). 3. The corporation shall have authority to issue 150,000,000 shares of common stock having a par value of $1.00 per share and 25,000,000 shares of preferred stock without par value. The Board of Directors of the corporation, by adoption of an amendment of these Articles of Incorporation, may fix in whole or in part the preferences, limitations and relative rights, within the limits set forth in the Act, of any series within the preferred stock before the issuance of any shares of that series. Stockholders shall not have preemptive rights to acquire unissued shares of the corporation. (a) 9 1/4% Series A Cumulative Redeemable Preferred Stock. (1) Designation and Number. A series of the preferred stock, designated the "9 1/4% Series A Cumulative Redeemable Preferred Stock" (the "Series A Preferred"), is hereby established. The number of shares of the Series A Preferred shall be 4,600,000. (2) Relative Seniority. In respect of rights to receive dividends and to participate in distributions or payments in the event of any liquidation, dissolution or winding up of the corporation, the Series A Preferred shall rank senior to the common stock and any other capital stock of the corporation ranking, as to dividends and upon liquidation, junior to the Series A Preferred (collectively, "Junior Stock"). (3) Dividends. The holders of the then outstanding Series A Preferred shall be entitled to receive, when and as declared by the Board of Directors out of any funds legally available therefor, cumulative preferential cash dividends at the rate of 9 1/4% of the liquidation preference of the Series A Preferred (equivalent to $2.3125 per share) per annum, payable quarterly in arrears in cash on the fifteenth day, or the next succeeding business day, of January, April, July and October in each year, beginning July 15, 1995 (each such day being hereinafter called a "Dividend Payment Date" and each period beginning on the day next following a Dividend Payment Date and ending on the next following Dividend Payment Date being hereinafter called a "Dividend Period"), to shareholders of record at the close of business on the first day of the calendar month in which the applicable Dividend Payment Date falls on or such date as shall be fixed by the Board of Directors at the time of declaration of the dividend (the "Dividend Record Date"), which shall be not less than 10 nor more than 30 days preceding the Dividend Payment Date. The amount of any dividend payable for the initial Dividend Period and for any other partial Dividend Period shall be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends on the shares of Series A Preferred shall accrue and be cumulative from and including the date of original issue thereof, whether or not (i) the corporation has earnings, (ii) dividends on such shares are declared or (iii) on any Dividend Payment Date there shall be funds legally available for the payment of such dividends. When dividends are not paid in full upon the shares of Series A Preferred and the shares of any other series of preferred stock ranking on a parity as to dividends with the Series A Preferred (or a sum sufficient for such full payment is not set apart therefor), all dividends declared upon shares of Series A Preferred and any other series of preferred stock ranking on a parity as to dividends with the Series A Preferred shall be declared pro rata so that the amount of dividends declared per share on the Series A Preferred and such other series of preferred stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of Series A Preferred and such other series of preferred stock bear to each other. Except as provided in the immediately preceding paragraph, unless full cumulative dividends on the Series A Preferred have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment on the Series A Preferred for all past dividend periods and the then current dividend period, (i) no dividends shall be declared or paid or set apart for payment on the preferred stock of the corporation ranking, as to dividends, on a parity with or junior to the Series A Preferred for any period, and (ii) no dividends (other than in Junior Stock) shall be declared or paid or set aside for payment or other distribution or shall be declared or made upon the Junior Stock or any other capital stock of the corporation ranking on a parity with the Series A Preferred as to dividends or upon liquidation ("Parity Stock"), nor shall any Junior Stock or any Parity Stock be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of Junior Stock or Parity Stock) by the corporation (except by conversion into or exchange for Junior Stock). Any dividend payment made on shares of the Series A Preferred shall first be credited against the earliest accrued but unpaid dividend due with respect to such shares which remains payable. No dividends on shares of Series A Preferred shall be declared by the Board of Directors of the corporation or paid or set apart for payment by the corporation at such time as the terms and provisions of any agreement of the corporation, including any agreement relating to its indebtedness, prohibits such declaration, payment or setting apart for payment or provides that such declaration, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such declaration or payment shall be restricted or prohibited by law. The amount of any dividends accrued on any shares of Series A Preferred at any Dividend Payment Date shall be the amount of any unpaid dividends accumulated thereon, to and including such Dividend Payment Date, whether or not earned or declared, and the amount of dividends accrued on any shares of Series A Preferred at any date other than a Dividend Payment Date shall be equal to the sum of the amount of any unpaid dividends accumulated thereon, to and including the last preceding Dividend Payment Date, whether or not earned or declared, plus an amount calculated on the basis of the annual dividend rate for the period after such last preceding Dividend Payment Date to and including the date as of which the calculation is made, based on a 360-day year of twelve 30-day months. Accrued but unpaid dividends on the Series A Preferred will not bear interest. Holders of the Series A Preferred will not be entitled to any dividends in excess of full cumulative dividends as described above. Except as provided in these Articles, the Series A Preferred shall not be entitled to participate in the earnings or assets of the corporation. (4) Liquidation Rights. (A) Upon the voluntary or involuntary dissolution, liquidation or winding up of the corporation, the holders of shares of the Series A Preferred then outstanding shall be entitled to receive and to be paid out of the assets of the corporation legally available for distribution to its shareholders, before any distribution shall be made to the holders of common stock or any other capital stock of the corporation ranking junior to the Series A Preferred upon liquidation, a liquidation preference of $25.00 per share, plus accrued and unpaid dividends thereon to the date of payment. (B) After the payment to the holders of the shares of the Series A Preferred of the full liquidation preference provided for in this paragraph (4), the holders of the Series A Preferred as such shall have no right or claim to any of the remaining assets of the corporation. (C) If, upon any voluntary or involuntary dissolution, liquidation, or winding up of the corporation, the amounts payable with respect to the liquidation preference of the shares of the Series A Preferred and any other shares of stock of the corporation ranking as to any such distribution on a parity with the shares of the Series A Preferred are not paid in full, the holders of the shares of the Series A Preferred and of such other shares will share ratably in any such distribution of assets of the corporation in proportion to the full respective liquidation preferences to which they are entitled. (D) Neither the sale, lease, transfer or conveyance of all or substantially all the property or business of the corporation, nor the merger or consolidation of the corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes of this paragraph (4). (5) Redemption. (A) Right of Optional Redemption. The Series A Preferred is not redeemable prior to April 24, 2000. On and after April 24, 2000, the corporation may, at its option, redeem at any time all or, from time to time, part of the Series A Preferred at a price per share (the "Series A Redemption Price"), payable in cash, of $25.00, together with all accrued and unpaid dividends to and including the date fixed for redemption (the "Series A Redemption Date"), without interest. In case of redemption of less than all shares of Series A Preferred at the time outstanding, the shares of Series A Preferred to be redeemed shall be selected pro rata from the holders of record of such shares in proportion to the number of shares of Series A Preferred held by such holders (as nearly as may be practicable without creating fractional shares) or by any other equitable method determined by the corporation. (B) Procedures for Redemption. (i) Notice of any redemption will be (a) given by publication in a newspaper of general circulation in the City of New York, New York, such publication to be made once a week for two successive weeks commencing not less than 30 nor more than 60 days prior to the Series A Redemption Date, and (b) mailed by the corporation, postage prepaid, not less than 30 nor more than 60 days prior to the Series A Redemption Date, addressed to the respective holders of record of the Series A Preferred to be redeemed at their respective addresses as they appear on the stock transfer records of the corporation. No failure to give such notice or any defect therein or in the mailing thereof shall affect the validity of the proceedings for the redemption of any Series A Preferred except as to the holder to whom the corporation has failed to give notice or except as to the holder to whom notice was defective. In addition to any information required by law or by the applicable rules of any exchange upon which Series A Preferred may be listed or admitted to trading, such notice shall state: (a) the Series A Redemption Date; (b) the Series A Redemption Price; (c) the number of shares of Series A Preferred to be redeemed; (d) the place or places where certificates for such shares are to be surrendered for payment of the Series A Redemption Price; and (e) that dividends on the shares to be redeemed will cease to accumulate on the Series A Redemption Date. If less than all the shares of Series A Preferred held by any holder are to be redeemed, the notice mailed to such holder shall also specify the number of shares of Series A Preferred held by such holder to be redeemed. (ii) If notice of redemption of any shares of Series A Preferred has been published and mailed in accordance with subparagraph (5)(B)(i) above and provided that on or before the Series A Redemption Date specified in such notice all funds necessary for such redemption shall have been irrevocably set aside by the corporation, separate and apart from its other funds in trust for the benefit of any holders of the shares of Series A Preferred so called for redemption, so as to be, and to continue to be available therefor, then, from and after the Series A Redemption Date, dividends on such shares of Series A Preferred shall cease to accrue, and such shares shall no longer be deemed to be outstanding and shall not have the status of Series A Preferred and all rights of the holders thereof as shareholders of the corporation (except the right to receive the Series A Redemption Price) shall terminate. Upon surrender, in accordance with said notice, of the certificates for any shares of Series A Preferred so redeemed (properly endorsed or assigned for transfer, if the corporation shall so require and the notice shall so state), such shares of Series A Preferred shall be redeemed by the corporation at the Series A Redemption Price. In case less than all the shares of Series A Preferred represented by any such certificate are redeemed, a new certificate or certificates shall be issued representing the unredeemed shares of Series A Preferred without cost to the holder thereof. (iii) The deposit of funds with a bank or trust company for the purpose of redeeming Series A Preferred shall be irrevocable except that: (a) the corporation shall be entitled to receive from such bank or trust company the interest or other earnings, if any, earned on any money so deposited in trust, and the holders of any shares redeemed shall have no claim to such interest or other earnings; and (b) any balance of monies so deposited by the corporation and unclaimed by the holders of the Series A Preferred entitled thereto at the expiration of two years from the applicable Series A Redemption Date shall be repaid, together with any interest or other earnings earned thereon, to the corporation, and after any such repayment, the holders of the shares entitled to the funds so repaid to the corporation shall look only to the corporation for payment without interest or other earnings. (C) Limitations on Redemption (i) The Series A Redemption Price (other than the portion thereof consisting of accrued and unpaid dividends) shall be payable solely out of the sale proceeds of other capital stock of the corporation and from no other source. (ii) Unless full cumulative dividends on all shares of Series A Preferred shall have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past Dividend Periods and the then current Dividend Period, no Series A Preferred shall be redeemed (unless all outstanding shares of Series A Preferred are simultaneously redeemed) or purchased or otherwise acquired directly or indirectly (except by exchange for Junior Stock); provided, however, that the foregoing shall not prevent the redemption of Series A Preferred pursuant to Article 4 or the purchase or acquisition of Series A Preferred pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series A Preferred. (D) Rights to Dividends on Shares Called for Redemption. If the Series A Redemption Date is after a Dividend Record Date and before the related Dividend Payment Date, the dividend payable on such Dividend Payment Date shall be paid to the holder in whose name the shares of Series A Preferred to be redeemed are registered at the close of business on such Dividend Record Date notwithstanding the redemption thereof between such Dividend Record Date and the related Dividend Payment Date or the corporation's default in the payment of the dividend due. Except as provided in this paragraph (5), the corporation will make no payment or allowance for unpaid dividends, whether or not in arrears, on called Series A Preferred. (6) Voting Rights. Except as required by the Virginia Stock Corporation Act and except as otherwise provided in this paragraph (6), the holders of the Series A Preferred shall not be entitled to vote at any meeting of the shareholders for election of directors or for any other purpose or otherwise to participate in any action taken by the corporation or the shareholders thereof, or to receive notice of any meeting of shareholders. (A) Whenever dividends on any shares of Series A Preferred shall be in arrears for six or more consecutive quarterly periods, the holders of such shares of Series A Preferred (voting separately as a class with all other series of preferred stock upon which like voting rights have been conferred and are exercisable) will be entitled to vote for the election of two additional directors of the corporation at a special meeting called by the holders of record of at least 10% of the Series A Preferred or the holders of any other series of preferred stock so in arrears (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the shareholders) or at the next annual meeting of shareholders, and at each subsequent annual meeting until all dividends accumulated on such shares of Series A Preferred for the past Dividend Periods and the then current Dividend Period shall have been fully paid or declared and a sum sufficient for the payment thereof set aside for payment. In such case, the entire Board of Directors of the corporation will be increased by two directors. (B) So long as any shares of Series A Preferred remain outstanding, the corporation shall not, without the affirmative vote of the holders of at least a majority of the shares of the Series A Preferred outstanding at the time, (i) authorize or create, or increase the authorized or issued amount of, any class or series of capital stock ranking prior to the Series A Preferred with respect to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up or reclassify any authorized capital stock of the corporation into any such shares, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such shares; or (ii) amend, alter or repeal the provisions of these Articles, whether by merger, consolidation or otherwise, so as to materially and adversely affect any right, preference, privilege or voting power of the Series A Preferred or the holders thereof; provided, however, that any increase in the amount of the authorized preferred stock or the creation or issuance of any other series of preferred stock, or any increase in the amount of authorized shares of such series, in each case ranking on a parity with or junior to the Series A Preferred with respect to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers. (C) The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of Series A Preferred shall have been redeemed or called for redemption upon proper notice and sufficient funds shall have been deposited in trust to effect such redemption. (D) So long as the Series A Preferred is listed or admitted to trading on the New York Stock Exchange, then notwithstanding anything to the contrary in these Articles, including without limitation Article 8, approval by the holders of at least two-thirds of the outstanding shares of the Series A Preferred shall be required for adoption of any amendment of these Articles or of the bylaws of the corporation that would materially affect the existing terms of the Series A Preferred. (7) Conversion of Series A Preferred. The Series A Preferred is not convertible into or exchangeable for any other property or securities of the corporation. (b) 8.60% Series B Cumulative Redeemable Preferred Stock. (1) Designation and Number. A series of the preferred stock, designated the "8.60% Series B Cumulative Redeemable Preferred Stock" (the "Series B Preferred"), is hereby established. The number of shares of the Series B Preferred shall be 6,900,000. Such number shall include 400,000 unissued shares of the Series A Preferred, which are hereby redesignated as 400,000 shares of the Series B Preferred. (2) Relative Seniority. In respect of rights to receive dividends and to participate in distributions or payments in the event of any liquidation, dissolution or winding up of the corporation, the Series B Preferred shall rank pari passu with the Series A Preferred and senior to the common stock and any other capital stock of the corporation ranking, as to dividends and upon liquidation, junior to the Series A Preferred (collectively, "Junior Stock"). (3) Dividends. The holders of the then outstanding Series B Preferred shall be entitled to receive, when and as declared by the Board of Directors out of any funds legally available therefor, cumulative preferential cash dividends at the rate of 8.60% of the liquidation preference of the Series B Preferred (equivalent to $2.15 per share) per annum, payable quarterly in arrears in cash on the last day, or the next succeeding business day, of February, May, August and November in each year, beginning August 31, 1997 (each such day being hereinafter called a "Dividend Payment Date" and each period beginning on the day next following a Dividend Payment Date and ending on the next following Dividend Payment Date being hereinafter called a "Dividend Period"), to shareholders of record at the close of business on the fifteenth day of the calendar month in which the applicable Dividend Payment Date falls on or such date as shall be fixed by the Board of Directors at the time of declaration of the dividend (the "Dividend Record Date"), which shall be not less than 10 nor more than 30 days preceding the Dividend Payment Date. The amount of any dividend payable for the initial Dividend Period and for any partial Dividend Period shall be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends on the shares of Series B Preferred shall accrue and be cumulative from and including the date of original issue thereof, whether or not (i) the corporation has earnings, (ii) dividends on such shares are declared or (iii) on any Dividend Payment Date there shall be funds legally available for the payment of such dividends. When dividends are not paid in full upon the shares of Series B Preferred and the shares of any other series of preferred stock ranking on a parity as to dividends with the Series B Preferred (or a sum sufficient for such full payment is not set apart therefor), all dividends declared upon shares of Series B Preferred and any other series of preferred stock ranking on a parity as to dividends with the Series B Preferred shall be declared pro rata so that the amount of dividends declared per share on the Series B Preferred and such other series of preferred stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of Series B Preferred and such other series of preferred stock bear to each other. Except as provided in the immediately preceding paragraph, unless full cumulative dividends on the Series B Preferred have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment on the Series B Preferred for all past dividend periods and the then current dividend period, (i) no dividends shall be declared or paid or set apart for payment on the preferred stock of the corporation ranking, as to dividends, on a parity with or junior to the Series B Preferred for any period, and (ii) no dividends (other than in Junior Stock) shall be declared or paid or set aside for payment or other distribution or shall be declared or made upon the Junior Stock or any other capital stock of the corporation ranking on a parity with the Series B Preferred as to dividends or upon liquidation ("Parity Stock"), nor shall any Junior Stock or any Parity Stock be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of Junior Stock or Parity Stock) by the corporation (except by conversion into or exchange for Junior Stock). Any dividend payment made on shares of the Series B Preferred shall first be credited against the earliest accrued but unpaid dividend due with respect to such shares which remains payable. No dividends on shares of Series B Preferred shall be declared by the Board of Directors of the corporation or paid or set apart for payment by the corporation at such time as the terms and provisions of any agreement of the corporation, including any agreement relating to its indebtedness, prohibits such declaration, payment or setting apart for payment or provides that such declaration, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such declaration or payment shall be restricted or prohibited by law. The amount of any dividends accrued on any shares of Series B Preferred at any Dividend Payment Date shall be the amount of any unpaid dividends accumulated thereon, to and including such Dividend Payment Date, whether or not earned or declared, and the amount of dividends accrued on any shares of Series B Preferred at any date other than a Dividend Payment Date shall be equal to the sum of the amount of any unpaid dividends accumulated thereon, to and including the last preceding Dividend Payment Date, whether or not earned or declared, plus an amount calculated on the basis of the annual dividend rate for the period after such last preceding Dividend Payment Date to and including the date as of which the calculation is made, based on a 360-day year of twelve 30-day months. Accrued but unpaid dividends on the Series B Preferred will not bear interest. Holders of the Series B Preferred will not be entitled to any dividends in excess of full cumulative dividends as described above. Except as provided in these Articles, the Series B Preferred shall not be entitled to participate in the earnings or assets of the corporation. (4) Liquidation Rights. (A) Upon the voluntary or involuntary dissolution, liquidation or winding up of the corporation, the holders of shares of the Series B Preferred then outstanding shall be entitled to receive and to be paid out of the assets of the corporation legally available for distribution to its shareholders, before any distribution shall be made to the holders of common stock or any other capital stock of the corporation ranking junior to the Series B Preferred upon liquidation, a liquidation preference of $25.00 per share, plus accrued and unpaid dividends thereon to the date of payment. (B) After the payment to the holders of the shares of the Series B Preferred of the full liquidation preference provided for in this paragraph (4), the holders of the Series B Preferred as such shall have no right or claim to any of the remaining assets of the corporation. (C) If, upon any voluntary or involuntary dissolution, liquidation or winding up of the corporation, the amounts payable with respect to the liquidation preference of the shares of the Series B Preferred and any other shares of stock of the corporation ranking as to any such distribution on a parity with the shares of the Series B Preferred are not paid in full, the holders of the shares of the Series B Preferred and of such other shares will share ratably in any such distribution of assets of the corporation in proportion to the full respective liquidation preferences to which they are entitled. (D) Neither the sale, lease, transfer or conveyance of all or substantially all the property or business of the corporation, nor the merger or consolidation of the corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes of this paragraph (4). (5) Redemption. (A) Right of Optional Redemption. The Series B Preferred is not redeemable prior to May 29, 2007. On and after May 29, 2007, the corporation may, at its option, redeem at any time all or, from time to time, part of the Series B Preferred at a price per share (the "Series B Redemption Price"), payable in cash, of $25.00, together with all accrued and unpaid dividends to and including the date fixed for redemption (the "Series B Redemption Date"), without interest. In case of redemption of less than all shares of Series B Preferred at the time outstanding, the shares of Series B Preferred to be redeemed shall be selected pro rata from the holders of record of such shares in proportion to the number of shares of Series B Preferred held by such holders (as nearly as may be practicable without creating fractional shares) or by any other equitable method determined by the corporation. (B) Procedures for Redemption. (i) Notice of any redemption will be (a) given by publication in a newspaper of general circulation in the City of New York, New York, such publication to be made once a week for two successive weeks commencing not less than 30 nor more than 60 days prior to the Series B Redemption Date, and (b) mailed by the corporation, postage prepaid, not less than 30 nor more than 60 days prior to the Series B Redemption Date, addressed to the respective holders of record of the Series B Preferred to be redeemed at their respective addresses as they appear on the stock transfer records of the corporation. No failure to give such notice or any defect therein or in the mailing thereof shall affect the validity of the proceedings for the redemption of any Series B Preferred except as to the holder to whom the corporation has failed to give notice or except as to the holder to whom notice was defective. In addition to any information required by law or by the applicable rules of any exchange upon which Series B Preferred may be listed or admitted to trading, such notice shall state: (a) the Series B Redemption Date; (b) the Series B Redemption Price; (c) the number of shares of Series B Preferred to be redeemed; (d) the place or places where certificates for such shares are to be surrendered for payment of the Series B Redemption Price; and (e) that dividends on the shares to be redeemed will cease to accumulate on the Series B Redemption Date. If less than all the shares of Series B Preferred held by any holder are to be redeemed, the notice mailed to such holder shall also specify the number of shares of Series B Preferred held by such holder to be redeemed. (ii) If notice of redemption of any shares of Series B Preferred has been published and mailed in accordance with subparagraph (5)(B)(i) above and provided that on or before the Series B Redemption Date specified in such notice all funds necessary for such redemption shall have been irrevocably set aside by the corporation, separate and apart from its other funds in trust for the benefit of any holders of the shares of Series B Preferred so called for redemption, so as to be, and to continue to be available therefor, then, from and after the Series B Redemption Date, dividends on such shares of Series B Preferred shall cease to accrue, and such shares shall no longer be deemed to be outstanding and shall not have the status of Series B Preferred and all rights of the holders thereof as shareholders of the corporation (except the right to receive the Series B Redemption Price) shall terminate. Upon surrender, in accordance with said notice, of the certificates for any shares of Series B Preferred so redeemed (properly endorsed or assigned for transfer, if the corporation shall so require and the notice shall so state), such shares of Series B Preferred shall be redeemed by the corporation at the Series B Redemption Price. In case less than all the shares of Series B Preferred represented by any such certificate are redeemed, a new certificate or certificates shall be issued representing the unredeemed shares of Series B Preferred without cost to the holder thereof. (iii) The deposit of funds with a bank or trust company for the purpose of redeeming Series B Preferred shall be irrevocable except that: (a) the corporation shall be entitled to receive from such bank or trust company the interest or other earnings, if any, earned on any money so deposited in trust, and the holders of any shares redeemed shall have no claim to such interest or other earnings; and (b) any balance of monies so deposited by the corporation and unclaimed by the holders of the Series B Preferred entitled thereto at the expiration of two years from the applicable Series B Redemption Date shall be repaid, together with any interest or other earnings earned thereon, to the corporation, and after any such repayment, the holders of the shares entitled to the funds so repaid to the corporation shall look only to the corporation for payment without interest or other earnings. (C) Limitations on Redemption (i) The Series B Redemption Price (other than the portion thereof consisting of accrued and unpaid dividends) shall be payable solely out of the sale proceeds of other capital stock of the corporation and from no other source. (ii) Unless full cumulative dividends on all shares of Series B Preferred shall have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past Dividend Periods and the then current Dividend Period, no Series B Preferred shall be redeemed (unless all outstanding shares of Series B Preferred are simultaneously redeemed) or purchased or otherwise acquired directly or indirectly (except by exchange for Junior Stock); provided, however, that the foregoing shall not prevent the redemption of Series B Preferred pursuant to Article 4 or the purchase or acquisition of Series B Preferred pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series B Preferred. (D) Rights to Dividends on Shares Called for Redemption. If the Series B Redemption Date is after a Dividend Record Date and before the related Dividend Payment Date, the dividend payable on such Dividend Payment Date shall be paid to the holder in whose name the shares of Series B Preferred to be redeemed are registered at the close of business on such Dividend Record Date notwithstanding the redemption thereof between such Dividend Record Date and the related Dividend Payment Date or the corporation's default in the payment of the dividend due. Except as provided in this paragraph (5), the corporation will make no payment or allowance for unpaid dividends, whether or not in arrears, on called Series B Preferred. (6) Voting Rights. Except as required by the Virginia Stock Corporation Act and except as otherwise provided in this paragraph (6), the holders of the Series B Preferred shall not be entitled to vote at any meeting of the shareholders for election of directors or for any other purpose or otherwise to participate in any action taken by the corporation or the shareholders thereof, or to receive notice of any meeting of shareholders. (A) Whenever dividends on any shares of Series B Preferred shall be in arrears for six or more consecutive quarterly periods, the holders of such shares of Series B Preferred (voting separately as a class with all other series of preferred stock upon which like voting rights have been conferred and are exercisable) will be entitled to vote for the election of two additional directors of the corporation at a special meeting called by the holders of record of at least 10% of the Series B Preferred or the holders of any other series of preferred stock so in arrears (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the shareholders) or at the next annual meeting of shareholders, and at each subsequent annual meeting until all dividends accumulated on such shares of Series B Preferred for the past Dividend Periods and the then current Dividend Period shall have been fully paid or declared and a sum sufficient for the payment thereof set aside for payment. In such case, the entire Board of Directors of the corporation will be increased by two directors. (B) So long as any shares of Series B Preferred remain outstanding, the corporation shall not, without the affirmative vote of the holders of at least a majority of the shares of the Series B Preferred outstanding at the time, (i) authorize or create, or increase the authorized or issued amount of, any class or series of capital stock ranking prior to the Series B Preferred with respect to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up or reclassify any authorized capital stock of the corporation into any such shares, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such shares; or (ii) amend, alter or repeal the provisions of these Articles, whether by merger, consolidation or otherwise, so as to materially and adversely affect any right, preference, privilege or voting power of the Series B Preferred or the holders thereof; provided, however, that any increase in the amount of the authorized preferred stock or the creation or issuance of any other series of preferred stock, or any increase in the amount of authorized shares of such series, in each case ranking on a parity with or junior to the Series B Preferred with respect to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers. (C) The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of Series B Preferred shall have been redeemed or called for redemption upon proper notice and sufficient funds shall have been deposited in trust to effect such redemption. (D) So long as the Series B Preferred is listed or admitted to trading on The New York Stock Exchange, then notwithstanding anything to the contrary in these Articles, including without limitation Article 8, approval by the holders of at least two-thirds of the outstanding shares of the Series B Preferred shall be required for adoption of any amendment of these Articles or of the bylaws of the corporation that would materially affect the existing terms of the Series B Preferred. (7) Conversion of Series B Preferred. The Series B Preferred is not convertible into or exchangeable for any other property or securities of the corporation. 4. If the Board of Directors of the corporation shall, at any time and in good faith, be of the opinion that direct or indirect ownership of shares of the corporation has or may become concentrated in any individual or individuals to an extent which would disqualify the corporation as a "real estate investment trust" under the requirements of the Code applicable of the qualification of "real estate investment trusts" (the "REIT provisions'), then the corporation shall have the power. (a) to call for redemption by lot or other means deemed equitable by the Board of Directors and to redeem a number of concentrated shares sufficient, in the opinion of the Board of Directors, to maintain or bring the direct or indirect ownership of shares of the corporation into conformity with the REIT provisions; and (b) to stop the transfer of its shares to any person whose acquisition thereof would, in the opinion of the Board of Directors, result in such disqualification. The per share redemption price of any shares redeemed by the corporation pursuant to paragraph (a) of this Article 4 shall be the highest closing bid price quotation (if then traded over the counter) or the closing sale price (if then listed on a national securities exchange) for the shares as of the business day preceding the day on which notice of redemption is given as reported by any source reasonably believed reliable by the Board of Directors, or, if no bid price quotation or closing sale price for the shares is available, as determined in good faith by the Board of Directors, From and after the date fixed for redemption by the Board of Directors, the holder of any shares so called for redemption shall cease to be entitled to dividends, voting rights and other benefits with respect to such shares excepting only the right to payment of the redemption price fixed as aforesaid. For the purpose of this Article 4, the terms "individual" and "ownership" of shares shall be defined in accordance with or by reference to the REIT provisions. 5. Holders of shares of the corporation shall upon demand disclose to the corporation in writing such information with respect to direct and indirect ownership thereof as the Board of Directors may deem necessary to enable the corporation to comply with the REIT provisions or to comply with the requirements of any other taxing authority. 6. The number of directors of the corporation shall be fixed by the By-Laws or, in the absence of a By-Law fixing such number, shall be three. 7. (a) To the full extent that the Act, as it exists on the date hereof or may hereafter be amended, permits the limitation or elimination of the liability of directors or officers, a director or officer of the corporation shall not be liable to the corporation or its stockholders for monetary damages. In the event that the Act shall be construed to require in any case in which such liability may be so limited or eliminated, as a condition of limitation or elimination thereof, specification in these Articles of an amount in dollars and/or cents as the amount of the liability of directors or officers, such amount is hereby specified at zero dollars and zero cents ($0.00), in cases in which such liability may be eliminated, and at the minimum amount permitted by the Act, expressed in dollars and/or cents, in cases in which such liability may be limited. (b) To the full extent permitted and in the manner prescribed by the Act, as it exists on the date hereof or may hereafter be amended, and any other applicable law, the corporation shall indemnify a director or officer of the corporation who is or was a party to any proceeding by reason of the fact that he is or was such a director or officer or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. The Board of Directors is hereby empowered, by majority vote of a quorum of disinterested directors, to contract in advance to indemnify any director or officer. (c) The Board of Directors is hereby empowered, by majority vote of a quorum of disinterested directors, to cause the corporation to indemnify or contract in advance to indemnify any person not specified in paragraph (b) of this Article 7 who was or is a party to any proceeding, by reason of the fact that he is or was an employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, to the same extent as if such person were required to be indemnified by paragraph (b). (d) The corporation may purchase and maintain insurance to indemnify it against the whole or any portion of its liability under this Article 7 and may also procure insurance, in such amounts as the Board of Directors may determine, on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against any liability asserted against or incurred by such person in any such capacity or arising from his status as such, whether or not the corporation would have power to indemnify such person against such liability under the provisions of this Article 7. (e) In the event there has been a change in the composition of a majority of the Board of Directors after the date of the alleged act or omission with respect to which indemnification is claimed, any determination as to indemnification and advancement of expenses with respect to any claim for indemnification made pursuant to paragraph (a) of this Article 7 shall be made by special legal counsel agreed upon by the Board of Directors and the proposed indemnitee. If the Board of Directors and the proposed indemnitee are unable to agree upon such special legal counsel, the Board of Directors and the proposed indemnitee each shall select a nominee, and the nominees shall select such special legal counsel. (f) The provisions of this Article 7 shall be applicable to all actions, claims, suits or proceedings commenced after the adoption hereof by stockholders, whether arising from any action taken or failure to act before or after such adoption. No amendment or repeal of this Article 7 shall diminish the rights provided hereby or diminish the right to indemnification with respect to any claim, issue or matter in any then pending or subsequent proceeding that is based in any material respect on any alleged action or failure to act prior to such amendment or repeal. (g) References herein to directors, officers, employees or agents shall include former directors, officers, employees and agents and their respective heirs, executors and administrators. 8. Except as otherwise required by the Act, by these Articles, or by the Board of Directors acting pursuant to Subsection C of Section 13.1-707 of the Act, or any successor provision, the vote required to approve an amendment or restatement of these Articles, other than an amendment or restatement that amends or affects the shareholder vote required by the Act to approve a merger, share exchange, sale of all or substantially all of the corporation's assets or the dissolution of the corporation, shall be a majority of all votes entitled to be cast by each voting group entitled to vote on the amendment. EX-4 3 EXHIBIT 4(II)(G) EXHIBIT 4(ii)(g) THREE YEAR CREDIT AGREEMENT Dated as of August 4, 1997 among UNITED DOMINION REALTY TRUST, INC., as Borrower, UNITED DOMINION REALTY, L.P. and Certain Other Subsidiaries and Affiliates of the Borrower, as Guarantors, THE LENDERS NAMED HEREIN AND NATIONSBANK, N.A., as Administrative Agent and FIRST UNION NATIONAL BANK, as Co-Agent TABLE OF CONTENTS
SECTION 1 DEFINITIONS .........................................................1 1.1 Definitions.......................................................1 1.2 Computation of Time Periods......................................20 1.3 Accounting Terms.................................................20 SECTION 2 CREDIT FACILITIES ..................................................21 2.1 Revolving Loans..................................................21 2.2 Swingline Loan Subfacility.......................................22 2.3 Competitive Loan Subfacility.....................................24 SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES......................27 3.1 Default Rate.....................................................27 3.2 Extension and Conversion.........................................27 3.3 Prepayments......................................................28 3.4 Termination and Reduction of Commitments.........................28 3.5 Fees.............................................................28 3.6 Capital Adequacy.................................................29 3.7 Inability To Determine Interest Rate.............................29 3.8 Illegality.......................................................29 3.9 Requirements of Law..............................................30 3.10 Taxes...........................................................31 3.11 Indemnity.......................................................33 3.12 Pro Rata Treatment..............................................33 3.13 Sharing of Payments.............................................34 3.14 Payments, Computations, Etc.....................................35 3.15 Evidence of Debt................................................36 SECTION 4 GUARANTY ...........................................................37 4.1 The Guarantee....................................................37 4.2 Obligations Unconditional........................................37 4.3 Reinstatement....................................................38 4.4 Certain Additional Waivers.......................................39 4.5 Remedies.........................................................39 4.6 Rights of Contribution...........................................39 4.7 Continuing Guarantee.............................................40 SECTION 5 CONDITIONS .........................................................40 5.1 Conditions to Closing............................................40 5.2 Conditions to All Extensions of Credit...........................41 SECTION 6 REPRESENTATIONS AND WARRANTIES......................................42 6.1 Financial Condition..............................................42 6.2 No Material Adverse Changes......................................43 6.3 Organization; Existence; Compliance with Law.....................43 6.4 Power; Authorization; Enforceable Obligations....................43 i 6.5 No Legal Bar.....................................................44 6.6 No Material Litigation...........................................44 6.7 No Default.......................................................44 6.8 Ownership of Property; Liens.....................................44 6.9 Taxes............................................................44 6.10 ERISA...........................................................45 6.11 Governmental Regulations, Etc...................................46 6.12 Subsidiaries....................................................47 6.13 Purpose of Extensions of Credit.................................47 6.14 Environmental Matters...........................................47 SECTION 7 AFFIRMATIVE COVENANTS...............................................48 7.1 Financial Statements.............................................48 7.2 Certificates; Other Information..................................49 7.3 Notices..........................................................49 7.4 Payment of Obligations...........................................51 7.5 Conduct of Business and Maintenance of Existence.................51 7.6 Maintenance of Property; Insurance...............................51 7.7 Inspection of Property; Books and Records; Discussions...........51 7.8 Environmental Laws...............................................52 7.9 Financial Covenants..............................................52 7.10 Agency Fees.....................................................53 7.11 Additional Guaranties and Stock Pledges.........................53 7.12 Ownership of Subsidiaries.......................................53 7.13 Use of Proceeds.................................................54 SECTION 8 NEGATIVE COVENANTS .................................................54 8.1 Limitations on Debt..............................................54 8.2 Restriction on Liens.............................................54 8.3 Consolidations, Mergers and Sales of Assets......................55 8.4 Loans and Investments............................................56 8.5 Transactions with Affiliates.....................................56 8.6 Transactions with Other Persons regarding this Agreement.........57 8.7 Limitation on Certain Restrictions on Subsidiaries...............57 SECTION 9 EVENTS OF DEFAULT ..................................................57 9.1 Events of Default................................................57 9.2 Acceleration; Remedies...........................................59 SECTION 10 AGENCY PROVISIONS .................................................60 10.1 Appointment.....................................................60 10.2 Delegation of Duties............................................61 10.3 Exculpatory Provisions..........................................61 10.4 Reliance on Communications......................................61 10.5 Notice of Default...............................................62 10.6 Non-Reliance on Administrative Agent and Other Lenders..........62 10.7 Indemnification.................................................63 10.8 Administrative Agent in its Individual Capacity.................63 ii 10.9 Successor Administrative Agent..................................63 SECTION 11 MISCELLANEOUS .....................................................64 11.1 Notices.........................................................64 11.2 Right of Set-Off................................................65 11.3 Benefit of Agreement............................................65 11.4 No Waiver; Remedies Cumulative..................................68 11.5 Payment of Expenses, etc........................................68 11.6 Amendments, Waivers and Consents................................69 11.7 Counterparts....................................................70 11.8 Headings........................................................70 11.9 Survival........................................................70 11.10 Governing Law; Submission to Jurisdiction; Venue...............70 11.11 Severability...................................................71 11.12 Entirety.......................................................71 11.13 Binding Effect; Termination....................................71 11.14 Source of Funds................................................71 11.15 Conflict.......................................................72
iii
SCHEDULES Schedule 2.1(a)............ Schedule of Lenders and Commitments Schedule 2.1(b)(i)......... Form of Notice of Borrowing Schedule 2.1(e)............ Form of Revolving Note Schedule 2.2(d)............ Form of Swingline Note Schedule 2.3(b)-1.......... Form of Competitive Bid Request Schedule 2.3(b)-2.......... Form of Notice of Receipt of Competitive Bid Request Schedule 2.3(c)............ Form of Competitive Bid Schedule 2.3(e)............ Form of Competitive Bid Accept/Reject Letter Schedule 2.3(i)............ Form of Competitive Note Schedule 3.2............... Form of Notice of Extension/Conversion Schedule 5.1(e)(v)......... Officer's Certificate Schedule 6.3............... Qualifications Concerning Organization, Existence and Compliance with Law Schedule 6.12.............. Subsidiaries Schedule 7.2(b)............ Form of Officer's Compliance Certificate Schedule 7.11.............. Form of Joinder Agreement Schedule 8.7............... REMICs and Other Special Subsidiaries Schedule 11.1.............. Schedule of Lender's Addresses Schedule 11.3(b)........... Form of Assignment and Acceptance
iv THREE-YEAR CREDIT AGREEMENT THIS CREDIT AGREEMENT dated as of August 4, 1997 (the "Credit Agreement"), is by and among UNITED DOMINION REALTY TRUST, INC., a Virginia corporation (the "Borrower"), UNITED DOMINION REALTY, L.P., a Virginia limited partnership and the other subsidiaries and affiliates identified on the signature pages hereto and such other subsidiaries and affiliates as may from time to time become Guarantors hereunder in accordance with the provisions hereof (the "Guarantors"), the lenders named herein and such other lenders as may become a party hereto (the "Lenders"), NATIONSBANK, N.A., as Administrative Agent (in such capacity, the "Administrative Agent") and FIRST UNION NATIONAL BANK, as Co-Agent. W I T N E S S E T H WHEREAS, the Borrower has requested that the Lenders provide a $200 million credit facility for the purposes hereinafter set forth; WHEREAS, the Borrower intends to use the credit facility in part to make loans and transfers to certain of its Subsidiaries and Affiliates, including the Guarantors; WHEREAS, the Guarantors acknowledge that establishment of the credit facility inures to the mutual benefit of the Borrower and the Guarantors; WHEREAS, the Lenders have agreed to make the requested credit facility available to the Borrower on the terms and conditions hereinafter set forth; NOW, THEREFORE, IN CONSIDERATION of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: SECTION 1 DEFINITIONS 1.1 Definitions. As used in this Credit Agreement, the following terms shall have the meanings specified below unless the context otherwise requires: "Additional Credit Party" means each Person that becomes a Guarantor after the Closing Date by execution of a Joinder Agreement. "Administrative Agent" shall have the meaning assigned to such term in the heading hereof, together with any successors or assigns. 1 "Administrative Agent's Fee Letter" means that certain letter agreement, dated as of April 1, 1997, between the Administrative Agent and the Borrower, as amended, modified, supplemented or replaced from time to time. "Affiliate" means, with respect to any Person, any other Person (i) directly or indirectly controlling or controlled by or under direct or indirect common control with such Person or (ii) directly or indirectly owning or holding five percent (5%) or more of the equity interest in such Person. For purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agency Services Address" means NationsBank, N.A., NC1-001-15-04, 101 North Tryon Street, Charlotte, North Carolina 28255, Attn: Agency Services, or such other address as may be identified by written notice from the Administrative Agent to the Borrower. "Aggregate Revolving Committed Amount" means the aggregate amount of Revolving Commitments in effect from time to time, being initially TWO HUNDRED MILLION DOLLARS ($200,000,000). "Applicable Percentage" means for any day, the rate per annum set forth below opposite the applicable rating for the Borrower's senior unsecured (non-credit enhanced) long term debt then in effect, it being understood that the Applicable Percentage for (i) Base Rate Loans shall be the percentage set forth under the column "Base Rate Margin", (ii) Eurodollar Loans shall be the percentage set forth under the column "Eurodollar Margin", and (iii) the Facility Fee shall be the percentage set forth under the column "Facility Fee":
Pricing S&P Moody's Base Rate Level Rating Rating Eurodollar Margin Margin Facility Fee I A- or above A3 or above 0.350% 0% 0.150% II BBB+ Baa1 0.425% 0% 0.175% III BBB Baa2 0.500% 0% 0.200% IV BBB- Baa3 0.550% 0% 0.250% V below BBB- below Baa3 0.750% 0% 0.500% or unrated or unrated
The numerical classification set forth under the column "Pricing Level" shall be established based on the better of ratings by S&P and Moody's for the Borrower's senior unsecured (non-credit enhanced) long term debt. The Applicable Percentage shall be determined and adjusted on the date five (5) Business Days after each change in debt rating. Adjustments in the Applicable Percentage shall be effective as to all Loans, existing and prospective, from the date of adjustment. The Administrative Agent shall promptly notify the Lenders of changes in the Applicable Percentage. Adjustments in 2 the Applicable Percentage shall be effective as to existing Extensions of Credit as well as new Extensions of Credit made thereafter. "Attributable Debt" means, in connection with any Sale-Leaseback Transaction occurring subsequent to the Closing Date, the lesser of (i) the present value, discounted according to GAAP at the debt rate implicit in the related lease, of the obligation of the lessee for rental payments over the remaining term of such lease(including any period for which such lease has been extended or may, at the option of the lessor be extended) and (ii) the fair market value of the assets subject to such Sale-Leaseback Transaction. "Attributed Principal Amount" means, on any day, with respect to any Securitization Transaction entered into by any member of the Consolidated Group, the aggregate amount (with respect to any such transaction, the "Invested Amount") paid to, or borrowed by, such Person as of such date under such Securitization Transaction, minus the aggregate amount received by the applicable Receivables Financier and applied to the reduction of the Invested Amount under such Securitization Transaction. "Bankruptcy Code" means the Bankruptcy Code in Title 11 of the United States Code, as amended, modified, succeeded or replaced from time to time. "Bankruptcy Event" means, with respect to any Person, the occurrence of any of the following with respect to such Person: (i) a court or governmental agency having jurisdiction in the premises shall enter a decree or order for relief in respect of such Person in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of such Person or for any substantial part of its Property or ordering the winding up or liquidation of its affairs; or (ii) there shall be commenced against such Person an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or any case, proceeding or other action for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of such Person or for any substantial part of its Property or for the winding up or liquidation of its affairs, and such involuntary case or other case, proceeding or other action shall remain undismissed, undischarged or unbonded for a period of ninety (90) consecutive days; or (iii) such Person shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of such Person or for any substantial part of its Property or make any general assignment for the benefit of creditors; or (iv) such Person shall be unable to, or shall admit in writing its inability to, pay its debts generally as they become due. "Base Rate" means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest whole multiple of 1/100 of 1%) equal to the greater of (a) the Federal Funds Rate in effect on such day plus 1/2 of 1% or (b) the Prime Rate in effect on such day. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable after due 3 inquiry to ascertain the Federal Funds Rate for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms hereof, the Base Rate shall be determined without regard to clause (a) of the first sentence of this definition until the circumstances giving rise to such inability no longer exist. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Rate, respectively. "Base Rate Loan" means any Loan bearing interest at a rate determined by reference to the Base Rate. "Borrower" means the Person identified as such in the heading hereof, together with any permitted successors and assigns. "Business Day" means a day other than a Saturday, Sunday or other day on which commercial banks in Charlotte, North Carolina or New York, New York are authorized or required by law to close, except that, when used in connection with a Eurodollar Loan, such day shall also be a day on which dealings between banks are carried on in U.S. dollar deposits in London, England. "Cash Equivalents" means (a) 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 twelve months from the date of acquisition, (b) U.S. dollar denominated time deposits and certificates of deposit of (i) any Lender, or (ii) any domestic commercial bank of recognized standing (y) having capital and surplus in excess of $500,000,000 and (z) whose short-term commercial paper rating from S&P is at least A-2 (and not lower than A-3) or the equivalent thereof or from Moody's is at least P-2 (and not lower than P-3) or the equivalent thereof (any such bank being an "Approved Bank"), in each case with maturities of not more than 270 days from the date of acquisition, (c) commercial paper and variable or fixed rate notes issued by any Approved Bank (or by the parent company thereof) or any variable rate notes issued by, or guaranteed by, any domestic corporation rated at least A-2 (and not lower than A-3) or the equivalent thereof by S&P or at least P-2 (and not lower than P-3) or the equivalent by Moody's and maturing within six months of the date of acquisition, (d) repurchase agreements entered into by a Person with a bank or trust company (including any of the Lenders) or recognized securities dealer having capital and surplus in excess of $500,000,000 for direct obligations issued by or fully guaranteed by the United States of America in which such Person shall have a perfected first priority security interest (subject to no other Liens) and having, on the date of purchase thereof, a fair market value of at least 100% of the amount of the repurchase obligations, (e) obligations of any State of the United States or any political subdivision thereof, the interest with respect to which is exempt from federal income taxation under Section 103 of the Code, having a long term rating of at least AA- or Aa-3 by S&P or Moody's, respectively, and maturing within three years from the date of acquisition thereof, (f) Investments in municipal auction preferred stock (i) rated A- (or the equivalent thereof) or better by S&P or A3 (or the equivalent thereof) or better by Moody's and (ii) with dividends that reset at least once every 365 days and (g) Investments, 4 classified in accordance with GAAP as current assets, in money market investment programs registered under the Investment Borrower Act of 1940, as amended, which are administered by reputable financial institutions having capital of at least $100,000,000 and the portfolios of which are limited to Investments of the character described in the foregoing subdivisions (a) through (f). "Change of Control" means the occurrence of any of the following events: (i) any Person or two or more Persons acting in concert shall have acquired beneficial ownership, directly or indirectly, of, or shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation, will result in its or their acquisition of, control over, voting stock of the Borrower (or other securities convertible into such voting stock) representing 35% or more of the combined voting power of all voting stock of the Borrower, or (ii) during any period of up to 24 consecutive months, commencing after the Closing Date, individuals who at the beginning of such 24 month period were directors of the Borrower (together with any new director whose election by the Borrower's Board of Directors or whose nomination for election by the Borrower's shareholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors 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 directors of the Borrower then in office. As used herein, "beneficial ownership" shall have the meaning provided in Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934. "Closing Date" means the date hereof. "Code" means the Internal Revenue Code of 1986, as amended, and any successor statute thereto, as interpreted by the rules and regulations issued thereunder, in each case as in effect from time to time. References to sections of the Code shall be construed also to refer to any successor sections. "Commitment" means the Revolving Commitment and the Swingline Commitment. "Commitment Percentage" means the Revolving Commitment Percentage. "Commitment Period" means the period from and including the Closing Date to but not including the earlier of (i) the Termination Date, or (ii) the date on which the Commitments terminate in accordance with the provisions of this Credit Agreement. "Competitive Bid" means an offer by a Lender to make a Competitive Loan pursuant to the terms of Section 2.3. "Competitive Bid Rate" means, as to any Competitive Bid made by a Lender in accordance with the provisions of Section 2.3, the fixed rate of interest offered by the Lender making the Competitive Bid. 5 "Competitive Bid Request" means a request by the Borrower for Competitive Bids in accordance with the provisions of Section 2.4(b). "Competitive Bid Request Fee" means such fee, if any, agreed upon by the Borrower and the Administrative Agent payable in connection with each Competitive Bid Request. "Competitive Loan" means a loan made by a Lender in its discretion pursuant to the provisions of Section 2.3. "Competitive Loan Lenders" means, at any time, those Lenders which have Competitive Loans outstanding. "Competitive Loan Maximum Amount" shall have the meaning assigned to such term in Section 2.3(a). "Competitive Note" or "Competitive Notes" means the promissory notes of the Borrower in favor of each of the Lenders evidencing the Competitive Loans in substantially the form attached as Schedule 2.3(i), individually or collectively, as appropriate, as such promissory notes may be amended, modified, restated, supplemented, extended, renewed or replaced from time to time. "Consolidated Adjusted Capitalization" means at any date the sum of (i) Consolidated Funded Debt plus (ii) Consolidated Adjusted Tangible Net Worth. "Consolidated Adjusted Tangible Net Worth" means at any date (i) the sum of (A) the consolidated shareholders' equity of the Consolidated Group plus (B) accumulated depreciation of real estate owned to the extent reflected in the then book value of the Consolidated Assets minus, without duplication, (ii) the sum of (A) the Intangible Assets of the Consolidated Group plus (B) all Restricted Investments (valued at the then book value thereof) of the Consolidated Group plus (C) Minority Interests. "Consolidated Assets" means the assets of the members of the Consolidated Group determined in accordance with GAAP on a consolidated basis. "Consolidated Attributable Debt" means at any date the Attributable Debt of the Consolidated Group, determined on a consolidated basis. "Consolidated EBITDA" means for any period for the Consolidated Group, the sum of Consolidated Net Income plus Consolidated Interest Expense plus all provisions for any Federal, state or other income taxes plus depreciation, amortization and other non-cash charges, in each case on a consolidated basis determined in accordance with GAAP applied on a consistent basis, but excluding in any event gains and losses on Investments and extraordinary gains and 6 losses, and taxes on such excluded gains and tax deductions or credits on account of such excluded losses. Except as expressly provided otherwise, the applicable period shall be for the four consecutive quarters ending as of the date of determination. "Consolidated Funded Debt" means total Funded Debt of the Consolidated Group on a consolidated basis determined in accordance with GAAP applied on a consistent basis. "Consolidated Group" means the Borrower and its consolidated Subsidiaries, as determined in accordance with GAAP. "Consolidated Interest Expense" means for any period for the Consolidated Group, all interest expense, including the amortization of debt discount and premium, the interest component under capital leases and the implied interest component under Securitization Transactions, in each case on a consolidated basis determined in accordance with GAAP applied on a consistent basis. The applicable period shall be for the four consecutive fiscal quarters ending as of the date of determination. "Consolidated Mortgage Debt" means at any date the Mortgage Debt of the Consolidated Group, determined on a consolidated basis. "Consolidated Net Income" means for any period, the net income of the Consolidated Group on a consolidated basis determined in accordance with GAAP applied on a consistent basis. The applicable period shall be for the four consecutive fiscal quarters ending as of the date of determination. "Consolidated Net Operating Income from Unencumbered Realty" means for any period, earnings before deduction of interest, income taxes, depreciation and amortization and before deduction of general and administrative expenses and overhead, relating to Consolidated Unencumbered Realty of the Consolidated Group on a consolidated basis determined in accordance with GAAP on a consistent basis. The applicable period shall be for the four consecutive fiscal quarters ending as of the date of determination. "Consolidated Net Worth" means total stockholders' equity for the Consolidated Group on a consolidated basis determined in accordance with GAAP applied on a consistent basis. "Consolidated Priority Claims" means at any date the sum (without duplication) of (i) Consolidated Mortgage Debt plus (ii) Consolidated Attributable Debt plus (iii) Consolidated Subsidiary Debt plus (iv) all preferred stock of Subsidiaries not owned by the Borrower and/or one or more of its Wholly-Owned Subsidiaries, valued at the higher of the voluntary or involuntary liquidation preference thereof. "Consolidated Senior Fixed Charges" means, as of the last day of each fiscal quarter for the Consolidated Group, the sum of the cash portion of Consolidated Interest Expense paid on or in respect of Consolidated Senior Funded Debt in the period of four 7 consecutive fiscal quarters ending on such day plus scheduled maturities of Consolidated Senior Funded Debt (excluding the amount by which a final installment exceeds the next preceding principal installment thereon) in the period of four consecutive fiscal quarters ending on such day. "Consolidated Senior Fixed Charge Coverage Ratio" means, for any period, the ratio of Consolidated EBITDA to Consolidated Senior Fixed Charges. "Consolidated Senior Funded Debt" means Consolidated Funded Debt (determined without including Subordinated Funded Debt). "Consolidated Subsidiary Debt" means at any date all Debt of Subsidiaries (exclusive of Debt owed to the Borrower), determined on a consolidated basis. "Consolidated Total Fixed Charge Coverage Ratio" means, for any period, the ratio of Consolidated EBITDA to Consolidated Total Fixed Charges. "Consolidated Total Fixed Charges" means, as of the last day of each fiscal quarter for the Consolidated Group, the sum of the cash portion of Consolidated Interest Expense paid in the period of four consecutive fiscal quarters ending on such day plus scheduled maturities of Consolidated Funded Debt (excluding the amount by which a final installment exceeds the next preceding principal installment thereon) in the period of four consecutive fiscal quarters ending on such day. "Consolidated Total Realty" means, for the Consolidated Group on a consolidated basis, the undepreciated cost of all Realty, whether improved or not. "Consolidated Unencumbered Interest Coverage Ratio" means, for any period, the ratio of (i) Consolidated Net Operating Income from Consolidated Unencumbered Realty to (ii) Consolidated Interest Expense relating to Consolidated Unsecured Debt. "Consolidated Unencumbered Realty" means, for the Consolidated Group on a consolidated basis, all Realty which is not encumbered by Lien securing Funded Debt. "Consolidated Unimproved Realty" means, for the Consolidated Group on a consolidated basis, the undepreciated cost of all raw unimproved land held for current or future development. For purposes hereof, property under development where construction and development is in progress shall not be considered to be unimproved to the extent that completed buildings are available for rent and are at least 75% leased. In such case, the undepreciated cost of the completed building(s) together with a proportionate cost of the related land and land improvements shall be considered as improved for purposes hereof. "Consolidated Unsecured Debt" means, for the Consolidated Group on a consolidated basis, all unsecured Consolidated Funded Debt. 8 "Contractual Obligation" means, as to any Person, any provision of any security issued by such Person or of any material agreement, instrument or undertaking to which such Person is a party or by which it or any of its property is bound. "Credit Documents" means a collective reference to this Credit Agreement, the Notes, each Joinder Agreement, the Administrative Agent's Fee Letter, and all other related agreements and documents issued or delivered hereunder or thereunder or pursuant hereto or thereto. "Credit Party" means any of the Borrower and the Guarantors. "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable arising in the ordinary course of business), (iv) all obligations of such Person as lessee under capital leases, (v) all obligations of such Person to purchase securities or other property which arise out of or in connection with the sale of the same or substantially similar securities or property, (vi) all obligations of such Person to reimburse any bank or other person in respect of amounts payable under a letter of credit or similar instrument (being the amount available to be drawn thereunder, whether or not then drawn), (vii) all obligations of others secured by a Lien on any asset of such Person, whether or not such obligation is assumed by such Person, (viii) all obligations of others Guaranteed by such Person, (ix) all obligations which in accordance with GAAP would be shown as liabilities on a balance sheet of such Person, (x) the Attributed Principal Amount under any Securitization Transaction and (xi) all obligations of such Person owing under any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing product to which such Person is a party, where such transaction is considered borrowed money indebtedness for tax purposes, but is classified as an operating lease in accordance with GAAP. Debt of any Person shall include Debt of any partnership or joint venture in such Person is a general partner or joint venturer to the extent of recourse to such Person for payment thereof. "Default" means any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. "Defaulting Lender" means, at any time, any Lender that, at such time, (i) has failed to make an Extension of Credit required pursuant to the terms of this Credit Agreement, (ii) has failed to pay to the Administrative Agent or any Lender an amount owed by such Lender pursuant to the terms of the Credit Agreement or any other of the Credit Documents, or (iii) has been deemed insolvent or has become subject to a bankruptcy or insolvency proceeding or to a receiver, trustee or similar proceeding. "Dollars" and "$" means dollars in lawful currency of the United States of America. 9 "Domestic Credit Party" means any Credit Party which is incorporated or organized under the laws of any State of the United States or the District of Columbia. "Domestic Subsidiary" means any Subsidiary which is incorporated or organized under the laws of any State of the United States or the District of Columbia. "Environmental Laws" means any and all lawful and applicable Federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions relating to the environment or to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes. "Equity Transaction" means, with respect to any member of the Consolidated Group, any issuance of shares of its capital stock or other equity interest, other than an issuance (i) to a member of the Consolidated Group or (ii) in connection with exercise by a present or former employee, officer or director under a stock incentive plan, stock option plan or other equity-based compensation plan or arrangement. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto, as interpreted by the rules and regulations thereunder, all as the same may be in effect from time to time. References to sections of ERISA shall be construed also to refer to any successor sections. "ERISA Affiliate" means an entity which is under common control with any Credit Party within the meaning of Section 4001(a)(14) of ERISA, or is a member of a group which includes the Borrower and which is treated as a single employer under Sections 414(b) or (c) of the Code. "ERISA Event" means (i) with respect to any Plan, the occurrence of a Reportable Event or the substantial cessation of operations (within the meaning of Section 4062(e) of ERISA); (ii) the withdrawal by the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a substantial employer (as such term is defined in Section 4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan; (iii) the distribution of a notice of intent to terminate or the actual termination of a Plan pursuant to Section 4041(a)(2) or 4041A of ERISA; (iv) the institution of proceedings to terminate or the actual termination of a Plan by the PBGC under Section 4042 of ERISA; (v) any event or condition which could reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan; (vi) the complete or partial withdrawal of the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate from a Multiemployer Plan; (vii) the conditions for imposition of a lien under Section 302(f) of ERISA exist with respect to any Plan; or (vii) the adoption of an 10 amendment to any Plan requiring the provision of security to such Plan pursuant to Section 307 of ERISA. "Eurodollar Loan" means any Loan bearing interest at a rate determined by reference to the Eurodollar Rate. "Eurodollar Rate" means, for the Interest Period for each Eurodollar Loan comprising part of the same borrowing (including conversions, extensions and renewals), a per annum interest rate determined pursuant to the following formula: Eurodollar Rate = Interbank Offered Rate -------------------------------- 1 - Eurodollar Reserve Percentage "Eurodollar Reserve Percentage" means for any day, that percentage (expressed as a decimal) which is in effect from time to time under Regulation D of the Board of Governors of the Federal Reserve System (or any successor), as such regulation may be amended from time to time or any successor regulation, as the maximum reserve requirement (including, without limitation, any basic, supplemental, emergency, special, or marginal reserves) applicable with respect to Eurocurrency liabilities as that term is defined in Regulation D (or against any other category of liabilities that includes deposits by reference to which the interest rate of Eurodollar Loans is determined), whether or not Lender has any Eurocurrency liabilities subject to such reserve requirement at that time. Eurodollar Loans shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefits of credits for proration, exceptions or offsets that may be available from time to time to a Lender. The Eurodollar Rate shall be adjusted automatically on and as of the effective date of any change in the Eurodollar Reserve Percentage. "Event of Default" means such term as defined in Section 9.1. "Extension of Credit" means, as to any Lender, the making of, or participation in, a Loan by such Lender. "Facility Fee" shall have the meaning given such term in Section 3.5(a). "Fees" means all fees payable pursuant to Section 3.5. "Federal Funds Rate" means, for any day, the rate of interest per annum (rounded upwards, if necessary, to the nearest whole multiple of 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (A) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day and (B) if no such rate is so published on such next preceding Business Day, the Federal Funds Rate for 11 such day shall be the average rate quoted to the Administrative Agent on such day on such transactions as determined by the Administrative Agent. "Foreign Credit Party" means a Credit Party which is not a Domestic Credit Party. "Foreign Subsidiary" means a Subsidiary which is not a Domestic Subsidiary. "Funded Debt" means at any date, with respect to any Person, without duplication, all Debt of such Person. "GAAP" means generally accepted accounting principles in the United States applied on a consistent basis and subject to the terms of Section 1.3 hereof. "Governmental Authority" means any Federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body. "Guarantee" by any Person, means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Guaranteed Obligations" means, as to each Guarantor, without duplication, all obligations of the Borrower to the Lenders and the Administrative Agent, whenever arising, under this Credit Agreement, the Notes or the Credit Documents relating to the Obligations hereunder (including interest accruing after a Bankruptcy Event, regardless of whether such interest is allowed as a claim under the Bankruptcy Code). "Guarantor" means each of those Persons identified as a "Guarantor" on the signature pages hereto, and each other Person which may hereafter become a Guarantor by execution of a Joinder Agreement, together with their successors and permitted assigns. "Intangible Assets" of any Person means at any date the amount of (i) all write-ups (other than write-ups resulting from write-ups of assets of a going concern business made within twelve months after the acquisition of such business) in the book value of any asset owned by such Person and (ii) all unamortized debt discount and expense, unamortized deferred charges, capitalized start-up costs, goodwill, patents, licenses, trademarks, trade names, copyrights, organization or developmental expenses, covenants not to compete and other intangible items. 12 "Interbank Offered Rate" means, for the Interest Period for each Eurodollar Loan comprising part of the same borrowing (including conversions, extensions and renewals), a per annum interest rate (rounded upwards, if necessary, to the nearest whole multiple of 1/100 of 1%) equal to the rate of interest, determined by the Administrative Agent on the basis of the offered rates for deposits in dollars for a period of time corresponding to such Interest Period (and commencing on the first day of such Interest Period), appearing on Telerate Page 3750 (or, if, for any reason, Telerate Page 3750 is not available, the Reuters Screen LIBO Page) as of approximately 11:00 A.M. (London time) two (2) Business Days before the first day of such Interest Period. As used herein, "Telerate Page 3750" means the display designated as page 3750 by Dow Jones Telerate, Inc. (or such other page as may replace such page on that service for the purpose of displaying the British Bankers Association London interbank offered rates) and "Reuters Screen LIBO Page" means the display designated as page "LIBO" on the Reuters Monitor Money Rates Service (or such other page as may replace the LIBO page on that service for the purpose of displaying London interbank offered rates of major banks). "Interest Payment Date" means (i) as to any Base Rate Loan, the last day of each March, June, September and December and the Termination Date and (ii) as to any Eurodollar Loan, Competitive Loan and Swingline Loan, the last day of each Interest Period for such Loan, the date of repayment of principal of such Loan and the Termination Date, and in addition where the applicable Interest Period is more than three months, then also the date three months from the beginning of the Interest Period, and each three months thereafter. If an Interest Payment Date falls on a date which is not a Business Day, such Interest Payment Date shall be deemed to be the next succeeding Business Day. "Interest Period" means (i) as to any Eurodollar Loan, a period of one, two, three or six month's duration, as the Borrower may elect, commencing in each case, on the date of the borrowing (including conversions, extensions and renewals), (ii) as to any Swingline Loan, a period of such duration, not to exceed 30 days, as the Borrower may request and the Swingline Lender may agree in accordance with the provisions of Section 2.2(b)(i), commencing in each case, on the date of borrowing, and (iii) as to any Competitive Loan, a period of not less than 7 nor more than 180 days' duration, as the Borrower may request and the Competitive Lender may agree in accordance with the provisions of Section 2.3; provided, however, (A) if any Interest Period would end on a day which is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day (except that in the case of Eurodollar Loans where the next succeeding Business Day falls in the next succeeding calendar month, then such Interest Period shall end on the next preceding Business Day), (B) no Interest Period shall extend beyond the Termination Date, and (C) in the case of Eurodollar Loans, where an Interest Period begins on a day for which there is no numerically corresponding day in the calendar month in which the Interest Period is to end, such Interest Period shall end on the last day of such calendar month. "Invested Amount" shall have the meaning given such term in the definition of Attributed Principal Amount. 13 "Investment", in any Person, means any loan or advance to such Person, any purchase or other acquisition of any capital stock, warrants, rights, options, obligations or other securities of, or equity interest in, such Person, any capital contribution to such Person or any other investment in such Person, including, without limitation, any Guaranty Obligation incurred for the benefit of such Person. "Joinder Agreement" means a Joinder Agreement substantially in the form of Schedule 7.11 hereto, executed and delivered by an Additional Credit Party in accordance with the provisions of Section 7.11. "Lenders" means each of the Persons identified as a "Lender" on the signature pages hereto, and their successors and assigns. "Lien" means any mortgage, pledge, hypothecation, assignment, deposit arrangement, security interest, encumbrance, lien (statutory or otherwise), preference, priority or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any financing or similar statement or notice filed under the Uniform Commercial Code as adopted and in effect in the relevant jurisdiction or other similar recording or notice statute, and any lease in the nature thereof). "Loan" or "Loans" means the Revolving Loans, the Swingline Loans and the Competitive Loans. "Material Adverse Effect" means a material adverse effect on (i) the condition (financial or otherwise), operations, business, assets, liabilities or prospects of the Consolidated Group taken as a whole, (ii) the ability of the Credit Parties taken as a whole to perform any material obligation under the Credit Documents to which they are parties or (iii) the rights and remedies of the Lenders or the Borrower under the Credit Documents. "Materials of Environmental Concern" means any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Laws, including, without limitation, polychlorinated biphenyls and urea-formaldehyde insulation. "Minority Interests" means any shares of stock of any class of a Subsidiary (other than directors' qualifying shares as required by law) that are not owned by the Borrower and/or one or more Wholly-Owned Subsidiaries. Minority Interests constituting preferred stock shall be valued at the voluntary or involuntary liquidation value of such preferred stock, whichever is greater, and by valuing common stock at the book value of the capitalized surplus applicable thereto adjusted, if necessary, to reflect any changes from the book value of such common stock required by the foregoing method of valuing Minority Interests in preferred stock. "Moody's" means Moody's Investors Service, Inc., or any successor or assignee of the business of such Borrower in the business of rating securities. 14 "Mortgage Debt" of any Person means at any date the aggregate principal amount of all Debt of such Person secured by a Lien on any real property owned or leased by it. "Multiemployer Plan" means a Plan which is a multiemployer plan as defined in Sections 3(37) or 4001(a)(3) of ERISA. "Multiple Employer Plan" means a Plan which the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate and at least one employer other than the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate are contributing sponsors. "NationsBank" means NationsBank, N.A. and its successors. "Non-Excluded Taxes" means such term as is defined in Section 3.10. "Note" or "Notes" means any Revolving Note, Swingline Note and/or Competitive Note. "Notice of Borrowing" means a written notice of borrowing or request for Competitive Bid in substantially the form of Schedule 2.1(b)(i) or Schedule 2.3(b)-1, as required by Section 2.1(b)(i) or Section 2.3(b), respectively. "Notice of Extension/Conversion" means the written notice of extension or conversion in substantially the form of Schedule 3.2, as required by Section 3.2. "Operating Partnership" means United Dominion Realty, L.P., together with any permitted successors and assigns. "Participation Interest" means the purchase by a Lender of a participation in Swingline Loans as provided in Section 2.2(b)(iii), and in Loans as provided in Section 3.13. "PBGC" means the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA and any successor thereof. "Permitted Investments" means Investments which are either (i) cash and Cash Equivalents; (ii) Investments consisting of stock, obligations, securities or other property received in settlement of accounts receivable (created in the ordinary course of business) from bankrupt obligors; (iii) acquisitions permitted by Section 8.3; (iv) Investments by a member of the Consolidated Group or an Affiliate of a member of the Consolidated Group in connection with a Permitted Securitization Transaction; (v) Investments by a member of the Consolidated Group in and to a Credit Party; and (vi) additional Investments of a type not contemplated by the foregoing clauses in aggregate amount outstanding, not to exceed the greater of (A) $25,000,000 or (B) one percent (1%) of Consolidated Adjusted Capitalization. 15 "Person" means any individual, partnership, joint venture, firm, corporation, limited liability company, association, trust or other enterprise (whether or not incorporated) or any Governmental Authority. "Plan" means any employee benefit plan (as defined in Section 3(3) of ERISA) which is covered by ERISA and with respect to which the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" within the meaning of Section 3(5) of ERISA. "Prime Rate" means the rate of interest per annum publicly announced from time to time by NationsBank as its prime rate in effect at its principal office in Charlotte, North Carolina, with each change in the Prime Rate being effective on the date such change is publicly announced as effective (it being understood and agreed that the Prime Rate is a reference rate used by NationsBank in determining interest rates on certain loans and is not intended to be the lowest rate of interest charged on any extension of credit by NationsBank to any debtor). "Pro Forma Basis" means, with respect to any transaction, that such transaction shall be deemed to have occurred as of the first day of the four fiscal-quarter period ending as of the most recent fiscal quarter end preceding the date of such transaction with respect to which the Administrative Agent and the Lenders have received the officer's certificate in accordance with the provisions of Section 7.2(b). As used herein, "transaction" means and includes (i) any corporate merger or consolidation as referred to in Section 8.3(a), and (ii) any acquisition of capital stock or securities or any purchase, lease or other acquisition of property as referred to in Section 8.3(c). "Property" means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible. "Quoted Rate" means, with respect to a Quoted Rate Swingline Loan, the fixed percentage rate per annum offered by the Swingline Lender and accepted by the Borrower with respect to such Quoted Rate Swingline Loan in accordance with the provisions of Section 2.2. "Quoted Rate Swingline Loan" means a Swingline Loan bearing interest at a Quoted Rate. "Realty" means all real property and interests therein, together with all improvements thereon. "Receivables" means any right of payment from or on behalf of any obligor, whether constituting an account, chattel paper, instrument, general intangible or otherwise, arising from the sale or financing by a member of the Consolidated Group or merchandise or services, and monies due thereunder, security in the merchandise and services financed thereby, records related thereto, and the right to payment of any interest or finance charges and other obligations with respect thereto, proceeds from 16 claims on insurance policies related thereto, any other proceeds related thereto, and any other related rights. "Receivables Financier" means, in connection with a Securitization Transaction, the Person which provides financing for such transaction whether by purchase, loan or otherwise in respect of Receivables. "Register" shall have the meaning given such term in Section 11.3(c). "Regulation G, T, U, or X" means Regulation G, T, U or X, respectively, 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. "Release" means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing into the environment (including the abandonment or discarding of barrels, containers and other closed receptacles containing any Materials of Environmental Concern). "Reportable Event" means any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the notice requirement has been waived by regulation. "Required Lenders" means Lenders having, at the time of determination thereof, more than fifty percent (50%) of the Commitments, or if the Commitments have been terminated, Lenders having, at the time of determination thereof, more than fifty percent (50%) of the aggregate principal amount of the Loans outstanding (taking into account in each case Participation Interests or obligation to participate therein); provided that the Commitments of, and outstanding principal amount of Loans (taking into account Participation Interests therein) owing to, a Defaulting Lender shall be excluded for purposes hereof in making a determination of Required Lenders. "Requirement of Law" means, as to any Person, the certificate of incorporation and by-laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its material property is subject. "Responsible Officer" means the Chief Financial Officer, the Controller or the Treasurer. "Restricted Investments" means Investments, including loans and advances, other than Permitted Investments. "Revolving Commitment" means, with respect to each Lender, the commitment of such Lender to make Revolving Loans in an aggregate principal amount at any time outstanding of up to such Lender's Revolving Commitment as specified in Schedule 2.1(a), as such amount may be reduced from time to time in accordance with the provisions hereof. 17 "Revolving Commitment Percentage" means, for each Lender, a fraction (expressed as a decimal) the numerator of which is the Revolving Commitment of such Lender at such time and the denominator of which is the Aggregate Revolving Committed Amount at such time. The initial Revolving Commitment Percentages are set out on Schedule 2.1(a). "Revolving Committed Amount" means, collectively, the aggregate amount of all of the Revolving Commitments as referenced in Section 2.1(a) and, individually, the amount of each Lender's Revolving Commitment as specified in Schedule 2.1(a). "Revolving Loans" shall have the meaning assigned to such term in Section 2.1(a). "Revolving Note" or "Revolving Notes" means the promissory notes of the Borrower in favor of each of the Lenders evidencing the Revolving Loans in substantially the form attached as Schedule 2.1(e), individually or collectively, as appropriate, as such promissory notes may be amended, modified, supplemented, extended, renewed or replaced from time to time. "S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill, Inc., or any successor or assignee of the business of such division in the business of rating securities. "Sale-Leaseback Transaction" means any arrangement with any Person (other than the Borrower or a Wholly-Owned Subsidiary or the Operating Partnership) providing for the leasing by the Borrower or any Subsidiary (as tenant) of real or personal property which has been or is to be sold or transferred by the Borrower or such Subsidiary to such Person or to any Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of the Borrower or such Subsidiary. "Securitization Subsidiary" shall have the meaning provided in the definition of "Securitization Transaction". "Securitization Transaction" means any financing transaction or series of financing transactions that have been or may be entered into by a member of the Consolidated Group pursuant to which such member of the Consolidated Group may sell, convey or otherwise transfer to (i) a Subsidiary or affiliate (a "Securitization Subsidiary"), or (ii) any other Person, or may grant a security interest in, any Receivables or interests therein secured by merchandise or services financed thereby (whether such Receivables are then existing or arising in the future) of such member of the Consolidated Group, and any assets related thereto, including without limitation, all security interests in merchandise or services financed thereby, the proceeds of such Receivables, and other assets which are customarily sold or in respect of which security interests are customarily granted in connection with securitization transactions involving such assets. 18 "Single Employer Plan" means any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan or a Multiple Employer Plan. "Solvent" or "Solvency" means, with respect to any Person as of a particular date, that on such date (i) such Person is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (ii) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature in their ordinary course, (iii) such Person is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which such Person's Property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Person is engaged or is to engage, (iv) the fair value of the Property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person and (v) the present fair saleable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed at the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "Subordinated Debt" means any Debt which by its terms is specifically subordinated in right of payment to the prior payment of the obligations of the Credit Parties under this Credit Agreement and the other Credit Documents on terms and conditions satisfactory to the Required Lenders. "Subordinated Funded Debt" means at any date all unsecured Funded Debt (i) no part of the principal of which is required to be paid (whether by way of mandatory sinking fund, mandatory redemption or otherwise) prior to the payment in full of the Loans hereunder and (ii) the payment of the principal of and interest on which, and any other obligations to the holder of such Debt, is subordinated to the prior payment in full of the Loans hereunder (including interest accruing after the date of commencement of any proceeding under any bankruptcy, insolvency, or similar law in which such Person is a debtor). "Subsidiary" means as to any Person, any corporation, partnership, limited liability company or other entity of which securities or other ownership interest having an ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person. Unless otherwise provided, references to a "Subsidiary" or "Subsidiaries" shall mean a Subsidiary or Subsidiaries of the Borrower. "Swingline Commitment" means the commitment of the Swingline Lender to make Swingline Loans in an aggregate principal amount at any time outstanding up to the Swingline Committed Amount and the commitment of the Lenders to purchase participation interests in the Swingline Loans up to their respective Revolving 19 Commitment Percentages as provided in Section 2.2(b)(iii), as such amounts may be reduced from time to time in accordance with the provisions hereof. "Swingline Committed Amount" means the amount of the Swingline Lender's Commitment as specified in Section 2.2(a). "Swingline Lender" means NationsBank or the successor Administrative Agent appointed pursuant to the provisions of Section 2.2(a). "Swingline Loan" means a swingline revolving loan made by the Swingline Lender pursuant to the provisions of Section 2.2. "Swingline Note" means the promissory note of the Borrower in favor of the Swingline Lender evidencing the Swingline Loans in substantially the form attached as Schedule 2.2(d), as such promissory note may be amended, modified, supplemented, extended, renewed or replaced from time to time. "Termination Date" means the date three (3) years following the Closing Date, or if extended with the written consent of each of the Lenders, such later date as to which the Termination Date may be extended. "364-Day Credit Agreement" means that 364-Day Credit Agreement dated as of the date hereof, as amended and modified, among the Borrower, the Guarantors and Lenders identified therein and NationsBank, N.A., as Administrative Agent. "Wholly-Owned Subsidiary" means as to any Person, any Subsidiary all of the voting stock or other similar voting interests are owned directly or indirectly by such Person. Unless otherwise provided, references to "Wholly-Owned Subsidiary" shall mean Wholly-Owned Subsidiaries of the Borrower. 1.2 Computation of Time Periods. For purposes of computation of periods of time hereunder, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding." 1.3 Accounting Terms. Except as otherwise expressly provided herein, all accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Lenders hereunder shall be prepared, in accordance with GAAP applied on a consistent basis. Financial statements, certificates and reports delivered hereunder shall be accompanied by a description of any changes in application of accounting principles and an estimation of the effects thereof. All calculations made for the purposes of determining compliance with this Credit Agreement shall (except as otherwise expressly provided herein) be made by application of GAAP applied on a basis consistent with the most recent annual or quarterly financial statements delivered pursuant to Section 7.1 hereof (or, prior to the delivery of the first financial statements pursuant to Section 7.1 hereof, consistent with the annual audited 20 financial statements referenced in Section 6.1(i) hereof); provided, however, if (a) the Borrower shall object to determining such compliance on such basis at the time of delivery of such financial statements due to any change in GAAP or the rules promulgated with respect thereto or (b) the Administrative Agent or the Required Lenders shall so object in writing within 30 days after delivery of such financial statements, then such calculations shall be made on a basis consistent with the most recent financial statements delivered by the Borrower to the Lenders as to which no such objection shall have been made. SECTION 2 CREDIT FACILITIES 2.1 Revolving Loans. (a) Revolving Commitment. During the Commitment Period, subject to the terms and conditions hereof, each Lender severally agrees to make revolving credit loans (the "Revolving Loans") to the Borrower from time to time in the amount of such Lender's Revolving Commitment Percentage of such Revolving Loans for the purposes hereinafter set forth; provided that (i) with regard to the Lenders collectively, the aggregate principal amount of Loans outstanding at any time shall not exceed the Aggregate Revolving Committed Amount, and (ii) with regard to each Lender individually, such Lender's Revolving Commitment Percentage of Loans outstanding at any time shall not exceed such Lender's Revolving Committed Amount. Revolving Loans may consist of Base Rate Loans or Eurodollar Loans, or a combination thereof, as the Borrower may request, and may be repaid and reborrowed in accordance with the provisions hereof. (b) Revolving Loan Borrowings. (i) Notice of Borrowing. The Borrower shall request a Revolving Loan borrowing by written notice (or telephone notice promptly confirmed in writing) to the Administrative Agent not later than 11:00 A.M. (Charlotte, North Carolina time) on the Business Day prior to the date of the requested borrowing in the case of Base Rate Loans, and on the third Business Day prior to the date of the requested borrowing in the case of Eurodollar Loans. Each such request for borrowing shall be irrevocable and shall specify (A) that a Revolving Loan is requested, (B) the date of the requested borrowing (which shall be a Business Day), (C) the aggregate principal amount to be borrowed, and (D) whether the borrowing shall be comprised of Base Rate Loans, Eurodollar Loans or a combination thereof, and if Eurodollar Loans are requested, the Interest Period(s) therefor. If the Borrower shall fail to specify in any such Notice of Borrowing (I) an applicable Interest Period in the case of a Eurodollar Loan, then such notice shall be deemed to be a request for an Interest Period of one month, or (II) the type of Revolving Loan requested, then such notice shall be deemed to be a request for a Eurodollar Loan with an Interest Period of one month. The Administrative Agent shall give notice to each Lender promptly upon receipt of each Notice of Borrowing pursuant to this Section 2.1(b)(i), the contents thereof and each such Lender's share of any borrowing to be made pursuant thereto. 21 (ii) Minimum Amounts. Each Revolving Loan shall be in a minimum aggregate principal amount of $5,000,000, in the case of Eurodollar Loans, or $1,000,000 (or the remaining Revolving Committed Amount, if less), in the case of Base Rate Loans, and integral multiples of $1,000,000 in excess thereof. (iii) Advances. Each Lender will make its Revolving Commitment Percentage of each Revolving Loan borrowing available to the Administrative Agent for the account of the Borrower as specified in Section 3.14(a), or in such other manner as the Administrative Agent may specify in writing, by 2:30 P.M. (Charlotte, North Carolina time) on the date specified in the applicable Notice of Borrowing in Dollars and in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent by crediting the account of the Borrower on the books of such office with the aggregate of the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent. (c) Repayment. The principal amount of all Revolving Loans shall be due and payable in full on the Termination Date. (d) Interest. Subject to the provisions of Section 3.1, (i) Base Rate Loans. During such periods as Revolving Loans shall be comprised in whole or in part of Base Rate Loans, such Base Rate Loans shall bear interest at a per annum rate equal to the Base Rate plus the Applicable Percentage; (ii) Eurodollar Loans. During such periods as Revolving Loans shall be comprised in whole or in part of Eurodollar Loans, such Eurodollar Loans shall bear interest at a per annum rate equal to the Eurodollar Rate plus the Applicable Percentage. Interest on Revolving Loans shall be payable in arrears on each applicable Interest Payment Date (or at such other times as may be specified herein). (e) Revolving Notes. The Revolving Loans shall be evidenced by a duly executed Revolving Note in favor of each Lender. (f) Maximum Number of Eurodollar Loans. The Borrower will be limited to a maximum number of ten (10) Eurodollar Loans outstanding at any time. For purposes hereof, Eurodollar Loans with separate or different Interest Periods will be considered as separate Eurodollar Loans even if their Interest Periods expire on the same date. 2.2 Swingline Loan Subfacility. (a) Swingline Commitment. Subject to the terms and conditions hereof and in reliance upon the representations and warranties set forth herein, the Swingline Lender, in its individual capacity, agrees to make certain revolving credit loans requested by the Borrower in Dollars to the Borrower (each a "Swingline Loan" and, collectively, the "Swingline Loans") from time to time from the Closing Date until the Termination Date for the purposes hereinafter set forth; provided, 22 however, (i) the aggregate principal amount of Swingline Loans outstanding at any time shall not exceed FIFTEEN MILLION DOLLARS ($15,000,000) (the "Swingline Committed Amount"), and (ii) with regard to the Lenders collectively, the aggregate principal amount of Loans outstanding at any time shall not exceed the Aggregate Revolving Committed Amount. Swingline Loans hereunder shall be made as Base Rate Loans or Quoted Rate Swingline Loans, as the Borrower may request in accordance with the provisions hereof, and may be repaid and reborrowed in accordance with the provisions hereof. (b) Swingline Loan Advances. (i) Notices; Disbursement. Whenever the Borrower desires a Swingline Loan advance hereunder it shall give written notice (or telephonic notice promptly confirmed in writing) to the Swingline Lender not later than 11:00 A.M. (Charlotte, North Carolina time) on the Business Day of the requested Swingline Loan advance. Each such notice shall be irrevocable and shall specify (A) that a Swingline Loan advance is requested, (B) the date of the requested Swingline Loan advance (which shall be a Business Day) and (C) the principal amount of and Interest Period for the Swingline Loan advance requested. Each Swingline Loan shall have such maturity date as the Swingline Lender and the Borrower shall agree upon receipt by the Swingline Lender of any such notice from the Borrower. The Swingline Lender shall initiate the transfer of funds representing the Swingline Loan advance to the Borrower by 3:00 P.M. (Charlotte, North Carolina time) on the Business Day of the requested borrowing. (ii) Minimum Amounts. Each Swingline Loan advance shall be in a minimum principal amount of $1,000,000 and in integral multiples of $500,000 in excess thereof (or the remaining amount of the Swingline Committed Amount, if less). (iii) Repayment of Swingline Loans. The principal amount of all Swingline Loans shall be due and payable on the earlier of (A) the maturity date agreed to by the Swingline Lender and the Borrower with respect to such Loan (which maturity date shall not be a date more than thirty (30) days from the date of advance thereof) or (B) the Termination Date. The Swingline Lender may, at any time, in its sole discretion, by written notice to the Borrower and the Lenders, demand repayment of its Swingline Loans by way of a Revolving Loan advance, in which case the Borrower shall be deemed to have requested a Revolving Loan advance comprised solely of Base Rate Loans in the amount of such Swingline Loans; provided, however, that any such demand shall be deemed to have been given one Business Day prior to the Termination Date and on the date of the occurrence of any Event of Default described in Section 9.1 and upon acceleration of the indebtedness hereunder and the exercise of remedies in accordance with the provisions of Section 9.2. Each Lender hereby irrevocably agrees to make its pro rata share of each such Revolving Loan in the amount, in the manner and on the date specified in the preceding sentence notwithstanding (I) the amount of such borrowing may not comply with the minimum amount for advances of Revolving Loans otherwise required hereunder, (II) whether any conditions specified in Section 5.2 are then satisfied, (III) whether a Default or an Event of Default then exists, (IV) failure of any such request or deemed request for Revolving Loan to be made by the time otherwise required hereunder, (V) whether the date of such borrowing is a date on which Revolving Loans are otherwise permitted to be made 23 hereunder or (VI) any termination of the Commitments relating thereto immediately prior to or contemporaneously with such borrowing. In the event that any Revolving Loan cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code with respect to the Borrower or any other Credit Party), then each Lender hereby agrees that it shall forthwith purchase (as of the date such borrowing would otherwise have occurred, but adjusted for any payments received from the Borrower on or after such date and prior to such purchase) from the Swingline Lender such Participations Interest in the outstanding Swingline Loans as shall be necessary to cause each such Lender to share in such Swingline Loans ratably based upon its Commitment Percentage of the Revolving Committed Amount (determined before giving effect to any termination of the Commitments pursuant to Section 3.4), provided that (A) all interest payable on the Swingline Loans shall be for the account of the Swingline Lender until the date as of which the respective Participation Interest is purchased and (B) at the time any purchase of Participation Interests pursuant to this sentence is actually made, the purchasing Lender shall be required to pay to the Swingline Lender, to the extent not paid to the Swingline Lender by the Borrower in accordance with the terms of subsection (c)(ii) below, interest on the principal amount of Participation Interests purchased for each day from and including the day upon which such borrowing would otherwise have occurred to but excluding the date of payment for such Participation Interests, at the rate equal to the Federal Funds Rate. (c) Interest on Swingline Loans. Subject to the provisions of Section 3.1, (i) Base Rate Loans. During such periods as Swingline Loans shall be comprised of Base Rate Loans, such Swingline Loans shall bear interest at a per annum rate (computed on the basis of the actual number of days elapsed over a year of 365 days) equal to the Base Rate. (ii) Quoted Rate Swingline Loans. During such periods as Swingline Loans shall be comprised of Quoted Rate Swingline Loans, such Swingline Loans shall bear interest at a per annum rate (computed on the basis of the actual number of days elapsed over a year of 360 days) equal to the Quoted Rate. Interest on Swingline Loans shall be payable in arrears on each applicable Interest Payment Date. Notwithstanding any other provision to the contrary set forth in this Credit Agreement, in the event that the principal amount of any Quoted Rate Swingline Loan is not repaid on the last day of the Interest Period for such Loan, then such Loan shall be automatically converted into a Base Rate Loan at the end of such Interest Period. (d) Swingline Note. The Swingline Loans shall be evidenced by a duly executed promissory note of the Borrower to the Swingline Lender in an original principal amount equal to the Swingline Committed Amount substantially in the form of Exhibit 2.2(d). 2.3 Competitive Loan Subfacility. 24 (a) Competitive Loans. Subject to the terms and conditions hereof and in reliance upon the representations and warranties set forth herein, the Borrower may, from time to time from the Closing Date until the Termination Date, request and each Lender may, in its sole discretion, agree to make, Competitive Loans in Dollars to the Borrower; provided, however, that (i) the aggregate principal amount of outstanding Competitive Loans shall not at any time exceed the lesser of (A) ONE HUNDRED MILLION DOLLARS ($100,000,000) or (B) the Revolving Committed Amount (the "Competitive Loan Maximum Amount"), and (ii) with regard to the Lenders collectively, the aggregate principal amount of Loans outstanding at any time shall not exceed the Aggregate Revolving Committed Amount. Each Competitive Loan shall be not less than $5,000,000 in the aggregate and integral multiples of $1,000,000 in excess thereof (or the remaining portion of the Competitive Loan Maximum Amount, if less). (b) Competitive Bid Requests. The Borrower may solicit Competitive Bids by delivery of a Competitive Bid Request substantially in the form of Exhibit 2.3(b)-1 to the Agent by 12:00 Noon (Charlotte, North Carolina time) on a Business Day not less than one (1) nor more than four (4) Business Days prior to the date of a requested Competitive Loan borrowing. A Competitive Bid Request shall specify (i) the date of the requested Competitive Loan borrowing (which shall be a Business Day), (ii) the amount of the requested Competitive Loan borrowing and (iii) the applicable Interest Periods requested and shall be accompanied by payment of the Competitive Bid Request Fee. The Agent shall, promptly following its receipt of a Competitive Bid Request under this subsection (b), notify the affected Lenders of its receipt and the contents thereof and invite the Lenders to submit Competitive Bids in response thereto. A form of such notice is provided in Exhibit 2.3(b)-2. No more than three (3) Competitive Bid Requests (e.g., the Borrower may request Competitive Bids for no more than three (3) different Interest Periods at a time) shall be submitted at any one time and Competitive Bid Requests may be made no more frequently than once every five (5) Business Days. (c) Competitive Bid Procedure. Each Lender may, in its sole discretion, make one or more Competitive Bids to the Borrower in response to a Competitive Bid Request. Each Competitive Bid must be received by the Agent not later than 10:00 A.M. (Charlotte, North Carolina time) on the Business Day next succeeding the date of receipt by the Agent of the related Competitive Bid Request. A Lender may offer to make all or part of the requested Competitive Loan borrowing and may submit multiple Competitive Bids in response to a Competitive Bid Request. The Competitive Bid shall specify (i) the particular Competitive Bid Request as to which the Competitive Bid is submitted, (ii) the minimum (which shall be not less than $1,000,000 and integral multiples of $500,000 in excess thereof) and maximum principal amounts of the requested Competitive Loan or Loans as to which the Lender is willing to make, and (iii) the applicable interest rate or rates and Interest Period or Periods therefor. A form of such Competitive Bid is provided in Exhibit 2.3(c). A Competitive Bid submitted by a Lender in accordance with the provisions hereof shall be irrevocable. The Agent shall promptly notify the Borrower of all Competitive Bids made and the terms thereof. The Agent shall send a copy of each of the Competitive Bids to the Borrower for its records as soon as practicable. (d) Submission of Competitive Bids by Agent. If the Agent, in its capacity as a Lender, elects to submit a Competitive Bid in response to any Competitive Bid Request, it shall submit such Competitive Bid directly to the Borrower one-half of an hour earlier than the latest 25 time at which the other Lenders are required to submit their Competitive Bids to the Agent in response to such Competitive Bid Request pursuant to subsection (c) above. (e) Acceptance of Competitive Bids. The Borrower may, in its sole and absolute discretion, subject only to the provisions of this subsection (e), accept or refuse any Competitive Bid offered to it. To accept a Competitive Bid, the Borrower shall give written notification (or telephonic notice promptly confirmed in writing) substantially in the form of Exhibit 2.3(e) of its acceptance of any or all such Competitive Bids to the Agent by 11:00 A.M. (Charlotte, North Carolina time) on the date on which notice of election to make a Competitive Bid is to be given to the Agent by the Lenders; provided, however, (i) the failure by the Borrower to give timely notice of its acceptance of a Competitive Bid shall be deemed to be a refusal thereof, (ii) the Borrower may accept Competitive Bids for the same Interest Period(s) only in ascending order of rates, (iii) the aggregate amount of Competitive Bids accepted by the Borrower shall not exceed the principal amount specified in the Competitive Bid Request, (iv) the Borrower may accept a portion of a Competitive Bid in the event, and to the extent, acceptance of the entire amount thereof would cause the Borrower to exceed the principal amount specified in the Competitive Bid Request, subject however to the minimum amounts provided herein (and provided that where two or more Lenders submit such a Competitive Bid at the same Competitive Bid Rate, then pro rata between or among such Lenders) and (v) no bid shall be accepted for a Competitive Loan unless such Competitive Loan is in a minimum principal amount of $1,000,000 and integral multiples of $500,000 in excess thereof, except that where a portion of a Competitive Bid is accepted in accordance with the provisions of subsection (iv) hereof, then in a minimum principal amount of $500,000 and integral multiples of $500,000 in excess thereof (but not in any event less than the minimum amount specified in the Competitive Bid), and in calculating the pro rata allocation of acceptances of portions of multiple bids at a particular Competitive Bid Rate pursuant to subsection (iv) hereof, the amounts shall be rounded to integral multiples of $100,000 in a manner which shall be in the discretion of the Borrower. A notice of acceptance of a Competitive Bid given by the Borrower in accordance with the provisions hereof shall be irrevocable. The Agent shall, not later than 12:00 Noon (Charlotte, North Carolina time) on the date of receipt by the Agent of a notification from the Borrower of its acceptance and/or refusal of Competitive Bids, notify each affected Lender of its receipt and the contents thereof. Upon its receipt from the Agent of notification of the Borrower's acceptance of its Competitive Bid in accordance with the terms of this subsection (e), each successful bidding Lender will thereupon become bound, subject to the other applicable conditions hereof, to make the Competitive Loan in respect of which its bid has been accepted. (f) Funding of Competitive Loans. Each Lender which is to make a Competitive Loan shall make its Competitive Loan borrowing available to the Agent for the account of the Borrower at the office of the Agent specified in Schedule 2.1(a), or at such other office as the Agent may designate in writing, by 1:30 P.M. (Charlotte, North Carolina time) on the date specified in the Competitive Bid Request in Dollars and in funds immediately available to the Agent. Such borrowing will then be made available to the Borrower by crediting the account of the Borrower on the books of such office with the aggregate of the amount made available to the Agent by the applicable Competitive Loan Lenders and in like funds as received by the Agent. 26 (g) Maturity of Competitive Loans. Each Competitive Loan shall mature and be due and payable in full on the last day of the Interest Period applicable thereto, unless accelerated sooner pursuant to Section 9.2. Unless the Borrower shall give notice to the Agent otherwise, the Borrower shall be deemed to have requested a Revolving Loan borrowing in the amount of the maturing Competitive Loan, the proceeds of which will be used to repay such Competitive Loan. (h) Interest on Competitive Loans. Subject to the provisions of Section 3.1, Competitive Loans shall bear interest in each case at the Competitive Bid Rate applicable thereto. Interest on Competitive Loans shall be payable in arrears on each Interest Payment Date. (i) Competitive Loan Notes. The Competitive Loans made by each Lender shall be evidenced by a duly executed promissory note of the Borrower to such Lender in an original principal amount equal to the Competitive Loan Maximum Amount and substantially in the form of Exhibit 2.3(i). SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES 3.1 Default Rate. Upon the occurrence, and during the continuance, of an Event of Default, the principal of and, to the extent permitted by law, interest on the Loans and any other amounts owing hereunder or under the other Credit Documents shall bear interest, payable on demand, at a per annum rate 2% greater than the rate which would otherwise be applicable (or if no rate is applicable, whether in respect of interest, fees or other amounts, then 2% greater than the Base Rate). 3.2 Extension and Conversion. Subject to the terms of Section 5.2, the Borrower shall have the option, on any Business Day, to extend existing Loans into a subsequent permissible Interest Period or to convert Loans into Loans of another interest rate type; provided, however, that (i) except as provided in Section 3.8, Eurodollar Loans may be converted into Base Rate Loans only on the last day of the Interest Period applicable thereto, (ii) Eurodollar Loans may be extended, and Base Rate Loans may be converted into Eurodollar Loans, only if no Default or Event of Default is in existence on the date of extension or conversion, (iii) Loans extended as, or converted into, Eurodollar Loans shall be subject to the terms of the definition of "Interest Period" set forth in Section 1.1 and shall be in such minimum amounts as provided in Section 2.1(b)(ii), (iv) any request for extension or conversion of a Eurodollar Loan which shall fail to specify an Interest Period shall be deemed to be a request for an Interest Period of one month and (v) Competitive Loans may be converted to Revolving Loans only on the last day of their Interest Periods. Each such extension or conversion shall be effected by the Borrower by giving a Notice of Extension/Conversion (or telephone notice promptly confirmed in writing) to the Administrative Agent prior to 11:00 A.M. (Charlotte, North Carolina time) on the Business Day of, in the case of the conversion of a Eurodollar Loan into a Base Rate Loan, and on the third Business Day prior to, in the case of the extension of a 27 Eurodollar Loan as, or conversion of a Base Rate Loan into, a Eurodollar Loan, the date of the proposed extension or conversion, specifying the date of the proposed extension or conversion, the Loans to be so extended or converted, the types of Loans into which such Loans are to be converted and, if appropriate, the applicable Interest Periods with respect thereto. Each request for extension or conversion shall be irrevocable and shall constitute a representation and warranty by the Borrower of the matters specified in subsections (a) through (e) of Section 5.2. In the event the Borrower fails to request extension or conversion of any Eurodollar Loan in accordance with this Section, or any such conversion or extension is not permitted or required by this Section, then such Eurodollar Loan shall be automatically converted into a Base Rate Loan at the end of the Interest Period applicable thereto. The Administrative Agent shall give each Lender notice as promptly as practicable of any such proposed extension or conversion affecting any Loan. 3.3 Prepayments. (a) Voluntary Prepayments. Revolving Loans may be repaid in whole or in part without premium or penalty; provided that (i) Eurodollar Loans may be prepaid only upon three (3) Business Days' prior written notice to the Administrative Agent and must be accompanied by payment of any amounts owing under Section 3.11, and (ii) partial prepayments shall be minimum principal amounts of $5,000,000, in the case of Eurodollar Loans, and $1,000,000, in the case of Base Rate Loans, and in integral multiples of $1,000,000 in excess thereof. (b) Mandatory Prepayments. If at any time, (i) the aggregate principal amount of Loans shall exceed the Aggregate Revolving Committed Amount, or (ii) the aggregate amount of Swingline Loans shall exceed the Swingline Committed Amount, or (iii) the aggregate amount of Competitive Loans shall exceed the Competitive Loan Maximum Amount, the Borrower shall immediately make payment on the Loans in an amount sufficient to eliminate the excess. (c) Application. Unless otherwise specified by the Borrower, prepayments made hereunder shall be applied first to Swingline Loans, then to Revolving Loans which are Base Rate Loans, then to Revolving Loans which are Eurodollar Loans in direct order of Interest Period maturities, then to Competitive Loans in direct order of Interest Period maturities. Amounts prepaid hereunder may be reborrowed in accordance with the provisions hereof. 3.4 Termination and Reduction of Commitments (a) Voluntary Reductions. The Revolving Commitments may be terminated or permanently reduced in whole or in part by the Borrower upon three (3) Business Days' prior written notice to the Administrative Agent, provided that (i) after giving effect to any voluntary reduction the aggregate amount of Loans shall not exceed the Aggregate Revolving Committed Amount, as reduced, and (ii) partial reductions shall be minimum principal amount of $5,000,000, and in integral multiples of $1,000,000 in excess thereof. (b) Mandatory Reduction. The Commitments hereunder shall terminate on the Termination Date. 3.5 Fees. 28 (a) Facility Fee. In consideration of the Commitments hereunder, the Borrower agrees to pay to the Administrative Agent for the ratable benefit of the Lenders a facility fee (the "Facility Fee") equal to the Applicable Percentage per annum on the average daily Revolving Committed Amount for the applicable period. The Facility Fee shall be payable quarterly in arrears on the 15th day following the last day of each calendar quarter for the immediately preceding quarter (or portion thereof) beginning with the first such date to occur after the Closing Date. (b) Administrative Fees. The Borrower agrees to pay to the Administrative Agent, for its own account, an annual administrative fee and such other fees, if any, referred to in the Administrative Agent's Fee Letter. 3.6 Capital Adequacy. If any Lender has determined, after the date hereof, that the adoption or the becoming effective of, or any change in, or any change by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof in the interpretation or administration of, any applicable law, rule or regulation regarding capital adequacy, or compliance by such Lender 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, has or would have the effect of reducing the rate of return on such Lender's capital or assets as a consequence of its commitments or obligations hereunder to a level below that which such Lender could have achieved but for such adoption, effectiveness, change or compliance (taking into consideration such Lender's policies with respect to capital adequacy), then, upon notice from such Lender to the Borrower, the Borrower shall be obligated to pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. Each determination by any such Lender of amounts owing under this Section shall, absent manifest error, be conclusive and binding on the parties hereto. 3.7 Inability To Determine Interest Rate. If prior to the first day of any Interest Period, the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the Lenders as soon as practicable thereafter. If such notice is given (a) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as Base Rate Loans and (b) any Loans that were to have been converted on the first day of such Interest Period to or continued as Eurodollar Loans shall be converted to or continued as Base Rate Loans. Until such notice has been withdrawn by the Administrative Agent, no further Eurodollar Loans shall be made or continued as such, nor shall the Borrower have the right to convert Base Rate Loans to Eurodollar Loans. 3.8 Illegality. 29 Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof occurring after the Closing Date shall make it unlawful for any Lender to make or maintain Eurodollar Loans as contemplated by this Credit Agreement, (a) such Lender shall promptly give written notice of such circumstances to the Borrower and the Administrative Agent (which notice shall be withdrawn whenever such circumstances no longer exist), (b) the commitment of such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and convert a Base Rate Loan to Eurodollar Loans shall forthwith be canceled and, until such time as it shall no longer be unlawful for such Lender to make or maintain Eurodollar Loans, such Lender shall then have a commitment only to make a Base Rate Loan when a Eurodollar Loan is requested and (c) such Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender, upon demand, without duplication, such amounts, if any, as may be reasonably required pursuant to Section 3.11. 3.9 Requirements of Law. If, after the date hereof, the adoption of or any change in any Requirement of Law or in the interpretation or application thereof applicable to any Lender, or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority, in each case made subsequent to the Closing Date (or, if later, the date on which such Lender becomes a Lender): (a) shall subject such Lender to any tax of any kind whatsoever with respect to any Eurodollar Loans made by it or its obligation to make Eurodollar Loans, or change the basis of taxation of payments to such Lender in respect thereof (except for (i) Non-Excluded Taxes covered by Section 3.10 (including Non-Excluded Taxes imposed solely by reason of any failure of such Lender to comply with its obligations under Section 3.10(b)) and (ii) changes in taxes measured by or imposed upon the overall net income, or franchise tax (imposed in lieu of such net income tax), of such Lender or its applicable lending office, branch, or any affiliate thereof)); (b) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the Eurodollar Rate hereunder; or (c) shall impose on such Lender any other condition (excluding any tax of any kind whatsoever); and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender reasonably deems to be material, of making, converting into, continuing or maintaining Eurodollar Loans or to reduce any amount receivable hereunder in respect thereof, then, in any such case, upon notice to the Borrower from such Lender, through the Administrative 30 Agent, in accordance herewith, the Borrower shall be obligated to promptly pay such Lender, upon its demand, any additional amounts necessary to compensate such Lender for such increased cost or reduced amount receivable, provided that, in any such case, the Borrower may elect to convert the Eurodollar Loans made by such Lender hereunder to Base Rate Loans by giving the Administrative Agent at least one Business Day's notice of such election, in which case the Borrower shall promptly pay to such Lender, upon demand, without duplication, such amounts, if any, as may be reasonably required pursuant to Section 3.11. If any Lender becomes entitled to claim any additional amounts pursuant to this subsection, it shall provide prompt notice thereof to the Borrower, through the Administrative Agent, certifying (x) that one of the events described in this paragraph (a) has occurred and describing in reasonable detail the nature of such event, (y) as to the increased cost or reduced amount resulting from such event and (z) as to the additional amount demanded by such Lender and a reasonably detailed explanation of the calculation thereof. Such a certificate as to any additional amounts payable pursuant to this subsection submitted by such Lender, through the Administrative Agent, to the Borrower shall be conclusive and binding on the parties hereto in the absence of manifest error. This covenant shall survive the termination of this Credit Agreement and the payment of the Loans and all other amounts payable hereunder. 3.10 Taxes. (a) Except as provided below in this subsection, all payments made by the Borrower under this Credit Agreement and any Notes shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any court, or governmental body, agency or other official, excluding taxes measured by or imposed upon the overall net income of any Lender or its applicable lending office, or any branch or affiliate thereof, and all franchise taxes, branch taxes, taxes on doing business or taxes on the overall capital or net worth of any Lender or its applicable lending office, or any branch or affiliate thereof, in each case imposed in lieu of net income taxes, imposed: (i) by the jurisdiction under the laws of which such Lender, applicable lending office, branch or affiliate is organized or is located, or in which its principal executive office is located, or any nation within which such jurisdiction is located or any political subdivision thereof; or (ii) by reason of any connection between the jurisdiction imposing such tax and such Lender, applicable lending office, branch or affiliate other than a connection arising solely from such Lender having executed, delivered or performed its obligations, or received payment under or enforced, this Credit Agreement or any Notes. If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts payable to the Administrative Agent or any Lender hereunder or under any Notes, (A) the amounts so payable to the Administrative Agent or such Lender shall be increased to the extent necessary to yield to the Administrative Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Credit Agreement and any Notes, provided, however, that the Borrower shall be entitled to deduct and withhold any Non-Excluded Taxes and shall not be required to increase any such amounts payable to any Lender that is not organized under the laws of the United States of America or a state thereof if such Lender fails to comply with the requirements of paragraph (b) of this subsection whenever any Non-Excluded Taxes are payable by the Borrower, and (B) as promptly as possible thereafter the Borrower shall send to the Administrative Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an 31 original official receipt received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Administrative Agent and the Lenders for any incremental taxes, interest or penalties that may become payable by the Administrative Agent or any Lender as a result of any such failure. The agreements in this subsection shall survive the termination of this Credit Agreement and the payment of the Loans and all other amounts payable hereunder. (b) Each Lender that is not incorporated under the laws of the United States of America or a state thereof shall: (X)(i) on or before the date of any payment by the Borrower under this Credit Agreement or Notes to such Lender, deliver to the Borrower and the Administrative Agent (A) two (2) duly completed copies of United States Internal Revenue Service Form 1001 or 4224, or successor applicable form, as the case may be, certifying that it is entitled to receive payments under this Credit Agreement and any Notes without deduction or withholding of any United States federal income taxes and (B) an Internal Revenue Service Form W-8 or W-9, or successor applicable form, as the case may be, certifying that it is entitled to an exemption from United States backup withholding tax; (ii) deliver to the Borrower and the Administrative Agent two (2) further copies of any such form or certification on or before the date that any such form or certification expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower; and (iii) obtain such extensions of time for filing and complete such forms or certifications as may reasonably be requested by the Borrower or the Administrative Agent; or (Y) in the case of any such Lender that is not a "bank" within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code, (i) represent to the Borrower (for the benefit of the Borrower and the Administrative Agent) that it is not a bank within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code, (ii) agree to furnish to the Borrower on or before the date of any payment by the Borrower, with a copy to the Administrative Agent two (2) accurate and complete original signed copies of Internal Revenue Service Form W-8, or successor applicable form certifying to such Lender's legal entitlement at the date of such certificate to an exemption from U.S. withholding tax under the provisions of Section 881(c) of the Internal Revenue Code with respect to payments to be made under this Credit Agreement and any Notes (and to deliver to the Borrower and the Administrative Agent two (2) further copies of such form on or before the date it expires or becomes obsolete and after the occurrence of any event requiring a change in the most recently provided form and, if necessary, obtain any extensions of time reasonably requested by the Borrower or the Administrative Agent for filing and completing such forms), and (iii) agree, to the extent legally entitled to do so, upon reasonable request by the Borrower, to provide to the Borrower (for the benefit of the Borrower and the Administrative Agent) such other forms as may be reasonably required in order to establish 32 the legal entitlement of such Lender to an exemption from withholding with respect to payments under this Credit Agreement and any Notes; unless in any such case any change in treaty, law or regulation has occurred after the date such Person becomes a Lender hereunder which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender so advises the Borrower and the Administrative Agent. Each Person that shall become a Lender or a participant of a Lender pursuant to subsection 11.3 shall, upon the effectiveness of the related transfer, be required to provide all of the forms, certifications and statements required pursuant to this subsection, provided that in the case of a participant of a Lender the obligations of such participant of a Lender pursuant to this subsection (b) shall be determined as if the participant of a Lender were a Lender except that such participant of a Lender shall furnish all such required forms, certifications and statements to the Lender from which the related participation shall have been purchased. 3.11 Indemnity. The Borrower promises to indemnify each Lender and to hold each Lender harmless from any loss or expense which such Lender may sustain or incur (other than through such Lender's gross negligence or willful misconduct) as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of Eurodollar Loans and Competitive Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Credit Agreement, (b) default by the Borrower in making any prepayment of a Eurodollar Loan or a Competitive Loan after the Borrower has given a notice thereof in accordance with the provisions of this Credit Agreement or (c) the making of a prepayment of Eurodollar Loans or Competitive Loans on a day which is not the last day of an Interest Period with respect thereto. With respect to Eurodollar Loans and Competitive Loans, such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of the applicable Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (excluding, however, the Applicable Percentage included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank Eurodollar market. The covenants of the Borrower set forth in this Section 3.11 shall survive the termination of this Credit Agreement and the payment of the Loans and all other amounts payable hereunder. 3.12 Pro Rata Treatment. Except to the extent otherwise provided herein: (a) Loans. Each Revolving Loan, each payment or prepayment of principal of any Revolving Loan, each payment of interest on the Revolving Loans, each payment of Facility Fees, each reduction of the Revolving Committed Amount and each conversion or extension of any Revolving Loan, shall be allocated pro rata among the Lenders in accordance with the respective 33 principal amounts of the outstanding Revolving Loans and Participation Interests to which such payment or prepayment is to be applied. With respect to Competitive Loans, if the Borrower fails to specify the particular Competitive Loan or Loans as to which any payment or other amount should be applied and it is not otherwise clear as to the particular Competitive Loan or Loans to which such payment or other amounts relate, or any such payment or other amount is to be applied to Competitive Loans without regard to any such direction by the Borrower, then each payment or prepayment of principal on Competitive Loans and each payment of interest or other amount on or in respect of Competitive Loans, shall be allocated pro rata among the relevant Competitive Loan Lenders in accordance with the then outstanding amounts of their respective Competitive Loans. (b) Advances. No Lender shall be responsible for the failure or delay by any other Lender in its obligation to make its ratable share of a borrowing hereunder (and further, no Lender shall be required to fulfill any obligation of a Defaulting Lender); provided, however, that the failure of any Lender to fulfill its obligations hereunder shall not relieve any other Lender of its obligations hereunder. Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its ratable share of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by such Lender within the time period specified therefor hereunder, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the Federal Funds Rate for a period of two (2) Business Days, and thereafter at the Base Rate, for the period until such Lender makes such amount immediately available to the Administrative Agent. If such Lender does not pay such amounts to the Administrative Agent forthwith upon demand, the Administrative Agent may notify the Borrower and request the Borrower to immediately pay such amount to the Administrative Agent with interest at the Base Rate. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. 3.13 Sharing of Payments. The Lenders agree among themselves that, in the event that any Lender shall obtain payment in respect of any Loan or any other obligation owing to such Lender under this Credit Agreement through the exercise of a right of setoff, banker's lien or counterclaim, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by such Lender under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means, in excess of its pro rata share of such payment as provided for in this Credit Agreement, such Lender shall promptly purchase from the other Lenders a participation in such Loans and other obligations in such amounts, and make such other adjustments from time to time, as shall be equitable to the end that all Lenders share such payment in accordance with their respective ratable shares as provided for in this Credit Agreement. The Lenders further agree among themselves that if payment to a Lender obtained by such Lender through the exercise of a right of setoff, banker's lien, counterclaim or other event as aforesaid shall be rescinded or must otherwise be restored, each Lender which shall have shared the benefit of such payment shall, by repurchase of a participation theretofore sold, return its share of that benefit (together with its share of any accrued interest 34 payable with respect thereto) to each Lender whose payment shall have been rescinded or otherwise restored. The Borrower agrees that any Lender so purchasing such a participation may, to the fullest extent permitted by law, exercise all rights of payment, including setoff, banker's lien or counterclaim, with respect to such participation as fully as if such Lender were a holder of such Loan or other obligation in the amount of such participation. Except as otherwise expressly provided in this Credit Agreement, if any Lender or the Administrative Agent shall fail to remit to the Administrative Agent or any other Lender an amount payable by such Lender or the Administrative Agent to the Administrative Agent or such other Lender pursuant to this Credit Agreement on the date when such amount is due, such payments shall be made together with interest thereon for each date from the date such amount is due until the date such amount is paid to the Administrative Agent or such other Lender at a rate per annum equal to the Federal Funds Rate. If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section 3.13 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders under this Section 3.13 to share in the benefits of any recovery on such secured claim. 3.14 Payments, Computations, Etc. (a) Except as otherwise specifically provided herein, all payments hereunder shall be made to the Administrative Agent in dollars in immediately available funds, without offset, deduction, counterclaim or withholding of any kind, at the Administrative Agent's office specified in Section 11.1 not later than 2:00 P.M. (Charlotte, North Carolina time) on the date when due. Payments received after such time shall be deemed to have been received on the next succeeding Business Day. The Administrative Agent may (but shall not be obligated to) debit the amount of any such payment which is not made by such time to any ordinary deposit account of the Borrower maintained with the Administrative Agent (with notice to the Borrower). The Borrower shall, at the time it makes any payment under this Credit Agreement, specify to the Administrative Agent the Loans, Fees, interest or other amounts payable by the Borrower hereunder to which such payment is to be applied (and in the event that it fails so to specify, or if such application would be inconsistent with the terms hereof, the Administrative Agent shall distribute such payment to the Lenders in such manner as the Administrative Agent may determine to be appropriate in respect of obligations owing by the Borrower hereunder, subject to the terms of Section 3.12(a)). The Administrative Agent will distribute such payments to such Lenders, if any such payment is received prior to 12:00 Noon (Charlotte, North Carolina time) on a Business Day in like funds as received prior to the end of such Business Day and otherwise the Administrative Agent will distribute such payment to such Lenders on the next succeeding Business Day. Whenever any payment 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 (subject to accrual of interest and Fees for the period of such extension), except that in the case of Eurodollar Loans, if the extension would cause the payment to be made in the next following calendar month, then such payment shall instead be made on the next preceding Business Day. Except as expressly provided otherwise herein, all computations of interest and fees shall be made on the basis of actual number of days elapsed over a year of 360 days, except with respect to computation of interest on Base Rate Loans which (unless the Base Rate is determined by reference to the Federal Funds Rate) shall be calculated based on a year of 365 or 366 days, as appropriate. Interest shall accrue from and include the date of borrowing, but exclude the date of payment. 35 (b) Allocation of Payments After Event of Default. Notwithstanding any other provisions of this Credit Agreement to the contrary, after the occurrence and during the continuance of an Event of Default, all amounts collected or received by the Administrative Agent or any Lender on account of the Guaranteed Obligations or any other amounts outstanding under any of the Credit Documents shall be paid over or delivered as follows: FIRST, to the payment of all reasonable out-of-pocket costs and expenses (including without limitation reasonable attorneys' fees) of the Administrative Agent in connection with enforcing the rights of the Lenders under the Credit Documents; SECOND, to payment of any fees owed to the Administrative Agent; THIRD, to the payment of all reasonable out-of-pocket costs and expenses (including without limitation, reasonable attorneys' fees) of each of the Lenders in connection with enforcing its rights under the Credit Documents or otherwise with respect to the Loans owing to such Lender; FOURTH, to the payment of all accrued interest (pro rata based on proportions of accrued unpaid interest on Loans) and fees on or in respect of the Loans; FIFTH, to the payment of the outstanding principal amount of the Guaranteed Obligations; SIXTH, to all other Loans and other obligations which shall have become due and payable under the Credit Documents or otherwise and not repaid pursuant to clauses "FIRST" through "FIFTH" above; and SEVENTH, to the payment of the surplus, if any, to whoever may be lawfully entitled to receive such surplus. In carrying out the foregoing, (i) amounts received shall be applied in the numerical order provided until exhausted prior to application to the next succeeding category; and (ii) each of the Lenders shall receive an amount equal to its pro rata share (based on the proportion that the then outstanding Loans (or in the case of application under clause "FOURTH" pro rata based on accrued unpaid interest) held by such Lender bears to the aggregate then outstanding Loans) of amounts available to be applied pursuant to clauses "THIRD", "FOURTH", "FIFTH" and "SIXTH" above. 3.15 Evidence of Debt. (a) Each Lender shall maintain an account or accounts evidencing each Loan made by such Lender to the Borrower from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Credit Agreement. Each Lender will make reasonable efforts to maintain the accuracy of its account or accounts and to promptly update its account or accounts from time to time, as necessary. 36 (b) The Administrative Agent shall maintain the Register pursuant to Section 11.3(c) hereof, and a subaccount for each Lender, in which Register and subaccounts (taken together) shall be recorded (i) the amount, type and Interest Period of each such Loan hereunder, (ii) the amount of any principal or interest due and payable or to become due and payable to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder from or for the account of the Borrower and each Lender's share thereof. The Administrative Agent will make reasonable efforts to maintain the accuracy of the subaccounts referred to in the preceding sentence and to promptly update such subaccounts from time to time, as necessary. (c) The entries made in the accounts, Register and subaccounts maintained pursuant to subsection (b) of this Section 3.15 (and, if consistent with the entries of the Administrative Agent, subsection (a)) shall be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain any such account, such Register or such subaccount, as applicable, or any error therein, shall not in any manner affect the obligation of the Borrower to repay the Loans made by such Lender in accordance with the terms hereof. SECTION 4 GUARANTY 4.1 The Guarantee. Each of the Guarantors hereby jointly and severally guarantees to each Lender and to the Administrative Agent as hereinafter provided the prompt payment of the Guaranteed Obligations in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration, a mandatory cash collateralization or otherwise) strictly in accordance with the terms thereof. The Guarantors hereby further agree that if any of the Guaranteed Obligations are not paid in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration, as mandatory cash collateralization or otherwise), the Guarantors will, jointly and severally, promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, as a mandatory prepayment, by acceleration or otherwise) in accordance with the terms of such extension or renewal. Notwithstanding any provision to the contrary contained herein or in any other of the Credit Documents, to the extent the obligations of a Guarantor shall be adjudicated to be invalid or unenforceable for any reason (including, without limitation, because of any applicable state or federal law relating to fraudulent conveyances or transfers) then the obligations of each Guarantor hereunder shall be limited to the maximum amount that is permissible under applicable law (whether federal or state and including, without limitation, the Bankruptcy Code). 4.2 Obligations Unconditional. The obligations of the Guarantors under Section 4.1 hereof are joint and several, absolute and unconditional, irrespective of the value, genuineness, validity, regularity or enforceability of any of the Credit Documents, or any other agreement or instrument referred to therein, or any 37 substitution, release or exchange of any other guarantee of or security for any of the Guaranteed Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever which might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section 4.2 that the obligations of the Guarantors hereunder shall be absolute and unconditional under any and all circumstances. Each Guarantor agrees that such Guarantor shall have no right of subrogation, indemnity, reimbursement or contribution against the Borrower or any other Guarantor of the Guaranteed Obligations for amounts paid under this Guaranty until such time as the Lenders have been irrevocably paid in full, all Commitments under the Credit Agreement have been terminated and no Person or Governmental Authority shall have any right to request any return or reimbursement of funds from the Lenders in connection with monies received under the Credit Documents. Without limiting the generality of the foregoing, it is agreed that, to the fullest extent permitted by law, the occurrence of any one or more of the following shall not alter or impair the liability of any Guarantor hereunder which shall remain absolute and unconditional as described above: (i) at any time or from time to time, without notice to any Guarantor, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived; (ii) any of the acts mentioned in any of the provisions of any of the Credit Documents or any other agreement or instrument referred to in the Credit Documents shall be done or omitted; (iii) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be modified, supplemented or amended in any respect, or any right under any of the Credit Documents or any other agreement or instrument referred to in the Credit Documents shall be waived or any other guarantee of any of the Guaranteed Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with; (iv) any Lien granted to, or in favor of, the Administrative Agent or any Lender or Lenders as security for any of the Guaranteed Obligations shall fail to attach or be perfected; or (v) any of the Guaranteed Obligations shall be determined to be void or voidable (including, without limitation, for the benefit of any creditor of any Guarantor) or shall be subordinated to the claims of any Person (including, without limitation, any creditor of any Guarantor). With respect to its obligations hereunder, each Guarantor hereby expressly waives diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Administrative Agent or any Lender exhaust any right, power or remedy or proceed against any Person under any of the Credit Documents or any other agreement or instrument referred to in the Credit Documents, or against any other Person under any other guarantee of, or security for, any of the Guaranteed Obligations. 4.3 Reinstatement. 38 The obligations of the Guarantors under this Section 4 shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of any Person in respect of the Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and each Guarantor agrees that it will indemnify the Administrative Agent and each Lender on demand for all reasonable costs and expenses (including, without limitation, fees and expenses of counsel) incurred by the Administrative Agent or such Lender in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law. 4.4 Certain Additional Waivers. Each Guarantor agrees that such Guarantor shall have no right of recourse to security for the Guaranteed Obligations, except through the exercise of the rights of subrogation pursuant to Section 4.2. 4.5 Remedies. The Guarantors agree that, to the fullest extent permitted by law, as between the Guarantors, on the one hand, and the Administrative Agent and the Lenders, on the other hand, the Guaranteed Obligations may be declared to be forthwith due and payable as provided in Section 9.2 hereof (and shall be deemed to have become automatically due and payable in the circumstances provided in said Section 9.2) for purposes of Section 4.1 hereof notwithstanding any stay, injunction or other prohibition preventing such declaration (or preventing the Guaranteed Obligations from becoming automatically due and payable) as against any other Person and that, in the event of such declaration (or the Guaranteed Obligations being deemed to have become automatically due and payable), the Guaranteed Obligations (whether or not due and payable by any other Person) shall forthwith become due and payable by the Guarantors for purposes of said Section 4.1. 4.6 Rights of Contribution. The Guarantors hereby agree, as among themselves, that if any Guarantor shall become an Excess Funding Guarantor (as defined below), each other Guarantor shall, on demand of such Excess Funding Guarantor (but subject to the succeeding provisions of this Section 4.6), pay to such Excess Funding Guarantor an amount equal to such Guarantor's Pro Rata Share (as defined below and determined, for this purpose, without reference to the properties, assets, liabilities and debts of such Excess Funding Guarantor) of such Excess Payment (as defined below). The payment obligation of any Guarantor to any Excess Funding Guarantor under this Section 4.6 shall be subordinate and subject in right of payment to the prior payment in full of the obligations of such Guarantor under the other provisions of this Section 4, and such Excess Funding Guarantor shall not exercise any right or remedy with respect to such excess until payment and satisfaction in full of all of such obligations. For purposes hereof, (i) "Excess Funding Guarantor" shall mean, in respect of any obligations arising under the other provisions of this Section 4 (hereafter, the "Guarantied Obligations"), a Guarantor that has paid an amount in excess of its Pro Rata Share of 39 the Guarantied Obligations; (ii) "Excess Payment" shall mean, in respect of any Guarantied Obligations, the amount paid by an Excess Funding Guarantor in excess of its Pro Rata Share of such Guarantied Obligations; and (iii) "Pro Rata Share", for the purposes of this Section 4.6, shall mean, for any Guarantor, the ratio (expressed as a percentage) of (a) the amount by which the aggregate present fair saleable value of all of its assets and properties exceeds the amount of all debts and liabilities of such Guarantor (including contingent, subordinated, unmatured, and unliquidated liabilities, but excluding the obligations of such Guarantor hereunder) to (b) the amount by which the aggregate present fair saleable value of all assets and other properties of the Borrower and all of the Guarantors exceeds the amount of all of the debts and liabilities (including contingent, subordinated, unmatured, and unliquidated liabilities, but excluding the obligations of the Borrower and the Guarantors hereunder) of the Borrower and all of the Guarantors, all as of the Closing Date (if any Guarantor becomes a party hereto subsequent to the Closing Date, then for the purposes of this Section 4.6 such subsequent Guarantor shall be deemed to have been a Guarantor as of the Closing Date and the information pertaining to, and only pertaining to, such Guarantor as of the date such Guarantor became a Guarantor shall be deemed true as of the Closing Date). 4.7 Continuing Guarantee. The guarantee in this Section 4 is a continuing guarantee, and shall apply to all Guaranteed Obligations whenever arising. SECTION 5 CONDITIONS 5.1 Conditions to Closing. This Credit Agreement shall become effective, and the initial Extensions of Credit may be made, upon the satisfaction of the following conditions precedent: (a) Execution of Credit Agreement and Credit Documents. Receipt of (i) multiple counterparts of this Credit Agreement, and (ii) a Revolving Note and Competitive Note for each Lender and a Swingline Note for the Swingline Lender. (b) Financial Information. Receipt of financial information regarding the Borrower and its subsidiaries, as may be requested by, and in each case in form and substance satisfactory to the Administrative Agent and the Lenders. (c) Absence of Legal Proceedings. The absence of any action , suit, investigation or proceeding pending in any court or before any arbitrator or governmental instrumentality which could reasonably be expected to have a Material Adverse Effect. (d) Legal Opinions. Receipt of multiple counterparts of opinions of counsel for the Credit Parties relating to the Credit Documents and the transactions contemplated herein, in form and substance satisfactory to the Administrative Agent and the Required Lenders. 40 (e) Corporate Documents. Receipt of the following (or their equivalent) for each of the Credit Parties: (i) Articles of Incorporation. Copies of the articles of incorporation or charter documents certified to be true and complete as of a recent date by the appropriate governmental authority of the state of its incorporation or organization. (ii) Resolutions. Copies of resolutions of the Board of Directors or other governing body approving and adopting the respective Credit Documents, the transactions contemplated therein and authorizing execution and delivery thereof, certified by a secretary or assistant secretary as of the Closing Date to be true and correct and in force and effect as of such date. (iii) Bylaws. Copies of the bylaws certified by a secretary or assistant secretary as of the Closing Date to be true and correct and in force and effect as of such date. (iv) Good Standing. Copies of (A) certificates of good standing, existence or its equivalent issued as of a recent date by the appropriate governmental authorities of the respective states of incorporation or organization and of each other state in which the failure to qualify and be in good standing would have a Material Adverse Effect and (B) where available, certificates indicating payment of all corporate franchise taxes issued as of a recent date by the appropriate governmental taxing authorities of such states. (v) Officer's Certificate. An officer's certificate for each of the Credit Parties dated as of the Closing Date substantially in the form of Schedule 5.1(i)(v) with appropriate insertions and attachments. (f) Fees. Receipt of all fees, if any, owing pursuant to the Administrative Agent's Fee Letter and Section 3.5. (g) Subsection 5.2 Conditions. The conditions specified in Section 5.2 shall be satisfied. (h) Additional Matters. All other documents and legal matters in connection with the transactions contemplated by this Credit Agreement shall be reasonably satisfactory in form and substance to the Agent and the Required Lenders. 5.2 Conditions to All Extensions of Credit. The obligation of each Lender to make any Extension of Credit hereunder (including the initial Extension of Credit to be made hereunder) is subject to the satisfaction of the following conditions precedent on the date of making such Extension of Credit: (a) Representations and Warranties. The representations and warranties made by the Credit Parties herein or in any 41 other Credit Documents or which are contained in any certificate furnished at any time under or in connection herewith shall be true and correct in all material respects on and as of the date of such Extension of Credit as if made on and as of such date (except for those which expressly relate to an earlier date). (b) No Default or Event of Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the Extension of Credit to be made on such date unless such Default or Event of Default shall have been waived in accordance with this Credit Agreement. (c) No Material Adverse Effect. No circumstances, events or conditions shall have occurred since the date of the audited financial statements referenced in Section 6.1 which would have a Material Adverse Effect. (d) Additional Conditions to Revolving Loans. If a Revolving Loan is made pursuant to Section 2.1, all conditions set forth therein shall have been satisfied. (e) Additional Conditions to Swingline Loans. If a Swingline Loan is made pursuant to Section 2.2, all conditions set forth therein shall have been satisfied. (f) Additional Conditions to Competitive Loans. If a Competitive Loan is made pursuant to Section 2.3, all conditions set forth therein shall have been satisfied. Each request for Extension of Credit (including extensions and conversions) and each acceptance by the Borrower of an Extension of Credit (including extensions and conversions) shall be deemed to constitute a representation and warranty by the Borrower as of the date of such Extension of Credit that the applicable conditions in paragraphs (a), (b) and (c), and in (d), (e) or (f) of this subsection have been satisfied. SECTION 6 REPRESENTATIONS AND WARRANTIES To induce the Lenders to enter into this Credit Agreement and to make Extensions of Credit herein provided for, each of the members of the Consolidated Group parties hereto (in the case of the Borrower, for itself and for each of the other members of the Consolidated Group; and in the case of each of the other Credit Parties, for itself) hereby represents and warrants to the Administrative Agent and to each Lender that: 6.1 Financial Condition. As to the Borrower, each of the financial statements described below (copies of which have heretofore been provided to the Administrative Agent for distribution to the Lenders), have been prepared in accordance with GAAP consistently applied throughout the periods covered thereby, are complete and correct in all material respects and present fairly the financial condition and results from operations of the entities and for the periods specified, subject in the case of interim Borrower-prepared statements to normal year-end adjustments: 42 (i) an audited consolidated balance sheet of the Borrower and its consolidated subsidiaries dated as of December 31, 1996, together with related statements of operations, cash flows and shareholders' equity certified by Ernst & Young LLP, independent auditors; and (ii) a Borrower-prepared consolidated balance sheet of the Borrower and its consolidated subsidiaries dated as of March 31, 1997, together with related consolidated statements of operations and cash flows. 6.2 No Material Adverse Changes. Since the date of the audited financial statements referenced in Section 6.1(i), there has been no circumstance, development or event relating to or affecting the members of the Consolidated Group which has had or would be reasonably expected to have a Material Adverse Effect. 6.3 Organization; Existence; Compliance with Law. Except as disclosed on Schedule 6.3, each of the members of the Consolidated Group (a) is duly organized, validly existing in good standing under the laws of the jurisdiction of its incorporation or organization, except in such jurisdictions where the failure to be so qualified and in good standing would not, in the aggregate, have a Material Adverse Effect, (b) has the corporate or other necessary power and authority, and the legal right to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign entity and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, other than in such jurisdictions where the failure to be so qualified and in good standing would not, in the aggregate, have a Material Adverse Effect, and (d) is in compliance with all Requirements of Law, except to the extent that the failure to comply therewith would not, in the aggregate, be reasonably expected to have a Material Adverse Effect. The Borrower is a "real estate investment trust" within the meaning provided under the Code. 6.4 Power; Authorization; Enforceable Obligations. Each of the Credit Parties has the corporate or other necessary power and authority, and the legal right, to make, deliver and perform the Credit Documents to which it is a party and has taken all necessary corporate or other action to authorize the execution, delivery and performance by it of the Credit Documents to which it is a party. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with acceptance of extensions of credit or the making of the guaranties hereunder or with the execution, delivery or performance of any Credit Documents by the Credit Parties (other than those which have been obtained, such filings as are required by the Securities and Exchange Commission and to fulfill other reporting requirements with Governmental Authorities) or with the validity or enforceability of any Credit Document against the Credit parties. Each Credit Document to which it is a party constitutes a legal, valid and binding 43 obligation of such Credit Party enforceable against such Credit Party in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). 6.5 No Legal Bar. The execution, delivery and performance of the Credit Documents, the borrowings hereunder and the use of the Extensions of Credit will not violate any Requirement of Law or any Contractual Obligation of any member of the Consolidated Group (except those as to which waivers or consents have been obtained), and will not result in, or require, the creation or imposition of any Lien on any of their respective properties or revenues pursuant to any Requirement of Law or Contractual Obligation other than the Liens arising under or contemplated in connection with the Credit Documents. No member of the Consolidated Group is in default under or with respect to any of its Contractual Obligations in any respect which would reasonably be expected to have a Material Adverse Effect. 6.6 No Material Litigation. No claim, litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the best knowledge of the Credit Parties, threatened by or against, any members of the Consolidated Group or against any of their respective properties or revenues which (a) relate to the Credit Documents or any of the transactions contemplated hereby or thereby, or (b) if adversely determined, would reasonably be expected to have a Material Adverse Effect. 6.7 No Default. No Default or Event of Default has occurred and is continuing. 6.8 Ownership of Property; Liens. Each of members of the Consolidated Group has good title in fee simple to, or a valid leasehold interest in, all its material real property, and good title to, or a valid leasehold interest in, all its other material property, and none of such property is subject to any Lien, except for liens permitted under Section 8.2. 6.9 Taxes. Each of the members of the Consolidated Group has filed or caused to be filed all United States federal income tax returns and all other material tax returns which, to the best knowledge of the Credit Parties, are required to be filed and has paid or received extensions regarding (a) all taxes shown to be due and payable on said returns or (b) all taxes shown to be due and payable on any assessments of which it has received notice made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any (i) taxes, fees or other charges with respect to which the failure to pay, in the 44 aggregate, would not have a Material Adverse Effect or (ii) taxes, fees or other charges the amount or validity of which are currently being contested and with respect to which reserves in conformity with GAAP have been provided on the books of such Person), and no tax Lien has been filed, and, to the best knowledge of the Credit Parties, no claim is being asserted, with respect to any such tax, fee or other charge. 6.10 ERISA. Except as would not reasonably be expected to have a Material Adverse Effect: (a) During the five-year period prior to the date on which this representation is made or deemed made: (i) no ERISA Event has occurred, and, to the best knowledge of the Credit Parties, no event or condition has occurred or exists as a result of which any ERISA Event could reasonably be expected to occur, with respect to any Plan; (ii) no "accumulated funding deficiency," as such term is defined in Section 302 of ERISA and Section 412 of the Code, whether or not waived, has occurred with respect to any Plan; (iii) each Plan has been maintained, operated, and funded in compliance with its own terms and in material compliance with the provisions of ERISA, the Code, and any other applicable federal or state laws; and (iv) no lien in favor of the PBGC or a Plan has arisen or is reasonably likely to arise on account of any Plan. (b) The actuarial present value of all "benefit liabilities" (as defined in Section 4001(a)(16) of ERISA), whether or not vested, under each Single Employer Plan, as of the last annual valuation date prior to the date on which this representation is made or deemed made (determined, in each case, in accordance with Financial Accounting Standards Board Statement 87, utilizing the actuarial assumptions used in such Plan's most recent actuarial valuation report), did not exceed as of such valuation date the fair market value of the assets of such Plan. (c) No member of the Consolidated Group nor any ERISA Affiliate has incurred, or, to the best knowledge of the Credit Parties, could be reasonably expected to incur, any withdrawal liability under ERISA to any Multiemployer Plan or Multiple Employer Plan. No member of the Consolidated Group nor any ERISA Affiliate would become subject to any withdrawal liability under ERISA if any member of the Consolidated Group or any ERISA Affiliate were to withdraw completely from all Multiemployer Plans and Multiple Employer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. No member of the Consolidated Group nor any ERISA Affiliate has received any notification that any Multiemployer Plan is in reorganization (within the meaning of Section 4241 of ERISA), is insolvent (within the meaning of Section 4245 of ERISA), or has been terminated (within the meaning of Title IV of ERISA), and no Multiemployer Plan is, to the best knowledge of the Credit Parties, reasonably expected to be in reorganization, insolvent, or terminated. (d) No prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) or breach of fiduciary responsibility has occurred with respect to a Plan which has subjected or may subject any member of the Consolidated Group or any ERISA Affiliate to any liability under Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the Code, or under any agreement or other instrument pursuant to which any member of the Consolidated Group or any ERISA Affiliate has agreed or is required to indemnify any person against any such liability. 45 (e) No member of the Consolidated Group nor any ERISA Affiliates has any material liability with respect to "expected post-retirement benefit obligations" within the meaning of the Financial Accounting Standards Board Statement 106. Each Plan which is a welfare plan (as defined in Section 3(1) of ERISA) to which Sections 601-609 of ERISA and Section 4980B of the Code apply has been administered in compliance in all material respects of such sections. 6.11 Governmental Regulations, Etc. (a) No part of the proceeds of Extensions of Credit hereunder will be used, directly or indirectly, for the purpose of purchasing or carrying any "margin stock" within the meaning of Regulation G or Regulation U, or for the purpose of purchasing or carrying or trading in any securities. If requested by any Lender or the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form U-1 referred to in said Regulation U. No indebtedness being reduced or retired out of the proceeds of Extensions of Credit hereunder was or will be incurred for the purpose of purchasing or carrying any margin stock within the meaning of Regulation U or any "margin security" within the meaning of Regulation T. "Margin stock" within the meanings of Regulation U does not constitute more than 25% of the value of the consolidated assets of the Borrower and its Subsidiaries. None of the transactions contemplated by this Credit Agreement (including, without limitation, the direct or indirect use of the proceeds of the Loans) will violate or result in a violation of the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, or regulations issued pursuant thereto, or Regulation G, T, U or X. (b) None of the members of the Consolidated Group is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act or the Investment Company Act of 1940, each as amended. In addition, none of the members of the Consolidated Group is (i) an "investment company" registered or required to be registered under the Investment Company Act of 1940, as amended, and is not controlled by such a company, or (ii) a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. (c) Each of the members of the Consolidated Group has obtained all material licenses, permits, franchises or other governmental authorizations necessary to the ownership of its respective Property and to the conduct of its business. (d) None of the members of the Consolidated Group is in violation of any applicable statute, regulation or ordinance of the United States of America, or of any state, city, town, municipality, county or any other jurisdiction, or of any agency thereof (including without limitation, environmental laws and regulations), which violation could reasonably be expected to have a Material Adverse Effect. (e) Each of the members of the Consolidated Group is current with all material reports and documents, if any, required to be filed with any state or federal securities commission or similar agency and is in full compliance in all material respects with all applicable rules and regulations of such commissions. 46 6.12 Subsidiaries. Set forth on Schedule 6.12 are all the Subsidiaries of the Borrower at the Closing Date, the jurisdiction of their incorporation and the direct or indirect ownership interest of the Borrower therein. 6.13 Purpose of Extensions of Credit. The Extensions of Credit will be used to refinance existing Funded Debt, and to finance working capital and other corporate purposes. 6.14 Environmental Matters. Except as would not reasonably be expected to have a Material Adverse Effect: (a) Each of the facilities and properties owned, leased or operated by the members of the Consolidated Group (the "Properties") and all operations at the Properties are in compliance with all applicable Environmental Laws, and there is no violation of any Environmental Law with respect to the Properties or the businesses operated by the members of the Consolidated Group (the "Businesses"), and there are no conditions relating to the Businesses or Properties that could give rise to material liability under any applicable Environmental Laws. (b) To the respective Credit Party's knowledge, none of the Properties contains any Materials of Environmental Concern at, on or under the Properties in amounts or concentrations that constitute or constituted a violation of, or could give rise to liability under, Environmental Laws. (c) None of the members of the Consolidated Group has received any written notice of, or inquiry from any Governmental Authority regarding, any violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Properties or the Businesses. (d) Materials of Environmental Concern have not been transported or disposed of from the Properties, or generated, treated, stored or disposed of at, on or under any of the Properties or any other location, in each case by or on behalf any members of the Consolidated Group during their ownership of the Properties in violation of, or in a manner that would be reasonably likely to give rise to liability under, any applicable Environmental Law. (e) No judicial proceeding or governmental or administrative action is pending or, to the best knowledge of any Credit Party, threatened, under any Environmental Law to which any member of the Consolidated Group is or will be named as a party, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to any member of the Consolidated Group, the Properties or the Businesses. 47 (f) There has been no release or, threat of release of Materials of Environmental Concern at or from the Properties or arising from or related to the operations (including, without limitation, disposal) of any member of the Consolidated Group in connection with the Properties or otherwise in connection with the Businesses, in violation of or in amounts or in a manner that could give rise to liability under Environmental Laws. SECTION 7 AFFIRMATIVE COVENANTS Each of the Credit Parties (in the case of the Borrower, for itself and each of the other members of the Consolidated Group, and in the case of each of the other Credit Parties, for itself) covenants and agrees that on the Closing Date, and so long as this Credit Agreement is in effect and until the Commitments have been terminated, no Loans remain outstanding and all amounts owing hereunder or in connection herewith have been paid in full: 7.1 Financial Statements. The Borrower shall furnish, or cause to be furnished, to the Administrative Agent for distribution to the Lenders: (a) Audited Financial Statements. As soon as available, but in any event within 90 days after the end of each fiscal year, an audited consolidated balance sheet of the Borrower and its subsidiaries as of the end of the fiscal year and the related consolidated statements of operations, shareholders' equity and cash flows for the year, audited by Ernst & Young LLP, or other firm of independent certified public accountants of nationally recognized standing, setting forth in each case in comparative form the figures for the previous year, reported without a "going concern" or like qualification or exception, or qualification indicating that the scope of the audit was inadequate to permit such independent certified public accountants to certify such financial statements without such qualification. (b) Borrower-Prepared Financial Statements. As soon as available, but in any event within 60 days after the end of each of the first three fiscal quarters, a Borrower-prepared consolidated balance sheet of the Borrower and its subsidiaries as of the end of the quarter and related Borrower-prepared consolidated statements of operations and cash flows for such quarterly period and for the fiscal year to date, in each case setting forth in comparative form the consolidated figures for the corresponding period or periods of the preceding fiscal year or the portion of the fiscal year ending with such period, as applicable, in each case subject to normal recurring year-end audit adjustments. All such financial statements shall be complete and correct in all material respects (subject, in the case of interim statements, to normal recurring year-end audit adjustments) and shall be prepared in reasonable detail and, in the case of the annual and quarterly financial statements provided in accordance with subsections (a) and (b) above, in accordance with GAAP applied consistently throughout the periods reflected therein and further accompanied by a description 48 of, and an estimation of the effect on the financial statements on account of, a change in the application of accounting principles as provided in Section 1.3. 7.2 Certificates; Other Information. The Borrower shall furnish, or cause to be furnished, to the Administrative Agent for distribution to the Lenders: (a) Accountant's Certificate and Reports. Concurrently with the delivery of the financial statements referred to in subsection 7.1(a) above, a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default, except as specified in such certificate. (b) Officer's Certificate. Concurrently with the delivery of the financial statements referred to in Sections 7.1(a) and 7.1(b) above, a certificate of a Responsible Officer stating that, to the best of such Responsible Officer's knowledge and belief, (i) the financial statements fairly present in all material respects the financial condition of the parties covered by such financial statements, (ii) during such period the members of the Consolidated Group have observed or performed in all material respects the covenants and other agreements hereunder and under the other Credit Documents relating to them, and satisfied in all material respects the conditions, contained in this Credit Agreement to be observed, performed or satisfied by them, and (iii) such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate. Such certificate shall include the calculations required to indicate compliance with Section 7.9. A form of Officer's Certificate is attached as Schedule 7.2(b). (c) Accountants' Reports. Promptly upon receipt, a copy of any final (as distinguished from a preliminary or discussion draft) "management letter" or other similar report submitted by independent accountants or financial consultants to the members of the Consolidated Group in connection with any annual, interim or special audit. (d) Public Information. Within thirty days after the same are sent, copies of all reports (other than those otherwise provided pursuant to subsection 7.1) and other financial information which any member of the Consolidated Group sends to its public stockholders, and within thirty days after the same are filed, copies of all financial statements and non-confidential reports which any member of the Consolidated Group may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Authority. (e) Other Information. Promptly, such additional financial and other information as the Administrative Agent, at the request of any Lender, may from time to time reasonably request. 7.3 Notices. 49 The Borrower shall give notice to the Administrative Agent (which shall promptly transmit such notice to each Lender) of: (a) Defaults. Immediately (and in any event within two (2) Business Days) after any Responsible Officer of any Credit Party knows or has reason to know thereof, the occurrence of any Default or Event of Default. (b) Contractual Obligations. Promptly, the occurrence of any default or event of default under any Contractual Obligation of any member of the Consolidated Group which would reasonably be expected to have a Material Adverse Effect. (c) Legal Proceedings. Promptly, any litigation, or any investigation or proceeding (including without limitation, any environmental proceeding) known to any member of the Consolidated Group, or any material development in respect thereof, affecting any member of the Consolidated Group which, if adversely determined, would reasonably be expected to have a Material Adverse Effect. (d) ERISA. Promptly, after any Responsible Officer of the Borrower knows or has reason to know of (i) any event or condition, including, but not limited to, any Reportable Event, that constitutes, or might reasonably lead to, an ERISA Event; (ii) with respect to any Multiemployer Plan, the receipt of notice as prescribed in ERISA or otherwise of any withdrawal liability assessed against any of their ERISA Affiliates, or of a determination that any Multiemployer Plan is in reorganization or insolvent (both within the meaning of Title IV of ERISA); (iii) the failure to make full payment on or before the due date (including extensions) thereof of all amounts which the members of the Consolidated Group or any ERISA Affiliate are required to contribute to each Plan pursuant to its terms and as required to meet the minimum funding standard set forth in ERISA and the Code with respect; or (iv) any change in the funding status of any Plan that reasonably could be expected to have a Material Adverse Effect; together with a description of any such event or condition or a copy of any such notice and a statement by the chief financial officer of the Borrower briefly setting forth the details regarding such event, condition, or notice, and the action, if any, which has been or is being taken or is proposed to be taken by the Credit Parties with respect thereto. Promptly upon request, the members of the Consolidated Group shall furnish the Administrative Agent and the Lenders with such additional information concerning any Plan as may be reasonably requested, including, but not limited to, copies of each annual report/return (Form 5500 series), as well as all schedules and attachments thereto required to be filed with the Department of Labor and/or the Internal Revenue Service pursuant to ERISA and the Code, respectively, for each "plan year" (within the meaning of Section 3(39) of ERISA). (e) Other. Promptly, any other development or event which a Responsible Officer of the Borrower determines could reasonably be expected to have a Material Adverse Effect. 50 Each notice pursuant to this subsection shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the relevant Credit Parties propose to take with respect thereto. 7.4 Payment of Obligations. Each of the members of the Consolidated Group shall pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, in accordance with prudent business practice (subject, where applicable, to specified grace periods) all material obligations of each member of the Consolidated Group of whatever nature and any additional costs that are imposed as a result of any failure to so pay, discharge or otherwise satisfy such obligations, other than (i) obligations with respect to which the failure to pay, in the aggregate, would not have a Material Adverse Effect, or (ii) obligations the amount or validity of which are being contested and with respect to which reserves in conformity with GAAP have been provided on the books of the appropriate members of the Consolidated Group. 7.5 Conduct of Business and Maintenance of Existence. Each member of the Consolidated Group shall continue to engage in business of the same general type as now conducted by it on the date hereof and similar or related businesses, and preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all rights, privileges, licenses and franchises necessary or desirable in the normal conduct of its business; comply with all Contractual Obligations and Requirements of Law applicable to it except to the extent that failure to comply therewith would not, in the aggregate, have a Material Adverse Effect. 7.6 Maintenance of Property; Insurance. Each member of the Consolidated Group shall keep all material property useful and necessary in its business in reasonably good working order and condition (ordinary wear and tear excepted); maintain with financially sound and reputable insurance companies casualty, liability and such other insurance (which may include plans of self-insurance) with such coverage and deductibles, and in such amounts as may be consistent with prudent business practice and in any event consistent with normal industry practice (except to any greater extent as may be required by the terms of any of the other Credit Documents); and furnish to the Administrative Agent, upon written request, full information as to the insurance carried. 7.7 Inspection of Property; Books and Records; Discussions. Each member of the Consolidated Group shall keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its businesses and activities; and permit, during regular business hours and upon reasonable notice by the Administrative Agent, the Administrative Agent to visit and inspect any of its properties and examine and make abstracts (including photocopies) from any of its books and records (other than materials protected by the attorney-client privilege and materials which the Credit Parties may not disclose without violation of a confidentiality obligation binding upon them) at any reasonable 51 time, and to discuss the business, operations, properties and financial and other condition of the members of the Consolidated Group with officers and employees of the members of the Consolidated Group and with their independent certified public accountants. The cost of the inspection referred to in the preceding sentence shall be for the account of the Lenders unless an Event of Default has occurred and is continuing, in which case the cost of such inspection shall be for the account of the Credit Parties. 7.8 Environmental Laws. Each member of the Consolidated Group shall: (a) Comply in all material respects with all applicable Environmental Laws and obtain and comply in all material respects with and maintain any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws except to the extent that failure to do so would not reasonably be expected to have a Material Adverse Effect; (b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws except to the extent that the same are being contested in good faith by appropriate proceedings and the failure to do or the pendency of such proceedings would not reasonably be expected to have a Material Adverse Effect; and (c) Defend, indemnify and hold harmless the Administrative Agent and the Lenders, and their respective employees, agents, officers and directors, from and against any and all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature known or unknown, contingent or otherwise, arising out of, or in any way relating to the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of the members of the Consolidated Group or the Properties, or any orders, requirements or demands of Governmental Authorities related thereto, including, without limitation, reasonable attorney's and consultant's fees, investigation and laboratory fees, response costs, court costs and litigation expenses, except to the extent that any of the foregoing arise out of the gross negligence or willful misconduct of the party seeking indemnification therefor. The agreements in this paragraph shall survive repayment of the Loans and all other amounts payable hereunder, and termination of the Commitments. 7.9 Financial Covenants. (a) Consolidated Adjusted Tangible Net Worth. Consolidated Adjusted Tangible Net Worth will not at any time be less than the sum of (i) $950,000,000 plus (ii) 100% of the net proceeds (after customary underwriting discounts and commissions and reasonable offering expenses) from Equity Transactions occurring after March 31, 1997. 52 (b) Consolidated Funded Debt Ratio. Consolidated Funded Debt shall not at any time exceed 60% of Consolidated Adjusted Capitalization. (c) Consolidated Priority Claims. Consolidated Priority Claims will not at any time exceed 35% of Consolidated Adjusted Capitalization. (d) Consolidated Senior Fixed Charge Coverage Ratio. As of the last day of each fiscal quarter, the Consolidated Senior Fixed Charge Coverage Ratio shall be not less than 1.75:1.0. (e) Consolidated Total Fixed Charge Coverage Ratio. As of the end of each fiscal quarter, the Consolidated Total Fixed Charge Coverage Ratio shall be not less than 1.4:1.0. (f) Consolidated Unencumbered Realty to Consolidated Unsecured Debt Ratio. The ratio of Consolidated Unencumbered Realty to Consolidated Unsecured Debt shall not at any time be less than 1.8:1.0. (g) Consolidated Unencumbered Interest Coverage Ratio. As of the end of each fiscal quarter, the Consolidated Unencumbered Interest Coverage Ratio shall be not less than 1.8:1.0. 7.10 Agency Fees. The Borrower shall pay to the Administrative Agent the annual agency fee and comply with the other agreements provided for in the Administrative Agent's Fee Letter. 7.11 Additional Guaranties and Stock Pledges. (a) Domestic Subsidiaries. Where the assets of Domestic Subsidiaries which are not Guarantors hereunder (the "Non-Guarantor Subsidiaries") shall, at any time exceed (i) five percent (5%) of Consolidated Assets in any instance, or (ii) fifteen percent (15%) of Consolidated Assets collectively as a group (the "Threshold Requirement"), then the Borrower shall promptly notify the Administrative Agent thereof, and cause one or more Non-Guarantor Subsidiaries to become a Guarantor hereunder by way of execution of a Joinder Agreement such that immediately after the joinder of such Subsidiaries as Guarantors hereunder, the remaining Non-Guarantor Subsidiaries shall not exceed the Threshold Requirement. Delivery of any such Joinder Agreement shall be accompanied by supporting resolutions, incumbency certificates, corporation formation and organizational documentation and opinions of counsel as the Administrative Agent may reasonably request. (b) Foreign Subsidiaries. At any time any Person becomes a Foreign Subsidiary, the Borrower will promptly notify the Administrative Agent thereof and cause delivery of supporting resolutions, incumbency certificates, corporation formation and organizational documentation and opinions of counsel as the Administrative Agent may reasonably request. 7.12 Ownership of Subsidiaries. 53 Except to the extent otherwise permitted in Section 8.4(b) and Section 8.7 and to the extent as would not cause a Change of Control and except as set forth on Schedule 6.12, the Borrower shall, directly or indirectly, own at all times 100% of the voting stock of each of its Subsidiaries. 7.13 Use of Proceeds. Extensions of Credit will be used solely for the purposes provided in Section 6.13. SECTION 8 NEGATIVE COVENANTS Each of the Credit Parties (in the case of the Borrower, for itself and each of the other members of the Consolidated Group, and in the case of each of the other Credit Parties, for itself) covenants and agrees that on the Closing Date, and so long as this Credit Agreement is in effect and until the Commitments have been terminated, no Loans remain outstanding and all amounts owing hereunder or in connection herewith, have been paid in full, no member of the Consolidated Group shall: 8.1 Limitations on Debt. Create, incur, assume or suffer to exist any Debt, except: (a) Debt the existence or incurrence of which would not violate the financial covenants of Section 7.9. 8.2 Restriction on Liens. Create, assume, incur or suffer to exist any Lien on any Property or asset of any kind, real or personal, tangible or intangible, now owned or hereafter acquired by it or assign or subordinate any present or future right to receive assets except: (a) Liens securing Funded Debt the existence or incurrence of which would not violate the financial covenants of Section 7.9; (b) Liens securing taxes, assessments or governmental charges or levies or the claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other like persons; provided that (A) with respect to Liens securing state and local taxes, such taxes are not yet payable, (B) with respect to Liens securing claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and the like, such liens are (1) unfiled and no other action has been taken to enforce the same and (2) the cumulative effect of all such Liens will not have a Material Adverse Effect, or (C) with respect to taxes, assessments or governmental charges or levies or claims or demand secured by such Liens, payment is not at the time required; 54 (c) Liens not securing Debt which are incurred in the ordinary course of business in connection with workmen's compensation, unemployment insurance, unemployment insurance, social security and other like laws; (d) any Lien arising pursuant to any order of attachment, distraint or similar legal process arising in connection with court proceedings so long as the execution or other enforcement thereof is effectively stayed and the claims secured thereto are being contested in good faith by appropriate proceedings; (e) zoning restrictions, easements, licenses, reservations, covenants, conditions, waivers, restrictions on the use of property or other minor encumbrances or irregularities of title which do not materially impair the use of any property in the operation or business of the Borrower or such Subsidiary or the value of such property for the purpose of such business; and (f) Liens on property or assets of such Subsidiary to secure obligations of such Subsidiary solely to the Borrower or a Wholly-Owned Subsidiary. 8.3 Consolidations, Mergers and Sales of Assets. (a) Enter into a transaction of merger or consolidation, except (i) a member of the Consolidated Group may be a party to a transaction of merger or consolidation with another member of the Consolidated Group, provided that (A) if the Borrower is a party thereto, it is the surviving corporation, or (B) if a Guarantor is a party thereto, it shall be the surviving corporation or the surviving corporation shall be a Domestic Subsidiary and shall become a Guarantor hereunder as an Additional Credit Party pursuant to Section 7.11 concurrently therewith, and (C) no Default or Event of Default shall exist either immediately prior to or immediately after giving effect thereto; and (ii) a member of the Consolidated Group (other than the Borrower) may be a party to a transaction of merger or consolidation with any other Person, provided that (A) the provisions of Section 7.11 regarding joinder of certain Subsidiaries as Additional Credit Parties hereunder shall be complied with, (B) no Default or Event of Default shall exist either immediately prior to or immediately after giving effect thereto, and (C) the provisions of subsection (c) of this Section shall be complied with. (b) other than as between Credit Parties, sell, lease, transfer or otherwise dispose of assets, property 55 and/or operations which in the aggregate in any fiscal year shall constitute more than fifteen percent (15%) of Consolidated Total Realty at the end of the immediately preceding fiscal year or contributed more than fifteen percent (15%) Consolidated EBITDA for the immediately preceding fiscal year, without the prior written consent of the Required Lenders (which consent shall not be unreasonably withheld or delayed). (c) Acquire all or any portion of the capital stock or other ownership interest in any Person which is not a Subsidiary or all or any substantial portion of the assets, property and/or operations of a Person which is not a Subsidiary, without the prior written consent of the Required Lenders (which consent shall not be unreasonably withheld or delayed), unless (i) in the case of an acquisition of capital stock or other ownership interest where after giving effect thereto, such Person will not be a Subsidiary, then such acquisition will not cause a violation of Section 8.4; (ii) in the case of an acquisition of capital stock or other ownership interest where after giving effect thereto, such Person will be a Subsidiary, or in the case of an acquisition of assets, property and/or operations then (A) the aggregate cost of all such acquisitions shall not exceed an amount equal to twenty-five percent (25%) of Consolidated Assets at the end of the immediately preceding fiscal year; (B) the Board of Directors (or functional equivalent) of the Person which is the subject of the acquisition shall have approved the acquisition; and (C) no Default or Event of Default would exist after giving effect thereto on a Pro Forma Basis. (d) In the case of the Borrower, liquidate, wind-up or dissolve, whether voluntarily or involuntarily (or suffer to permit any such liquidation or dissolution). (e) Alter the character of their business in any material respect from that conducted as of the Closing Date and similar or related businesses. (e) The foregoing provisions of this Section shall not apply to leases of property and assets by members of the Consolidated Group to individual tenants in the ordinary course of business. 8.4 Loans and Investments. (a) Make loans, advances or Investments (including, for purposes hereof, Guaranty Obligations) to or in respect of any other Person, except for (i) Permitted Investments and (ii) other Investments which in the aggregate do not at any time exceed five percent (5%) of Consolidated Assets. (b) Invest in or acquire unimproved real property such that following the investment, Consolidated Unimproved Realty and purchase money mortgages are at any time greater than ten percent (10%) of the Consolidated Total Realty. 8.5 Transactions with Affiliates. Enter into any transaction, directly or indirectly, including without limitation, the purchase, sale or exchange of property or the rendering of any service to, any Affiliate or 56 shareholder of the Borrower, except in the ordinary course of business pursuant to the reasonable requirements of the business of the Borrower or such Subsidiary and upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary than would be obtainable in a comparable arms-length transaction with a person not an Affiliate or shareholder; provided that the foregoing restrictions shall not apply to extensions of credit by the Borrower to its officers and directors pursuant to the Borrower's Stock Purchase and Loan Plan in an aggregate amount not to exceed at any time 5% of Consolidated Adjusted Tangible Net Worth. 8.6 Transactions with Other Persons regarding this Agreement. Enter into any agreement with any Person whereby any of them would agree to any restriction on the Borrower's right with the Lenders' consent to amend or waive any of the provisions of this Credit Agreement. 8.7 Limitation on Certain Restrictions on Subsidiaries. Other than as presently exist in respect of REMICs and other special Subsidiaries listed on Schedule 8.7, create or otherwise cause or suffer to exist or become effective, directly or indirectly, any encumbrance or restriction on the ability of any Subsidiary to (i) pay dividends or make any other distributions on its capital stock or any other interest or participation in its profits owned by any member of the Consolidated Group, (ii) make loans or advances to any member of the Consolidated Group, or (iii) transfer any of its properties or assets to any member of the Consolidated Group, except for encumbrances or restrictions existing under or by reason of (A) applicable law or (B) this Credit Agreement unless, after giving effect thereto on a Pro Forma Basis, the aggregate amount of Consolidated EBITDA attributable to all such REMICs and other special Subsidiaries shall be less than 25% of Consolidated EBITDA. SECTION 9 EVENTS OF DEFAULT 9.1 Events of Default. An Event of Default shall exist upon the occurrence of any of the following specified events (each an "Event of Default"): (a) Payment. Any Credit Party shall (i) default in the payment when due of any principal of any of the Loans, or (ii) default, and such defaults shall continue for five (5) or more Business Days, in the payment when due of any interest on the Loans or of any Fees or other amounts owing hereunder, under any of the other Credit Documents or in connection herewith or therewith; or (b) Representations. Any representation, warranty or statement made or deemed to be made herein, in any of the other Credit Documents, or in any statement or certificate 57 delivered or required to be delivered pursuant hereto or thereto shall prove untrue in any material respect on the date as of which it was deemed to have been made; or (c) Covenants. (i) Default in the due performance or observance of any term, covenant or agreement contained in Section 7.3(a), 7.9, 7.11, 7.13 or 8.1 through 8.7 (except in the case of negative covenants contained in Sections 8.1 through 8.7, those Defaults which may occur or arise other than on account of or by affirmative or intentional act of the Borrower or event or condition which the Borrower shall with knowledge permit to exist, all of which shall be subject to the provisions of clause (ii) hereof), inclusive, or (ii) Default in the due performance or observance by it of any term, covenant or agreement (other than those referred to in subsections (a), (b) or (c)(i) of this Section 9.1) contained in this Credit Agreement and such default shall continue unremedied for a period of at least 30 days after the earlier of a Responsible Officer of a Credit Party becoming aware of such default or notice thereof by the Administrative Agent or such longer period not to exceed an additional 30 days provided that the Borrower is diligently pursuing remedy of such default; or (d) Other Credit Documents. (i) Any Credit Party shall default in the due performance or observance of any material term, covenant or agreement in any of the other Credit Documents (subject to applicable grace or cure periods, if any), or (ii) any Credit Document shall fail to be in full force and effect or to give the Administrative Agent and/or the Lenders any material part of the rights, powers and privileges purported to be created thereby; or (e) Guaranties. The guaranty given by any Guarantor hereunder or any material provision thereof shall cease to be in full force and effect, or any Guarantor hereunder or any Person acting by or on behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations under such guaranty, or any Guarantor shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to any guaranty; or (f) Bankruptcy, etc. Any Bankruptcy Event shall occur with respect to any member of the Consolidated Group; or (g) Defaults under Other Agreements. (i) Any member of the Consolidated Group shall default in the performance or observance (beyond the applicable grace period with respect thereto, if any) of any material obligation or condition of any contract or lease material to the Consolidated Group, taken as a whole; or (ii) With respect to any Debt (other than Debt outstanding under this Credit Agreement) in excess of $25,000,000 in the aggregate for the Consolidated Group taken as a whole, (A) (1) any member of the Consolidated Group shall default in any payment (beyond the applicable grace period with respect thereto, if any) with respect to any such 58 Debt, or (2) the occurrence and continuance of a default in the observance or performance relating to such Debt or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event or condition shall occur or condition exist, the effect of which default or other event or condition is to cause, or permit, the holder or holders of such Debt (or trustee or agent on behalf of such holders) to cause (determined without regard to whether any notice or lapse of time is required), any such Debt to become due prior to its stated maturity; or (B) any such Debt shall be declared due and payable, or required to be prepaid other than by a regularly scheduled required prepayment, prior to the stated maturity thereof; or (iii) The occurrence of an Event of Default under the 364-Day Credit Agreement; or (h) Judgments. Any member of the Consolidated Group shall fail within 30 days of the date due and payable to pay, bond or otherwise discharge any judgment, settlement or order for the payment of money which judgment, settlement or order, when aggregated with all other such judgments, settlements or orders due and unpaid at such time, exceeds $5,000,000, and which is not stayed on appeal (or for which no motion for stay is pending) or is not otherwise being executed; or (i) ERISA. Any of the following events or conditions, if such event or condition could reasonably be expected to have a Material Adverse Effect shall occur: (1) any "accumulated funding deficiency," as such term is defined in Section 302 of ERISA and Section 412 of the Code, whether or not waived, shall exist with respect to any Plan, or any lien shall arise on the assets of a member of the Consolidated Group or any ERISA Affiliate in favor of the PBGC or a Plan; (2) an ERISA Event shall occur with respect to a Single Employer Plan, which is, in the reasonable opinion of the Administrative Agent, likely to result in the termination of such Plan for purposes of Title IV of ERISA; (3) an ERISA Event shall occur with respect to a Multiemployer Plan or Multiple Employer Plan, which is, in the reasonable opinion of the Administrative Agent, likely to result in (i) the termination of such Plan for purposes of Title IV of ERISA, or (ii) a member of the Consolidated Group or any ERISA Affiliate incurring any liability in connection with a withdrawal from, reorganization of (within the meaning of Section 4241 of ERISA), or insolvency of (within the meaning of Section 4245 of ERISA) such Plan; or (4) any prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) or breach of fiduciary responsibility shall occur which may subject a member of the Consolidated Group or any ERISA Affiliate to any liability under Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the Code, or under any agreement or other instrument pursuant to which a member of the Consolidated Group or any ERISA Affiliate has agreed or is required to indemnify any person against any such liability; or (j) Ownership. There shall occur a Change of Control. 9.2 Acceleration; Remedies. Upon the occurrence of an Event of Default, and at any time thereafter, the Administrative Agent shall, upon the request and direction of the Required Lenders, by written notice to the Credit Parties take any of the following actions: 59 (i) Termination of Commitments. Declare the Commitments terminated whereupon the Commitments shall be immediately terminated. (ii) Acceleration. Declare the unpaid principal of and any accrued interest in respect of all Loans and any and all other indebtedness or obligations of any and every kind owing by the Credit Parties to the Administrative Agent and/or any of the Lenders hereunder to be due whereupon the same shall be immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each of the Credit Parties. (iii) Enforcement of Rights. Enforce any and all rights and interests created and existing under the Credit Documents. Notwithstanding the foregoing, if an Event of Default specified in Section 9.1(f) shall occur, then the Commitments shall automatically terminate and all Loans, all accrued interest in respect thereof, all accrued and unpaid Fees and other indebtedness or obligations owing to the Administrative Agent and/or any of the Lenders hereunder automatically shall immediately become due and payable without presentment, demand, protest or the giving of any notice or other action by the Administrative Agent or the Lenders, all of which are hereby waived by the Credit Parties. SECTION 10 AGENCY PROVISIONS 10.1 Appointment. Each Lender hereby designates and appoints NationsBank, N.A. as administrative agent (in such capacity, the "Administrative Agent") of such Lender to act as specified herein and the other Credit Documents, and each such Lender hereby authorizes the Administrative Agent as the Administrative Agent for such Lender, to take such action on its behalf under the provisions of this Credit Agreement and the other Credit Documents and to exercise such powers and perform such duties as are expressly delegated by the terms hereof and of the other Credit Documents, together with such other powers as are reasonably incidental thereto. Each Lenders further directs and authorizes the Administrative Agent to execute releases (or similar agreements) to give effect to the provisions of this Credit Agreement and the other Credit Documents. Notwithstanding any provision to the contrary elsewhere herein and in the other Credit Documents, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein and therein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Credit Agreement or any of the other Credit Documents, or shall otherwise exist against the Administrative Agent. The provisions of this Section are solely for the benefit of the Administrative Agent and the Lenders and none of the Credit Parties shall have any rights as a third party beneficiary of the provisions hereof. In performing its functions and duties under this Credit Agreement and the other Credit Documents, the Administrative Agent shall act solely as Administrative Agent of the Lenders and 60 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 or any of their respective Affiliates. 10.2 Delegation of Duties. The Administrative Agent may execute any of its duties hereunder or under the other Credit Documents 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. 10.3 Exculpatory Provisions. The Administrative Agent and its officers, directors, employees, agents, attorneys-in-fact or affiliates shall not be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection herewith or in connection with any of the other Credit Documents (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 any of the Credit Parties contained herein or in any of the other Credit Documents or in any certificate, report, document, financial statement or other written or oral statement referred to or provided for in, or received by the Administrative Agent under or in connection herewith or in connection with the other Credit Documents, or enforceability or sufficiency therefor of any of the other Credit Documents, or for any failure of any Credit Party to perform its obligations hereunder or thereunder. The Administrative Agent shall not be responsible to any Lender for the effectiveness, genuineness, validity, enforceability, collectability or sufficiency of this Credit Agreement, or any of the other Credit Documents or for any representations, warranties, recitals or statements made herein or therein or made by the Borrower or any Credit Party 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 Credit Parties 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 or to inspect the properties, books or records of the Credit Parties or any of their respective Affiliates. 10.4 Reliance on Communications. 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, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to any of the Credit Parties, independent accountants and other experts selected by the Administrative Agent with reasonable care). The Administrative Agent may deem and treat the Lenders as the owners of their respective interests hereunder for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative 61 Agent in accordance with Section 11.3(b) hereof. The Administrative Agent and the Borrower shall be fully justified in failing or refusing to take any action under this Credit Agreement or under any of the other Credit Documents 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 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, hereunder or under any of the other Credit Documents in accordance with a request of the Required Lenders (or to the extent specifically provided in Section 11.6, all the Lenders) and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders (including their successors and assigns). 10.5 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 a Credit Party referring to the Credit Document, 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. 10.6 Non-Reliance on Administrative Agent and Other Lenders. Each Lender expressly acknowledges that each of the Administrative Agent and its officers, directors, employees, Administrative Agents, attorneys-in-fact or affiliates has not made any representations or warranties to it and that no act by the Administrative Agent or any affiliate thereof hereinafter taken, including any review of the affairs of any Credit Party or any of their respective Affiliates, 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, the other Credit Parties or their respective Affiliates and made its own decision to make its Loans hereunder and enter into this Credit 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 Credit 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, the other Credit Parties and their respective Affiliates. 62 Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, 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 or other conditions, prospects or creditworthiness of the Borrower, the other Credit Parties or any of their respective Affiliates which may come into the possession of the Administrative Agent or any of its officers, directors, employees, Administrative Agents, attorneys-in-fact or affiliates. 10.7 Indemnification. The Lenders agree to indemnify the Administrative Agent in its capacity as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Commitments (or if the Commitments have expired or been terminated, in accordance with the respective principal amounts of outstanding Loans and Participation Interests of the Lenders), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including without limitation at any time following the final payment of all of the obligations of the Borrower hereunder and under the other Credit Documents) 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 Credit Agreement or the other Credit Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the gross negligence or willful misconduct of the Administrative Agent. 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 shall survive the repayment of the Loans and other obligations under the Credit Documents and the termination of the Commitments hereunder. 10.8 Administrative Agent in its 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, its Subsidiaries or their respective Affiliates as though the Administrative Agent were not the Administrative Agent hereunder. With respect to the Loans made by and all obligations of the Borrower hereunder and under the other Credit Documents, the Administrative Agent shall have the same rights and powers under this Credit 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. 10.9 Successor Administrative Agent. The Administrative Agent may, at any time, resign upon 20 days' written notice to the Lenders and the Borrower, and may be removed, upon show of cause, by the Required Lenders upon 30 days' written notice to the Administrative Agent. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the notice of resignation or notice of removal, as appropriate, then the retiring Administrative Agent shall select a successor Administrative Agent provided such successor is a Lender hereunder or a commercial bank organized under the laws of the United States of America or of any State thereof and has a 63 combined capital and surplus of at least $400,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations as Administrative Agent, as appropriate, under this Credit Agreement and the other Credit Documents and the provisions of this Section 10.9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Credit Agreement. SECTION 11 MISCELLANEOUS 11.1 Notices. Except as otherwise expressly provided herein, all notices and other communications shall have been duly given and shall be effective (i) when delivered, (ii) when transmitted via telecopy (or other facsimile device) to the number set out below, (iii) the day following the day on which the same has been delivered prepaid to a reputable national overnight air courier service, or (iv) the third Business Day following the day on which the same is sent by certified or registered mail, postage prepaid, in each case to the respective parties at the address, in the case of the Borrower, Guarantors and the Administrative Agent, set forth below, and, in the case of the Lenders, set forth on Schedule 11.1, or at such other address as such party may specify by written notice to the other parties hereto: if to the Borrower or the Guarantors: United Dominion Realty Trust, Inc. 10 South Sixth Street Richmond, Virginia 23219-3802 Attn: Chief Financial Officer Telephone: (804) 344-1691 Telecopy: (804) 780-0431 with a copy to: United Dominion Realty Trust, Inc. 10 South Sixth Street Richmond, Virginia 23219-3802 Attn: General Counsel Telephone: (804) 344-1685 Telecopy: (804) 788-4607 if to the Administrative Agent: NationsBank, N.A. 101 N. Tryon Street 64 Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attn: Agency Services Telephone: (704) 386-9046 Telecopy: (704) 386-9923 with a copy to: NationsBank, N.A. Mid-Atlantic Corporate Finance 1111 E. Main Street 4th Floor Pavilion Richmond, Virginia 23277-0001 Attn: Senior Bank Debt Telephone: (804) 788-2244 Telecopy: (804) 788-3669 11.2 Right of Set-Off. 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 authorized at any time and from time to time, without presentment, demand, protest or other notice of any kind (all of which rights 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 branches, agencies or Affiliates of such Lender wherever located) to or for the credit or the account of any Credit Party against obligations and liabilities of such Person to such Lender hereunder, under the Notes, the other Credit Documents or otherwise, irrespective of whether such Lender shall have made any demand hereunder and although such obligations, liabilities or claims, or any of them, may be contingent or unmatured, and any such set-off shall be deemed to have been made immediately upon the occurrence of an Event of Default even though such charge is made or entered on the books of such Lender subsequent thereto. Any Person purchasing a participation in the Loans and Commitments hereunder pursuant to Section 3.13 or Section 11.3(d) may exercise all rights of set-off with respect to its participation interest as fully as if such Person were a Lender hereunder. It is specifically acknowledged and agreed that no right of set-off shall be exercised against accounts identified as holding tenant deposit accounts. 11.3 Benefit of Agreement. (a) Generally. This Credit 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 none of the Credit Parties may assign or transfer any of its interests without prior written consent of the Lenders; provided further that the rights of each Lender to transfer, assign or grant participations in its rights and/or obligations hereunder shall be limited as set forth in this Section 11.3, provided however that nothing herein shall prevent or prohibit any Lender from (i) pledging its Loans hereunder to a Federal Reserve Bank in 65 support of borrowings made by such Lender from such Federal Reserve Bank, or (ii) granting assignments or selling participations in such Lender's Loans and/or Commitments hereunder to its parent company and/or to any Affiliate or Subsidiary of such Lender. (b) Assignments. Each Lender may assign all or a portion of its rights and obligations hereunder, pursuant to an assignment agreement substantially in the form of Schedule 11.3(b), to (i) any Lender or any Affiliate or Subsidiary of a Lender, or (ii) any other commercial bank, financial institution or "accredited investor" (as defined in Regulation D of the Securities and Exchange Commission) reasonably acceptable to the Administrative Agent and, so long as no Default or Event of Default has occurred and is continuing, the Borrower; provided that (i) any such assignment (other than any assignment to an existing Lender) shall be in a minimum aggregate amount of $5,000,000 (or, if less, the remaining amount of the Commitment being assigned by such Lender) of the Commitments and in integral multiples of $1,000,000 above such amount and (ii) each such assignment shall be of a constant, not varying, percentage of all such Lender's rights and obligations under this Credit Agreement. Any assignment hereunder shall be effective upon delivery to the Administrative Agent of written notice of the assignment together with a transfer fee of $3,500 payable to the Administrative Agent for its own account from and after the later of (i) the effective date specified in the applicable assignment agreement and (ii) the date of recording of such assignment in the Register pursuant to the terms of subsection (c) below. The assigning Lender will give prompt notice to the Administrative Agent and the Borrower of any such assignment. Upon the effectiveness of any such assignment (and after notice to, and (to the extent required pursuant to the terms hereof), with the consent of, the Borrower as provided herein), the assignee shall become a "Lender" for all purposes of this Credit Agreement and the other Credit Documents and, to the extent of such assignment, the assigning Lender shall be relieved of its obligations hereunder to the extent of the Loans and Commitment components being assigned. Along such lines the Borrower agrees that upon notice of any such assignment and surrender of the appropriate Note or Notes, it will promptly provide to the assigning Lender and to the assignee separate promissory notes in the amount of their respective interests substantially in the form of the original Note (but with notation thereon that it is given in substitution for and replacement of the original Note or any replacement notes thereof). By executing and delivering an assignment agreement in accordance with this Section 11.3(b), the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim; (ii) except as set forth in clause (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto or the financial condition of any Credit Party or any of their respective Affiliates or the performance or observance by any Credit Party of any of its obligations under this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto; (iii) such assignee represents and warrants that it is 66 legally authorized to enter into such assignment agreement; (iv) such assignee confirms that it has received a copy of this Credit Agreement, the other Credit Documents and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such assignment agreement; (v) such assignee will independently and without reliance upon the Administrative Agent, such assigning Lender or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Credit Agreement and the other Credit Documents; (vi) such assignee appoints and authorizes the Administrative Agent to take such action on its behalf and to exercise such powers under this Credit Agreement or any other Credit Document as are delegated to the Administrative Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Credit Agreement and the other Credit Documents are required to be performed by it as a Lender. (c) Maintenance of Register. The Administrative Agent shall maintain at one of its offices in Charlotte, North Carolina a copy of each Lender assignment agreement delivered to it in accordance with the terms of subsection (b) above and a register for the recordation of the identity of the principal amount, type and Interest Period of each Loan outstanding hereunder, the names, addresses and the Commitments of the Lenders pursuant to the terms hereof from time to time (the "Register"). The Administrative Agent will make reasonable efforts to maintain the accuracy of the Register and to promptly update the Register from time to time, as necessary. The entries in the Register shall be conclusive in the absence of manifest error and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Credit Agreement. The Register shall be available for inspection by the Borrower and each Lender, at any reasonable time and from time to time upon reasonable prior notice. (d) Participations. Each Lender may sell, transfer, grant or assign participations in all or any part of such Lender's interests and obligations hereunder; provided that (i) such selling Lender shall remain a "Lender" for all purposes under this Credit Agreement (such selling Lender's obligations under the Credit Documents remaining unchanged) and the participant shall not constitute a Lender hereunder, (ii) no such participant shall have, or be granted, rights to approve any amendment or waiver relating to this Credit Agreement or the other Credit Documents except to the extent any such amendment or waiver would (A) reduce the principal of or rate of interest on or Fees in respect of any Loans in which the participant is participating, (B) postpone the date fixed for any payment of principal (including extension of the Termination Date or the date of any mandatory prepayment), interest or Fees in which the participant is participating, or (C) except as expressly provided in the Credit Documents, release any Guarantor from its guaranty obligations hereunder, and (iii) sub-participations by the participant (except to an affiliate, parent Borrower or affiliate of a parent Borrower of the participant) shall be prohibited. In the case of any such participation, the participant shall not have any rights under this Credit Agreement or the other Credit Documents (the participant's rights against the selling Lender in respect of such participation to be those set forth in the participation agreement with such Lender creating such participation) and all amounts payable by the 67 Borrower hereunder shall be determined as if such Lender had not sold such participation, provided, however, that such participant shall be entitled to receive additional amounts under Sections 3.6, 3.9, 3.10 and 3.11 on the same basis as if it were a Lender. 11.4 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 Credit Document and no course of dealing between the Administrative Agent or any Lender and any of the Credit Parties shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit 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 provided herein are cumulative and not exclusive of any rights or remedies which the Administrative Agent or any Lender would otherwise have. No notice to or demand on any Credit Party in any case shall entitle the Borrower or any other Credit Party 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. 11.5 Payment of Expenses, etc. The Borrower agrees to: (i) pay all reasonable out-of-pocket costs and expenses (A) of the Administrative Agent in connection with the negotiation, preparation, execution and delivery and administration of this Credit Agreement and the other Credit Documents and the documents and instruments referred to therein (including, without limitation, the reasonable fees and expenses of Moore & Van Allen, PLLC, special counsel to the Administrative Agent) and any amendment, waiver or consent relating hereto and thereto including, but not limited to, any such amendments, waivers or consents resulting from or related to any work-out, renegotiation or restructure relating to the performance by the Credit Parties under this Credit Agreement and (B) of the Administrative Agent and the Lenders in connection with enforcement of the Credit Documents and the documents and instruments referred to therein (including, without limitation, in connection with any such enforcement, the reasonable fees and disbursements of counsel for the Administrative Agent and each of the Lenders); (ii) pay and hold 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 (iii) indemnify each Lender, its officers, directors, employees, representatives and Administrative Agents 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 investigation, litigation or other proceeding (whether or not any Lender is a party thereto) related to the entering into and/or performance of any Credit Document or the use of proceeds of any Loans (including other extensions of credit) hereunder or the consummation of any other transactions contemplated in any Credit Document, including, without limitation, the reasonable fees and disbursements of counsel incurred in connection with any such investigation, litigation or other proceeding or (B) the presence or Release of any Materials of Environmental Concern at, under or from any Property owned, operated or leased by the Borrower or any of its Subsidiaries, or the failure by the Borrower or any of its Subsidiaries to comply with any Environmental Law (but excluding, in the 68 case of either of clause (A) or (B) above, any such losses, liabilities, claims, damages or expenses to the extent incurred by reason of gross negligence or willful misconduct on the part of the Person to be indemnified). 11.6 Amendments, Waivers and Consents. Neither this Credit Agreement nor any other Credit Document nor any of the terms hereof or thereof may be amended, changed, waived, discharged or terminated unless such amendment, change, waiver, discharge or termination is in writing entered into by, or approved in writing by, the Required Lenders and the Borrower, provided, however, that: (a) without the consent of each Lender affected thereby, no such amendment may: (i) extend the final maturity of any Loan, or extend or waive any principal amortization payment of any Loan, or any portion thereof, (ii) 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) thereon or Fees hereunder, (iii) reduce or waive the principal amount of any Loan, (iv) increase the Commitment of a Lender over the amount thereof in effect (it being understood and agreed that a waiver of any Default or Event of Default (other than an Event of Default of the type described in Section 9.1(f) hereof) or mandatory reduction in the Commitments shall not constitute a change in the terms of any Commitment of any Lender), (v) except as the result of or in connection with a dissolution, merger or disposition of a Subsidiary permitted under Section 8.3, release the Borrower or substantially all of the other Credit Parties from its or their obligations under the Credit Documents, (vi) amend, modify or waive any provision of this Section 11.6 or Section 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 9.1(a), 11.2, 11.3, 11.5 or 11.9, (vii) reduce any percentage specified in, or otherwise modify, the definition of Required Lenders, or (viii) consent to the assignment or transfer by the Borrower (or another Credit Party) of any of its rights and obligations under (or in respect of) the Credit Documents except as permitted thereby; and (b) without the consent of the Administrative Agent, no provision of Section 10 may be amended. 69 Notwithstanding the fact that the consent of all the Lenders is required in certain circumstances as set forth above, (x) each Lender is entitled to vote as such Lender sees fit on any bankruptcy reorganization plan that affects the Loans, and each Lender acknowledges that the provisions of Section 1126(c) of the Bankruptcy Code supersedes the unanimous consent provisions set forth herein and (y) the Required Lenders may consent to allow a Credit Party to use cash collateral in the context of a bankruptcy or insolvency proceeding. 11.7 Counterparts. This Credit Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. It shall not be necessary in making proof of this Credit Agreement to produce or account for more than one such counterpart. 11.8 Headings. The headings of the sections and subsections hereof are provided for convenience only and shall not in any way affect the meaning or construction of any provision of this Credit Agreement. 11.9 Survival. All indemnities set forth herein, including, without limitation, in Section 2.2(i), 3.9, 3.11, 10.7 or 11.5 shall survive the execution and delivery of this Credit Agreement, the making of the Loans, the repayment of the Loans and other obligations under the Credit Documents and the termination of the Commitments hereunder, and all representations and warranties made by the Credit Parties herein shall survive delivery of the Notes and the making of the Loans hereunder. 11.10 Governing Law; Submission to Jurisdiction; Venue. (a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA. Any legal action or proceeding with respect to this Credit Agreement or any other Credit Document may be brought in the courts of the Commonwealth of Virginia in the City of Richmond, or of the United States for the Eastern District of Virginia, and, by execution and delivery of this Credit Agreement, each of the Credit Parties hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the nonexclusive jurisdiction of such courts. Each of the Credit Parties 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 it at the address set out for notices pursuant to Section 11.1, such service to become effective three (3) days after such mailing. Nothing herein shall affect the right of the Administrative Agent to serve process in any other manner permitted by law or to commence legal proceedings or to otherwise proceed against any Credit Party in any other jurisdiction. 70 (b) Each of the Credit Parties 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 Credit Agreement or any other Credit Document brought in the courts referred to in subsection (a) hereof 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) TO THE EXTENT PERMITTED BY LAW, EACH OF THE ADMINISTRATIVE AGENT, THE LENDERS, THE BORROWER AND THE CREDIT PARTIES HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS CREDIT AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY. 11.11 Severability. If any provision of any of the Credit Documents is determined to be illegal, invalid or unenforceable, such provision shall be fully severable and the remaining provisions shall remain in full force and effect and shall be construed without giving effect to the illegal, invalid or unenforceable provisions. 11.12 Entirety. This Credit Agreement together with the other Credit Documents represent the entire agreement of the parties hereto and thereto, and supersede all prior agreements and understandings, oral or written, if any, including any commitment letters or correspondence relating to the Credit Documents or the transactions contemplated herein and therein. 11.13 Binding Effect; Termination. (a) This Credit Agreement shall become effective at such time on or after the Closing Date when it shall have been executed by the Borrower, the Guarantors and the Administrative Agent, and the Administrative Agent shall have received copies hereof (telefaxed or otherwise) which, when taken together, bear the signatures of each Lender, and thereafter this Credit Agreement shall be binding upon and inure to the benefit of the Borrower, the Guarantors, the Administrative Agent and each Lender and their respective successors and assigns. (b) The term of this Credit Agreement shall be until no Loans, or any other amounts payable hereunder or under any of the other Credit Documents shall remain outstanding and until all of the Commitments hereunder shall have expired or been terminated. 11.14 Source of Funds. Each of the Lenders hereby represents and warrants to the Borrower that at least one of the following statements is an accurate representation as to the source of funds to be used by such Lender in connection with the financing hereunder: 71 (a) no part of such funds constitutes assets allocated to any separate account maintained by such Lender in which any employee benefit plan (or its related trust) has any interest; (b) to the extent that any part of such funds constitutes assets allocated to any separate account maintained by such Lender, such Lender has disclosed to the Borrower the name of each employee benefit plan whose assets in such account exceed 10% of the total assets of such account as of the date of such purchase (and, for purposes of this subsection (b), all employee benefit plans maintained by the same employer or employee organization are deemed to be a single plan); (c) to the extent that any part of such funds constitutes assets of an insurance Borrower's general account, such insurance Borrower has complied with all of the requirements of the regulations issued under Section 401(c)(1)(A) of ERISA; or (d) such funds constitute assets of one or more specific benefit plans which such Lender has identified in writing to the Borrower. As used in this Section 11.15, the terms "employee benefit plan" and "separate account" shall have the respective meanings assigned to such terms in Section 3 of ERISA. 11.15 Conflict. To the extent that there is a conflict or inconsistency between any provision hereof, on the one hand, and any provision of any Credit Document, on the other hand, this Credit Agreement shall control. [Signature Page to Follow] 72 IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Credit Agreement to be duly executed and delivered as of the date first above written. BORROWER: UNITED DOMINION REALTY TRUST, INC., a Virginia corporation By:_________________________ Name: Title: GUARANTORS: UNITED DOMINION REALTY, L.P., a Virginia limited partnership By:_________________________ Name: Title: UDRT OF NORTH CAROLINA, L.L.C., a North Carolina limited liability company By:_________________________ Name: Title: UDRT OF ALABAMA, INC., an Alabama corporation By:_________________________ Name: Title: UDR SOUTH CAROLINA TRUST, a Maryland real estate investment trust By:_________________________ Name: Title: UDR WESTERN RESIDENTIAL, INC., a Virginia corporation By:_________________________ Name: Title: SOUTH WEST REIT HOLDING, INC., a Texas corporation By:_________________________ Name: Title: LENDERS: NATIONSBANK, N.A., individually in its capacity as a Lender and in its capacity as Administrative Agent By:____________________________________ Name: Title: FIRST UNION NATIONAL BANK By:____________________________________ Name: Title: GUARANTY FEDERAL BANK By:____________________________________ Name: Title: CRESTAR BANK By:____________________________________ Name: Title: SIGNET BANK By:____________________________________ Name: Title: COMERICA BANK By:____________________________________ Name: Title: DG BANK DEUTSCHE GENOSSENSCHAFTSBANK By:____________________________________ Name: Title: By:____________________________________ Name: Title: BANK HAPOALIM B.M. By:____________________________________ Name: Title: By:____________________________________ Name: Title: THE SUMITOMO BANK, LTD. By:____________________________________ Name: Title: Schedule 2.1(a) Schedule of Lenders and Commitments
Revolving Revolving Commitment Lender Commitment Percentage NationsBank, N.A. $ 40,000,000.00 20.000000% First Union National Bank $ 38,000,000.00 19.000000% Guaranty Federal $ 36,000,000.00 18.000000% Crestar Bank $ 17,000,000.00 8.500000% Signet Bank $ 17,000,000.00 8.500000% Comerica Bank $ 16,000,000.00 8.000000% DG Bank $ 16,000,000.00 8.000000% Bank Hapoalim $ 12,000,000.00 6.000000% Sumitomo Bank $ 8,000,000.00 4.000000% ---------------------- --------- $ 200,000,000.00 100.000000%
Schedule 2.1(b)(i) FORM OF NOTICE OF BORROWING NationsBank, N.A., NationsBank, N.A., as Administrative Agent for the Lenders as Swingline Lender 101 N. Tryon Street 101 N. Tryon Street Independence Center, 15th Floor Independence Center, 15th Floor NC1-001-15-04 NC1-001-15-04 Charlotte, North Carolina 28255 Charlotte, North Carolina 28255 Attention: Agency Services Attention: Agency Services Re: Three-Year Credit Agreement dated as of August 4, 1997 (as amended and modified, the "Credit Agreement") among United Dominion Realty Trust, Inc., the Guarantors and Lenders identified therein and NationsBank, N.A., as Administrative Agent. Terms used but not otherwise defined herein shall have the meanings provided in the Credit Agreement. Ladies and Gentlemen: The undersigned, UNITED DOMINION REALTY TRUST, INC., a Virginia corporation, being the Borrower under the above-referenced Credit Agreement hereby gives notice pursuant to Section 2.1(b) of the Credit Agreement of a request for a Revolving Loan or of a request for Swingline Loan pursuant to Section 2.2(b) of the Credit Agreement as follows ________ Revolving Loan ________ Swingline Loan (A) Date of Borrowing (which is a Business Day) _______________________ (B) Principal Amount of Borrowing _______________________ (C) Interest rate basis _______________________ (D) Interest Period and the last day thereof _______________________ In accordance with the requirements of Section 5.2 of the Credit Agreement, the undersigned Borrower hereby certifies that: (a) The representations and warranties contained in the Credit Agreement and the other Credit Documents are true and correct in all material respects as of the date of this request, and will be true and correct after giving effect to the requested Extension of Credit (except for those which expressly relate to an earlier date). (b) No Default or Event of Default exists, or will exist after giving effect to the requested Extension of Credit. (c) As to any Credit Party, no involuntary action has been commenced under applicable bankruptcy, insolvency or other similar law in effect, or any case, proceeding or other action for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) as to any Credit Party or as to any substantial part of the property of any Credit Party or for the winding up or liquidation of its affairs, and remains undismissed, undischarged or unbonded. (d) No circumstances, events or conditions have occurred since the date of the audited financial statements referenced in Section 6.1 of the Credit Agreement which would have a Material Adverse Effect. (e) All conditions set forth in Section 2.1 as to the making of Revolving Loans or in Section 2.2 as to the making of Swingline Loans, as appropriate, have been satisfied. Very truly yours, UNITED DOMINION REALTY TRUST, INC. By:_______________________________ Name: Title: Schedule 2.1(e) FORM OF REVOLVING NOTE August 4, 1997 FOR VALUE RECEIVED, the undersigned Borrower, hereby promises to pay to the order of ________________________, and its successors and assigns, on or before the Termination Date to the office of the Administrative Agent in immediately available funds as provided in the Credit Agreement, the principal amount of such Lender's Revolving Committed Amount or, if less, the aggregate unpaid principal amount of all Revolving Loans made by such Lender to the undersigned Borrower, together with interest thereon at the rates and as provided in the Credit Agreement. This Note is one of the Revolving Notes referred to in the Three-Year Credit Agreement dated as of August 4, 1997 (as amended and modified, the "Credit Agreement") among United Dominion Realty Trust, Inc., a Virginia corporation, United Dominion Realty, L.P., a Virginia limited partnership, the Guarantors and Lenders identified therein and NationsBank, N.A., as Administrative Agent. Terms used but not otherwise defined herein shall have the meanings provided in the Credit Agreement. The holder may endorse and attach a schedule to reflect borrowings evidenced by this Note and all payments and prepayments thereon; provided that any failure to endorse such information shall not affect the obligation of the undersigned Borrower to pay amounts evidenced hereby. Upon the occurrence of an Event of Default, all amounts evidenced by this Note may, or shall, become immediately due and payable as provided in the Credit Agreement without presentment, demand, protest or notice of any kind, all of which are waived by the undersigned Borrower. In the event payment of amounts evidenced by this Note is not made at any stated or accelerated maturity, the undersigned Borrower agrees to pay, in addition to principal and interest, all costs of collection, including reasonable attorneys' fees. This Note and the Loans and amounts evidenced hereby may be transferred only as provided in the Credit Agreement. This Note shall be governed by, and construed and interpreted in accordance with, the law of the Commonwealth of Virginia. IN WITNESS WHEREOF, the undersigned Borrower has caused this Note to be duly executed as of the date first above written. UNITED DOMINION REALTY TRUST, INC., a Virginia corporation By_________________________________ Name: Title: Schedule 2.2(d) FORM OF SWINGLINE NOTE August 4, 1997 FOR VALUE RECEIVED, the undersigned Borrower, hereby promises to pay to the order of NATIONSBANK, N.A., and its successors and assigns, on or before the Termination Date to the office of the Administrative Agent in immediately available funds as provided in the Credit Agreement, the principal amount of all Swingline Loans in such amounts and on such dates as provided in the Credit Agreement; together with interest thereon at the rates and as provided in the Credit Agreement. This Note is the Swingline Note referred to in the Three-Year Credit Agreement dated as of August 4, 1997 (as amended and modified, the "Credit Agreement") among United Dominion Realty Trust, Inc., a Virginia corporation, United Dominion Realty, L.P., a Virginia limited partnership, the Guarantors and Lenders identified therein and NationsBank, N.A., as Administrative Agent. Terms used but not otherwise defined herein shall have the meanings provided in the Credit Agreement. The holder may endorse and attach a schedule to reflect borrowings evidenced by this Note and all payments and prepayments thereon; provided that any failure to endorse such information shall not affect the obligation of the undersigned Borrower to pay amounts evidenced hereby. Upon the occurrence of an Event of Default, all amounts evidenced by this Note may, or shall, become immediately due and payable as provided in the Credit Agreement without presentment, demand, protest or notice of any kind, all of which are waived by the undersigned Borrower. In the event payment of amounts evidenced by this Note is not made at any stated or accelerated maturity, the undersigned Borrower agrees to pay, in addition to principal and interest, all costs of collection, including reasonable attorneys' fees. This Note and the Loans and amounts evidenced hereby may be transferred only as provided in the Credit Agreement. This Note shall be governed by, and construed and interpreted in accordance with, the law of the Commonwealth of Virginia. IN WITNESS WHEREOF, the undersigned Borrower has caused this Note to be duly executed as of the date first above written. UNITED DOMINION REALTY TRUST, INC., a Virginia corporation By_________________________________ Name: Title: Schedule 2.3(b)-1 FORM OF COMPETITIVE BID REQUEST NationsBank, N.A., as Administrative Agent for the Lenders 101 North Tryon Street Independence Center, 15th Floor NC1-005-15-04 Charlotte, North Carolina 28255 Attn: Agency Services Re: Three-Year Credit Agreement dated as of August 4, 1997 (as amended and modified the "Credit Agreement") among United Dominion Realty Trust, Inc., the Guarantors and Lenders identified therein and NationsBank, N.A., as Administrative Agent. Terms used but not otherwise defined shall have the meanings provided in the Credit Agreement. Ladies and Gentlemen: The undersigned, UNITED DOMINION REALTY TRUST, INC., a Virginia corporation, being the Borrower under the above-referenced Credit Agreement hereby gives you notice pursuant to Section 2.3(b) of the Credit Agreement it requests solicitation of Competitive Bids under the Credit Agreement, and in connection therewith sets forth below the terms on which the related Competitive Loan borrowing is requested to be made: (A) Date of Competitive Loan borrowing (which is a Business Day) __________________________ (B) Principal amount of Competitive Loan borrowing __________________________ (C) Interest Period and the last day thereof __________________________ In accordance with the requirements of Section 5.2, the Borrower hereby reaffirms the representations and warranties set forth in the Credit Agreement as provided in subsection (b) of such Section, and confirms that the matters referenced in subsections (c), (d), (e) and (f) of such Section, are true and correct. UNITED DOMINION REALTY TRUST, INC. By:______________________________ Name: Title: Schedule 2.3(b)-2 FORM OF NOTICE OF RECEIPT OF COMPETITIVE BID REQUEST [Name of Lender] [Address] Attention: Re: Three-Year Credit Agreement dated as of August 4, 1997 (as amended and modified the "Credit Agreement") among United Dominion Realty Trust, Inc., the Guarantors and Lenders identified therein and NationsBank, N.A., as Administrative Agent. Terms used but not otherwise defined shall have the meanings provided in the Credit Agreement. Dear Sirs: UNITED DOMINION REALTY TRUST, INC., a Virginia corporation, being Borrower under the above-referenced Credit Agreement made a Competitive Bid Request on _______________, 19__, pursuant to Section 2.3(b) of the Credit Agreement, and in that connection you are invited to submit a Competitive Bid by 10:00 A.M. (Charlotte, North Carolina time) ______________, 19__ [Date of Proposed Competitive Loan Borrowing]. Your Competitive Bid must comply with Section 2.3(c) of the Credit Agreement and the terms set forth below on which the Competitive Bid Request was made: (A) Date of Competitive Borrowing _________________________ (B) Principal amount of Competitive Borrowing _________________________ (C) Interest Period and the last day thereof _________________________ NATIONSBANK, N.A., as Administrative Agent By:_____________________________________ Name: Title: Schedule 2.3(c) FORM OF COMPETITIVE BID NationsBank, N.A., as Agent for the Lenders 101 North Tryon Street Independence Center, 15th Floor NC1-005-15-04 Charlotte, North Carolina 28255 Attn: Agency Services Re: Three-Year Credit Agreement dated as of August 4, 1997 (as amended and modified the "Credit Agreement") among United Dominion Realty Trust, Inc., the Guarantors and Lenders identified therein and NationsBank, N.A., as Administrative Agent. Terms used but not otherwise defined shall have the meanings provided in the Credit Agreement. Ladies and Gentlemen: The undersigned, [Name of Lender], hereby makes a Competitive Bid pursuant to Section 2.3(c) of the Credit Agreement, in response to the Competitive Bid Request made by the Borrower on _____________________, 19__, and in that connection sets forth below the terms on which such Competitive Bid is made: (A) Principal Amount ______________________________ (B) Competitive Bid Rate ______________________________ (C) Interest Period and last day thereof ______________________________ The undersigned hereby confirms that is prepared, subject to the conditions set forth in the Credit Agreement, to extend credit to the Borrower upon acceptance by the Borrower of this bid in accordance with Section 2.3(e) of the Credit Agreement. [NAME OF LENDER] By:___________________________________ Name: Title: Schedule 2.3(e) FORM OF COMPETITIVE BID ACCEPT/REJECT LETTER NationsBank, N.A., as Agent for the Lenders 101 North Tryon Street Independence Center, 15th Floor NC1-005-15-04 Charlotte, North Carolina 28255 Attn: Agency Services Re: Three-Year Credit Agreement dated as of August 4, 1997 (as amended and modified the "Credit Agreement") among United Dominion Realty Trust, Inc., the Guarantors and Lenders identified therein and NationsBank, N.A., as Administrative Agent. Terms used but not otherwise defined shall have the meanings provided in the Credit Agreement. Ladies and Gentlemen: In accordance with Section 2.3(e) of the Credit Agreement, in connection with our Competitive Bid Request dated __________________ and in accordance with Section 2.3(e) of the Credit Agreement, we hereby accept the following bids for maturity on [date]: Principal Amount Competitive Bid Rate Lender $ [%] $ [%] We hereby reject the following bids: Principal Amount Competitive Bid Rate Lender $ [%] $ [%] UNITED DOMINION REALTY TRUST, INC. By:____________________________________ Name: Title: Schedule 2.3(i) FORM OF COMPETITIVE NOTE August 4, 1997 FOR VALUE RECEIVED, the undersigned Borrower, hereby promises to pay to the order of ________________________, and its successors and assigns, on or before the Termination Date to the office of the Administrative Agent in immediately available funds as provided in the Credit Agreement, the aggregate principal amount of all Competitive Loans made by such Lender made by such Lender to the undersigned Borrower, together with interest thereon at the rates and as provided in the Credit Agreement. This Note is one of the Competitive Notes referred to in the Three-Year Credit Agreement dated as of August 4, 1997 (as amended and modified, the "Credit Agreement") among United Dominion Realty Trust, Inc., a Virginia corporation, United Dominion Realty, L.P., a Virginia limited partnership, the Guarantors and Lenders identified therein and NationsBank, N.A., as Administrative Agent. Terms used but not otherwise defined herein shall have the meanings provided in the Credit Agreement. The holder may endorse and attach a schedule to reflect borrowings evidenced by this Note and all payments and prepayments thereon; provided that any failure to endorse such information shall not affect the obligation of the undersigned Borrower to pay amounts evidenced hereby. Upon the occurrence of an Event of Default, all amounts evidenced by this Note may, or shall, become immediately due and payable as provided in the Credit Agreement without presentment, demand, protest or notice of any kind, all of which are waived by the undersigned Borrower. In the event payment of amounts evidenced by this Note is not made at any stated or accelerated maturity, the undersigned Borrower agrees to pay, in addition to principal and interest, all costs of collection, including reasonable attorneys' fees. This Note and the Loans and amounts evidenced hereby may be transferred only as provided in the Credit Agreement. This Note shall be governed by, and construed and interpreted in accordance with, the law of the Commonwealth of Virginia. IN WITNESS WHEREOF, the undersigned Borrower has caused this Note to be duly executed as of the date first above written. UNITED DOMINION REALTY TRUST, INC., a Virginia corporation By_________________________________ Name: Title: Schedule 3.2 Form of Notice of Extension/Conversion NationsBank, N.A., as Administrative Agent for the Lenders 101 N. Tryon Street Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Agency Services Re: Three-Year Credit Agreement dated as of August 4, 1997 (as amended and modified, the "Credit Agreement") among United Dominion Realty Trust, Inc., the Guarantors and Lenders identified therein and NationsBank, N.A., as Administrative Agent. Terms used but not otherwise defined herein shall have the meanings provided in the Credit Agreement. Ladies and Gentlemen: The undersigned, UNITED DOMINION REALTY TRUST, INC. (the "Borrower"), refers to the Credit Agreement dated as of August 4, 1997 (as amended, modified, extended or restated from time to time, the "Credit Agreement"), among the Borrower, the Lenders and NationsBank, N.A., as Administrative Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Borrower hereby gives notice pursuant to Section 3.2 of the Credit Agreement that it requests an extension or conversion of a Revolving Loan outstanding under the Credit Agreement, and in connection therewith sets forth below the terms on which such extension or conversion is requested to be made: (A) Date of Extension or Conversion (which is the last day of the the applicable Interest Period) _______________________ (B) Principal Amount of Extension or Conversion _______________________ (C) Interest rate basis _______________________ (D) Interest Period and the last day thereof _______________________ In accordance with the requirements of Section 5.2 of the Credit Agreement, the undersigned Borrower hereby certifies that: (a) The representations and warranties contained in the Credit Agreement and the other Credit Documents are true and correct in all material respects as of the date of this request, and will be true and correct after giving effect to the requested Extension of Credit (except for those which expressly relate to an earlier date). (b) No Default or Event of Default exists, or will exist after giving effect to the requested Extension of Credit. (c) As to any Credit Party, no involuntary action has been commenced under applicable bankruptcy, insolvency or other similar law in effect, or any case, proceeding or other action for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) as to any Credit Party or as to any substantial part of the property of any Credit Party or for the winding up or liquidation of its affairs, and remains undismissed, undischarged or unbonded. (d) No circumstances, events or conditions have occurred since the date of the audited financial statements referenced in Section 6.1 of the Credit Agreement which would have a Material Adverse Effect. Very truly yours, UNITED DOMINION REALTY TRUST, INC. By:_________________________________ Name: Title: Schedule 5.1(e)(v) Officer's Certificate Pursuant to Section 5.1(i)(v) of the Three-Year Credit Agreement (the "Credit Agreement"), dated as of August 4, 1997, among UNITED DOMINION REALTY TRUST, INC., a Virginia corporation, the Guarantors and Lenders identified therein and NationsBank, N.A., as Administrative Agent, the undersigned ____________________ Secretary of _________________________ (the "Corporation") hereby certifies as follows: 1. Attached hereto as Annex I is a true and complete copy of resolutions duly adopted by the Board of Directors of the Corporation on __________________, 1996. The attached resolutions have not been rescinded or modified and remain in full force and effect. The attached resolutions are the only corporate proceedings of the Corporation now in force relating to or affecting the matters referenced to therein. 2. Attached hereto as Annex II is a true and complete copy of the By-laws of the Corporation as in effect on the date hereof. 3. Attached hereto as Annex III is a true and complete copy of the Certificate of Incorporation of the Corporation and all amendments thereto as in effect on the date hereof. 4. The following persons are now duly elected and qualified officers of the Corporation, holding the offices indicated, and the signature appearing opposite his name below is his true and genuine signature, and such officer is duly authorized to execute and deliver on behalf of the Corporation the Credit Agreement, the Notes to be issued pursuant thereto and the other Credit Documents and to act as a Responsible Officer on behalf of the Corporation under the Credit Agreement: Name Office Signature ----------------------- IN WITNESS WHEREOF, the undersigned has hereunto set his/her name and affixed the corporate seal of the Corporation. -------------------------------, Secretary (CORPORATE SEAL) Date: __________________, 1996 I, ___________________, ___________________ of ________________________, hereby certify that ______________________, whose genuine signature appears above, is, and has been at all times since ________________________, a duly elected, qualified and acting _________________ of____________________________________. ___________________________________ of ___________________________________ ____________________________________, 1996 Schedule 6.3 Qualifications Concerning Organization, Existence and Compliance with Law Schedule 6.12 Subsidiaries Schedule 7.2(b) Form of Officer's Compliance Certificate This Certificate is delivered in accordance with the provisions of Section 7.2(b) of that Three-Year Credit Agreement dated as of August 4, 1997 (as amended, modified and supplemented, the "Credit Agreement") among UNITED DOMINION REALTY TRUST, INC., a Virginia corporation, the Guarantors and Lenders identified therein, and NationsBank, N.A., as Administrative Agent. Terms used but not otherwise defined herein shall have the same meanings provided in the Credit Agreement. The undersigned, being a Responsible Officer of UNITED DOMINION REALTY TRUST, INC., a Virginia corporation, hereby certifies, in my official capacity and not in my individual capacity, that to the best of my knowledge and belief: (a) the financial statements of the Borrower of this Certificate fairly present the financial condition of the parties covered by such financial statements in all material respects; (b) during the period the Credit Parties have observed or performed all of their covenants and other agreements in all material respects, and satisfied in all material respects every material condition, contained in this Credit Agreement to be observed, performed or satisfied by them; and (c) the undersigned has no actual knowledge of any Default or Event of Default. Detailed calculations demonstrating compliance with the financial covenants set out in Section 7.9 of the Credit Agreement are attached to this Certificate. This the ___________ day of ___________________, 199___. UNITED DOMINION REALTY TRUST, INC. By:___________________________ Name: Title: Attachment to Officer's Certificate Computation of Financial Covenants Schedule 7.11 Form of Joinder Agreement THIS JOINDER AGREEMENT (the "Agreement"), dated as of _____________, 19__, is by and between _____________________, a ___________________ (the "Applicant Guarantor"), and NATIONSBANK, N.A., in its capacity as Administrative Agent under that certain Three-Year Credit Agreement dated as of August 4, 1997 (as amended and modified, the "Credit Agreement") by and among UNITED DOMINION REALTY TRUST, INC., a Virginia corporation, the Guarantors and Lenders identified therein and NationsBank, N.A., as Administrative Agent. All of the defined terms in the Credit Agreement are incorporated herein by reference. The Applicant Guarantor has indicated its desire to become a Guarantor or is required by the terms of Section 7.11 of the Credit Agreement to become, a Guarantor under the Credit Agreement. Accordingly, the Applicant Guarantor hereby agrees as follows with the Administrative Agent, for the benefit of the Lenders: 1. The Applicant Guarantor hereby acknowledges, agrees and confirms that, by its execution of this Agreement, the Applicant Guarantor will be deemed to be a party to the Credit Agreement and a "Guarantor" for all purposes of the Credit Agreement and the other Credit Documents, and shall have all of the obligations of a Guarantor thereunder as if it had executed the Credit Agreement and the other Credit Documents. The Applicant Guarantor agrees to be bound by, all of the terms, provisions and conditions contained in the Credit Documents, including without limitation (i) all of the affirmative and negative covenants set forth in Sections 7 and 8 of the Credit Agreement and (ii) all of the undertakings and waivers set forth in Section 4 of the Credit Agreement. Without limiting the generality of the foregoing terms of this paragraph 1, the Applicant Guarantor hereby (A) jointly and severally together with the other Guarantors, guarantees to each Lender, the Administrative Agent and the Issuing Lender as provided in Section 4 of the Credit Agreement, the prompt payment and performance of the Guaranteed Obligations in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration, as a mandatory cash collateralization or otherwise) strictly in accordance with the terms thereof. and (B) agrees that if any of the Guaranteed Obligations are not paid or performed in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration, as a mandatory cash collateralization or otherwise), the Applicant Guarantor will, jointly and severally together with the other Guarantors, promptly pay and perform the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, as a mandatory prepayment, by acceleration, as a mandatory cash collateralization or otherwise) in accordance with the terms of such extension or renewal. 2. The Applicant Guarantor acknowledges and confirms that it has received a copy of the Credit Agreement and the Schedules and Exhibits thereto. The information on the Schedules to the Credit Agreement is amended to provide the information shown on the attached Schedule A. 3. The Applicant Guarantor hereby waives acceptance by the Administrative Agent and the Lenders of the guaranty by the Applicant Guarantor under Section 4 of the Credit Agreement upon the execution of this Joinder Agreement by the Applicant Guarantor. 4. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute one contract. 5. This Agreement shall be governed by and construed and interpreted in accordance with the laws of the Commonwealth of Virginia. IN WITNESS WHEREOF, the Applicant Guarantor has caused this Joinder Agreement to be duly executed by its authorized officers, and the Administrative Agent, for the benefit of the Lenders, has caused the same to be accepted by its authorized officer, as of the day and year first above written. APPLICANT GUARANTOR By:___________________________ Name: Title: Address for Notices: Attn: _______________________ Telephone: Telecopy: Acknowledged and accepted: NATIONSBANK, N.A., as Administrative Agent By:____________________________ Name: Title: Schedule A to Joinder Agreement Address for Applicant Guarantor Notices Schedule 8.6 Existing Investments Schedule 8.7 REMICs and Other Special Subsidiaries Schedule 11.1 Schedule of Lenders' Addresses NationsBank, N.A. NationsBank, N.A. Mid-Atlantic Corporate Finance 1111 E. Main Street Richmond, Virginia 23277-0001 Attn: William K. Burton Telephone: (804) 788-3637 Facsimile: (804) 788-3669 Signet Bank Signet Bank 7799 Leesburg Pike Falls Church, Virginia 22043 Attn: Eric Lawrence Telephone: (703) 714-5144 Facsimile: (703) 506-0284 Crestar Bank Crestar Bank 919 E. Main Street 8th Floor Richmond, Virginia 23219 Attn: Richard Dickinson Telephone: (804) 782-5956 Facsimile: (804) 782-7986 First Union National Bank First Union National Bank 301 South College Street, DC-6 6th Floor Charlotte, North Carolina 28288 Attn: John Schissel Telephone: (704) 383-1967 Facsimile: (704) 383-6205 Sumitomo Bank, Ltd. Sumitomo Bank, Ltd. 277 Park Avenue 6th Floor New York, New York 10172 Attn: Honami Matsugasaki Telephone: (212) 224-4176 Facsimile: (212) 224-4504 DG Bank DG Bank 609 Fifth Avenue New York, New York 10017-1021 Attn: Linda J. O'Connell Telephone: (212) 745-1586 Facsimile: (212) 745-1556 Bank Hapoalim B.M. Bank Hapoalim B.M. 1515 Market Street 2nd Floor Philadelphia, Pennsylvania 19102 Attn: Ellen Frank Telephone: (215) 665-2251 Facsimile: (215) 665-2217 Guaranty Federal Bank Guaranty Federal Bank 8333 Douglas Avenue Dallas, Texas 75225 Attn: Roger C. Davis Telephone: (214) 260-2849 Facsimile: (214) 360-1678 Comerica Bank Comerica Bank 500 Woodward Street 7th Floor Detroit, Michigan 48226 Attn: Dave Campbell Telephone: (313) 222-9306 Facsimile: (313) 222-9295 Schedule 11.3(b) Form of Assignment and Acceptance THIS ASSIGNMENT AND ACCEPTANCE dated as of _________________________, 1996 is entered into between THE LENDER IDENTIFIED ON THE SIGNATURE PAGES AS THE "ASSIGNOR" (the "Assignor") and THE PARTIES IDENTIFIED ON THE SIGNATURE PAGES AS "ASSIGNEES" ("Assignee"). Reference is made to that Three-Year Credit Agreement dated as of August 4, 1997 (as amended and modified, the "Credit Agreement") among UNITED DOMINION REALTY TRUST, INC., a Virginia corporation (the "Borrower"), the Guarantors and Lenders identified therein and NationsBank, N.A., as Administrative Agent. Terms defined in the Credit Agreement are used herein with the same meanings. 1. The Assignor hereby sells and assigns, without recourse, to the Assignees, and the Assignees hereby purchase and assume, without recourse, from the Assignor, effective as of the Effective Date shown below, those rights and interests of the Assignor under the Credit Agreement identified below (the "Assigned Interests"), including the Loans and Commitments relating thereto, together with unpaid interest and fees relating thereto accruing from the Effective Date. The Assignor represents and warrants that it owns the interests assigned hereby free and clear of liens, encumbrances or other claims. Each of the Assignees represents that it is an Eligible Assignee within the meaning of the term in the Credit Agreement. The Assignor and each of the Assignees hereby makes and agrees to be bound by all the representations, warranties and agreements set forth in Section 11.3 of the Credit Agreement, a copy of which has been received by each such party. From and after the Effective Date (i) each Assignee, if it is not already a Lender under the Credit Agreement, shall be a party to and be bound by the provisions of the Credit Agreement and, to the extent of the interests assigned by this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) each Assignor shall, to the extent of the interests assigned by this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement (other than the rights of indemnification referenced in Section 11.9 of the Credit Agreement). 2. This Assignment and Acceptance shall be governed by and construed in accordance with the laws of the State of New York.
3. Terms of Assignment (a) Date of Assignment: ___________________, 199__ (b) Legal Name of Assignor: SEE SIGNATURE PAGE (c) Legal Name of Assignee: SEE SIGNATURE PAGE (d) Effective Date of Assignment: ___________________, 199__
See Schedule I attached for a description of the Loans and Commitments (and the percentage interests therein and relating thereto) which are the subject of this Assignment and Acceptance. 4. The fee payable to the Paying Agent in connection with this Assignment is enclosed. IN WITNESS WHEREOF, the parties hereto have caused the execution of this instrument by their duly authorized officers as of the date first above written. ASSIGNOR: ASSIGNEE: By_________________________________ By____________________________ Name: Name: Title: Title: ACKNOWLEDGMENT AND CONSENT NATIONSBANK, N.A. United Dominion Realty Trust, Inc. as Administrative Agent By_________________________________ By____________________________ Name: Name: Title: Title: SCHEDULE I TO ASSIGNMENT AND ACCEPTANCE United Dominion Realty Trust, Inc. REVOLVING LOANS PRIOR TO ASSIGNMENT
Revolving Revolving Revolving Committed Commitment Loans Amount Percentage Outstanding ASSIGNOR ASSIGNEES -------------------- -------------------- -------------------- $ $
REVOLVING LOANS INTERESTS SUBJECT OF THIS ASSIGNMENT
Revolving Revolving Revolving Committed Commitment Loans Amount Percentage Outstanding ASSIGNOR -------------------- -------------------- -------------------- $ $
SCHEDULE I TO ASSIGNMENT AND ACCEPTANCE United Dominion Realty Trust, Inc. REVOLVING LOANS AFTER ASSIGNMENT
Revolving Revolving Revolving Committed Commitment Loans Amount Percentage Outstanding ASSIGNOR ASSIGNEES -------------------- -------------------- -------------------- $ $
EX-4 4 EXHIBIT 4(II)(H) EXHIBIT 4(ii)(h) 364-DAY CREDIT AGREEMENT Dated as of August 4, 1997 among UNITED DOMINION REALTY TRUST, INC., as Borrower, UNITED DOMINION REALTY, L.P. and Certain Other Subsidiaries and Affiliates of the Borrower, as Guarantors, THE LENDERS NAMED HEREIN AND NATIONSBANK, N.A., as Administrative Agent and FIRST UNION NATIONAL BANK, as Co-Agent TABLE OF CONTENTS SECTION 1 DEFINITIONS ..........................................................................................1 1.1 Definitions.........................................................................................1 1.2 Computation of Time Periods........................................................................19 1.3 Accounting Terms...................................................................................19 SECTION 2 CREDIT FACILITIES ....................................................................................19 2.1 Revolving Loans....................................................................................19 SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES........................................................21 3.1 Default Rate.......................................................................................21 3.2 Extension and Conversion...........................................................................21 3.3 Prepayments........................................................................................22 3.4 Termination and Reduction of Commitments...........................................................22 3.5 Fees...............................................................................................22 3.6 Capital Adequacy...................................................................................23 3.7 Inability To Determine Interest Rate...............................................................23 3.8 Illegality.........................................................................................23 3.9 Requirements of Law................................................................................24 3.10 Taxes.............................................................................................25 3.11 Indemnity.........................................................................................27 3.12 Pro Rata Treatment................................................................................27 3.13 Sharing of Payments...............................................................................28 3.14 Payments, Computations, Etc.......................................................................29 3.15 Evidence of Debt..................................................................................30 SECTION 4 GUARANTY .............................................................................................31 4.1 The Guarantee......................................................................................31 4.2 Obligations Unconditional..........................................................................31 4.3 Reinstatement......................................................................................32 4.4 Certain Additional Waivers.........................................................................32 4.5 Remedies...........................................................................................33 4.6 Rights of Contribution.............................................................................33 4.7 Continuing Guarantee...............................................................................33 SECTION 5 CONDITIONS ...........................................................................................34 5.1 Conditions to Closing..............................................................................34 5.2 Conditions to All Extensions of Credit.............................................................35 SECTION 6 REPRESENTATIONS AND WARRANTIES........................................................................36 6.1 Financial Condition................................................................................36 6.2 No Material Adverse Changes........................................................................36 6.3 Organization; Existence; Compliance with Law.......................................................36 6.4 Power; Authorization; Enforceable Obligations......................................................37 6.5 No Legal Bar.......................................................................................37 6.6 No Material Litigation.............................................................................37 6.7 No Default.........................................................................................38 6.8 Ownership of Property; Liens.......................................................................38 6.9 Taxes..............................................................................................38 6.10 ERISA.............................................................................................38 6.11 Governmental Regulations, Etc.....................................................................39 6.12 Subsidiaries......................................................................................40 6.13 Purpose of Extensions of Credit...................................................................40 6.14 Environmental Matters.............................................................................40 i SECTION 7 AFFIRMATIVE COVENANTS.................................................................................41 7.1 Financial Statements...............................................................................41 7.2 Certificates; Other Information....................................................................42 7.3 Notices............................................................................................43 7.4 Payment of Obligations.............................................................................44 7.5 Conduct of Business and Maintenance of Existence...................................................44 7.6 Maintenance of Property; Insurance.................................................................45 7.7 Inspection of Property; Books and Records; Discussions.............................................45 7.8 Environmental Laws.................................................................................45 7.9 Financial Covenants................................................................................46 7.10 Agency Fees.......................................................................................46 7.11 Additional Guaranties and Stock Pledges...........................................................47 7.12 Ownership of Subsidiaries.........................................................................47 7.13 Use of Proceeds...................................................................................47 SECTION 8 NEGATIVE COVENANTS ...................................................................................47 8.1 Limitations on Debt................................................................................47 8.2 Restriction on Liens...............................................................................48 8.3 Consolidations, Mergers and Sales of Assets........................................................48 8.4 Loans and Investments..............................................................................50 8.5 Transactions with Affiliates.......................................................................50 8.6 Transactions with Other Persons regarding this Agreement...........................................50 8.7 Limitation on Certain Restrictions on Subsidiaries.................................................50 SECTION 9 EVENTS OF DEFAULT.....................................................................................51 9.1 Events of Default..................................................................................51 9.2 Acceleration; Remedies.............................................................................53 SECTION 10 AGENCY PROVISIONS................................................................................... 54 10.1 Appointment.......................................................................................54 10.2 Delegation of Duties..............................................................................54 10.3 Exculpatory Provisions............................................................................54 10.4 Reliance on Communications........................................................................55 10.5 Notice of Default.................................................................................55 10.6 Non-Reliance on Administrative Agent and Other Lenders............................................56 10.7 Indemnification...................................................................................56 10.8 Administrative Agent in its Individual Capacity...................................................57 10.9 Successor Administrative Agent....................................................................57 ii SECTION 11 MISCELLANEOUS .......................................................................................57 11.1 Notices...........................................................................................57 11.2 Right of Set-Off..................................................................................59 11.3 Benefit of Agreement..............................................................................59 11.4 No Waiver; Remedies Cumulative....................................................................61 11.5 Payment of Expenses, etc..........................................................................62 11.6 Amendments, Waivers and Consents..................................................................62 11.7 Counterparts......................................................................................63 11.8 Headings..........................................................................................63 11.9 Survival..........................................................................................64 11.10 Governing Law; Submission to Jurisdiction; Venue.................................................64 11.11 Severability.....................................................................................64 11.12 Entirety.........................................................................................65 11.13 Binding Effect; Termination......................................................................65 11.14 Source of Funds..................................................................................65 11.15 Conflict.........................................................................................66 SCHEDULES
Schedule 2.1(a)............ Schedule of Lenders and Commitments Schedule 2.1(b)(i)......... Form of Notice of Borrowing Schedule 2.1(e)............ Form of Revolving Note Schedule 3.2............... Form of Notice of Extension/Conversion Schedule 5.1(e)(v)......... Officer's Certificate Schedule 6.3............... Qualifications Concerning Organization, Existence and Compliance with Law Schedule 6.12.............. Subsidiaries Schedule 7.2(b)............ Form of Officer's Compliance Certificate Schedule 7.11.............. Form of Joinder Agreement Schedule 8.7............... REMICs and Other Special Subsidiaries Schedule 11.1.............. Schedule of Lender's Addresses Schedule 11.3(b)........... Form of Assignment and Acceptance
364-DAY CREDIT AGREEMENT THIS CREDIT AGREEMENT dated as of August 4, 1997 (the "Credit Agreement"), is by and among UNITED DOMINION REALTY TRUST, INC., a Virginia corporation (the "Borrower"), UNITED DOMINION REALTY, L.P., a Virginia limited partnership and the other subsidiaries and affiliates identified on the signature pages hereto and such other subsidiaries and affiliates as may from time to time become Guarantors hereunder in accordance with the provisions hereof (the "Guarantors"), the lenders named herein and such other lenders as may become a party hereto (the "Lenders"), NATIONSBANK, N.A., as Administrative Agent (in such capacity, the "Administrative Agent") and FIRST UNION NATIONAL BANK, as Co-Agent. W I T N E S S E T H WHEREAS, the Borrower has requested that the Lenders provide a $50 million credit facility for the purposes hereinafter set forth; WHEREAS, the Borrower intends to use the credit facility in part to make loans and transfers to certain of its Subsidiaries and Affiliates, including the Guarantors; WHEREAS, the Guarantors acknowledge that establishment of the credit facility inures to the mutual benefit of the Borrower and the Guarantors; WHEREAS, the Lenders have agreed to make the requested credit facility available to the Borrower on the terms and conditions hereinafter set forth; NOW, THEREFORE, IN CONSIDERATION of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: SECTION 1 DEFINITIONS 1.1 Definitions. As used in this Credit Agreement, the following terms shall have the meanings specified below unless the context otherwise requires: "Additional Credit Party" means each Person that becomes a Guarantor after the Closing Date by execution of a Joinder Agreement. "Administrative Agent" shall have the meaning assigned to such term in the heading hereof, together with any successors or assigns. 1 "Administrative Agent's Fee Letter" means that certain letter agreement, dated as of April 1, 1997, between the Administrative Agent and the Borrower, as amended, modified, supplemented or replaced from time to time. "Affiliate" means, with respect to any Person, any other Person (i) directly or indirectly controlling or controlled by or under direct or indirect common control with such Person or (ii) directly or indirectly owning or holding five percent (5%) or more of the equity interest in such Person. For purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agency Services Address" means NationsBank, N.A., NC1-001-15-04, 101 North Tryon Street, Charlotte, North Carolina 28255, Attn: Agency Services, or such other address as may be identified by written notice from the Administrative Agent to the Borrower. "Aggregate Revolving Committed Amount" means the aggregate amount of Revolving Commitments in effect from time to time, being initially FIFTY MILLION DOLLARS ($50,000,000). "Applicable Percentage" means for any day, the rate per annum set forth below opposite the applicable rating for the Borrower's senior unsecured (non-credit enhanced) long term debt then in effect, it being understood that the Applicable Percentage for (i) Base Rate Loans shall be the percentage set forth under the column "Base Rate Margin", (ii) Eurodollar Loans shall be the percentage set forth under the column "Eurodollar Margin", and (iii) the Facility Fee shall be the percentage set forth under the column "Facility Fee":
Pricing S&P Moody's Base Rate Level Rating Rating Eurodollar Margin Margin Facility Fee I A- or above A3 or above 0.4000% 0% 0.1000% II BBB+ Baa1 0.4750% 0% 0.1250% III BBB Baa2 0.5500% 0% 0.1500% IV BBB- Baa3 0.6125% 0% 0.1875% V below BBB- below Baa3 0.8750% 0% 0.3750% or unrated or unrated
The numerical classification set forth under the column "Pricing Level" shall be established based on the better of ratings by S&P and Moody's for the Borrower's senior unsecured (non-credit enhanced) long term debt. The Applicable Percentage shall be determined and adjusted on the date five (5) Business Days after each change in debt rating. Adjustments in the Applicable Percentage shall be effective as to all Loans, existing and prospective, from the date of adjustment. The Administrative Agent shall promptly notify the Lenders of changes in the Applicable Percentage. Adjustments in the Applicable Percentage shall be effective as to existing Extensions of Credit as well as new Extensions of Credit made thereafter. 2 "Attributable Debt" means, in connection with any Sale-Leaseback Transaction occurring subsequent to the Closing Date, the lesser of (i) the present value, discounted according to GAAP at the debt rate implicit in the related lease, of the obligation of the lessee for rental payments over the remaining term of such lease(including any period for which such lease has been extended or may, at the option of the lessor be extended) and (ii) the fair market value of the assets subject to such Sale-Leaseback Transaction. "Attributed Principal Amount" means, on any day, with respect to any Securitization Transaction entered into by any member of the Consolidated Group, the aggregate amount (with respect to any such transaction, the "Invested Amount") paid to, or borrowed by, such Person as of such date under such Securitization Transaction, minus the aggregate amount received by the applicable Receivables Financier and applied to the reduction of the Invested Amount under such Securitization Transaction. "Bankruptcy Code" means the Bankruptcy Code in Title 11 of the United States Code, as amended, modified, succeeded or replaced from time to time. "Bankruptcy Event" means, with respect to any Person, the occurrence of any of the following with respect to such Person: (i) a court or governmental agency having jurisdiction in the premises shall enter a decree or order for relief in respect of such Person in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of such Person or for any substantial part of its Property or ordering the winding up or liquidation of its affairs; or (ii) there shall be commenced against such Person an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or any case, proceeding or other action for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of such Person or for any substantial part of its Property or for the winding up or liquidation of its affairs, and such involuntary case or other case, proceeding or other action shall remain undismissed, undischarged or unbonded for a period of ninety (90) consecutive days; or (iii) such Person shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of such Person or for any substantial part of its Property or make any general assignment for the benefit of creditors; or (iv) such Person shall be unable to, or shall admit in writing its inability to, pay its debts generally as they become due. "Base Rate" means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest whole multiple of 1/100 of 1%) equal to the greater of (a) the Federal Funds Rate in effect on such day plus 1/2 of 1% or (b) the Prime Rate in effect on such day. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable after due inquiry to ascertain the Federal Funds Rate for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms hereof, the Base Rate shall be determined without regard to clause (a) of the first sentence of this definition until the circumstances giving rise to such inability no longer exist. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Rate, respectively. 3 "Base Rate Loan" means any Loan bearing interest at a rate determined by reference to the Base Rate. "Borrower" means the Person identified as such in the heading hereof, together with any permitted successors and assigns. "Business Day" means a day other than a Saturday, Sunday or other day on which commercial banks in Charlotte, North Carolina or New York, New York are authorized or required by law to close, except that, when used in connection with a Eurodollar Loan, such day shall also be a day on which dealings between banks are carried on in U.S. dollar deposits in London, England. "Cash Equivalents" means (a) 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 twelve months from the date of acquisition, (b) U.S. dollar denominated time deposits and certificates of deposit of (i) any Lender, or (ii) any domestic commercial bank of recognized standing (y) having capital and surplus in excess of $500,000,000 and (z) whose short-term commercial paper rating from S&P is at least A-2 (and not lower than A-3) or the equivalent thereof or from Moody's is at least P-2 (and not lower than P-3) or the equivalent thereof (any such bank being an "Approved Bank"), in each case with maturities of not more than 270 days from the date of acquisition, (c) commercial paper and variable or fixed rate notes issued by any Approved Bank (or by the parent company thereof) or any variable rate notes issued by, or guaranteed by, any domestic corporation rated at least A-2 (and not lower than A-3) or the equivalent thereof by S&P or at least P-2 (and not lower than P-3) or the equivalent by Moody's and maturing within six months of the date of acquisition, (d) repurchase agreements entered into by a Person with a bank or trust company (including any of the Lenders) or recognized securities dealer having capital and surplus in excess of $500,000,000 for direct obligations issued by or fully guaranteed by the United States of America in which such Person shall have a perfected first priority security interest (subject to no other Liens) and having, on the date of purchase thereof, a fair market value of at least 100% of the amount of the repurchase obligations, (e) obligations of any State of the United States or any political subdivision thereof, the interest with respect to which is exempt from federal income taxation under Section 103 of the Code, having a long term rating of at least AA- or Aa-3 by S&P or Moody's, respectively, and maturing within three years from the date of acquisition thereof, (f) Investments in municipal auction preferred stock (i) rated A- (or the equivalent thereof) or better by S&P or A3 (or the equivalent thereof) or better by Moody's and (ii) with dividends that reset at least once every 365 days and (g) Investments, classified in accordance with GAAP as current assets, in money market investment programs registered under the Investment Borrower Act of 1940, as amended, which are administered by reputable financial institutions having capital of at least $100,000,000 and the portfolios of which are limited to Investments of the character described in the foregoing subdivisions (a) through (f). 4 "Change of Control" means the occurrence of any of the following events: (i) any Person or two or more Persons acting in concert shall have acquired beneficial ownership, directly or indirectly, of, or shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation, will result in its or their acquisition of, control over, voting stock of the Borrower (or other securities convertible into such voting stock) representing 35% or more of the combined voting power of all voting stock of the Borrower, or (ii) during any period of up to 24 consecutive months, commencing after the Closing Date, individuals who at the beginning of such 24 month period were directors of the Borrower (together with any new director whose election by the Borrower's Board of Directors or whose nomination for election by the Borrower's shareholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors 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 directors of the Borrower then in office. As used herein, "beneficial ownership" shall have the meaning provided in Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934. "Closing Date" means the date hereof. "Code" means the Internal Revenue Code of 1986, as amended, and any successor statute thereto, as interpreted by the rules and regulations issued thereunder, in each case as in effect from time to time. References to sections of the Code shall be construed also to refer to any successor sections. "Commitment" means the Revolving Commitment. "Commitment Percentage" means the Revolving Commitment Percentage. "Commitment Period" means the period from and including the Closing Date to but not including the earlier of (i) the Termination Date, or (ii) the date on which the Commitments terminate in accordance with the provisions of this Credit Agreement. "Consolidated Adjusted Capitalization" means at any date the sum of (i) Consolidated Funded Debt plus (ii) Consolidated Adjusted Tangible Net Worth. "Consolidated Adjusted Tangible Net Worth" means at any date (i) the sum of (A) the consolidated shareholders' equity of the Consolidated Group plus (B) accumulated depreciation of real estate owned to the extent reflected in the then book value of the Consolidated Assets minus, without duplication, 5 (ii) the sum of (A) the Intangible Assets of the Consolidated Group plus (B) all Restricted Investments (valued at the then book value thereof) of the Consolidated Group plus (C) Minority Interests. "Consolidated Assets" means the assets of the members of the Consolidated Group determined in accordance with GAAP on a consolidated basis. "Consolidated Attributable Debt" means at any date the Attributable Debt of the Consolidated Group, determined on a consolidated basis. "Consolidated EBITDA" means for any period for the Consolidated Group, the sum of Consolidated Net Income plus Consolidated Interest Expense plus all provisions for any Federal, state or other income taxes plus depreciation, amortization and other non-cash charges, in each case on a consolidated basis determined in accordance with GAAP applied on a consistent basis, but excluding in any event gains and losses on Investments and extraordinary gains and losses, and taxes on such excluded gains and tax deductions or credits on account of such excluded losses. Except as expressly provided otherwise, the applicable period shall be for the four consecutive quarters ending as of the date of determination. "Consolidated Funded Debt" means total Funded Debt of the Consolidated Group on a consolidated basis determined in accordance with GAAP applied on a consistent basis. "Consolidated Group" means the Borrower and its consolidated Subsidiaries, as determined in accordance with GAAP. "Consolidated Interest Expense" means for any period for the Consolidated Group, all interest expense, including the amortization of debt discount and premium, the interest component under capital leases and the implied interest component under Securitization Transactions, in each case on a consolidated basis determined in accordance with GAAP applied on a consistent basis. The applicable period shall be for the four consecutive fiscal quarters ending as of the date of determination. "Consolidated Mortgage Debt" means at any date the Mortgage Debt of the Consolidated Group, determined on a consolidated basis. "Consolidated Net Income" means for any period, the net income of the Consolidated Group on a consolidated basis determined in accordance with GAAP applied on a consistent basis. The applicable period shall be for the four consecutive fiscal quarters ending as of the date of determination. "Consolidated Net Operating Income from Unencumbered Realty" means for any period, earnings before deduction of interest, income taxes, depreciation and amortization and before deduction of general and administrative expenses and overhead, relating to Consolidated Unencumbered Realty of the Consolidated Group on a consolidated basis determined in accordance with GAAP on a consistent basis. The applicable period shall be for the four consecutive fiscal quarters ending as of the date of determination. 6 "Consolidated Net Worth" means total stockholders' equity for the Consolidated Group on a consolidated basis determined in accordance with GAAP applied on a consistent basis. "Consolidated Priority Claims" means at any date the sum (without duplication) of (i) Consolidated Mortgage Debt plus (ii) Consolidated Attributable Debt plus (iii) Consolidated Subsidiary Debt plus (iv) all preferred stock of Subsidiaries not owned by the Borrower and/or one or more of its Wholly-Owned Subsidiaries, valued at the higher of the voluntary or involuntary liquidation preference thereof. "Consolidated Senior Fixed Charges" means, as of the last day of each fiscal quarter for the Consolidated Group, the sum of the cash portion of Consolidated Interest Expense paid on or in respect of Consolidated Senior Funded Debt in the period of four consecutive fiscal quarters ending on such day plus scheduled maturities of Consolidated Senior Funded Debt (excluding the amount by which a final installment exceeds the next preceding principal installment thereon) in the period of four consecutive fiscal quarters ending on such day. "Consolidated Senior Fixed Charge Coverage Ratio" means, for any period, the ratio of Consolidated EBITDA to Consolidated Senior Fixed Charges. "Consolidated Senior Funded Debt" means Consolidated Funded Debt (determined without including Subordinated Funded Debt). "Consolidated Subsidiary Debt" means at any date all Debt of Subsidiaries (exclusive of Debt owed to the Borrower), determined on a consolidated basis. "Consolidated Total Fixed Charge Coverage Ratio" means, for any period, the ratio of Consolidated EBITDA to Consolidated Total Fixed Charges. "Consolidated Total Fixed Charges" means, as of the last day of each fiscal quarter for the Consolidated Group, the sum of the cash portion of Consolidated Interest Expense paid in the period of four consecutive fiscal quarters ending on such day plus scheduled maturities of Consolidated Funded Debt (excluding the amount by which a final installment exceeds the next preceding principal installment thereon) in the period of four consecutive fiscal quarters ending on such day. "Consolidated Total Realty" means, for the Consolidated Group on a consolidated basis, the undepreciated cost of all Realty, whether improved or not. "Consolidated Unencumbered Interest Coverage Ratio" means, for any period, the ratio of (i) Consolidated Net Operating Income from Consolidated Unencumbered Realty to (ii) Consolidated Interest Expense relating to Consolidated Unsecured Debt. 7 "Consolidated Unencumbered Realty" means, for the Consolidated Group on a consolidated basis, all Realty which is not encumbered by Lien securing Funded Debt. "Consolidated Unimproved Realty" means, for the Consolidated Group on a consolidated basis, the undepreciated cost of all raw unimproved land held for current or future development. For purposes hereof, property under development where construction and development is in progress shall not be considered to be unimproved to the extent that completed buildings are available for rent and are at least 75% leased. In such case, the undepreciated cost of the completed building(s) together with a proportionate cost of the related land and land improvements shall be considered as improved for purposes hereof. "Consolidated Unsecured Debt" means, for the Consolidated Group on a consolidated basis, all unsecured Consolidated Funded Debt. "Contractual Obligation" means, as to any Person, any provision of any security issued by such Person or of any material agreement, instrument or undertaking to which such Person is a party or by which it or any of its property is bound. "Credit Documents" means a collective reference to this Credit Agreement, the Notes, each Joinder Agreement, the Administrative Agent's Fee Letter, and all other related agreements and documents issued or delivered hereunder or thereunder or pursuant hereto or thereto. "Credit Party" means any of the Borrower and the Guarantors. "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable arising in the ordinary course of business), (iv) all obligations of such Person as lessee under capital leases, (v) all obligations of such Person to purchase securities or other property which arise out of or in connection with the sale of the same or substantially similar securities or property, (vi) all obligations of such Person to reimburse any bank or other person in respect of amounts payable under a letter of credit or similar instrument (being the amount available to be drawn thereunder, whether or not then drawn), (vii) all obligations of others secured by a Lien on any asset of such Person, whether or not such obligation is assumed by such Person, (viii) all obligations of others Guaranteed by such Person, (ix) all obligations which in accordance with GAAP would be shown as liabilities on a balance sheet of such Person, (x) the Attributed Principal Amount under any Securitization Transaction and (xi) all obligations of such Person owing under any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing product to which such Person is a party, where such transaction is considered borrowed money indebtedness for tax purposes, but is classified as an operating lease in accordance with GAAP. Debt of any Person shall include Debt of any partnership or joint venture in such Person is a general partner or joint venturer to the extent of recourse to such Person for payment thereof. 8 "Default" means any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. "Defaulting Lender" means, at any time, any Lender that, at such time, (i) has failed to make an Extension of Credit required pursuant to the terms of this Credit Agreement, (ii) has failed to pay to the Administrative Agent or any Lender an amount owed by such Lender pursuant to the terms of the Credit Agreement or any other of the Credit Documents, or (iii) has been deemed insolvent or has become subject to a bankruptcy or insolvency proceeding or to a receiver, trustee or similar proceeding. "Dollars" and "$" means dollars in lawful currency of the United States of America. "Domestic Credit Party" means any Credit Party which is incorporated or organized under the laws of any State of the United States or the District of Columbia. "Domestic Subsidiary" means any Subsidiary which is incorporated or organized under the laws of any State of the United States or the District of Columbia. "Environmental Laws" means any and all lawful and applicable Federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions relating to the environment or to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes. "Equity Transaction" means, with respect to any member of the Consolidated Group, any issuance of shares of its capital stock or other equity interest, other than an issuance (i) to a member of the Consolidated Group or (ii) in connection with exercise by a present or former employee, officer or director under a stock incentive plan, stock option plan or other equity-based compensation plan or arrangement. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto, as interpreted by the rules and regulations thereunder, all as the same may be in effect from time to time. References to sections of ERISA shall be construed also to refer to any successor sections. "ERISA Affiliate" means an entity which is under common control with any Credit Party within the meaning of Section 4001(a)(14) of ERISA, or is a member of a group which includes the Borrower and which is treated as a single employer under Sections 414(b) or (c) of the Code. 9 "ERISA Event" means (i) with respect to any Plan, the occurrence of a Reportable Event or the substantial cessation of operations (within the meaning of Section 4062(e) of ERISA); (ii) the withdrawal by the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a substantial employer (as such term is defined in Section 4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan; (iii) the distribution of a notice of intent to terminate or the actual termination of a Plan pursuant to Section 4041(a)(2) or 4041A of ERISA; (iv) the institution of proceedings to terminate or the actual termination of a Plan by the PBGC under Section 4042 of ERISA; (v) any event or condition which could reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan; (vi) the complete or partial withdrawal of the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate from a Multiemployer Plan; (vii) the conditions for imposition of a lien under Section 302(f) of ERISA exist with respect to any Plan; or (vii) the adoption of an amendment to any Plan requiring the provision of security to such Plan pursuant to Section 307 of ERISA. "Eurodollar Loan" means any Loan bearing interest at a rate determined by reference to the Eurodollar Rate. "Eurodollar Rate" means, for the Interest Period for each Eurodollar Loan comprising part of the same borrowing (including conversions, extensions and renewals), a per annum interest rate determined pursuant to the following formula: Eurodollar Rate = Interbank Offered Rate -------------------------------- 1 - Eurodollar Reserve Percentage "Eurodollar Reserve Percentage" means for any day, that percentage (expressed as a decimal) which is in effect from time to time under Regulation D of the Board of Governors of the Federal Reserve System (or any successor), as such regulation may be amended from time to time or any successor regulation, as the maximum reserve requirement (including, without limitation, any basic, supplemental, emergency, special, or marginal reserves) applicable with respect to Eurocurrency liabilities as that term is defined in Regulation D (or against any other category of liabilities that includes deposits by reference to which the interest rate of Eurodollar Loans is determined), whether or not Lender has any Eurocurrency liabilities subject to such reserve requirement at that time. Eurodollar Loans shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefits of credits for proration, exceptions or offsets that may be available from time to time to a Lender. The Eurodollar Rate shall be adjusted automatically on and as of the effective date of any change in the Eurodollar Reserve Percentage. "Event of Default" means such term as defined in Section 9.1. "Extension of Credit" means, as to any Lender, the making of, or participation in, a Loan by such Lender. 10 "Facility Fee" shall have the meaning given such term in Section 3.5(a). "Fees" means all fees payable pursuant to Section 3.5. "Federal Funds Rate" means, for any day, the rate of interest per annum (rounded upwards, if necessary, to the nearest whole multiple of 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (A) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day and (B) if no such rate is so published on such next preceding Business Day, the Federal Funds Rate for such day shall be the average rate quoted to the Administrative Agent on such day on such transactions as determined by the Administrative Agent. "Foreign Credit Party" means a Credit Party which is not a Domestic Credit Party. "Foreign Subsidiary" means a Subsidiary which is not a Domestic Subsidiary. "Funded Debt" means at any date, with respect to any Person, without duplication, all Debt of such Person. "GAAP" means generally accepted accounting principles in the United States applied on a consistent basis and subject to the terms of Section 1.3 hereof. "Governmental Authority" means any Federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body. "Guarantee" by any Person, means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Guaranteed Obligations" means, as to each Guarantor, without duplication, all obligations of the Borrower to the Lenders and the Administrative Agent, whenever arising, under this Credit Agreement, the Notes or the Credit Documents relating to the Obligations hereunder (including interest accruing after a Bankruptcy Event, regardless of whether such interest is allowed as a claim under the Bankruptcy Code). 11 "Guarantor" means each of those Persons identified as a "Guarantor" on the signature pages hereto, and each other Person which may hereafter become a Guarantor by execution of a Joinder Agreement, together with their successors and permitted assigns. "Intangible Assets" of any Person means at any date the amount of (i) all write-ups (other than write-ups resulting from write-ups of assets of a going concern business made within twelve months after the acquisition of such business) in the book value of any asset owned by such Person and (ii) all unamortized debt discount and expense, unamortized deferred charges, capitalized start-up costs, goodwill, patents, licenses, trademarks, trade names, copyrights, organization or developmental expenses, covenants not to compete and other intangible items. "Interbank Offered Rate" means, for the Interest Period for each Eurodollar Loan comprising part of the same borrowing (including conversions, extensions and renewals), a per annum interest rate (rounded upwards, if necessary, to the nearest whole multiple of 1/100 of 1%) equal to the rate of interest, determined by the Administrative Agent on the basis of the offered rates for deposits in dollars for a period of time corresponding to such Interest Period (and commencing on the first day of such Interest Period), appearing on Telerate Page 3750 (or, if, for any reason, Telerate Page 3750 is not available, the Reuters Screen LIBO Page) as of approximately 11:00 A.M. (London time) two (2) Business Days before the first day of such Interest Period. As used herein, "Telerate Page 3750" means the display designated as page 3750 by Dow Jones Telerate, Inc. (or such other page as may replace such page on that service for the purpose of displaying the British Bankers Association London interbank offered rates) and "Reuters Screen LIBO Page" means the display designated as page "LIBO" on the Reuters Monitor Money Rates Service (or such other page as may replace the LIBO page on that service for the purpose of displaying London interbank offered rates of major banks). "Interest Payment Date" means (i) as to any Base Rate Loan, the last day of each March, June, September and December and the Termination Date and (ii) as to any Eurodollar Loan, the last day of each Interest Period for such Loan, the date of repayment of principal of such Loan and the Termination Date, and in addition where the applicable Interest Period is more than three months, then also the date three months from the beginning of the Interest Period, and each three months thereafter. If an Interest Payment Date falls on a date which is not a Business Day, such Interest Payment Date shall be deemed to be the next succeeding Business Day. "Interest Period" means as to any Eurodollar Loan, a period of one, two, three or six month's duration, as the Borrower may elect, commencing in each case, on the date of the borrowing (including conversions, extensions and renewals); provided, however, (A) if any Interest Period would end on a day which is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day (except where the next succeeding Business Day falls in the next succeeding calendar month, then such Interest Period shall end on the next preceding Business Day), (B) no Interest Period shall extend beyond the Termination Date, and (C) where an Interest Period begins on a day for which there is no numerically corresponding day in the calendar month in which the Interest Period is to end, such Interest Period shall end on the last day of such calendar month. 12 "Invested Amount" shall have the meaning given such term in the definition of Attributed Principal Amount. "Investment", in any Person, means any loan or advance to such Person, any purchase or other acquisition of any capital stock, warrants, rights, options, obligations or other securities of, or equity interest in, such Person, any capital contribution to such Person or any other investment in such Person, including, without limitation, any Guaranty Obligation incurred for the benefit of such Person. "Joinder Agreement" means a Joinder Agreement substantially in the form of Schedule 7.11 hereto, executed and delivered by an Additional Credit Party in accordance with the provisions of Section 7.11. "Lenders" means each of the Persons identified as a "Lender" on the signature pages hereto, and their successors and assigns. "Lien" means any mortgage, pledge, hypothecation, assignment, deposit arrangement, security interest, encumbrance, lien (statutory or otherwise), preference, priority or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any financing or similar statement or notice filed under the Uniform Commercial Code as adopted and in effect in the relevant jurisdiction or other similar recording or notice statute, and any lease in the nature thereof). "Loan" or "Loans" means the Revolving Loans. "Material Adverse Effect" means a material adverse effect on (i) the condition (financial or otherwise), operations, business, assets, liabilities or prospects of the Consolidated Group taken as a whole, (ii) the ability of the Credit Parties taken as a whole to perform any material obligation under the Credit Documents to which they are parties or (iii) the rights and remedies of the Lenders or the Borrower under the Credit Documents. "Materials of Environmental Concern" means any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Laws, including, without limitation, polychlorinated biphenyls and urea-formaldehyde insulation. "Minority Interests" means any shares of stock of any class of a Subsidiary (other than directors' qualifying shares as required by law) that are not owned by the Borrower and/or one or more Wholly-Owned Subsidiaries. Minority Interests constituting preferred stock shall be valued at the voluntary or involuntary liquidation value of such preferred stock, whichever is greater, and by valuing common stock at the book value of the capitalized surplus applicable thereto adjusted, if necessary, to reflect any changes from the book value of such common stock required by the foregoing method of valuing Minority Interests in preferred stock. 13 "Moody's" means Moody's Investors Service, Inc., or any successor or assignee of the business of such Borrower in the business of rating securities. "Mortgage Debt" of any Person means at any date the aggregate principal amount of all Debt of such Person secured by a Lien on any real property owned or leased by it. "Multiemployer Plan" means a Plan which is a multiemployer plan as defined in Sections 3(37) or 4001(a)(3) of ERISA. "Multiple Employer Plan" means a Plan which the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate and at least one employer other than the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate are contributing sponsors. "NationsBank" means NationsBank, N.A. and its successors. "Non-Excluded Taxes" means such term as is defined in Section 3.10. "Note" or "Notes" means any Revolving Note. "Notice of Borrowing" means a written notice of borrowing in substantially the form of Schedule 2.1(b)(i), as required by Section 2.1(b)(i). "Notice of Extension/Conversion" means the written notice of extension or conversion in substantially the form of Schedule 3.2, as required by Section 3.2. "Operating Partnership" means United Dominion Realty, L.P., together with any permitted successors and assigns. "Participation Interest" means the purchase by a Lender of a participation in Loans as provided in Section 3.13. "PBGC" means the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA and any successor thereof. "Permitted Investments" means Investments which are either (i) cash and Cash Equivalents; (ii) Investments consisting of stock, obligations, securities or other property received in settlement of accounts receivable (created in the ordinary course of business) from bankrupt obligors; (iii) acquisitions permitted by Section 8.3; (iv) Investments by a member of the Consolidated Group or an Affiliate of a member of the Consolidated Group in connection with a Permitted Securitization Transaction; (v) Investments by a member of the Consolidated Group in and to a Credit Party; and (vi) additional Investments of a type not contemplated by the foregoing clauses in aggregate amount outstanding, not to exceed the greater of (A) $25,000,000 or (B) one percent (1%) of Consolidated Adjusted Capitalization. 14 "Person" means any individual, partnership, joint venture, firm, corporation, limited liability company, association, trust or other enterprise (whether or not incorporated) or any Governmental Authority. "Plan" means any employee benefit plan (as defined in Section 3(3) of ERISA) which is covered by ERISA and with respect to which the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" within the meaning of Section 3(5) of ERISA. "Prime Rate" means the rate of interest per annum publicly announced from time to time by NationsBank as its prime rate in effect at its principal office in Charlotte, North Carolina, with each change in the Prime Rate being effective on the date such change is publicly announced as effective (it being understood and agreed that the Prime Rate is a reference rate used by NationsBank in determining interest rates on certain loans and is not intended to be the lowest rate of interest charged on any extension of credit by NationsBank to any debtor). "Pro Forma Basis" means, with respect to any transaction, that such transaction shall be deemed to have occurred as of the first day of the four fiscal-quarter period ending as of the most recent fiscal quarter end preceding the date of such transaction with respect to which the Administrative Agent and the Lenders have received the officer's certificate in accordance with the provisions of Section 7.2(b). As used herein, "transaction" means and includes (i) any corporate merger or consolidation as referred to in Section 8.3(a), and (ii) any acquisition of capital stock or securities or any purchase, lease or other acquisition of property as referred to in Section 8.3(c). "Property" means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible. "Realty" means all real property and interests therein, together with all improvements thereon. "Receivables" means any right of payment from or on behalf of any obligor, whether constituting an account, chattel paper, instrument, general intangible or otherwise, arising from the sale or financing by a member of the Consolidated Group or merchandise or services, and monies due thereunder, security in the merchandise and services financed thereby, records related thereto, and the right to payment of any interest or finance charges and other obligations with respect thereto, proceeds from claims on insurance policies related thereto, any other proceeds related thereto, and any other related rights. 15 "Receivables Financier" means, in connection with a Securitization Transaction, the Person which provides financing for such transaction whether by purchase, loan or otherwise in respect of Receivables. "Register" shall have the meaning given such term in Section 11.3(c). "Regulation G, T, U, or X" means Regulation G, T, U or X, respectively, 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. "Release" means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing into the environment (including the abandonment or discarding of barrels, containers and other closed receptacles containing any Materials of Environmental Concern). "Reportable Event" means any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the notice requirement has been waived by regulation. "Required Lenders" means Lenders having, at the time of determination thereof, more than fifty percent (50%) of the Commitments, or if the Commitments have been terminated, Lenders having, at the time of determination thereof, more than fifty percent (50%) of the aggregate principal amount of the Loans outstanding (taking into account in each case Participation Interests or obligation to participate therein); provided that the Commitments of, and outstanding principal amount of Loans (taking into account Participation Interests therein) owing to, a Defaulting Lender shall be excluded for purposes hereof in making a determination of Required Lenders. "Requirement of Law" means, as to any Person, the certificate of incorporation and by-laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its material property is subject. "Responsible Officer" means the Chief Financial Officer, the Controller or the Treasurer. "Restricted Investments" means Investments, including loans and advances, other than Permitted Investments. "Revolving Commitment" means, with respect to each Lender, the commitment of such Lender to make Revolving Loans in an aggregate principal amount at any time outstanding of up to such Lender's Revolving Commitment as specified in Schedule 2.1(a), as such amount may be reduced from time to time in accordance with the provisions hereof. "Revolving Commitment Percentage" means, for each Lender, a fraction (expressed as a decimal) the numerator of which is the Revolving Commitment of such Lender at such time and the denominator of which is the Aggregate Revolving Committed Amount at such time. The initial Revolving Commitment Percentages are set out on Schedule 2.1(a). 16 "Revolving Committed Amount" means, collectively, the aggregate amount of all of the Revolving Commitments as referenced in Section 2.1(a) and, individually, the amount of each Lender's Revolving Commitment as specified in Schedule 2.1(a). "Revolving Loans" shall have the meaning assigned to such term in Section 2.1(a). "Revolving Note" or "Revolving Notes" means the promissory notes of the Borrower in favor of each of the Lenders evidencing the Revolving Loans in substantially the form attached as Schedule 2.1(e), individually or collectively, as appropriate, as such promissory notes may be amended, modified, supplemented, extended, renewed or replaced from time to time. "S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill, Inc., or any successor or assignee of the business of such division in the business of rating securities. "Sale-Leaseback Transaction" means any arrangement with any Person (other than the Borrower or a Wholly-Owned Subsidiary or the Operating Partnership) providing for the leasing by the Borrower or any Subsidiary (as tenant) of real or personal property which has been or is to be sold or transferred by the Borrower or such Subsidiary to such Person or to any Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of the Borrower or such Subsidiary. "Securitization Subsidiary" shall have the meaning provided in the definition of "Securitization Transaction". "Securitization Transaction" means any financing transaction or series of financing transactions that have been or may be entered into by a member of the Consolidated Group pursuant to which such member of the Consolidated Group may sell, convey or otherwise transfer to (i) a Subsidiary or affiliate (a "Securitization Subsidiary"), or (ii) any other Person, or may grant a security interest in, any Receivables or interests therein secured by merchandise or services financed thereby (whether such Receivables are then existing or arising in the future) of such member of the Consolidated Group, and any assets related thereto, including without limitation, all security interests in merchandise or services financed thereby, the proceeds of such Receivables, and other assets which are customarily sold or in respect of which security interests are customarily granted in connection with securitization transactions involving such assets. "Single Employer Plan" means any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan or a Multiple Employer Plan. 17 "Solvent" or "Solvency" means, with respect to any Person as of a particular date, that on such date (i) such Person is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (ii) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature in their ordinary course, (iii) such Person is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which such Person's Property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Person is engaged or is to engage, (iv) the fair value of the Property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person and (v) the present fair saleable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed at the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "Subordinated Debt" means any Debt which by its terms is specifically subordinated in right of payment to the prior payment of the obligations of the Credit Parties under this Credit Agreement and the other Credit Documents on terms and conditions satisfactory to the Required Lenders. "Subordinated Funded Debt" means at any date all unsecured Funded Debt (i) no part of the principal of which is required to be paid (whether by way of mandatory sinking fund, mandatory redemption or otherwise) prior to the payment in full of the Loans hereunder and (ii) the payment of the principal of and interest on which, and any other obligations to the holder of such Debt, is subordinated to the prior payment in full of the Loans hereunder (including interest accruing after the date of commencement of any proceeding under any bankruptcy, insolvency, or similar law in which such Person is a debtor). "Subsidiary" means as to any Person, any corporation, partnership, limited liability company or other entity of which securities or other ownership interest having an ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person. Unless otherwise provided, references to a "Subsidiary" or "Subsidiaries" shall mean a Subsidiary or Subsidiaries of the Borrower. "Termination Date" means the date 364 days following the Closing Date, or if extended with the written consent of each of the Lenders, such later date not more than 364 days following the then applicable Termination Date. "Three Year Credit Agreement" means that Three Year Credit Agreement dated as of the date hereof, as amended and modified, among the Borrower, the Guarantors and Lenders identified therein and NationsBank, N.A., as Administrative Agent. 18 "Wholly-Owned Subsidiary" means as to any Person, any Subsidiary all of the voting stock or other similar voting interests are owned directly or indirectly by such Person. Unless otherwise provided, references to "Wholly-Owned Subsidiary" shall mean Wholly-Owned Subsidiaries of the Borrower. 1.2 Computation of Time Periods. For purposes of computation of periods of time hereunder, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding." 1.3 Accounting Terms. Except as otherwise expressly provided herein, all accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Lenders hereunder shall be prepared, in accordance with GAAP applied on a consistent basis. Financial statements, certificates and reports delivered hereunder shall be accompanied by a description of any changes in application of accounting principles and an estimation of the effects thereof. All calculations made for the purposes of determining compliance with this Credit Agreement shall (except as otherwise expressly provided herein) be made by application of GAAP applied on a basis consistent with the most recent annual or quarterly financial statements delivered pursuant to Section 7.1 hereof (or, prior to the delivery of the first financial statements pursuant to Section 7.1 hereof, consistent with the annual audited financial statements referenced in Section 6.1(i) hereof); provided, however, if (a) the Borrower shall object to determining such compliance on such basis at the time of delivery of such financial statements due to any change in GAAP or the rules promulgated with respect thereto or (b) the Administrative Agent or the Required Lenders shall so object in writing within 30 days after delivery of such financial statements, then such calculations shall be made on a basis consistent with the most recent financial statements delivered by the Borrower to the Lenders as to which no such objection shall have been made. SECTION 2 CREDIT FACILITIES 2.1 Revolving Loans. (a) Revolving Commitment. During the Commitment Period, subject to the terms and conditions hereof, each Lender severally agrees to make revolving credit loans (the "Revolving Loans") to the Borrower from time to time in the amount of such Lender's Revolving Commitment Percentage of such Revolving Loans for the purposes hereinafter set forth; provided that (i) with regard to the Lenders collectively, the aggregate principal amount of Loans outstanding at any time shall not exceed the Aggregate Revolving Committed Amount, and (ii) with regard to each Lender individually, such Lender's Revolving Commitment Percentage of Loans outstanding at any time shall not exceed such Lender's Revolving Committed Amount. Revolving Loans may consist of Base Rate Loans or Eurodollar Loans, or a combination thereof, as the Borrower may request, and may be repaid and reborrowed in accordance with the provisions hereof. 19 (b) Revolving Loan Borrowings. (i) Notice of Borrowing. The Borrower shall request a Revolving Loan borrowing by written notice (or telephone notice promptly confirmed in writing) to the Administrative Agent not later than 11:00 A.M. (Charlotte, North Carolina time) on the Business Day prior to the date of the requested borrowing in the case of Base Rate Loans, and on the third Business Day prior to the date of the requested borrowing in the case of Eurodollar Loans. Each such request for borrowing shall be irrevocable and shall specify (A) that a Revolving Loan is requested, (B) the date of the requested borrowing (which shall be a Business Day), (C) the aggregate principal amount to be borrowed, and (D) whether the borrowing shall be comprised of Base Rate Loans, Eurodollar Loans or a combination thereof, and if Eurodollar Loans are requested, the Interest Period(s) therefor. If the Borrower shall fail to specify in any such Notice of Borrowing (I) an applicable Interest Period in the case of a Eurodollar Loan, then such notice shall be deemed to be a request for an Interest Period of one month, or (II) the type of Revolving Loan requested, then such notice shall be deemed to be a request for a Eurodollar Loan with an Interest Period of one month. The Administrative Agent shall give notice to each Lender promptly upon receipt of each Notice of Borrowing pursuant to this Section 2.1(b)(i), the contents thereof and each such Lender's share of any borrowing to be made pursuant thereto. (ii) Minimum Amounts. Each Revolving Loan shall be in a minimum aggregate principal amount of $5,000,000, in the case of Eurodollar Loans, or $1,000,000 (or the remaining Revolving Committed Amount, if less), in the case of Base Rate Loans, and integral multiples of $1,000,000 in excess thereof. (iii) Advances. Each Lender will make its Revolving Commitment Percentage of each Revolving Loan borrowing available to the Administrative Agent for the account of the Borrower as specified in Section 3.14(a), or in such other manner as the Administrative Agent may specify in writing, by 2:30 P.M. (Charlotte, North Carolina time) on the date specified in the applicable Notice of Borrowing in Dollars and in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent by crediting the account of the Borrower on the books of such office with the aggregate of the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent. (c) Repayment. The principal amount of all Revolving Loans shall be due and payable in full on the Termination Date. (d) Interest. Subject to the provisions of Section 3.1, (i) Base Rate Loans. During such periods as Revolving Loans shall be comprised in whole or in part of Base Rate Loans, such Base Rate Loans shall bear interest at a per annum rate equal to the Base Rate plus the Applicable Percentage; 20 (ii) Eurodollar Loans. During such periods as Revolving Loans shall be comprised in whole or in part of Eurodollar Loans, such Eurodollar Loans shall bear interest at a per annum rate equal to the Eurodollar Rate plus the Applicable Percentage. Interest on Revolving Loans shall be payable in arrears on each applicable Interest Payment Date (or at such other times as may be specified herein). (e) Revolving Notes. The Revolving Loans shall be evidenced by a duly executed Revolving Note in favor of each Lender. (f) Maximum Number of Eurodollar Loans. The Borrower will be limited to a maximum number of ten (10) Eurodollar Loans outstanding at any time. For purposes hereof, Eurodollar Loans with separate or different Interest Periods will be considered as separate Eurodollar Loans even if their Interest Periods expire on the same date. SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES 3.1 Default Rate. Upon the occurrence, and during the continuance, of an Event of Default, the principal of and, to the extent permitted by law, interest on the Loans and any other amounts owing hereunder or under the other Credit Documents shall bear interest, payable on demand, at a per annum rate 2% greater than the rate which would otherwise be applicable (or if no rate is applicable, whether in respect of interest, fees or other amounts, then 2% greater than the Base Rate). 3.2 Extension and Conversion. Subject to the terms of Section 5.2, the Borrower shall have the option, on any Business Day, to extend existing Loans into a subsequent permissible Interest Period or to convert Loans into Loans of another interest rate type; provided, however, that (i) except as provided in Section 3.8, Eurodollar Loans may be converted into Base Rate Loans only on the last day of the Interest Period applicable thereto, (ii) Eurodollar Loans may be extended, and Base Rate Loans may be converted into Eurodollar Loans, only if no Default or Event of Default is in existence on the date of extension or conversion, (iii) Loans extended as, or converted into, Eurodollar Loans shall be subject to the terms of the definition of "Interest Period" set forth in Section 1.1 and shall be in such minimum amounts as provided in Section 2.1(b)(ii) , and (iv) any request for extension or conversion of a Eurodollar Loan which shall fail to specify an Interest Period shall be deemed to be a request for an Interest Period of one month. Each such extension or conversion shall be effected by the Borrower by giving a Notice of Extension/Conversion (or telephone notice promptly confirmed in writing) to the Administrative Agent prior to 11:00 A.M. (Charlotte, North Carolina time) on the Business Day of, in the case of the conversion of a Eurodollar Loan into a Base Rate Loan, and on the third Business Day prior to, in the case of the extension of a Eurodollar Loan as, or conversion of a Base Rate Loan into, a Eurodollar Loan, the date of the proposed extension or conversion, specifying the date of the proposed extension or conversion, the Loans to be so extended or converted, the types of Loans into which such Loans are to be converted and, if appropriate, the applicable Interest Periods with respect thereto. Each request for extension or conversion shall be irrevocable and shall constitute a representation and warranty by the Borrower of the matters specified in subsections (a) through (e) of Section 5.2. In the event the Borrower fails to request extension or conversion of any Eurodollar Loan in accordance with this Section, or any such conversion or extension is not permitted or required by this Section, then such Eurodollar Loan shall be automatically converted into a Base Rate Loan at the end of the Interest Period applicable thereto. The Administrative Agent shall give each Lender notice as promptly as practicable of any such proposed extension or conversion affecting any Loan. 21 3.3 Prepayments. (a) Voluntary Prepayments. Revolving Loans may be repaid in whole or in part without premium or penalty; provided that (i) Eurodollar Loans may be prepaid only upon three (3) Business Days' prior written notice to the Administrative Agent and must be accompanied by payment of any amounts owing under Section 3.11, and (ii) partial prepayments shall be minimum principal amounts of $5,000,000, in the case of Eurodollar Loans, and $1,000,000, in the case of Base Rate Loans, and in integral multiples of $1,000,000 in excess thereof. (b) Mandatory Prepayments. If at any time, the aggregate principal amount of Loans shall exceed the Aggregate Revolving Committed Amount, the Borrower shall immediately make payment on the Loans in an amount sufficient to eliminate the excess. (c) Application. Unless otherwise specified by the Borrower, prepayments made hereunder shall be applied first to Revolving Loans which are Base Rate Loans, then to Revolving Loans which are Eurodollar Loans in direct order of Interest Period maturities. Amounts prepaid hereunder may be reborrowed in accordance with the provisions hereof. 3.4 Termination and Reduction of Commitments (a) Voluntary Reductions. The Revolving Commitments may be terminated or permanently reduced in whole or in part by the Borrower upon three (3) Business Days' prior written notice to the Administrative Agent, provided that (i) after giving effect to any voluntary reduction the aggregate amount of Loans shall not exceed the Aggregate Revolving Committed Amount, as reduced, and (ii) partial reductions shall be minimum principal amount of $5,000,000, and in integral multiples of $1,000,000 in excess thereof. (b) Mandatory Reduction. The Commitments hereunder shall terminate on the Termination Date. 3.5 Fees. (a) Facility Fee. In consideration of the Commitments hereunder, the Borrower agrees to pay to the Administrative Agent for the ratable benefit of the Lenders a facility fee (the "Facility Fee") equal to the Applicable Percentage per annum on the average daily Revolving Committed Amount for the applicable period. The Facility Fee shall be payable quarterly in arrears on the 15th day following the last day of each calendar quarter for the immediately preceding quarter (or portion thereof) beginning with the first such date to occur after the Closing Date. 22 (b) Administrative Fees. The Borrower agrees to pay to the Administrative Agent, for its own account, an annual administrative fee and such other fees, if any, referred to in the Administrative Agent's Fee Letter. 3.6 Capital Adequacy. If any Lender has determined, after the date hereof, that the adoption or the becoming effective of, or any change in, or any change by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof in the interpretation or administration of, any applicable law, rule or regulation regarding capital adequacy, or compliance by such Lender 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, has or would have the effect of reducing the rate of return on such Lender's capital or assets as a consequence of its commitments or obligations hereunder to a level below that which such Lender could have achieved but for such adoption, effectiveness, change or compliance (taking into consideration such Lender's policies with respect to capital adequacy), then, upon notice from such Lender to the Borrower, the Borrower shall be obligated to pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. Each determination by any such Lender of amounts owing under this Section shall, absent manifest error, be conclusive and binding on the parties hereto. 3.7 Inability To Determine Interest Rate. If prior to the first day of any Interest Period, the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the Lenders as soon as practicable thereafter. If such notice is given (a) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as Base Rate Loans and (b) any Loans that were to have been converted on the first day of such Interest Period to or continued as Eurodollar Loans shall be converted to or continued as Base Rate Loans. Until such notice has been withdrawn by the Administrative Agent, no further Eurodollar Loans shall be made or continued as such, nor shall the Borrower have the right to convert Base Rate Loans to Eurodollar Loans. 3.8 Illegality. Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof occurring after the Closing Date shall make it unlawful for any Lender to make or maintain Eurodollar Loans as contemplated by this Credit Agreement, (a) such Lender shall promptly give written notice of such circumstances to the Borrower and the Administrative Agent (which notice shall be withdrawn whenever such circumstances no longer exist), (b) the commitment of such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and convert a Base Rate Loan to Eurodollar Loans shall forthwith be canceled and, until such time as it shall no longer be unlawful for such Lender to make or maintain Eurodollar Loans, such Lender shall then have a commitment only to make a Base Rate Loan when a Eurodollar Loan is requested and (c) such Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender, upon demand, without duplication, such amounts, if any, as may be reasonably required pursuant to Section 3.11. 23 3.9 Requirements of Law. If, after the date hereof, the adoption of or any change in any Requirement of Law or in the interpretation or application thereof applicable to any Lender, or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority, in each case made subsequent to the Closing Date (or, if later, the date on which such Lender becomes a Lender): (a) shall subject such Lender to any tax of any kind whatsoever with respect to any Eurodollar Loans made by it or its obligation to make Eurodollar Loans, or change the basis of taxation of payments to such Lender in respect thereof (except for (i) Non-Excluded Taxes covered by Section 3.10 (including Non-Excluded Taxes imposed solely by reason of any failure of such Lender to comply with its obligations under Section 3.10(b)) and (ii) changes in taxes measured by or imposed upon the overall net income, or franchise tax (imposed in lieu of such net income tax), of such Lender or its applicable lending office, branch, or any affiliate thereof)); (b) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the Eurodollar Rate hereunder; or (c) shall impose on such Lender any other condition (excluding any tax of any kind whatsoever); and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender reasonably deems to be material, of making, converting into, continuing or maintaining Eurodollar Loans or to reduce any amount receivable hereunder in respect thereof, then, in any such case, upon notice to the Borrower from such Lender, through the Administrative Agent, in accordance herewith, the Borrower shall be obligated to promptly pay such Lender, upon its demand, any additional amounts necessary to compensate such Lender for such increased cost or reduced amount receivable, provided that, in any such case, the Borrower may elect to convert the Eurodollar Loans made by such Lender hereunder to Base Rate Loans by giving the Administrative Agent at least one Business Day's notice of such election, in which case the Borrower shall promptly pay to such Lender, upon demand, without duplication, such amounts, if any, as may be reasonably required pursuant to Section 3.11. If any Lender becomes entitled to claim any additional amounts pursuant to this subsection, it shall provide prompt notice thereof to the Borrower, through the Administrative Agent, certifying (x) that one of the events described in this paragraph (a) has occurred and describing in reasonable detail the nature of such event, (y) as to the increased cost or reduced amount resulting from such event and (z) as to the additional amount demanded by such Lender and a reasonably detailed explanation of the calculation thereof. Such a certificate as to any additional amounts payable pursuant to this subsection submitted by such Lender, through the Administrative Agent, to the Borrower shall be conclusive and binding on the parties hereto in the absence of manifest error. This covenant shall survive the termination of this Credit Agreement and the payment of the Loans and all other amounts payable hereunder. 24 3.10 Taxes. (a) Except as provided below in this subsection, all payments made by the Borrower under this Credit Agreement and any Notes shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any court, or governmental body, agency or other official, excluding taxes measured by or imposed upon the overall net income of any Lender or its applicable lending office, or any branch or affiliate thereof, and all franchise taxes, branch taxes, taxes on doing business or taxes on the overall capital or net worth of any Lender or its applicable lending office, or any branch or affiliate thereof, in each case imposed in lieu of net income taxes, imposed: (i) by the jurisdiction under the laws of which such Lender, applicable lending office, branch or affiliate is organized or is located, or in which its principal executive office is located, or any nation within which such jurisdiction is located or any political subdivision thereof; or (ii) by reason of any connection between the jurisdiction imposing such tax and such Lender, applicable lending office, branch or affiliate other than a connection arising solely from such Lender having executed, delivered or performed its obligations, or received payment under or enforced, this Credit Agreement or any Notes. If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts payable to the Administrative Agent or any Lender hereunder or under any Notes, (A) the amounts so payable to the Administrative Agent or such Lender shall be increased to the extent necessary to yield to the Administrative Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Credit Agreement and any Notes, provided, however, that the Borrower shall be entitled to deduct and withhold any Non-Excluded Taxes and shall not be required to increase any such amounts payable to any Lender that is not organized under the laws of the United States of America or a state thereof if such Lender fails to comply with the requirements of paragraph (b) of this subsection whenever any Non-Excluded Taxes are payable by the Borrower, and (B) as promptly as possible thereafter the Borrower shall send to the Administrative Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Administrative Agent and the Lenders for any incremental taxes, interest or penalties that may become payable by the Administrative Agent or any Lender as a result of any such failure. The agreements in this subsection shall survive the termination of this Credit Agreement and the payment of the Loans and all other amounts payable hereunder. 25 (b) Each Lender that is not incorporated under the laws of the United States of America or a state thereof shall: (X)(i) on or before the date of any payment by the Borrower under this Credit Agreement or Notes to such Lender, deliver to the Borrower and the Administrative Agent (A) two (2) duly completed copies of United States Internal Revenue Service Form 1001 or 4224, or successor applicable form, as the case may be, certifying that it is entitled to receive payments under this Credit Agreement and any Notes without deduction or withholding of any United States federal income taxes and (B) an Internal Revenue Service Form W-8 or W-9, or successor applicable form, as the case may be, certifying that it is entitled to an exemption from United States backup withholding tax; (ii) deliver to the Borrower and the Administrative Agent two (2) further copies of any such form or certification on or before the date that any such form or certification expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower; and (iii) obtain such extensions of time for filing and complete such forms or certifications as may reasonably be requested by the Borrower or the Administrative Agent; or (Y) in the case of any such Lender that is not a "bank" within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code, (i) represent to the Borrower (for the benefit of the Borrower and the Administrative Agent) that it is not a bank within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code, (ii) agree to furnish to the Borrower on or before the date of any payment by the Borrower, with a copy to the Administrative Agent two (2) accurate and complete original signed copies of Internal Revenue Service Form W-8, or successor applicable form certifying to such Lender's legal entitlement at the date of such certificate to an exemption from U.S. withholding tax under the provisions of Section 881(c) of the Internal Revenue Code with respect to payments to be made under this Credit Agreement and any Notes (and to deliver to the Borrower and the Administrative Agent two (2) further copies of such form on or before the date it expires or becomes obsolete and after the occurrence of any event requiring a change in the most recently provided form and, if necessary, obtain any extensions of time reasonably requested by the Borrower or the Administrative Agent for filing and completing such forms), and (iii) agree, to the extent legally entitled to do so, upon reasonable request by the Borrower, to provide to the Borrower (for the benefit of the Borrower and the Administrative Agent) such other forms as may be reasonably required in order to establish the legal entitlement of such Lender to an exemption from withholding with respect to payments under this Credit Agreement and any Notes; unless in any such case any change in treaty, law or regulation has occurred after the date such Person becomes a Lender hereunder which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender so advises the Borrower and the Administrative Agent. Each Person that shall become a Lender or a participant of a Lender pursuant to subsection 11.3 shall, upon the effectiveness of the related transfer, be required to provide all of the forms, certifications and statements required pursuant to this subsection, provided that in the case of a participant of a Lender the obligations of such participant of a Lender pursuant to this subsection (b) shall be determined as if the participant of a Lender were a Lender except that such participant of a Lender shall furnish all such required forms, certifications and statements to the Lender from which the related participation shall have been purchased. 26 3.11 Indemnity. The Borrower promises to indemnify each Lender and to hold each Lender harmless from any loss or expense which such Lender may sustain or incur (other than through such Lender's gross negligence or willful misconduct) as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of Eurodollar Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Credit Agreement, (b) default by the Borrower in making any prepayment of a Eurodollar Loan after the Borrower has given a notice thereof in accordance with the provisions of this Credit Agreement or (c) the making of a prepayment of Eurodollar Loans on a day which is not the last day of an Interest Period with respect thereto. With respect to Eurodollar Loans, such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of the applicable Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (excluding, however, the Applicable Percentage included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank Eurodollar market. The covenants of the Borrower set forth in this Section 3.11 shall survive the termination of this Credit Agreement and the payment of the Loans and all other amounts payable hereunder. 3.12 Pro Rata Treatment. Except to the extent otherwise provided herein: (a) Loans. Each Loan, each payment or prepayment of principal of any Loan, each payment of interest on the Loans, each payment of Facility Fees, each reduction of the Revolving Committed Amount and each conversion or extension of any Loan, shall be allocated pro rata among the Lenders in accordance with the respective principal amounts of their outstanding Loans and Participation Interests. (b) Advances. No Lender shall be responsible for the failure or delay by any other Lender in its obligation to make its ratable share of a borrowing hereunder (and further, no Lender shall be required to fulfill any obligation of a Defaulting Lender); provided, however, that the failure of any Lender to fulfill its obligations hereunder shall not relieve any other Lender of its obligations hereunder. Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its ratable share of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by such Lender within the time period specified therefor hereunder, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the Federal Funds Rate for a period of two (2) Business Days, and thereafter at the Base Rate, for the period until such Lender makes such amount immediately available to the Administrative Agent. If such Lender does not pay such amounts to the Administrative Agent forthwith upon demand, the Administrative Agent may notify the Borrower and request the Borrower to immediately pay such amount to the Administrative Agent with interest at the Base Rate. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. 27 3.13 Sharing of Payments. The Lenders agree among themselves that, in the event that any Lender shall obtain payment in respect of any Loan or any other obligation owing to such Lender under this Credit Agreement through the exercise of a right of setoff, banker's lien or counterclaim, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by such Lender under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means, in excess of its pro rata share of such payment as provided for in this Credit Agreement, such Lender shall promptly purchase from the other Lenders a participation in such Loans and other obligations in such amounts, and make such other adjustments from time to time, as shall be equitable to the end that all Lenders share such payment in accordance with their respective ratable shares as provided for in this Credit Agreement. The Lenders further agree among themselves that if payment to a Lender obtained by such Lender through the exercise of a right of setoff, banker's lien, counterclaim or other event as aforesaid shall be rescinded or must otherwise be restored, each Lender which shall have shared the benefit of such payment shall, by repurchase of a participation theretofore sold, return its share of that benefit (together with its share of any accrued interest payable with respect thereto) to each Lender whose payment shall have been rescinded or otherwise restored. The Borrower agrees that any Lender so purchasing such a participation may, to the fullest extent permitted by law, exercise all rights of payment, including setoff, banker's lien or counterclaim, with respect to such participation as fully as if such Lender were a holder of such Loan or other obligation in the amount of such participation. Except as otherwise expressly provided in this Credit Agreement, if any Lender or the Administrative Agent shall fail to remit to the Administrative Agent or any other Lender an amount payable by such Lender or the Administrative Agent to the Administrative Agent or such other Lender pursuant to this Credit Agreement on the date when such amount is due, such payments shall be made together with interest thereon for each date from the date such amount is due until the date such amount is paid to the Administrative Agent or such other Lender at a rate per annum equal to the Federal Funds Rate. If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section 3.13 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders under this Section 3.13 to share in the benefits of any recovery on such secured claim. 28 3.14 Payments, Computations, Etc. (a) Except as otherwise specifically provided herein, all payments hereunder shall be made to the Administrative Agent in dollars in immediately available funds, without offset, deduction, counterclaim or withholding of any kind, at the Administrative Agent's office specified in Section 11.1 not later than 2:00 P.M. (Charlotte, North Carolina time) on the date when due. Payments received after such time shall be deemed to have been received on the next succeeding Business Day. The Administrative Agent may (but shall not be obligated to) debit the amount of any such payment which is not made by such time to any ordinary deposit account of the Borrower maintained with the Administrative Agent (with notice to the Borrower). The Borrower shall, at the time it makes any payment under this Credit Agreement, specify to the Administrative Agent the Loans, Fees, interest or other amounts payable by the Borrower hereunder to which such payment is to be applied (and in the event that it fails so to specify, or if such application would be inconsistent with the terms hereof, the Administrative Agent shall distribute such payment to the Lenders in such manner as the Administrative Agent may determine to be appropriate in respect of obligations owing by the Borrower hereunder, subject to the terms of Section 3.12(a)). The Administrative Agent will distribute such payments to such Lenders, if any such payment is received prior to 12:00 Noon (Charlotte, North Carolina time) on a Business Day in like funds as received prior to the end of such Business Day and otherwise the Administrative Agent will distribute such payment to such Lenders on the next succeeding Business Day. Whenever any payment 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 (subject to accrual of interest and Fees for the period of such extension), except that in the case of Eurodollar Loans, if the extension would cause the payment to be made in the next following calendar month, then such payment shall instead be made on the next preceding Business Day. Except as expressly provided otherwise herein, all computations of interest and fees shall be made on the basis of actual number of days elapsed over a year of 360 days, except with respect to computation of interest on Base Rate Loans which (unless the Base Rate is determined by reference to the Federal Funds Rate) shall be calculated based on a year of 365 or 366 days, as appropriate. Interest shall accrue from and include the date of borrowing, but exclude the date of payment. (b) Allocation of Payments After Event of Default. Notwithstanding any other provisions of this Credit Agreement to the contrary, after the occurrence and during the continuance of an Event of Default, all amounts collected or received by the Administrative Agent or any Lender on account of the Guaranteed Obligations or any other amounts outstanding under any of the Credit Documents shall be paid over or delivered as follows: FIRST, to the payment of all reasonable out-of-pocket costs and expenses (including without limitation reasonable attorneys' fees) of the Administrative Agent in connection with enforcing the rights of the Lenders under the Credit Documents; SECOND, to payment of any fees owed to the Administrative Agent; THIRD, to the payment of all reasonable out-of-pocket costs and expenses (including without limitation, reasonable attorneys' fees) of each of the Lenders in connection with enforcing its rights under the Credit Documents or otherwise with respect to the Loans owing to such Lender; 29 FOURTH, to the payment of all accrued interest and fees on or in respect of the Loans; FIFTH, to the payment of the outstanding principal amount of the Guaranteed Obligations; SIXTH, to all other Loans and other obligations which shall have become due and payable under the Credit Documents or otherwise and not repaid pursuant to clauses "FIRST" through "FIFTH" above; and SEVENTH, to the payment of the surplus, if any, to whoever may be lawfully entitled to receive such surplus. In carrying out the foregoing, (i) amounts received shall be applied in the numerical order provided until exhausted prior to application to the next succeeding category; and (ii) each of the Lenders shall receive an amount equal to its pro rata share (based on the proportion that the then outstanding Loans held by such Lender bears to the aggregate then outstanding Loans) of amounts available to be applied pursuant to clauses "THIRD", "FOURTH", "FIFTH" and "SIXTH" above. 3.15 Evidence of Debt. (a) Each Lender shall maintain an account or accounts evidencing each Loan made by such Lender to the Borrower from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Credit Agreement. Each Lender will make reasonable efforts to maintain the accuracy of its account or accounts and to promptly update its account or accounts from time to time, as necessary. (b) The Administrative Agent shall maintain the Register pursuant to Section 11.3(c) hereof, and a subaccount for each Lender, in which Register and subaccounts (taken together) shall be recorded (i) the amount, type and Interest Period of each such Loan hereunder, (ii) the amount of any principal or interest due and payable or to become due and payable to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder from or for the account of the Borrower and each Lender's share thereof. The Administrative Agent will make reasonable efforts to maintain the accuracy of the subaccounts referred to in the preceding sentence and to promptly update such subaccounts from time to time, as necessary. (c) The entries made in the accounts, Register and subaccounts maintained pursuant to subsection (b) of this Section 3.15 (and, if consistent with the entries of the Administrative Agent, subsection (a)) shall be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain any such account, such Register or such subaccount, as applicable, or any error therein, shall not in any manner affect the obligation of the Borrower to repay the Loans made by such Lender in accordance with the terms hereof. 30 SECTION 4 GUARANTY 4.1 The Guarantee. Each of the Guarantors hereby jointly and severally guarantees to each Lender and to the Administrative Agent as hereinafter provided the prompt payment of the Guaranteed Obligations in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration, a mandatory cash collateralization or otherwise) strictly in accordance with the terms thereof. The Guarantors hereby further agree that if any of the Guaranteed Obligations are not paid in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration, as mandatory cash collateralization or otherwise), the Guarantors will, jointly and severally, promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, as a mandatory prepayment, by acceleration or otherwise) in accordance with the terms of such extension or renewal. Notwithstanding any provision to the contrary contained herein or in any other of the Credit Documents, to the extent the obligations of a Guarantor shall be adjudicated to be invalid or unenforceable for any reason (including, without limitation, because of any applicable state or federal law relating to fraudulent conveyances or transfers) then the obligations of each Guarantor hereunder shall be limited to the maximum amount that is permissible under applicable law (whether federal or state and including, without limitation, the Bankruptcy Code). 4.2 Obligations Unconditional. The obligations of the Guarantors under Section 4.1 hereof are joint and several, absolute and unconditional, irrespective of the value, genuineness, validity, regularity or enforceability of any of the Credit Documents, or any other agreement or instrument referred to therein, or any substitution, release or exchange of any other guarantee of or security for any of the Guaranteed Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever which might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section 4.2 that the obligations of the Guarantors hereunder shall be absolute and unconditional under any and all circumstances. Each Guarantor agrees that such Guarantor shall have no right of subrogation, indemnity, reimbursement or contribution against the Borrower or any other Guarantor of the Guaranteed Obligations for amounts paid under this Guaranty until such time as the Lenders have been irrevocably paid in full, all Commitments under the Credit Agreement have been terminated and no Person or Governmental Authority shall have any right to request any return or reimbursement of funds from the Lenders in connection with monies received under the Credit Documents. Without limiting the generality of the foregoing, it is agreed that, to the fullest extent permitted by law, the occurrence of any one or more of the following shall not alter or impair the liability of any Guarantor hereunder which shall remain absolute and unconditional as described above: (i) at any time or from time to time, without notice to any Guarantor, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived; 31 (ii) any of the acts mentioned in any of the provisions of any of the Credit Documents or any other agreement or instrument referred to in the Credit Documents shall be done or omitted; (iii) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be modified, supplemented or amended in any respect, or any right under any of the Credit Documents or any other agreement or instrument referred to in the Credit Documents shall be waived or any other guarantee of any of the Guaranteed Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with; (iv) any Lien granted to, or in favor of, the Administrative Agent or any Lender or Lenders as security for any of the Guaranteed Obligations shall fail to attach or be perfected; or (v) any of the Guaranteed Obligations shall be determined to be void or voidable (including, without limitation, for the benefit of any creditor of any Guarantor) or shall be subordinated to the claims of any Person (including, without limitation, any creditor of any Guarantor). With respect to its obligations hereunder, each Guarantor hereby expressly waives diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Administrative Agent or any Lender exhaust any right, power or remedy or proceed against any Person under any of the Credit Documents or any other agreement or instrument referred to in the Credit Documents, or against any other Person under any other guarantee of, or security for, any of the Guaranteed Obligations. 4.3 Reinstatement. The obligations of the Guarantors under this Section 4 shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of any Person in respect of the Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and each Guarantor agrees that it will indemnify the Administrative Agent and each Lender on demand for all reasonable costs and expenses (including, without limitation, fees and expenses of counsel) incurred by the Administrative Agent or such Lender in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law. 4.4 Certain Additional Waivers. Each Guarantor agrees that such Guarantor shall have no right of recourse to security for the Guaranteed Obligations, except through the exercise of the rights of subrogation pursuant to Section 4.2. 32 4.5 Remedies. The Guarantors agree that, to the fullest extent permitted by law, as between the Guarantors, on the one hand, and the Administrative Agent and the Lenders, on the other hand, the Guaranteed Obligations may be declared to be forthwith due and payable as provided in Section 9.2 hereof (and shall be deemed to have become automatically due and payable in the circumstances provided in said Section 9.2) for purposes of Section 4.1 hereof notwithstanding any stay, injunction or other prohibition preventing such declaration (or preventing the Guaranteed Obligations from becoming automatically due and payable) as against any other Person and that, in the event of such declaration (or the Guaranteed Obligations being deemed to have become automatically due and payable), the Guaranteed Obligations (whether or not due and payable by any other Person) shall forthwith become due and payable by the Guarantors for purposes of said Section 4.1. 4.6 Rights of Contribution. The Guarantors hereby agree, as among themselves, that if any Guarantor shall become an Excess Funding Guarantor (as defined below), each other Guarantor shall, on demand of such Excess Funding Guarantor (but subject to the succeeding provisions of this Section 4.6), pay to such Excess Funding Guarantor an amount equal to such Guarantor's Pro Rata Share (as defined below and determined, for this purpose, without reference to the properties, assets, liabilities and debts of such Excess Funding Guarantor) of such Excess Payment (as defined below). The payment obligation of any Guarantor to any Excess Funding Guarantor under this Section 4.6 shall be subordinate and subject in right of payment to the prior payment in full of the obligations of such Guarantor under the other provisions of this Section 4, and such Excess Funding Guarantor shall not exercise any right or remedy with respect to such excess until payment and satisfaction in full of all of such obligations. For purposes hereof, (i) "Excess Funding Guarantor" shall mean, in respect of any obligations arising under the other provisions of this Section 4 (hereafter, the "Guarantied Obligations"), a Guarantor that has paid an amount in excess of its Pro Rata Share of the Guarantied Obligations; (ii) "Excess Payment" shall mean, in respect of any Guarantied Obligations, the amount paid by an Excess Funding Guarantor in excess of its Pro Rata Share of such Guarantied Obligations; and (iii) "Pro Rata Share", for the purposes of this Section 4.6, shall mean, for any Guarantor, the ratio (expressed as a percentage) of (a) the amount by which the aggregate present fair saleable value of all of its assets and properties exceeds the amount of all debts and liabilities of such Guarantor (including contingent, subordinated, unmatured, and unliquidated liabilities, but excluding the obligations of such Guarantor hereunder) to (b) the amount by which the aggregate present fair saleable value of all assets and other properties of the Borrower and all of the Guarantors exceeds the amount of all of the debts and liabilities (including contingent, subordinated, unmatured, and unliquidated liabilities, but excluding the obligations of the Borrower and the Guarantors hereunder) of the Borrower and all of the Guarantors, all as of the Closing Date (if any Guarantor becomes a party hereto subsequent to the Closing Date, then for the purposes of this Section 4.6 such subsequent Guarantor shall be deemed to have been a Guarantor as of the Closing Date and the information pertaining to, and only pertaining to, such Guarantor as of the date such Guarantor became a Guarantor shall be deemed true as of the Closing Date). 4.7 Continuing Guarantee. The guarantee in this Section 4 is a continuing guarantee, and shall apply to all Guaranteed Obligations whenever arising. 33 SECTION 5 CONDITIONS 5.1 Conditions to Closing. This Credit Agreement shall become effective, and the initial Extensions of Credit may be made, upon the satisfaction of the following conditions precedent: (a) Execution of Credit Agreement and Credit Documents. Receipt of (i) multiple counterparts of this Credit Agreement, and (ii) a Revolving Note for each Lender. (b) Financial Information. Receipt of financial information regarding the Borrower and its subsidiaries, as may be requested by, and in each case in form and substance satisfactory to the Administrative Agent and the Lenders. (c) Absence of Legal Proceedings. The absence of any action , suit, investigation or proceeding pending in any court or before any arbitrator or governmental instrumentality which could reasonably be expected to have a Material Adverse Effect. (d) Legal Opinions. Receipt of multiple counterparts of opinions of counsel for the Credit Parties relating to the Credit Documents and the transactions contemplated herein, in form and substance satisfactory to the Administrative Agent and the Required Lenders. (e) Corporate Documents. Receipt of the following (or their equivalent) for each of the Credit Parties: (i) Articles of Incorporation. Copies of the articles of incorporation or charter documents certified to be true and complete as of a recent date by the appropriate governmental authority of the state of its incorporation or organization. (ii) Resolutions. Copies of resolutions of the Board of Directors or other governing body approving and adopting the respective Credit Documents, the transactions contemplated therein and authorizing execution and delivery thereof, certified by a secretary or assistant secretary as of the Closing Date to be true and correct and in force and effect as of such date. (iii) Bylaws. Copies of the bylaws certified by a secretary or assistant secretary as of the Closing Date to be true and correct and in force and effect as of such date. (iv) Good Standing. Copies of (A) certificates of good standing, existence or its equivalent issued as of a recent date by the appropriate governmental authorities of the respective states of incorporation or organization and of each other state in which the failure to qualify and be in good standing would have a Material Adverse Effect and (B) where available, certificates indicating payment of all corporate franchise taxes issued as of a recent date by the appropriate governmental taxing authorities of such states. 34 (v) Officer's Certificate. An officer's certificate for each of the Credit Parties dated as of the Closing Date substantially in the form of Schedule 5.1(i)(v) with appropriate insertions and attachments. (f) Fees. Receipt of all fees, if any, owing pursuant to the Administrative Agent's Fee Letter and Section 3.5. (g) Subsection 5.2 Conditions. The conditions specified in Section 5.2 shall be satisfied. (h) Additional Matters. All other documents and legal matters in connection with the transactions contemplated by this Credit Agreement shall be reasonably satisfactory in form and substance to the Agent and the Required Lenders. 5.2 Conditions to All Extensions of Credit. The obligation of each Lender to make any Extension of Credit hereunder (including the initial Extension of Credit to be made hereunder) is subject to the satisfaction of the following conditions precedent on the date of making such Extension of Credit: (a) Representations and Warranties. The representations and warranties made by the Credit Parties herein or in any other Credit Documents or which are contained in any certificate furnished at any time under or in connection herewith shall be true and correct in all material respects on and as of the date of such Extension of Credit as if made on and as of such date (except for those which expressly relate to an earlier date). (b) No Default or Event of Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the Extension of Credit to be made on such date unless such Default or Event of Default shall have been waived in accordance with this Credit Agreement. (c) No Material Adverse Effect. No circumstances, events or conditions shall have occurred since the date of the audited financial statements referenced in Section 6.1 which would have a Material Adverse Effect. (d) Additional Conditions to Revolving Loans. If a Revolving Loan is made pursuant to Section 2.1, all conditions set forth therein shall have been satisfied. Each request for Extension of Credit (including extensions and conversions) and each acceptance by the Borrower of an Extension of Credit (including extensions and conversions) shall be deemed to constitute a representation and warranty by the Borrower as of the date of such Extension of Credit that the applicable conditions in paragraphs (a), (b), (c) and (d) of this subsection have been satisfied. 35 SECTION 6 REPRESENTATIONS AND WARRANTIES To induce the Lenders to enter into this Credit Agreement and to make Extensions of Credit herein provided for, each of the members of the Consolidated Group parties hereto (in the case of the Borrower, for itself and for each of the other members of the Consolidated Group; and in the case of each of the other Credit Parties, for itself) hereby represents and warrants to the Administrative Agent and to each Lender that: 6.1 Financial Condition. As to the Borrower, each of the financial statements described below (copies of which have heretofore been provided to the Administrative Agent for distribution to the Lenders), have been prepared in accordance with GAAP consistently applied throughout the periods covered thereby, are complete and correct in all material respects and present fairly the financial condition and results from operations of the entities and for the periods specified, subject in the case of interim Borrower-prepared statements to normal year-end adjustments: (i) an audited consolidated balance sheet of the Borrower and its consolidated subsidiaries dated as of December 31, 1996, together with related statements of operations, cash flows and shareholders' equity certified by Ernst & Young LLP, independent auditors; and (ii) a Borrower-prepared consolidated balance sheet of the Borrower and its consolidated subsidiaries dated as of March 31, 1997, together with related consolidated statements of operations and cash flows. 6.2 No Material Adverse Changes. Since the date of the audited financial statements referenced in Section 6.1(i), there has been no circumstance, development or event relating to or affecting the members of the Consolidated Group which has had or would be reasonably expected to have a Material Adverse Effect. 6.3 Organization; Existence; Compliance with Law. Except as disclosed on Schedule 6.3, each of the members of the Consolidated Group (a) is duly organized, validly existing in good standing under the laws of the jurisdiction of its incorporation or organization, except in such jurisdictions where the failure to be so qualified and in good standing would not, in the aggregate, have a Material Adverse Effect, (b) has the corporate or other necessary power and authority, and the legal right to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign entity and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, other than in such jurisdictions where the failure to be so qualified and in good standing would not, in the aggregate, have a Material Adverse Effect, and (d) is in compliance with all Requirements of Law, except to the extent that the failure to comply therewith would not, in the aggregate, be reasonably expected to have a Material Adverse Effect. 36 The Borrower is a "real estate investment trust" within the meaning provided under the Code. 6.4 Power; Authorization; Enforceable Obligations. Each of the Credit Parties has the corporate or other necessary power and authority, and the legal right, to make, deliver and perform the Credit Documents to which it is a party and has taken all necessary corporate or other action to authorize the execution, delivery and performance by it of the Credit Documents to which it is a party. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with acceptance of extensions of credit or the making of the guaranties hereunder or with the execution, delivery or performance of any Credit Documents by the Credit Parties (other than those which have been obtained, such filings as are required by the Securities and Exchange Commission and to fulfill other reporting requirements with Governmental Authorities) or with the validity or enforceability of any Credit Document against the Credit parties. Each Credit Document to which it is a party constitutes a legal, valid and binding obligation of such Credit Party enforceable against such Credit Party in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). 6.5 No Legal Bar. The execution, delivery and performance of the Credit Documents, the borrowings hereunder and the use of the Extensions of Credit will not violate any Requirement of Law or any Contractual Obligation of any member of the Consolidated Group (except those as to which waivers or consents have been obtained), and will not result in, or require, the creation or imposition of any Lien on any of their respective properties or revenues pursuant to any Requirement of Law or Contractual Obligation other than the Liens arising under or contemplated in connection with the Credit Documents. No member of the Consolidated Group is in default under or with respect to any of its Contractual Obligations in any respect which would reasonably be expected to have a Material Adverse Effect. 6.6 No Material Litigation. No claim, litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the best knowledge of the Credit Parties, threatened by or against, any members of the Consolidated Group or against any of their respective properties or revenues which (a) relate to the Credit Documents or any of the transactions contemplated hereby or thereby, or (b) if adversely determined, would reasonably be expected to have a Material Adverse Effect. 37 6.7 No Default. No Default or Event of Default has occurred and is continuing. 6.8 Ownership of Property; Liens. Each of members of the Consolidated Group has good title in fee simple to, or a valid leasehold interest in, all its material real property, and good title to, or a valid leasehold interest in, all its other material property, and none of such property is subject to any Lien, except for liens permitted under Section 8.2. 6.9 Taxes. Each of the members of the Consolidated Group has filed or caused to be filed all United States federal income tax returns and all other material tax returns which, to the best knowledge of the Credit Parties, are required to be filed and has paid or received extensions regarding (a) all taxes shown to be due and payable on said returns or (b) all taxes shown to be due and payable on any assessments of which it has received notice made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any (i) taxes, fees or other charges with respect to which the failure to pay, in the aggregate, would not have a Material Adverse Effect or (ii) taxes, fees or other charges the amount or validity of which are currently being contested and with respect to which reserves in conformity with GAAP have been provided on the books of such Person), and no tax Lien has been filed, and, to the best knowledge of the Credit Parties, no claim is being asserted, with respect to any such tax, fee or other charge. 6.10 ERISA. Except as would not reasonably be expected to have a Material Adverse Effect: (a) During the five-year period prior to the date on which this representation is made or deemed made: (i) no ERISA Event has occurred, and, to the best knowledge of the Credit Parties, no event or condition has occurred or exists as a result of which any ERISA Event could reasonably be expected to occur, with respect to any Plan; (ii) no "accumulated funding deficiency," as such term is defined in Section 302 of ERISA and Section 412 of the Code, whether or not waived, has occurred with respect to any Plan; (iii) each Plan has been maintained, operated, and funded in compliance with its own terms and in material compliance with the provisions of ERISA, the Code, and any other applicable federal or state laws; and (iv) no lien in favor of the PBGC or a Plan has arisen or is reasonably likely to arise on account of any Plan. (b) The actuarial present value of all "benefit liabilities" (as defined in Section 4001(a)(16) of ERISA), whether or not vested, under each Single Employer Plan, as of the last annual valuation date prior to the date on which this representation is made or deemed made (determined, in each case, in accordance with Financial Accounting Standards Board Statement 87, utilizing the actuarial assumptions used in such Plan's most recent actuarial valuation report), did not exceed as of such valuation date the fair market value of the assets of such Plan. 38 (c) No member of the Consolidated Group nor any ERISA Affiliate has incurred, or, to the best knowledge of the Credit Parties, could be reasonably expected to incur, any withdrawal liability under ERISA to any Multiemployer Plan or Multiple Employer Plan. No member of the Consolidated Group nor any ERISA Affiliate would become subject to any withdrawal liability under ERISA if any member of the Consolidated Group or any ERISA Affiliate were to withdraw completely from all Multiemployer Plans and Multiple Employer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. No member of the Consolidated Group nor any ERISA Affiliate has received any notification that any Multiemployer Plan is in reorganization (within the meaning of Section 4241 of ERISA), is insolvent (within the meaning of Section 4245 of ERISA), or has been terminated (within the meaning of Title IV of ERISA), and no Multiemployer Plan is, to the best knowledge of the Credit Parties, reasonably expected to be in reorganization, insolvent, or terminated. (d) No prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) or breach of fiduciary responsibility has occurred with respect to a Plan which has subjected or may subject any member of the Consolidated Group or any ERISA Affiliate to any liability under Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the Code, or under any agreement or other instrument pursuant to which any member of the Consolidated Group or any ERISA Affiliate has agreed or is required to indemnify any person against any such liability. (e) No member of the Consolidated Group nor any ERISA Affiliates has any material liability with respect to "expected post-retirement benefit obligations" within the meaning of the Financial Accounting Standards Board Statement 106. Each Plan which is a welfare plan (as defined in Section 3(1) of ERISA) to which Sections 601-609 of ERISA and Section 4980B of the Code apply has been administered in compliance in all material respects of such sections. 6.11 Governmental Regulations, Etc. (a) No part of the proceeds of Extensions of Credit hereunder will be used, directly or indirectly, for the purpose of purchasing or carrying any "margin stock" within the meaning of Regulation G or Regulation U, or for the purpose of purchasing or carrying or trading in any securities. If requested by any Lender or the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form U-1 referred to in said Regulation U. No indebtedness being reduced or retired out of the proceeds of Extensions of Credit hereunder was or will be incurred for the purpose of purchasing or carrying any margin stock within the meaning of Regulation U or any "margin security" within the meaning of Regulation T. "Margin stock" within the meanings of Regulation U does not constitute more than 25% of the value of the consolidated assets of the Borrower and its Subsidiaries. None of the transactions contemplated by this Credit Agreement (including, without limitation, the direct or indirect use of the proceeds of the Loans) will violate or result in a violation of the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, or regulations issued pursuant thereto, or Regulation G, T, U or X. (b) None of the members of the Consolidated Group is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act or the Investment Company Act of 1940, each as amended. In addition, none of the members of the Consolidated Group is (i) an "investment company" registered or required to be registered under the Investment Company Act of 1940, as amended, and is not controlled by such a company, or (ii) a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. 39 (c) Each of the members of the Consolidated Group has obtained all material licenses, permits, franchises or other governmental authorizations necessary to the ownership of its respective Property and to the conduct of its business. (d) None of the members of the Consolidated Group is in violation of any applicable statute, regulation or ordinance of the United States of America, or of any state, city, town, municipality, county or any other jurisdiction, or of any agency thereof (including without limitation, environmental laws and regulations), which violation could reasonably be expected to have a Material Adverse Effect. (e) Each of the members of the Consolidated Group is current with all material reports and documents, if any, required to be filed with any state or federal securities commission or similar agency and is in full compliance in all material respects with all applicable rules and regulations of such commissions. 6.12 Subsidiaries. Set forth on Schedule 6.12 are all the Subsidiaries of the Borrower at the Closing Date, the jurisdiction of their incorporation and the direct or indirect ownership interest of the Borrower therein. 6.13 Purpose of Extensions of Credit. The Extensions of Credit will be used to refinance existing Funded Debt, and to finance working capital and other corporate purposes. 6.14 Environmental Matters. Except as would not reasonably be expected to have a Material Adverse Effect: (a) Each of the facilities and properties owned, leased or operated by the members of the Consolidated Group (the "Properties") and all operations at the Properties are in compliance with all applicable Environmental Laws, and there is no violation of any Environmental Law with respect to the Properties or the businesses operated by the members of the Consolidated Group (the "Businesses"), and there are no conditions relating to the Businesses or Properties that could give rise to material liability under any applicable Environmental Laws. (b) To the respective Credit Party's knowledge, none of the Properties contains any Materials of Environmental Concern at, on or under the Properties in amounts or concentrations that constitute or constituted a violation of, or could give rise to liability under, Environmental Laws. 40 (c) None of the members of the Consolidated Group has received any written notice of, or inquiry from any Governmental Authority regarding, any violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Properties or the Businesses. (d) Materials of Environmental Concern have not been transported or disposed of from the Properties, or generated, treated, stored or disposed of at, on or under any of the Properties or any other location, in each case by or on behalf any members of the Consolidated Group during their ownership of the Properties in violation of, or in a manner that would be reasonably likely to give rise to liability under, any applicable Environmental Law. (e) No judicial proceeding or governmental or administrative action is pending or, to the best knowledge of any Credit Party, threatened, under any Environmental Law to which any member of the Consolidated Group is or will be named as a party, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to any member of the Consolidated Group, the Properties or the Businesses. (f) There has been no release or, threat of release of Materials of Environmental Concern at or from the Properties or arising from or related to the operations (including, without limitation, disposal) of any member of the Consolidated Group in connection with the Properties or otherwise in connection with the Businesses, in violation of or in amounts or in a manner that could give rise to liability under Environmental Laws. SECTION 7 AFFIRMATIVE COVENANTS Each of the Credit Parties (in the case of the Borrower, for itself and each of the other members of the Consolidated Group, and in the case of each of the other Credit Parties, for itself) covenants and agrees that on the Closing Date, and so long as this Credit Agreement is in effect and until the Commitments have been terminated, no Loans remain outstanding and all amounts owing hereunder or in connection herewith have been paid in full: 7.1 Financial Statements. The Borrower shall furnish, or cause to be furnished, to the Administrative Agent for distribution to the Lenders: (a) Audited Financial Statements. As soon as available, but in any event within 90 days after the end of each fiscal year, an audited consolidated balance sheet of the Borrower and its subsidiaries as of the end of the fiscal year and the related consolidated statements of operations, shareholders' equity and cash flows for the year, audited by Ernst & Young LLP, or other firm of independent certified public accountants of nationally recognized standing, setting forth in each case in comparative form the figures for the previous year, reported without a "going concern" or like qualification or exception, or qualification indicating that the scope of the audit was inadequate to permit such independent certified public accountants to certify such financial statements without such qualification. 41 (b) Borrower-Prepared Financial Statements. As soon as available, but in any event within 60 days after the end of each of the first three fiscal quarters, a Borrower-prepared consolidated balance sheet of the Borrower and its subsidiaries as of the end of the quarter and related Borrower-prepared consolidated statements of operations and cash flows for such quarterly period and for the fiscal year to date, in each case setting forth in comparative form the consolidated figures for the corresponding period or periods of the preceding fiscal year or the portion of the fiscal year ending with such period, as applicable, in each case subject to normal recurring year-end audit adjustments. All such financial statements shall be complete and correct in all material respects (subject, in the case of interim statements, to normal recurring year-end audit adjustments) and shall be prepared in reasonable detail and, in the case of the annual and quarterly financial statements provided in accordance with subsections (a) and (b) above, in accordance with GAAP applied consistently throughout the periods reflected therein and further accompanied by a description of, and an estimation of the effect on the financial statements on account of, a change in the application of accounting principles as provided in Section 1.3. 7.2 Certificates; Other Information. The Borrower shall furnish, or cause to be furnished, to the Administrative Agent for distribution to the Lenders: (a) Accountant's Certificate and Reports. Concurrently with the delivery of the financial statements referred to in subsection 7.1(a) above, a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default, except as specified in such certificate. (b) Officer's Certificate. Concurrently with the delivery of the financial statements referred to in Sections 7.1(a) and 7.1(b) above, a certificate of a Responsible Officer stating that, to the best of such Responsible Officer's knowledge and belief, (i) the financial statements fairly present in all material respects the financial condition of the parties covered by such financial statements, (ii) during such period the members of the Consolidated Group have observed or performed in all material respects the covenants and other agreements hereunder and under the other Credit Documents relating to them, and satisfied in all material respects the conditions, contained in this Credit Agreement to be observed, performed or satisfied by them, and (iii) such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate. Such certificate shall include the calculations required to indicate compliance with Section 7.9. A form of Officer's Certificate is attached as Schedule 7.2(b). 42 (c) Accountants' Reports. Promptly upon receipt, a copy of any final (as distinguished from a preliminary or discussion draft) "management letter" or other similar report submitted by independent accountants or financial consultants to the members of the Consolidated Group in connection with any annual, interim or special audit. (d) Public Information. Within thirty days after the same are sent, copies of all reports (other than those otherwise provided pursuant to subsection 7.1) and other financial information which any member of the Consolidated Group sends to its public stockholders, and within thirty days after the same are filed, copies of all financial statements and non-confidential reports which any member of the Consolidated Group may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Authority. (e) Other Information. Promptly, such additional financial and other information as the Administrative Agent, at the request of any Lender, may from time to time reasonably request. 7.3 Notices. Each of the Credit Parties shall give notice to the Administrative Agent (which shall promptly transmit such notice to each Lender) of: (a) Defaults. Immediately (and in any event within two (2) Business Days) after any Responsible Officer of any Credit Party knows or has reason to know thereof, the occurrence of any Default or Event of Default. (b) Contractual Obligations. Promptly, the occurrence of any default or event of default under any Contractual Obligation of any member of the Consolidated Group which would reasonably be expected to have a Material Adverse Effect. (c) Legal Proceedings. Promptly, any litigation, or any investigation or proceeding (including without limitation, any environmental proceeding) known to any member of the Consolidated Group, or any material development in respect thereof, affecting any member of the Consolidated Group which, if adversely determined, would reasonably be expected to have a Material Adverse Effect. (d) ERISA. Promptly, after any Responsible Officer of the Borrower knows or has reason to know of (i) any event or condition, including, but not limited to, any Reportable Event, that constitutes, or might reasonably lead to, an ERISA Event; (ii) with respect to any Multiemployer Plan, the receipt of notice as prescribed in ERISA or otherwise of any withdrawal liability assessed against any of their ERISA Affiliates, or of a determination that any Multiemployer Plan is in reorganization or insolvent (both within the meaning of Title IV of ERISA); (iii) the failure to make full payment on or before the due date (including extensions) thereof of all amounts which the members of the Consolidated Group or any ERISA Affiliate are required to contribute to each Plan pursuant to its terms and as required to meet the minimum funding standard set forth in ERISA and the Code with respect; or (iv) any change in the funding status of any Plan that reasonably could be expected to have a Material Adverse Effect; together with a description of any such event or condition or a copy of any such notice and a statement by the chief financial officer of the Borrower briefly setting forth the details regarding such event, condition, or notice, and the action, if any, which has been or is being taken or is proposed to be taken by the Credit Parties with respect thereto. Promptly upon request, the members of the Consolidated Group shall furnish the Administrative Agent and the Lenders with such additional information concerning any Plan as may be reasonably requested, including, but not limited to, copies of each annual report/return (Form 5500 series), as well as all schedules and attachments thereto required to be filed with the Department of Labor and/or the Internal Revenue Service pursuant to ERISA and the Code, respectively, for each "plan year" (within the meaning of Section 3(39) of ERISA). 43 (e) Other. Promptly, any other development or event which a Responsible Officer of the Borrower determines could reasonably be expected to have a Material Adverse Effect. Each notice pursuant to this subsection shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the relevant Credit Parties propose to take with respect thereto. 7.4 Payment of Obligations. Each member of the Consolidated Group shall pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, in accordance with prudent business practice (subject, where applicable, to specified grace periods) all material obligations of each member of the Consolidated Group of whatever nature and any additional costs that are imposed as a result of any failure to so pay, discharge or otherwise satisfy such obligations, other than (i) obligations with respect to which the failure to pay, in the aggregate, would not have a Material Adverse Effect, or (ii) obligations, the amount or validity of which are being contested and with respect to which reserves in conformity with GAAP have been provided on the books of the appropriate members of the Consolidated Group. 7.5 Conduct of Business and Maintenance of Existence. Each member of the Consolidated Group shall continue to engage in business of the same general type as now conducted by it on the date hereof and similar or related businesses, and preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all rights, privileges, licenses and franchises necessary or desirable in the normal conduct of its business; comply with all Contractual Obligations and Requirements of Law applicable to it except to the extent that failure to comply therewith would not, in the aggregate, have a Material Adverse Effect. 7.6 Maintenance of Property; Insurance. Each member of the Consolidated Group shall keep all material property useful and necessary in its business in reasonably good working order and condition (ordinary wear and tear excepted); maintain with financially sound and reputable insurance companies casualty, liability and such other insurance (which may include plans of self-insurance) with such coverage and deductibles, and in such amounts as may be consistent with prudent business practice and in any event consistent with normal industry practice (except to any greater extent as may be required by the terms of any of the other Credit Documents); and furnish to the Administrative Agent, upon written request, full information as to the insurance carried. 44 7.7 Inspection of Property; Books and Records; Discussions. Each member of the Consolidated Group shall keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its businesses and activities; and permit, during regular business hours and upon reasonable notice by the Administrative Agent, the Administrative Agent to visit and inspect any of its properties and examine and make abstracts (including photocopies) from any of its books and records (other than materials protected by the attorney-client privilege and materials which the Credit Parties may not disclose without violation of a confidentiality obligation binding upon them) at any reasonable time, and to discuss the business, operations, properties and financial and other condition of the members of the Consolidated Group with officers and employees of the members of the Consolidated Group and with their independent certified public accountants. The cost of the inspection referred to in the preceding sentence shall be for the account of the Lenders unless an Event of Default has occurred and is continuing, in which case the cost of such inspection shall be for the account of the Credit Parties. 7.8 Environmental Laws. Each member of the Consolidated Group shall: (a) Comply in all material respects with all applicable Environmental Laws and obtain and comply in all material respects with and maintain any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws except to the extent that failure to do so would not reasonably be expected to have a Material Adverse Effect; (b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws except to the extent that the same are being contested in good faith by appropriate proceedings and the failure to do or the pendency of such proceedings would not reasonably be expected to have a Material Adverse Effect; and 45 (c) Defend, indemnify and hold harmless the Administrative Agent and the Lenders, and their respective employees, agents, officers and directors, from and against any and all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature known or unknown, contingent or otherwise, arising out of, or in any way relating to the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of the members of the Consolidated Group or the Properties, or any orders, requirements or demands of Governmental Authorities related thereto, including, without limitation, reasonable attorney's and consultant's fees, investigation and laboratory fees, response costs, court costs and litigation expenses, except to the extent that any of the foregoing arise out of the gross negligence or willful misconduct of the party seeking indemnification therefor. The agreements in this paragraph shall survive repayment of the Loans and all other amounts payable hereunder, and termination of the Commitments. 7.9 Financial Covenants. (a) Consolidated Adjusted Tangible Net Worth. Consolidated Adjusted Tangible Net Worth will not at any time be less than the sum of (i) $950,000,000 plus (ii) 100% of the net proceeds (after customary underwriting discounts and commissions and reasonable offering expenses) from Equity Transactions occurring after March 31, 1997. (b) Consolidated Funded Debt Ratio. Consolidated Funded Debt shall not at any time exceed 60% of Consolidated Adjusted Capitalization. (c) Consolidated Priority Claims. Consolidated Priority Claims will not at any time exceed 35% of Consolidated Adjusted Capitalization. (d) Consolidated Senior Fixed Charge Coverage Ratio. As of the last day of each fiscal quarter, the Consolidated Senior Fixed Charge Coverage Ratio shall be not less than 1.75:1.0. (e) Consolidated Total Fixed Charge Coverage Ratio. As of the end of each fiscal quarter, the Consolidated Total Fixed Charge Coverage Ratio shall be not less than 1.4:1.0. (f) Consolidated Unencumbered Realty to Consolidated Unsecured Debt Ratio. The ratio of Consolidated Unencumbered Realty to Consolidated Unsecured Debt shall not at any time be less than 1.8:1.0. (g) Consolidated Unencumbered Interest Coverage Ratio. As of the end of each fiscal quarter, the Consolidated Unencumbered Interest Coverage Ratio shall be not less than 1.8:1.0. 7.10 Agency Fees. The Borrower shall pay to the Administrative Agent the annual agency fee and comply with the other agreements provided for in the Administrative Agent's Fee Letter. 46 7.11 Additional Guaranties and Stock Pledges. (a) Domestic Subsidiaries. Where the assets of Domestic Subsidiaries which are not Guarantors hereunder (the "Non-Guarantor Subsidiaries") shall, at any time exceed (i) five percent (5%) of Consolidated Assets in any instance, or (ii) fifteen percent (15%) of Consolidated Assets collectively as a group (the "Threshold Requirement"), then the Borrower shall promptly notify the Administrative Agent thereof, and cause one or more Non-Guarantor Subsidiaries to become a Guarantor hereunder by way of execution of a Joinder Agreement such that immediately after the joinder of such Subsidiaries as Guarantors hereunder, the remaining Non-Guarantor Subsidiaries shall not exceed the Threshold Requirement. Delivery of any such Joinder Agreement shall be accompanied by supporting resolutions, incumbency certificates, corporation formation and organizational documentation and opinions of counsel as the Administrative Agent may reasonably request. (b) Foreign Subsidiaries. At any time any Person becomes a Foreign Subsidiary, the Borrower will promptly notify the Administrative Agent thereof and cause delivery of supporting resolutions, incumbency certificates, corporation formation and organizational documentation and opinions of counsel as the Administrative Agent may reasonably request. 7.12 Ownership of Subsidiaries. Except to the extent otherwise permitted in Section 8.4(b) and Section 8.7 and to the extent as would not cause a Change of Control and except as set forth on Schedule 6.12, the Borrower shall, directly or indirectly, own at all times 100% of the voting stock of each of its Subsidiaries. 7.13 Use of Proceeds. Extensions of Credit will be used solely for the purposes provided in Section 6.13. SECTION 8 NEGATIVE COVENANTS Each of the Credit Parties (in the case of the Borrower, for itself and each of the other members of the Consolidated Group, and in the case of each of the other Credit Parties, for itself) covenants and agrees that on the Closing Date, and so long as this Credit Agreement is in effect and until the Commitments have been terminated, no Loans remain outstanding and all amounts owing hereunder or in connection herewith, have been paid in full, no member of the Consolidated Group shall: 8.1 Limitations on Debt. Create, incur, assume or suffer to exist any Debt, except: (a) Debt the existence or incurrence of which would not violate the financial covenants of Section 7.9. 47 8.2 Restriction on Liens. Create, assume, incur or suffer to exist any Lien on any Property or asset of any kind, real or personal, tangible or intangible, now owned or hereafter acquired by it or assign or subordinate any present or future right to receive assets except: (a) Liens securing Funded Debt the existence or incurrence of which would not violate the financial covenants of Section 7.9; (b) Liens securing taxes, assessments or governmental charges or levies or the claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other like persons; provided that (A) with respect to Liens securing state and local taxes, such taxes are not yet payable, (B) with respect to Liens securing claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and the like, such liens are (1) unfiled and no other action has been taken to enforce the same and (2) the cumulative effect of all such Liens will not have a Material Adverse Effect, or (C) with respect to taxes, assessments or governmental charges or levies or claims or demand secured by such Liens, payment is not at the time required; (c) Liens not securing Debt which are incurred in the ordinary course of business in connection with workmen's compensation, unemployment insurance, unemployment insurance, social security and other like laws; (d) any Lien arising pursuant to any order of attachment, distraint or similar legal process arising in connection with court proceedings so long as the execution or other enforcement thereof is effectively stayed and the claims secured thereto are being contested in good faith by appropriate proceedings; (e) zoning restrictions, easements, licenses, reservations, covenants, conditions, waivers, restrictions on the use of property or other minor encumbrances or irregularities of title which do not materially impair the use of any property in the operation or business of the Borrower or such Subsidiary or the value of such property for the purpose of such business; and (f) Liens on property or assets of such Subsidiary to secure obligations of such Subsidiary solely to the Borrower or a Wholly-Owned Subsidiary. 8.3 Consolidations, Mergers and Sales of Assets. (a) Enter into a transaction of merger or consolidation, except (i) a member of the Consolidated Group may be a party to a transaction of merger or consolidation with another member of the Consolidated Group, provided that (A) if the Borrower is a party thereto, it is the surviving corporation, or (B) if a Guarantor is a party thereto, it shall be the surviving corporation or the surviving corporation shall be a Domestic Subsidiary and shall become a Guarantor hereunder as an Additional Credit Party pursuant to Section 7.11 concurrently therewith, and (C) no Default or Event of Default shall exist either immediately prior to or immediately after giving effect thereto; and 48 (ii) a member of the Consolidated Group (other than the Borrower) may be a party to a transaction of merger or consolidation with any other Person, provided that (A) the provisions of Section 7.11 regarding joinder of certain Subsidiaries as Additional Credit Parties hereunder shall be complied with, (B) no Default or Event of Default shall exist either immediately prior to or immediately after giving effect thereto, and (C) the provisions of subsection (c) of this Section shall be complied with. (b) other than as between Credit Parties, sell, lease, transfer or otherwise dispose of assets, property and/or operations which in the aggregate in any fiscal year shall constitute more than fifteen percent (15%) of Consolidated Total Realty at the end of the immediately preceding fiscal year or contributed more than fifteen percent (15%) Consolidated EBITDA for the immediately preceding fiscal year, without the prior written consent of the Required Lenders (which consent shall not be unreasonably withheld or delayed). (c) Acquire all or any portion of the capital stock or other ownership interest in any Person which is not a Subsidiary or all or any substantial portion of the assets, property and/or operations of a Person which is not a Subsidiary, without the prior written consent of the Required Lenders (which consent shall not be unreasonably withheld or delayed), unless (i) in the case of an acquisition of capital stock or other ownership interest where after giving effect thereto, such Person will not be a Subsidiary, then such acquisition will not cause a violation of Section 8.4; (ii) in the case of an acquisition of capital stock or other ownership interest where after giving effect thereto, such Person will be a Subsidiary, or in the case of an acquisition of assets, property and/or operations then (A) the aggregate cost of all such acquisitions shall not exceed an amount equal to twenty-five percent (25%) of Consolidated Assets at the end of the immediately preceding fiscal year; (B) the Board of Directors (or functional equivalent) of the Person which is the subject of the acquisition shall have approved the acquisition; and (C) no Default or Event of Default would exist after giving effect thereto on a Pro Forma Basis. (d) In the case of the Borrower, liquidate, wind-up or dissolve, whether voluntarily or involuntarily (or suffer to permit any such liquidation or dissolution). (e) Alter the character of their business in any material respect from that conducted as of the Closing Date and similar or related businesses. 49 (e) The foregoing provisions of this Section shall not apply to leases of property and assets by members of the Consolidated Group to individual tenants in the ordinary course of business. 8.4 Loans and Investments. (a) Make loans, advances or Investments (including, for purposes hereof, Guaranty Obligations) to or in respect of any other Person, except for (i) Permitted Investments and (ii) other Investments which in the aggregate do not at any time exceed five percent (5%) of Consolidated Assets. (b) Invest in or acquire unimproved real property such that following the investment, Consolidated Unimproved Realty and purchase money mortgages are at any time greater than ten percent (10%) of the Consolidated Total Realty. 8.5 Transactions with Affiliates. Enter into any transaction, directly or indirectly, including without limitation, the purchase, sale or exchange of property or the rendering of any service to, any Affiliate or shareholder of the Borrower, except in the ordinary course of business pursuant to the reasonable requirements of the business of the Borrower or such Subsidiary and upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary than would be obtainable in a comparable arms-length transaction with a person not an Affiliate or shareholder; provided that the foregoing restrictions shall not apply to extensions of credit by the Borrower to its officers and directors pursuant to the Borrower's Stock Purchase and Loan Plan in an aggregate amount not to exceed at any time 5% of Consolidated Adjusted Tangible Net Worth. 8.6 Transactions with Other Persons regarding this Agreement. Enter into any agreement with any Person whereby any of them would agree to any restriction on the Borrower's right with the Lenders' consent to amend or waive any of the provisions of this Credit Agreement. 8.7 Limitation on Certain Restrictions on Subsidiaries. Other than as presently exist in respect of REMICs and other special Subsidiaries listed on Schedule 8.7, create or otherwise cause or suffer to exist or become effective, directly or indirectly, any encumbrance or restriction on the ability of any Subsidiary to (i) pay dividends or make any other distributions on its capital stock or any other interest or participation in its profits owned by any member of the Consolidated Group, (ii) make loans or advances to any member of the Consolidated Group, or (iii) transfer any of its properties or assets to any member of the Consolidated Group, except for encumbrances or restrictions existing under or by reason of (A) applicable law or (B) this Credit Agreement unless, after giving effect thereto on a Pro Forma Basis, the aggregate amount of Consolidated EBITDA attributable to all such REMICs and other special Subsidiaries shall be less than 25% of Consolidated EBITDA. 50 SECTION 9 EVENTS OF DEFAULT 9.1 Events of Default. An Event of Default shall exist upon the occurrence of any of the following specified events (each an "Event of Default"): (a) Payment. Any Credit Party shall (i) default in the payment when due of any principal of any of the Loans, or (ii) default, and such defaults shall continue for five (5) or more Business Days, in the payment when due of any interest on the Loans or of any Fees or other amounts owing hereunder, under any of the other Credit Documents or in connection herewith or therewith; or (b) Representations. Any representation, warranty or statement made or deemed to be made herein, in any of the other Credit Documents, or in any statement or certificate delivered or required to be delivered pursuant hereto or thereto shall prove untrue in any material respect on the date as of which it was deemed to have been made; or (c) Covenants. (i) Default in the due performance or observance of any term, covenant or agreement contained in Section 7.3(a), 7.9, 7.11, 7.13 or 8.1 through 8.7 (except in the case of negative covenants contained in Sections 8.1 through 8.7, those Defaults which may occur or arise other than on account of or by affirmative or intentional act of the Borrower or event or condition which the Borrower shall with knowledge permit to exist, all of which shall be subject to the provisions of clause (ii) hereof), inclusive, or (ii) Default in the due performance or observance by it of any term, covenant or agreement (other than those referred to in subsections (a), (b) or (c)(i) of this Section 9.1) contained in this Credit Agreement and such default shall continue unremedied for a period of at least 30 days after the earlier of a Responsible Officer of a Credit Party becoming aware of such default or notice thereof by the Administrative Agent or such longer period not to exceed an additional 30 days provided that the Borrower is diligently pursuing remedy of such default; or (d) Other Credit Documents. (i) Any Credit Party shall default in the due performance or observance of any material term, covenant or agreement in any of the other Credit Documents (subject to applicable grace or cure periods, if any), or (ii) any Credit Document shall fail to be in full force and effect or to give the Administrative Agent and/or the Lenders any material part of the rights, powers and privileges purported to be created thereby; or 51 (e) Guaranties. The guaranty given by any Guarantor hereunder or any material provision thereof shall cease to be in full force and effect, or any Guarantor hereunder or any Person acting by or on behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations under such guaranty, or any Guarantor shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to any guaranty; or (f) Bankruptcy, etc. Any Bankruptcy Event shall occur with respect to any member of the Consolidated Group; or (g) Defaults under Other Agreements. (i) Any member of the Consolidated Group shall default in the performance or observance (beyond the applicable grace period with respect thereto, if any) of any material obligation or condition of any contract or lease material to the Consolidated Group, taken as a whole; or (ii) With respect to any Debt (other than Debt outstanding under this Credit Agreement) in excess of $25,000,000 in the aggregate for the Consolidated Group taken as a whole, (A) (1) any member of the Consolidated Group shall default in any payment (beyond the applicable grace period with respect thereto, if any) with respect to any such Debt, or (2) the occurrence and continuance of a default in the observance or performance relating to such Debt or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event or condition shall occur or condition exist, the effect of which default or other event or condition is to cause, or permit, the holder or holders of such Debt (or trustee or agent on behalf of such holders) to cause (determined without regard to whether any notice or lapse of time is required), any such Debt to become due prior to its stated maturity; or (B) any such Debt shall be declared due and payable, or required to be prepaid other than by a regularly scheduled required prepayment, prior to the stated maturity thereof; or (iii) The occurrence of an Event of Default under the Three Year Credit Agreement; or (h) Judgments. Any member of the Consolidated Group shall fail within 30 days of the date due and payable to pay, bond or otherwise discharge any judgment, settlement or order for the payment of money which judgment, settlement or order, when aggregated with all other such judgments, settlements or orders due and unpaid at such time, exceeds $5,000,000, and which is not stayed on appeal (or for which no motion for stay is pending) or is not otherwise being executed; or 52 (i) ERISA. Any of the following events or conditions, if such event or condition could reasonably be expected to have a Material Adverse Effect shall occur: (1) any "accumulated funding deficiency," as such term is defined in Section 302 of ERISA and Section 412 of the Code, whether or not waived, shall exist with respect to any Plan, or any lien shall arise on the assets of a member of the Consolidated Group or any ERISA Affiliate in favor of the PBGC or a Plan; (2) an ERISA Event shall occur with respect to a Single Employer Plan, which is, in the reasonable opinion of the Administrative Agent, likely to result in the termination of such Plan for purposes of Title IV of ERISA; (3) an ERISA Event shall occur with respect to a Multiemployer Plan or Multiple Employer Plan, which is, in the reasonable opinion of the Administrative Agent, likely to result in (i) the termination of such Plan for purposes of Title IV of ERISA, or (ii) a member of the Consolidated Group or any ERISA Affiliate incurring any liability in connection with a withdrawal from, reorganization of (within the meaning of Section 4241 of ERISA), or insolvency of (within the meaning of Section 4245 of ERISA) such Plan; or (4) any prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) or breach of fiduciary responsibility shall occur which may subject a member of the Consolidated Group or any ERISA Affiliate to any liability under Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the Code, or under any agreement or other instrument pursuant to which a member of the Consolidated Group or any ERISA Affiliate has agreed or is required to indemnify any person against any such liability; or (j) Ownership. There shall occur a Change of Control. 9.2 Acceleration; Remedies. Upon the occurrence of an Event of Default, and at any time thereafter, the Administrative Agent shall, upon the request and direction of the Required Lenders, by written notice to the Credit Parties take any of the following actions: (i) Termination of Commitments. Declare the Commitments terminated whereupon the Commitments shall be immediately terminated. (ii) Acceleration. Declare the unpaid principal of and any accrued interest in respect of all Loans and any and all other indebtedness or obligations of any and every kind owing by the Credit Parties to the Administrative Agent and/or any of the Lenders hereunder to be due whereupon the same shall be immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each of the Credit Parties. (iii) Enforcement of Rights. Enforce any and all rights and interests created and existing under the Credit Documents. Notwithstanding the foregoing, if an Event of Default specified in Section 9.1(f) shall occur, then the Commitments shall automatically terminate and all Loans, all accrued interest in respect thereof, all accrued and unpaid Fees and other indebtedness or obligations owing to the Administrative Agent and/or any of the Lenders hereunder automatically shall immediately become due and payable without presentment, demand, protest or the giving of any notice or other action by the Administrative Agent or the Lenders, all of which are hereby waived by the Credit Parties. 53 SECTION 10 AGENCY PROVISIONS 10.1 Appointment. Each Lender hereby designates and appoints NationsBank, N.A. as administrative agent (in such capacity, the "Administrative Agent") of such Lender to act as specified herein and the other Credit Documents, and each such Lender hereby authorizes the Administrative Agent as the Administrative Agent for such Lender, to take such action on its behalf under the provisions of this Credit Agreement and the other Credit Documents and to exercise such powers and perform such duties as are expressly delegated by the terms hereof and of the other Credit Documents, together with such other powers as are reasonably incidental thereto. Each Lenders further directs and authorizes the Administrative Agent to execute releases (or similar agreements) to give effect to the provisions of this Credit Agreement and the other Credit Documents. Notwithstanding any provision to the contrary elsewhere herein and in the other Credit Documents, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein and therein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Credit Agreement or any of the other Credit Documents, or shall otherwise exist against the Administrative Agent. The provisions of this Section are solely for the benefit of the Administrative Agent and the Lenders and none of the Credit Parties shall have any rights as a third party beneficiary of the provisions hereof. In performing its functions and duties under this Credit Agreement and the other Credit Documents, the Administrative Agent shall act solely as Administrative 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 or any of their respective Affiliates. 10.2 Delegation of Duties. The Administrative Agent may execute any of its duties hereunder or under the other Credit Documents 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. 10.3 Exculpatory Provisions. The Administrative Agent and its officers, directors, employees, agents, attorneys-in-fact or affiliates shall not be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection herewith or in connection with any of the other Credit Documents (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 any of the Credit Parties contained herein or in any of the other Credit Documents or in any certificate, report, document, financial statement or other written or oral statement referred to or provided for in, or received by the Administrative Agent under or in connection herewith or in connection with the other Credit Documents, or enforceability or sufficiency therefor of any of the other Credit Documents, or for any failure of any Credit Party to perform its obligations hereunder or thereunder. The Administrative Agent shall not be responsible to any Lender for the effectiveness, genuineness, validity, enforceability, collectability or sufficiency of this Credit Agreement, or any of the other Credit Documents or for any representations, warranties, recitals or statements made herein or therein or made by the Borrower or any Credit Party 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 Credit Parties 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 or to inspect the properties, books or records of the Credit Parties or any of their respective Affiliates. 54 10.4 Reliance on Communications. 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, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to any of the Credit Parties, independent accountants and other experts selected by the Administrative Agent with reasonable care). The Administrative Agent may deem and treat the Lenders as the owners of their respective interests hereunder for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent in accordance with Section 11.3(b) hereof. The Administrative Agent and the Borrower shall be fully justified in failing or refusing to take any action under this Credit Agreement or under any of the other Credit Documents 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 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, hereunder or under any of the other Credit Documents in accordance with a request of the Required Lenders (or to the extent specifically provided in Section 11.6, all the Lenders) and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders (including their successors and assigns). 10.5 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 a Credit Party referring to the Credit Document, 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. 55 10.6 Non-Reliance on Administrative Agent and Other Lenders. Each Lender expressly acknowledges that each of the Administrative Agent and its officers, directors, employees, Administrative Agents, attorneys-in-fact or affiliates has not made any representations or warranties to it and that no act by the Administrative Agent or any affiliate thereof hereinafter taken, including any review of the affairs of any Credit Party or any of their respective Affiliates, 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, the other Credit Parties or their respective Affiliates and made its own decision to make its Loans hereunder and enter into this Credit 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 Credit 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, the other Credit Parties and their respective Affiliates. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, 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 or other conditions, prospects or creditworthiness of the Borrower, the other Credit Parties or any of their respective Affiliates which may come into the possession of the Administrative Agent or any of its officers, directors, employees, Administrative Agents, attorneys-in-fact or affiliates. 10.7 Indemnification. The Lenders agree to indemnify the Administrative Agent in its capacity as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Commitments (or if the Commitments have expired or been terminated, in accordance with the respective principal amounts of outstanding Loans and Participation Interests of the Lenders), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including without limitation at any time following the final payment of all of the obligations of the Borrower hereunder and under the other Credit Documents) 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 Credit Agreement or the other Credit Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the gross negligence or willful misconduct of the Administrative Agent. 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 shall survive the repayment of the Loans and other obligations under the Credit Documents and the termination of the Commitments hereunder. 56 10.8 Administrative Agent in its 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, its Subsidiaries or their respective Affiliates as though the Administrative Agent were not the Administrative Agent hereunder. With respect to the Loans made by and all obligations of the Borrower hereunder and under the other Credit Documents, the Administrative Agent shall have the same rights and powers under this Credit 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. 10.9 Successor Administrative Agent. The Administrative Agent may, at any time, resign upon 20 days' written notice to the Lenders and the Borrower, and may be removed, upon show of cause, by the Required Lenders upon 30 days' written notice to the Administrative Agent. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the notice of resignation or notice of removal, as appropriate, then the retiring Administrative Agent shall select a successor Administrative Agent provided such successor is a Lender hereunder or a commercial bank organized under the laws of the United States of America or of any State thereof and has a combined capital and surplus of at least $400,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations as Administrative Agent, as appropriate, under this Credit Agreement and the other Credit Documents and the provisions of this Section 10.9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Credit Agreement. SECTION 11 MISCELLANEOUS 11.1 Notices. Except as otherwise expressly provided herein, all notices and other communications shall have been duly given and shall be effective (i) when delivered, (ii) when transmitted via telecopy (or other facsimile device) to the number set out below, (iii) the day following the day on which the same has been delivered prepaid to a reputable national overnight air courier service, or (iv) the third Business Day following the day on which the same is sent by certified or registered mail, postage prepaid, in each case to the respective parties at the address, in the case of the Borrower, Guarantors and the Administrative Agent, set forth below, and, in the case of the Lenders, set forth on Schedule 11.1, or at such other address as such party may specify by written notice to the other parties hereto: 57 if to the Borrower or the Guarantors: United Dominion Realty Trust, Inc. 10 South Sixth Street Richmond, Virginia 23219-3802 Attn: Chief Financial Officer Telephone: (804) 344-1691 Telecopy: (804) 780-0431 with a copy to: United Dominion Realty Trust, Inc. 10 South Sixth Street Richmond, Virginia 23219-3802 Attn: General Counsel Telephone: (804) 344-1685 Telecopy: (804) 788-4607 if to the Administrative Agent: NationsBank, N.A. 101 N. Tryon Street Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attn: Agency Services Telephone: (704) 386-9046 Telecopy: (704) 386-9923 with a copy to: NationsBank, N.A. Mid-Atlantic Corporate Finance 1111 E. Main Street 4th Floor Pavilion Richmond, Virginia 23277-0001 Attn: Senior Bank Debt Telephone: (804) 788-2244 Telecopy: (804) 788-3669 58 11.2 Right of Set-Off. 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 authorized at any time and from time to time, without presentment, demand, protest or other notice of any kind (all of which rights 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 branches, agencies or Affiliates of such Lender wherever located) to or for the credit or the account of any Credit Party against obligations and liabilities of such Person to such Lender hereunder, under the Notes, the other Credit Documents or otherwise, irrespective of whether such Lender shall have made any demand hereunder and although such obligations, liabilities or claims, or any of them, may be contingent or unmatured, and any such set-off shall be deemed to have been made immediately upon the occurrence of an Event of Default even though such charge is made or entered on the books of such Lender subsequent thereto. Any Person purchasing a participation in the Loans and Commitments hereunder pursuant to Section 3.13 or Section 11.3(d) may exercise all rights of set-off with respect to its participation interest as fully as if such Person were a Lender hereunder. It is specifically acknowledged and agreed that no right of set-off shall be exercised against accounts identified as holding tenant deposit accounts. 11.3 Benefit of Agreement. (a) Generally. This Credit 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 none of the Credit Parties may assign or transfer any of its interests without prior written consent of the Lenders; provided further that the rights of each Lender to transfer, assign or grant participations in its rights and/or obligations hereunder shall be limited as set forth in this Section 11.3, provided however that nothing herein shall prevent or prohibit any Lender from (i) pledging its Loans hereunder to a Federal Reserve Bank in support of borrowings made by such Lender from such Federal Reserve Bank, or (ii) granting assignments or selling participations in such Lender's Loans and/or Commitments hereunder to its parent Borrower and/or to any Affiliate or Subsidiary of such Lender. (b) Assignments. Each Lender may assign all or a portion of its rights and obligations hereunder, pursuant to an assignment agreement substantially in the form of Schedule 11.3(b), to (i) any Lender or any Affiliate or Subsidiary of a Lender, or (ii) any other commercial bank, financial institution or "accredited investor" (as defined in Regulation D of the Securities and Exchange Commission) reasonably acceptable to the Administrative Agent and, so long as no Default or Event of Default has occurred and is continuing, the Borrower; provided that (i) any such assignment (other than any assignment to an existing Lender) shall be in a minimum aggregate amount of $5,000,000 (or, if less, the remaining amount of the Commitment being assigned by such Lender) of the Commitments and in integral multiples of $1,000,000 above such amount and (ii) each such assignment shall be of a constant, not varying, percentage of all such Lender's rights and obligations under this Credit Agreement. Any assignment hereunder shall be effective upon delivery to the Administrative Agent of written notice of the assignment together with a transfer fee of $3,500 payable to the Administrative Agent for its own account from and after the later of (i) the effective date specified in the applicable assignment agreement and (ii) the date of recording of such assignment in the Register pursuant to the terms of subsection (c) below. The assigning Lender will give prompt notice to the Administrative Agent and the Borrower of any such assignment. Upon the effectiveness of any such assignment (and after notice to, and (to the extent required pursuant to the terms hereof), with the consent of, the Borrower as provided herein), the assignee shall become a "Lender" for all purposes of this Credit Agreement and the other Credit Documents and, to the extent of such assignment, the assigning Lender shall be relieved of its obligations hereunder to the extent of the Loans and Commitment components being assigned. Along such lines the Borrower agrees that upon notice of any such assignment and surrender of the appropriate Note or Notes, it will promptly provide to the assigning Lender and to the assignee separate promissory notes in the amount of their respective interests substantially in the form of the original Note (but with notation thereon that it is given in substitution for and replacement of the original Note or any replacement notes thereof). By executing and delivering an assignment agreement in accordance with this Section 11.3(b), the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim; (ii) except as set forth in clause (i) above, such 59 assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto or the financial condition of any Credit Party or any of their respective Affiliates or the performance or observance by any Credit Party of any of its obligations under this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto; (iii) such assignee represents and warrants that it is legally authorized to enter into such assignment agreement; (iv) such assignee confirms that it has received a copy of this Credit Agreement, the other Credit Documents and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such assignment agreement; (v) such assignee will independently and without reliance upon the Administrative Agent, such assigning Lender or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Credit Agreement and the other Credit Documents; (vi) such assignee appoints and authorizes the Administrative Agent to take such action on its behalf and to exercise such powers under this Credit Agreement or any other Credit Document as are delegated to the Administrative Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Credit Agreement and the other Credit Documents are required to be performed by it as a Lender. (c) Maintenance of Register. The Administrative Agent shall maintain at one of its offices in Charlotte, North Carolina a copy of each Lender assignment agreement delivered to it in accordance with the terms of subsection (b) above and a register for the recordation of the identity of the principal amount, type and Interest Period of each Loan outstanding hereunder, the names, addresses and the Commitments of the Lenders pursuant to the terms hereof from time to time (the "Register"). The Administrative Agent will make reasonable efforts to maintain the accuracy of the Register and to promptly update the Register from time to time, as necessary. The entries in the Register shall be conclusive in the absence of manifest error and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Credit Agreement. The Register shall be available for inspection by the Borrower and each Lender, at any reasonable time and from time to time upon reasonable prior notice. 60 (d) Participations. Each Lender may sell, transfer, grant or assign participations in all or any part of such Lender's interests and obligations hereunder; provided that (i) such selling Lender shall remain a "Lender" for all purposes under this Credit Agreement (such selling Lender's obligations under the Credit Documents remaining unchanged) and the participant shall not constitute a Lender hereunder, (ii) no such participant shall have, or be granted, rights to approve any amendment or waiver relating to this Credit Agreement or the other Credit Documents except to the extent any such amendment or waiver would (A) reduce the principal of or rate of interest on or Fees in respect of any Loans in which the participant is participating, (B) postpone the date fixed for any payment of principal (including extension of the Termination Date or the date of any mandatory prepayment), interest or Fees in which the participant is participating, or (C) except as expressly provided in the Credit Documents, release any Guarantor from its guaranty obligations hereunder, and (iii) sub-participations by the participant (except to an affiliate, parent Borrower or affiliate of a parent Borrower of the participant) shall be prohibited. In the case of any such participation, the participant shall not have any rights under this Credit Agreement or the other Credit Documents (the participant's rights against the selling Lender in respect of such participation to be those set forth in the participation agreement with such Lender creating such participation) and all amounts payable by the Borrower hereunder shall be determined as if such Lender had not sold such participation, provided, however, that such participant shall be entitled to receive additional amounts under Sections 3.6, 3.9, 3.10 and 3.11 on the same basis as if it were a Lender. 11.4 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 Credit Document and no course of dealing between the Administrative Agent or any Lender and any of the Credit Parties shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit 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 provided herein are cumulative and not exclusive of any rights or remedies which the Administrative Agent or any Lender would otherwise have. No notice to or demand on any Credit Party in any case shall entitle the Borrower or any other Credit Party 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. 61 11.5 Payment of Expenses, etc. The Borrower agrees to: (i) pay all reasonable out-of-pocket costs and expenses (A) of the Administrative Agent in connection with the negotiation, preparation, execution and delivery and administration of this Credit Agreement and the other Credit Documents and the documents and instruments referred to therein (including, without limitation, the reasonable fees and expenses of Moore & Van Allen, PLLC, special counsel to the Administrative Agent) and any amendment, waiver or consent relating hereto and thereto including, but not limited to, any such amendments, waivers or consents resulting from or related to any work-out, renegotiation or restructure relating to the performance by the Credit Parties under this Credit Agreement and (B) of the Administrative Agent and the Lenders in connection with enforcement of the Credit Documents and the documents and instruments referred to therein (including, without limitation, in connection with any such enforcement, the reasonable fees and disbursements of counsel for the Administrative Agent and each of the Lenders); (ii) pay and hold 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 (iii) indemnify each Lender, its officers, directors, employees, representatives and Administrative Agents 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 investigation, litigation or other proceeding (whether or not any Lender is a party thereto) related to the entering into and/or performance of any Credit Document or the use of proceeds of any Loans (including other extensions of credit) hereunder or the consummation of any other transactions contemplated in any Credit Document, including, without limitation, the reasonable fees and disbursements of counsel incurred in connection with any such investigation, litigation or other proceeding or (B) the presence or Release of any Materials of Environmental Concern at, under or from any Property owned, operated or leased by the Borrower or any of its Subsidiaries, or the failure by the Borrower or any of its Subsidiaries to comply with any Environmental Law (but excluding, in the case of either of clause (A) or (B) above, any such losses, liabilities, claims, damages or expenses to the extent incurred by reason of gross negligence or willful misconduct on the part of the Person to be indemnified). 11.6 Amendments, Waivers and Consents. Neither this Credit Agreement nor any other Credit Document nor any of the terms hereof or thereof may be amended, changed, waived, discharged or terminated unless such amendment, change, waiver, discharge or termination is in writing entered into by, or approved in writing by, the Required Lenders and the Borrower, provided, however, that: (a) without the consent of each Lender affected thereby, no such amendment may: (i) extend the final maturity of any Loan, or extend or waive any principal amortization payment of any Loan, or any portion thereof, 62 (ii) 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) thereon or Fees hereunder, (iii) reduce or waive the principal amount of any Loan, (iv) increase the Commitment of a Lender over the amount thereof in effect (it being understood and agreed that a waiver of any Default or Event of Default (other than an Event of Default of the type described in Section 9.1(f) hereof) or mandatory reduction in the Commitments shall not constitute a change in the terms of any Commitment of any Lender), (v) except as the result of or in connection with a dissolution, merger or disposition of a Subsidiary permitted under Section 8.3, release the Borrower or substantially all of the other Credit Parties from its or their obligations under the Credit Documents, (vi) amend, modify or waive any provision of this Section 11.6 or Section 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 9.1(a), 11.2, 11.3, 11.5 or 11.9, (vii) reduce any percentage specified in, or otherwise modify, the definition of Required Lenders, or (viii) consent to the assignment or transfer by the Borrower (or another Credit Party) of any of its rights and obligations under (or in respect of) the Credit Documents except as permitted thereby; and (b) without the consent of the Administrative Agent, no provision of Section 10 may be amended. Notwithstanding the fact that the consent of all the Lenders is required in certain circumstances as set forth above, (x) each Lender is entitled to vote as such Lender sees fit on any bankruptcy reorganization plan that affects the Loans, and each Lender acknowledges that the provisions of Section 1126(c) of the Bankruptcy Code supersedes the unanimous consent provisions set forth herein and (y) the Required Lenders may consent to allow a Credit Party to use cash collateral in the context of a bankruptcy or insolvency proceeding. 11.7 Counterparts. This Credit Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. It shall not be necessary in making proof of this Credit Agreement to produce or account for more than one such counterpart. 11.8 Headings. The headings of the sections and subsections hereof are provided for convenience only and shall not in any way affect the meaning or construction of any provision of this Credit Agreement. 63 11.9 Survival. All indemnities set forth herein, including, without limitation, in Section 3.9, 3.11, 10.7 or 11.5 shall survive the execution and delivery of this Credit Agreement, the making of the Loans, the repayment of the Loans and other obligations under the Credit Documents and the termination of the Commitments hereunder, and all representations and warranties made by the Credit Parties herein shall survive delivery of the Notes and the making of the Loans hereunder. 11.10 Governing Law; Submission to Jurisdiction; Venue. (a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA. Any legal action or proceeding with respect to this Credit Agreement or any other Credit Document may be brought in the courts of the Commonwealth of Virginia in the City of Richmond, or of the United States for the Eastern District of Virginia, and, by execution and delivery of this Credit Agreement, each of the Credit Parties hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the nonexclusive jurisdiction of such courts. Each of the Credit Parties 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 it at the address set out for notices pursuant to Section 11.1, such service to become effective three (3) days after such mailing. Nothing herein shall affect the right of the Administrative Agent to serve process in any other manner permitted by law or to commence legal proceedings or to otherwise proceed against any Credit Party in any other jurisdiction. (b) Each of the Credit Parties 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 Credit Agreement or any other Credit Document brought in the courts referred to in subsection (a) hereof 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) TO THE EXTENT PERMITTED BY LAW, EACH OF THE ADMINISTRATIVE AGENT, THE LENDERS, THE BORROWER AND THE CREDIT PARTIES HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS CREDIT AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY. 11.11 Severability. 64 If any provision of any of the Credit Documents is determined to be illegal, invalid or unenforceable, such provision shall be fully severable and the remaining provisions shall remain in full force and effect and shall be construed without giving effect to the illegal, invalid or unenforceable provisions. 11.12 Entirety. This Credit Agreement together with the other Credit Documents represent the entire agreement of the parties hereto and thereto, and supersede all prior agreements and understandings, oral or written, if any, including any commitment letters or correspondence relating to the Credit Documents or the transactions contemplated herein and therein. 11.13 Binding Effect; Termination. (a) This Credit Agreement shall become effective at such time on or after the Closing Date when it shall have been executed by the Borrower, the Guarantors and the Administrative Agent, and the Administrative Agent shall have received copies hereof (telefaxed or otherwise) which, when taken together, bear the signatures of each Lender, and thereafter this Credit Agreement shall be binding upon and inure to the benefit of the Borrower, the Guarantors, the Administrative Agent and each Lender and their respective successors and assigns. (b) The term of this Credit Agreement shall be until no Loans, or any other amounts payable hereunder or under any of the other Credit Documents shall remain outstanding and until all of the Commitments hereunder shall have expired or been terminated. 11.14 Source of Funds. Each of the Lenders hereby represents and warrants to the Borrower that at least one of the following statements is an accurate representation as to the source of funds to be used by such Lender in connection with the financing hereunder: (a) no part of such funds constitutes assets allocated to any separate account maintained by such Lender in which any employee benefit plan (or its related trust) has any interest; (b) to the extent that any part of such funds constitutes assets allocated to any separate account maintained by such Lender, such Lender has disclosed to the Borrower the name of each employee benefit plan whose assets in such account exceed 10% of the total assets of such account as of the date of such purchase (and, for purposes of this subsection (b), all employee benefit plans maintained by the same employer or employee organization are deemed to be a single plan); (c) to the extent that any part of such funds constitutes assets of an insurance Borrower's general account, such insurance Borrower has complied with all of the requirements of the regulations issued under Section 401(c)(1)(A) of ERISA; or 65 (d) such funds constitute assets of one or more specific benefit plans which such Lender has identified in writing to the Borrower. As used in this Section 11.15, the terms "employee benefit plan" and "separate account" shall have the respective meanings assigned to such terms in Section 3 of ERISA. 11.15 Conflict. To the extent that there is a conflict or inconsistency between any provision hereof, on the one hand, and any provision of any Credit Document, on the other hand, this Credit Agreement shall control. [Signature Page to Follow] 66 IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Credit Agreement to be duly executed and delivered as of the date first above written. BORROWER: UNITED DOMINION REALTY TRUST, INC., a Virginia corporation By:_________________________ Name: Title: GUARANTORS: UNITED DOMINION REALTY, L.P., a Virginia limited partnership By:_________________________ Name: Title: UDRT OF NORTH CAROLINA, L.L.C., a North Carolina limited liability company By:_________________________ Name: Title: UDRT OF ALABAMA, INC., an Alabama corporation By:_________________________ Name: Title: UDR SOUTH CAROLINA TRUST, a Maryland real estate investment trust By:_________________________ Name: Title: UDR WESTERN RESIDENTIAL, INC., a Virginia corporation By:_________________________ Name: Title: SOUTH WEST REIT HOLDING, INC., a Texas corporation By:_________________________ Name: Title: LENDERS: NATIONSBANK, N.A., individually in its capacity as a Lender and in its capacity as Administrative Agent By:___________________________________ Name: Title: FIRST UNION NATIONAL BANK By:____________________________________ Name: Title: GUARANTY FEDERAL BANK By:____________________________________ Name: Title: CRESTAR BANK By:____________________________________ Name: Title: SIGNET BANK By:____________________________________ Name: Title: COMERICA BANK By:____________________________________ Name: Title: DG BANK DEUTSCHE GENOSSENSCHAFTSBANK By:____________________________________ Name: Title: By:____________________________________ Name: Title: BANK HAPOALIM B.M. By:____________________________________ Name: Title: By:____________________________________ Name: Title: THE SUMITOMO BANK, LTD. By:____________________________________ Name: Title: Schedule 2.1(a) Schedule of Lenders and Commitments Revolving Commitment Lender Revolving Commitment Percentage NationsBank, N.A. $ 10,000,000.00 20.000000% First Union National Bank $ 9,500,000.00 19.000000% Guaranty Federal $ 9,000,000.00 18.000000% Crestar Bank $ 4,250,000.00 8.500000% Signet Bank $ 4,250,000.00 8.500000% Comerica Bank $ 4,000,000.00 8.000000% DG Bank $ 4,000,000.00 8.000000% Bank Hapoalim $ 3,000,000.00 6.000000% Sumitomo Bank $ 2,000,000.00 4.000000% --------------------- --------- $ 50,000,000.00 100.000000% Schedule 2.1(b)(i) FORM OF NOTICE OF BORROWING NationsBank, N.A., as Administrative Agent for the Lenders 101 N. Tryon Street Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Agency Services Re: 364-Day Credit Agreement dated as of August 4, 1997 (as amended and modified, the "Credit Agreement") among United Dominion Realty Trust, Inc., the Guarantors and Lenders identified therein and NationsBank, N.A., as Administrative Agent. Terms used but not otherwise defined herein shall have the meanings provided in the Credit Agreement. Ladies and Gentlemen: The undersigned, UNITED DOMINION REALTY TRUST, INC., a Virginia corporation, being the Borrower under the above-referenced Credit Agreement hereby gives notice pursuant to Section 2.1(b) of the Credit Agreement of a request for a Revolving as follows ________ Revolving Loan (A) Date of Borrowing (which is a Business Day) _______________________ (B) Principal Amount of Borrowing _______________________ (C) Interest rate basis _______________________ (D) Interest Period and the last day thereof _______________________ In accordance with the requirements of Section 5.2 of the Credit Agreement, the undersigned Borrower hereby certifies that: (a) The representations and warranties contained in the Credit Agreement and the other Credit Documents are true and correct in all material respects as of the date of this request, and will be true and correct after giving effect to the requested Extension of Credit (except for those which expressly relate to an earlier date). (b) No Default or Event of Default exists, or will exist after giving effect to the requested Extension of Credit. (c) As to any Credit Party, no involuntary action has been commenced under applicable bankruptcy, insolvency or other similar law in effect, or any case, proceeding or other action for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) as to any Credit Party or as to any substantial part of the property of any Credit Party or for the winding up or liquidation of its affairs, and remains undismissed, undischarged or unbonded. (d) No circumstances, events or conditions have occurred since the date of the audited financial statements referenced in Section 6.1 of the Credit Agreement which would have a Material Adverse Effect. (e) All conditions set forth in Section 2.1 as to the making of Revolving Loans have been satisfied. Very truly yours, UNITED DOMINION REALTY TRUST, INC. By:_______________________________ Name: Title: Schedule 2.1(e) FORM OF REVOLVING NOTE August 4, 1997 FOR VALUE RECEIVED, the undersigned Borrower, hereby promises to pay to the order of ________________________, and its successors and assigns, on or before the Termination Date to the office of the Administrative Agent in immediately available funds as provided in the Credit Agreement, the principal amount of such Lender's Revolving Committed Amount or, if less, the aggregate unpaid principal amount of all Revolving Loans made by such Lender to the undersigned Borrower, together with interest thereon at the rates and as provided in the Credit Agreement. This Note is one of the Revolving Notes referred to in the 364-Day Credit Agreement dated as of August 4, 1997 (as amended and modified, the "Credit Agreement") among United Dominion Realty Trust, Inc., a Virginia corporation, United Dominion Realty, L.P., a Virginia limited partnership, the Guarantors and Lenders identified therein and NationsBank, N.A., as Administrative Agent. Terms used but not otherwise defined herein shall have the meanings provided in the Credit Agreement. The holder may endorse and attach a schedule to reflect borrowings evidenced by this Note and all payments and prepayments thereon; provided that any failure to endorse such information shall not affect the obligation of the undersigned Borrower to pay amounts evidenced hereby. Upon the occurrence of an Event of Default, all amounts evidenced by this Note may, or shall, become immediately due and payable as provided in the Credit Agreement without presentment, demand, protest or notice of any kind, all of which are waived by the undersigned Borrower. In the event payment of amounts evidenced by this Note is not made at any stated or accelerated maturity, the undersigned Borrower agrees to pay, in addition to principal and interest, all costs of collection, including reasonable attorneys' fees. This Note and the Loans and amounts evidenced hereby may be transferred only as provided in the Credit Agreement. This Note shall be governed by, and construed and interpreted in accordance with, the law of the Commonwealth of Virginia. IN WITNESS WHEREOF, the undersigned Borrower has caused this Note to be duly executed as of the date first above written. UNITED DOMINION REALTY TRUST, INC., a Virginia corporation By_________________________________ Name: Title: Schedule 3.2 Form of Notice of Extension/Conversion NationsBank, N.A., as Administrative Agent for the Lenders 101 N. Tryon Street Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Agency Services Re: 364-Day Credit Agreement dated as of August 4, 1997 (as amended and modified, the "Credit Agreement") among United Dominion Realty Trust, Inc., the Guarantors and Lenders identified therein and NationsBank, N.A., as Administrative Agent. Terms used but not otherwise defined herein shall have the meanings provided in the Credit Agreement. Ladies and Gentlemen: The undersigned, UNITED DOMINION REALTY TRUST, INC. (the "Borrower"), refers to the 364-Day Credit Agreement dated as of August 4, 1997 (as amended, modified, extended or restated from time to time, the "Credit Agreement"), among the Borrower, the Lenders and NationsBank, N.A., as Administrative Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Borrower hereby gives notice pursuant to Section 3.2 of the Credit Agreement that it requests an extension or conversion of a Revolving Loan outstanding under the Credit Agreement, and in connection therewith sets forth below the terms on which such extension or conversion is requested to be made: (A) Date of Extension or Conversion (which is the last day of the the applicable Interest Period) _______________________ (B) Principal Amount of Extension or Conversion _______________________ (C) Interest rate basis _______________________ (D) Interest Period and the last day thereof _______________________ In accordance with the requirements of Section 5.2 of the Credit Agreement, the undersigned Borrower hereby certifies that: (a) The representations and warranties contained in the Credit Agreement and the other Credit Documents are true and correct in all material respects as of the date of this request, and will be true and correct after giving effect to the requested Extension of Credit (except for those which expressly relate to an earlier date). (b) No Default or Event of Default exists, or will exist after giving effect to the requested Extension of Credit. (c) As to any Credit Party, no involuntary action has been commenced under applicable bankruptcy, insolvency or other similar law in effect, or any case, proceeding or other action for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) as to any Credit Party or as to any substantial part of the property of any Credit Party or for the winding up or liquidation of its affairs, and remains undismissed, undischarged or unbonded. (d) No circumstances, events or conditions have occurred since the date of the audited financial statements referenced in Section 6.1 of the Credit Agreement which would have a Material Adverse Effect. Very truly yours, UNITED DOMINION REALTY TRUST, INC. By:_______________________________ Name: Title: Schedule 5.1(e)(v) Officer's Certificate Pursuant to Section 5.1(i)(v) of the 364-Day Credit Agreement (the "Credit Agreement"), dated as of August 4, 1997, among UNITED DOMINION REALTY TRUST, INC., a Virginia corporation, the Guarantors and Lenders identified therein and NationsBank, N.A., as Administrative Agent, the undersigned ____________________ Secretary of _________________________ (the "Corporation") hereby certifies as follows: 1. Attached hereto as Annex I is a true and complete copy of resolutions duly adopted by the Board of Directors of the Corporation on __________________, 1996. The attached resolutions have not been rescinded or modified and remain in full force and effect. The attached resolutions are the only corporate proceedings of the Corporation now in force relating to or affecting the matters referenced to therein. 2. Attached hereto as Annex II is a true and complete copy of the By-laws of the Corporation as in effect on the date hereof. 3. Attached hereto as Annex III is a true and complete copy of the Certificate of Incorporation of the Corporation and all amendments thereto as in effect on the date hereof. 4. The following persons are now duly elected and qualified officers of the Corporation, holding the offices indicated, and the signature appearing opposite his name below is his true and genuine signature, and such officer is duly authorized to execute and deliver on behalf of the Corporation the Credit Agreement, the Notes to be issued pursuant thereto and the other Credit Documents and to act as a Responsible Officer on behalf of the Corporation under the Credit Agreement: Name Office Signature _______________________ IN WITNESS WHEREOF, the undersigned has hereunto set his/her name and affixed the corporate seal of the Corporation. ________________________________, Secretary (CORPORATE SEAL) Date: __________________, 1996 I, ___________________, ___________________ of ________________________, hereby certify that ______________________, whose genuine signature appears above, is, and has been at all times since ________________________, a duly elected, qualified and acting _________________ of ________________________. ___________________________________ of ___________________________________ _________________________, 1996 Schedule 6.3 Qualifications Concerning Organization, Existence and Compliance with Law Schedule 6.12 Subsidiaries Schedule 7.2(b) Form of Officer's Compliance Certificate This Certificate is delivered in accordance with the provisions of Section 7.2(b) of that 364-Day Credit Agreement dated as of August 4, 1997 (as amended, modified and supplemented, the "Credit Agreement") among UNITED DOMINION REALTY TRUST, INC., a Virginia corporation, the Guarantors and Lenders identified therein, and NationsBank, N.A., as Administrative Agent. Terms used but not otherwise defined herein shall have the same meanings provided in the Credit Agreement. The undersigned, being a Responsible Officer of UNITED DOMINION REALTY TRUST, INC., a Virginia corporation, hereby certifies, in my official capacity and not in my individual capacity, that to the best of my knowledge and belief: (a) the financial statements of the Borrower of this Certificate fairly present the financial condition of the parties covered by such financial statements in all material respects; (b) during the period the Credit Parties have observed or performed all of their covenants and other agreements in all material respects, and satisfied in all material respects every material condition, contained in this Credit Agreement to be observed, performed or satisfied by them; and (c) the undersigned has no actual knowledge of any Default or Event of Default. Detailed calculations demonstrating compliance with the financial covenants set out in Section 7.9 of the Credit Agreement are attached to this Certificate. This the ___________ day of ___________________, 199___. UNITED DOMINION REALTY TRUST, INC. By:___________________________ Name: Title: Attachment to Officer's Certificate Computation of Financial Covenants Schedule 7.11 Form of Joinder Agreement THIS JOINDER AGREEMENT (the "Agreement"), dated as of _____________, 19__, is by and between _____________________, a ___________________ (the "Applicant Guarantor"), and NATIONSBANK, N.A., in its capacity as Administrative Agent under that certain 364-Day Credit Agreement dated as of August 4, 1997 (as amended and modified, the "Credit Agreement") by and among UNITED DOMINION REALTY TRUST, INC., a Virginia corporation, the Guarantors and Lenders identified therein and NationsBank, N.A., as Administrative Agent. All of the defined terms in the Credit Agreement are incorporated herein by reference. The Applicant Guarantor has indicated its desire to become a Guarantor or is required by the terms of Section 7.11 of the Credit Agreement to become, a Guarantor under the Credit Agreement. Accordingly, the Applicant Guarantor hereby agrees as follows with the Administrative Agent, for the benefit of the Lenders: 1. The Applicant Guarantor hereby acknowledges, agrees and confirms that, by its execution of this Agreement, the Applicant Guarantor will be deemed to be a party to the Credit Agreement and a "Guarantor" for all purposes of the Credit Agreement and the other Credit Documents, and shall have all of the obligations of a Guarantor thereunder as if it had executed the Credit Agreement and the other Credit Documents. The Applicant Guarantor agrees to be bound by, all of the terms, provisions and conditions contained in the Credit Documents, including without limitation (i) all of the affirmative and negative covenants set forth in Sections 7 and 8 of the Credit Agreement and (ii) all of the undertakings and waivers set forth in Section 4 of the Credit Agreement. Without limiting the generality of the foregoing terms of this paragraph 1, the Applicant Guarantor hereby (A) jointly and severally together with the other Guarantors, guarantees to each Lender, the Administrative Agent and the Issuing Lender as provided in Section 4 of the Credit Agreement, the prompt payment and performance of the Guaranteed Obligations in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration, as a mandatory cash collateralization or otherwise) strictly in accordance with the terms thereof. and (B) agrees that if any of the Guaranteed Obligations are not paid or performed in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration, as a mandatory cash collateralization or otherwise), the Applicant Guarantor will, jointly and severally together with the other Guarantors, promptly pay and perform the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, as a mandatory prepayment, by acceleration, as a mandatory cash collateralization or otherwise) in accordance with the terms of such extension or renewal. 2. The Applicant Guarantor acknowledges and confirms that it has received a copy of the Credit Agreement and the Schedules and Exhibits thereto. The information on the Schedules to the Credit Agreement is amended to provide the information shown on the attached Schedule A. 3. The Applicant Guarantor hereby waives acceptance by the Administrative Agent and the Lenders of the guaranty by the Applicant Guarantor under Section 4 of the Credit Agreement upon the execution of this Joinder Agreement by the Applicant Guarantor. 4. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute one contract. 5. This Agreement shall be governed by and construed and interpreted in accordance with the laws of the Commonwealth of Virginia. IN WITNESS WHEREOF, the Applicant Guarantor has caused this Joinder Agreement to be duly executed by its authorized officers, and the Administrative Agent, for the benefit of the Lenders, has caused the same to be accepted by its authorized officer, as of the day and year first above written. APPLICANT GUARANTOR By:_______________________ Name: Title: Address for Notices: Attn: ___________________ Telephone: Telecopy: Acknowledged and accepted: NATIONSBANK, N.A., as Administrative Agent By:_______________________ Name: Title: Schedule A to Joinder Agreement Address for Applicant Guarantor Notices Schedule 8.6 Existing Investments Schedule 8.7 REMICs and Other Special Subsidiaries Schedule 11.1 Schedule of Lenders' Addresses NationsBank, N.A. NationsBank, N.A. Mid-Atlantic Corporate Finance 1111 E. Main Street Richmond, Virginia 23277-0001 Attn: William K. Burton Telephone: (804) 788-3637 Facsimile: (804) 788-3669 Signet Bank Signet Bank 7799 Leesburg Pike Falls Church, Virginia 22043 Attn: Eric Lawrence Telephone: (703) 714-5144 Facsimile: (703) 506-0284 Crestar Bank Crestar Bank 919 E. Main Street 8th Floor Richmond, Virginia 23219 Attn: Richard Dickinson Telephone: (804) 782-5956 Facsimile: (804) 782-7986 First Union National Bank First Union National Bank 301 South College Street, DC-6 6th Floor Charlotte, North Carolina 28288 Attn: John Schissel Telephone: (704) 383-1967 Facsimile: (704) 383-6205 Sumitomo Bank, Ltd. Sumitomo Bank, Ltd. 277 Park Avenue 6th Floor New York, New York 10172 Attn: Honami Matsugasaki Telephone: (212) 224-4176 Facsimile: (212) 224-4504 DG Bank DG Bank 609 Fifth Avenue New York, New York 10017-1021 Attn: Linda J. O'Connell Telephone: (212) 745-1586 Facsimile: (212) 745-1556 Bank Hapoalim B.M. Bank Hapoalim B.M. 1515 Market Street 2nd Floor Philadelphia, Pennsylvania 19102 Attn: Ellen Frank Telephone: (215) 665-2251 Facsimile: (215) 665-2217 Guaranty Federal Bank Guaranty Federal Bank 8333 Douglas Avenue Dallas, Texas 75225 Attn: Roger C. Davis Telephone: (214) 260-2849 Facsimile: (214) 360-1678 Comerica Bank Comerica Bank 500 Woodward Street 7th Floor Detroit, Michigan 48226 Attn: Dave Campbell Telephone: (313) 222-9306 Facsimile: (313) 222-9295 Schedule 11.3(b) Form of Assignment and Acceptance THIS ASSIGNMENT AND ACCEPTANCE dated as of _________________________, 1996 is entered into between THE LENDER IDENTIFIED ON THE SIGNATURE PAGES AS THE "ASSIGNOR" (the "Assignor") and THE PARTIES IDENTIFIED ON THE SIGNATURE PAGES AS "ASSIGNEES" ("Assignee"). Reference is made to that 364-Day Credit Agreement dated as of August 4, 1997 (as amended and modified, the "Credit Agreement") among UNITED DOMINION REALTY TRUST, INC., a Virginia corporation (the "Borrower"), the Guarantors and Lenders identified therein and NationsBank, N.A., as Administrative Agent. Terms defined in the Credit Agreement are used herein with the same meanings. 1. The Assignor hereby sells and assigns, without recourse, to the Assignees, and the Assignees hereby purchase and assume, without recourse, from the Assignor, effective as of the Effective Date shown below, those rights and interests of the Assignor under the Credit Agreement identified below (the "Assigned Interests"), including the Loans and Commitments relating thereto, together with unpaid interest and fees relating thereto accruing from the Effective Date. The Assignor represents and warrants that it owns the interests assigned hereby free and clear of liens, encumbrances or other claims. Each of the Assignees represents that it is an Eligible Assignee within the meaning of the term in the Credit Agreement. The Assignor and each of the Assignees hereby makes and agrees to be bound by all the representations, warranties and agreements set forth in Section 11.3 of the Credit Agreement, a copy of which has been received by each such party. From and after the Effective Date (i) each Assignee, if it is not already a Lender under the Credit Agreement, shall be a party to and be bound by the provisions of the Credit Agreement and, to the extent of the interests assigned by this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) each Assignor shall, to the extent of the interests assigned by this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement (other than the rights of indemnification referenced in Section 11.9 of the Credit Agreement). 2. This Assignment and Acceptance shall be governed by and construed in accordance with the laws of the State of New York. 3. Terms of Assignment (a) Date of Assignment: ___________________, 199__ (b) Legal Name of Assignor: SEE SIGNATURE PAGE (c) Legal Name of Assignee: SEE SIGNATURE PAGE (d) Effective Date of Assignment: ___________________, 199__ See Schedule I attached for a description of the Loans and Commitments (and the percentage interests therein and relating thereto) which are the subject of this Assignment and Acceptance. 4. The fee payable to the Paying Agent in connection with this Assignment is enclosed. IN WITNESS WHEREOF, the parties hereto have caused the execution of this instrument by their duly authorized officers as of the date first above written. ASSIGNOR: ASSIGNEE: By____________________________ By____________________________ Name: Name: Title: Title: ACKNOWLEDGMENT AND CONSENT NATIONSBANK, N.A. United Dominion Realty Trust, Inc. as Administrative Agent By____________________________ By____________________________ Name: Name: Title: Title: SCHEDULE I TO ASSIGNMENT AND ACCEPTANCE United Dominion Realty Trust, Inc. REVOLVING LOANS PRIOR TO ASSIGNMENT Revolving Revolving Revolving Committed Commitment Loans Amount Percentage Outstanding ASSIGNOR ASSIGNEES ------------------ -------------------- ---------------- $ $ REVOLVING LOANS INTERESTS SUBJECT OF THIS ASSIGNMENT Revolving Revolving Revolving Committed Commitment Loans Amount Percentage Outstanding ASSIGNOR ------------------ -------------------- ----------------- $ $ SCHEDULE I TO ASSIGNMENT AND ACCEPTANCE United Dominion Realty Trust, Inc. REVOLVING LOANS AFTER ASSIGNMENT Revolving Revolving Revolving Committed Commitment Loans Amount Percentage Outstanding ASSIGNOR ASSIGNEES -------------- ---------------- -------------- $ $ EX-10 5 EXHIBIT 10(IX) EXHIBIT 10(ix) SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF UNITED DOMINION REALTY, L.P. Dated as of August 30, 1997 TABLE OF CONTENTS ARTICLE I. DEFINED TERMS 1.01 Defined Terms............................................................. 1 ARTICLE II. PARTNERSHIP CONTINUATION AND IDENTIFICATION 2.01 Continuation.............................................................. 8 2.02 Name, Office and Registered Agent......................................... 8 2.03 Partners.................................................................. 8 2.04 Term and Dissolution...................................................... 8 2.05 Filing of Certificate and Perfection of Limited Partnership............... 9 2.06 Certificates Describing Partnership Units................................. 9 ARTICLE III. BUSINESS OF THE PARTNERSHIP 3.01 Business of the Partnership............................................... 10 ARTICLE IV. CAPITAL CONTRIBUTIONS AND ACCOUNTS 4.01 Capital Contributions..................................................... 10 4.02 Additional Capital Contributions and Issuances of Additional Partnership Interests......................................... 11 4.03 Loans to the Partnership.................................................. 12 4.04 Capital Accounts.......................................................... 12 4.05 Percentage Interests...................................................... 13 4.06 No Interest on Contributions.............................................. 13 4.07 Return of Capital Contributions........................................... 13 4.08 No Third Party Beneficiary................................................ 13
i ARTICLE V. PROFITS AND LOSSES; DISTRIBUTIONS 5.01 Allocation of Profit and Loss............................................. 14 5.02 Distribution of Cash...................................................... 15 5.03 REIT Distribution Requirements............................................ 16 5.04 No Right to Distributions in Kind......................................... 16 5.05 Limitations on Return of Capital Contributions............................ 16 5.06 Distributions Upon Liquidation............................................ 17 5.07 Substantial Economic Effect............................................... 17 ARTICLE VI. RIGHTS, OBLIGATIONS AND POWERS OF THE GENERAL PARTNER 6.01 Management of the Partnership............................................. 18 6.02 Delegation of Authority................................................... 21 6.03 Indemnification and Exculpation of Indemnitees............................ 21 6.04 Liability of the General Partner.......................................... 22 6.05 Partnership Expenses...................................................... 23 6.06 Outside Activities........................................................ 23 6.07 Employment or Retention of Affiliates..................................... 24 6.08 Title to Partnership Assets............................................... 24 ARTICLE VII. CHANGES IN GENERAL PARTNER AND THE COMPANY 7.01 Transfer of a General Partner's Partnership Interest; Transactions Involving the Company....................................... 24 7.02 Admission of a Substitute or Additional General........................... 26 7.03 Effect of Bankruptcy, Withdrawal, Death or Dissolution of a General Partner..................................................... 27 7.04 Removal of a General Partner.............................................. 27 ARTICLE VIII. RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS 8.01 Management of the Partnership............................................. 29 8.02 Power of Attorney......................................................... 29 8.03 Limitation on Liability of Limited Partners............................... 29 8.04 Ownership by Limited Partner of Corporate General Partner or Affiliate..................................................... 29 8.05 Redemption Right.......................................................... 29 8.06 NYSE Listing and Securities Act Registration of REIT Shares.............................................................. 33
ii ARTICLE IX. TRANSFERS OF LIMITED PARTNERSHIP INTERESTS 9.01 Purchase for Investment................................................... 33 9.02 Restrictions on Transfer of Limited Partnership Interests................. 33 9.03 Admission of Substitute Limited Partner................................... 34 9.04 Rights of Assignees of Partnership Interests.............................. 35 9.05 Effect of Bankruptcy, Death, Incompetence or Termination of a Limited Partner..................................................... 36 9.06 Joint Ownership of Interests.............................................. 36 ARTICLE X. BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS 10.01 Books and Records......................................................... 37 10.02 Custody of Partnership Funds; Bank Accounts............................... 37 10.03 Fiscal and Taxable Year................................................... 37 10.04 Annual Tax Information and Report......................................... 37 10.05 Tax Matters Partner; Tax Elections; Special Basis Adjustments............. 37 10.06 Reports to Limited Partners............................................... 38 ARTICLE XI. AMENDMENT OF AGREEMENT; MERGER; NOTICE 11.01 Amendment of Agreement; Merger............................................ 39 11.02 Notice to Limited Partners................................................ 39 ARTICLE XII. GENERAL PROVISIONS 12.01 Notices................................................................... 39 12.02 Survival of Rights........................................................ 40 12.03 Additional Documents...................................................... 40 12.04 Severability.............................................................. 40 12.05 Entire Agreement.......................................................... 40 12.06 Rules of Construction..................................................... 40 12.07 Headings.................................................................. 40 12.08 Counterparts.............................................................. 40 12.09 Governing Law............................................................. 40
iii EXHIBITS EXHIBIT A - Partners, Capital Contributions and Percentage Interests EXHIBIT B - Notice of Exercise of Redemption Right iv SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF UNITED DOMINION REALTY, L.P. Dated as of August 30, 1997 RECITALS United Dominion Realty, L.P. (the "Partnership") was formed as a limited partnership under the laws of the Commonwealth of Virginia by a Certificate of Limited Partnership filed with the Clerk of the State Corporation Commission of Virginia on October 23, 1995 and commenced operations on November 4, 1995. This Second Amended and Restated Agreement of Limited Partnership is entered into this 30th day of August, 1997 by and among United Dominion Realty Trust, Inc. (the "Company") as the general partner (in such capacity, the "General Partner") and the Limited Partners set forth on Exhibit A hereto, for the purpose of amending and restating the First Amended and Restated Agreement of Limited Partnership dated as of December 31, 1995 (the "First Restatement"). AGREEMENT NOW, THEREFORE, in consideration of the foregoing, of mutual covenants between the parties hereto, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree to amend the First Restatement to read in its entirety as follows: ARTICLE I. DEFINED TERMS 1.01 Defined Terms. The following defined terms used in this Agreement shall have the meanings specified below: "Act" means the Virginia Revised Uniform Limited Partnership Act, as it may be amended from time to time. "Additional Funds" is defined in Section 4.03. "Additional Limited Partner" means a Person admitted to this Partnership as a Limited Partner pursuant to Section 4.02. "Affiliate" means, (i) any Person that, directly or indirectly, controls or is controlled by or is under common control with such Person, (ii) any other Person that owns, beneficially, directly or indirectly, 10% or more of the outstanding capital stock, shares or equity interests of such Person, or (iii) any officer, director, employee, partner or trustee of such Person or any Person controlling, controlled by or under common control with such Person (excluding trustees and persons serving in similar capacities who are not otherwise an Affiliate of such Person). For the purposes of this definition, "control" (including the correlative meanings of the terms "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, through the ownership of voting securities or partnership interests or otherwise. "Agreed Value" means the fair market value of a Partner's non-cash Capital Contribution as of the date of contribution as agreed to by the such Partner and the General Partner. The name and address of each Partner, number of Partnership Units issued to such Partner, and the Agreed Value of such Partner's non-cash Capital Contributions as of the date of contribution thereof is set forth on Exhibit A. "Agreement" means this Second Amended and Restated Agreement of Limited Partnership, as amended from time to time. "Capital Account" is defined in Section 4.04. "Capital Contribution" means the total amount of capital contributed to the Partnership by each Partner. Any reference to the Capital Contribution of a Partner shall include the Capital Contribution made by a predecessor holder of the Partnership Interest of such Partner. The paid-in Capital Contribution shall mean the cash amount or the Agreed Value of other assets actually contributed by each Partner to the capital of the Partnership. "Capital Transaction" means the refinancing, sale, exchange, condemnation, recovery of a damage award or insurance proceeds (other than business or rental interruption insurance proceeds not reinvested in the repair or reconstruction of Properties), or other disposition of any Property (or the Partnership's interest therein). "Cash Amount" means an amount of cash per Partnership Unit equal to the Value of the REIT Shares Amount on the date of receipt by the General Partner of a Notice of Redemption. "Certificate" means any instrument or document that is required under the laws of the Commonwealth of Virginia, or any other jurisdiction in which the Partnership conducts business, to be signed and sworn to by the Partners of the Partnership (either by themselves or pursuant to the power-of-attorney granted to the General Partner in Section 8.02) and filed for recording in the appropriate public offices within the Commonwealth of Virginia or such other jurisdiction to perfect or maintain the Partnership as a limited partnership, to effect the admission, withdrawal, or substitution of any Partner of the Partnership, or to protect the limited liability of the Limited Partners as limited partners under the laws of the Commonwealth of Virginia or such other jurisdiction. 2 "Charter" means the Articles of Incorporation of the Company, as amended from time to time. "Code" means the Internal Revenue Code of 1986, as amended, and as hereafter amended from time to time. Reference to any particular provision of the Code shall mean that provision in the Code at the date hereof and any successor provision of the Code. "Commission" means the Securities and Exchange Commission. "Company" means United Dominion Realty Trust, Inc., a Virginia corporation. "Conversion Factor" means 1.0, as adjusted pursuant to Section 8.05(f). "Event of Bankruptcy" as to any Person means the filing of a petition for relief as to such Person as debtor or bankrupt under the Bankruptcy Code of 1978 or similar provision of law of any jurisdiction (except if such petition is contested by such Person and has been dismissed within 90 days); insolvency or bankruptcy of such Person as finally determined by a court proceeding; filing by such Person of a petition or application to accomplish the same or for the appointment of a receiver or a trustee for such Person or a substantial part of his assets; commencement of any proceedings relating to such Person as a debtor under any other reorganization, arrangement, insolvency, adjustment of debt or liquidation law of any jurisdiction, whether now in existence or hereinafter in effect, either by such Person or by another, provided that if such proceeding is commenced by another, such Person indicates his approval of such proceeding, consents thereto or acquiesces therein, or such proceeding is contested by such Person and has not been finally dismissed within 90 days. "General Partner" means the Company and any Person who becomes a substitute or additional General Partner as provided herein, and any of their successors as General Partner. At any time at which the Partnership has two or more General Partners, all such General Partners shall designate one of such General Partners as managing General Partner and may from time to time designate a successor managing General Partner and, unless the context otherwise requires, references to the General Partner shall mean the General Partner at the time so designated as managing General Partner. "General Partnership Interest" means a Partnership Interest held by the General Partner that is a general partnership interest. "Indemnitee" means (i) any Person made a party to a proceeding by reason of such Person's status as the General Partner or a director, officer or employee of the Partnership or the General Partner, and (ii) such other Persons (including Affiliates of the General Partner or the Partnership) as the General Partner may designate from time to time, in its sole and absolute discretion. 3 "Investment Agreement" means the contribution, investment, subscription or other agreement or agreements pursuant to which a Limited Partner contributes property or cash to the Partnership in exchange for a Partnership Interest. "Limited Partner" means any Person named as a Limited Partner on Exhibit A attached hereto, and any Person who becomes a Substitute or Additional Limited Partner, in such Person's capacity as a Limited Partner in the Partnership. "Limited Partnership Interest" means the ownership interest of a Limited Partner in the Partnership at any particular time, including the right of such Limited Partner to any and all benefits to which such Limited Partner may be entitled as provided in this Agreement and in the Act, together with the obligations of such Limited Partner to comply with all the provisions of this Agreement and of such Act. "Loss" is defined in Section 5.01(f). "Minimum Limited Partnership Interest" means the lesser of (i) 1% or (ii) if the total Capital Contributions to the Partnership exceeds $50 million, 1% divided by the ratio of the total Capital Contributions to the Partnership to $50 million; provided, however, that the Minimum Limited Partnership Interest shall not be less than 0.2% at any time. "Notice of Redemption" means the Notice of Exercise of Redemption Right substantially in the form attached as Exhibit B hereto. "NYSE" means the New York Stock Exchange and includes any other national securities exchange on which the REIT Shares are listed at the determination date. "Offer" is defined in Section 7.01(c). "Original Limited Partner" means UDRT of North Carolina, L.L.C., a North Carolina limited liability company. "Partner" means any General Partner or Limited Partner. "Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in Regulations Section 1.704-2(i). A Partner's share of Partner Nonrecourse Debt Minimum Gain shall be determined in accordance with Regulations Section 1.704-2(i)(5). "Partnership Interest" means an ownership interest in the Partnership held by either a Limited Partner or the General Partner and includes any and all benefits to which the holder of such a Partnership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement. 4 "Partnership Minimum Gain" has the meaning set forth in Regulations Section 1.704-2(d). In accordance with Regulations Section 1.704-2(d), the amount of Partnership Minimum Gain is determined by first computing, for each Partnership nonrecourse liability, any gain the Partnership would realize if it disposed of the property subject to that liability for no consideration other than full satisfaction of the liability, and then aggregating the separately computed gains. A Partner's share of Partnership Minimum Gain shall be determined in accordance with Regulations Section 1.704-2(g)(1). "Partnership Record Date" means the record date established by the General Partner for the distribution of cash pursuant to Section 5.02, which record date shall be the same as the record date established by the General Partner for a distribution to the holders of the REIT Shares. "Partnership Unit" means a fractional, undivided share of the Partnership Interests of all Partners issued hereunder. The allocation of Partnership Units among the Partners shall be as set forth on Exhibit A, as may be amended from time to time. "Percentage Interest" means at any time the percentage ownership interest in the Partnership of each Partner, as determined by dividing the Partnership Units owned by such Partner by the total number of Partnership Units outstanding at such time. The Percentage Interest of each Partner shall be as set forth on Exhibit A, as may be amended from time to time. "Percentage Interest Adjustment Date" means the effective date of an adjustment of the Partners' Percentage Interests pursuant to Section 4.05. "Person" means any individual, partnership, corporation, joint venture, trust or other entity. "Profit" is defined in Section 5.01(f). "Property" means any apartment property or other investment in which the Partnership holds an ownership interest. "Redeeming Partner" is defined in Section 8.05(a). "Redemption Amount" means either the Cash Amount or the REIT Shares Amount, as selected by the General Partner in its sole and absolute discretion pursuant to Section 8.05(b). "Redemption Right" is defined in Section 8.05(a). 5 "Regulations" means the Federal Income Tax Regulations issued under the Code, as amended and as hereafter amended from time to time. Reference to any particular provision of the Regulations shall mean that provision of the Regulations on the date hereof and any successor provision of the Regulations. "REIT" means a real estate investment trust under Sections 856 through 860 of the Code. "REIT Expenses" means (i) costs and expenses relating to the continuity of existence of the Company and its Subsidiaries (all such entities shall, for purposes of this section, be included within the definition of Company), including, without limitation, taxes, fees and assessments associated therewith and any costs, expenses or fees payable to any director, officer or employee of the Company (including, without limitation, any costs of indemnification), (ii) costs and expenses relating to any offer or registration of REIT Shares or other securities by the Company and all statements, reports, fees and expenses incidental thereto, including, without limitation, underwriting discounts and selling commissions applicable to any such offer of securities and any costs and expenses associated with any claims made by any holders of such securities or any underwriters or placement agents thereof, (iii) costs and expenses incurred in connection with the repurchase of any securities by the Company, (iv) costs and expenses associated with the preparation and filing of any periodic or other reports and communications by the Company under federal, state or local laws or regulations, including filings with the Commission, (v) costs and expenses associated with compliance by the Company with laws, rules and regulations promulgated by any regulatory body, including the Commission and any securities exchange, (vi) costs and expenses associated with any 401(k) plan, incentive plan, bonus plan or other plan providing for compensation for the employees of the Company, (vii) costs and expenses incurred by the Company relating to any issuance or redemption of Partnership Interests, and (viii) all other operating or administrative costs incurred by the Company in connection with the ordinary course of the Company's or the Partnership's business (including the business of any Subsidiary thereof). "REIT Share" means a share of common stock of the Company, $1 par value per share, or a share of the common stock of any Successor Entity. "REIT Shares Amount" shall mean a whole number of REIT Shares equal to the product of the number of Partnership Units offered for redemption by a Redeeming Partner, multiplied by the Conversion Factor as adjusted to and including the Specified Redemption Date plus cash in lieu of any fractional REIT Shares based on the Value of a REIT Share as of the date of receipt by the General Partner of a Notice of Redemption; provided that in the event the Company issues to all holders of REIT Shares rights, options, warrants or convertible or exchangeable securities entitling the shareholders to subscribe for or purchase REIT Shares, or any other securities or property (collectively, the "rights"), and the rights have not expired at the Specified Redemption Date, then the REIT Shares Amount shall also include the rights issuable to a holder of the REIT Shares Amount of REIT Shares on the record date fixed for purposes of determining the holders of REIT Shares entitled to rights. 6 "Securities Act" means the Securities Act of 1933, as amended. "Service" means the Internal Revenue Service. "Specified Redemption Date" means (i) with respect to Partnership Units to be redeemed for a Cash Amount, the first Business Day of the month that is at least 20 business days after the receipt by the General Partner of the Notice of Redemption, as the same may be extended pursuant to Section 8.05(d) and (ii) with respect to Partnership Units to be redeemed for a REIT Shares Amount, the fifth Business Day following the date of the General Partner's notice of its election to purchase such Partnership Units pursuant to Section 8.05(b). "Subsidiary" means, with respect to any Person, any corporation or other entity of which a majority of (i) the voting power of the voting equity securities (including general partners' interests) or (ii) the outstanding equity interests is owned, directly or indirectly, by such Person. "Subsidiary Partnership" means any partnership of which the majority of the limited or general partnership interests therein are owned, directly or indirectly, by the Partnership. "Substitute Limited Partner" means any Person admitted to the Partnership as a Limited Partner pursuant to Section 9.03. "Transaction" is defined in Section 7.01(c). "Transfer" is defined in Section 9.02(a). "Value" means, with respect to any security, the average of the daily market price of such security for the twenty (20) consecutive trading days immediately preceding the date of such valuation. The market price for each such trading day shall be: (i) if such security is listed or admitted to trading on any securities exchange or The Nasdaq National Market, the closing price, regular way, on such day or, if no sale takes place on such day, the average of the closing bid and asked prices on such day, (ii) if such security is not listed or admitted to trading on any securities exchange or The Nasdaq National Market, the last reported sale price on such day or, if no sale takes place on such day, the average of the closing bid and asked prices on such day, as reported by a recognized quotation source designated by the Company, or (iii) if such security is not listed or admitted to trading on any securities exchange or The Nasdaq National Market and no such last reported sale price or closing bid and asked prices are available, the average of the reported high bid and low asked prices on such day, as reported by a recognized quotation source designated by the General Partner, or if there shall be no bid and asked prices on such day, the average of the high bid and low asked prices, as so reported, on the most recent day (not more than twenty (20) days prior to the date in question) for which prices have been so reported; provided, that if there are no bid and asked prices reported during the twenty (20) days prior to the date in question, the value of such security shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate. In the event that any security includes any additional rights the value of which is not included within such price, then the value of such rights shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate, and included in determining the "Value" of such security. 7 ARTICLE II. PARTNERSHIP CONTINUATION AND IDENTIFICATION 2.01 Continuation. The Partners hereby agree to continue the Partnership pursuant to the Act and upon the terms and conditions set forth in this Agreement. 2.02 Name, Office and Registered Agent. The name of the Partnership shall be United Dominion Realty, L.P. The specified office and place of business of the Partnership shall be 10 South 6th Street, Richmond, Virginia 23219-3802. The General Partner may at any time change the location of such office, provided the General Partner gives notice to the Partners of any such change. The name and address of the Partnership's registered agent is Katheryn E. Surface, United Dominion Realty Trust, Inc., 10 South Sixth Street, Richmond Virginia 23219-3802. The sole duty of the registered agent as such is to forward to the Partnership any notice that is served on her as registered agent. 2.03 Partners. (a) The General Partner of the Partnership is the Company. Its principal place of business shall be the same as that of the Partnership. (b) The Limited Partners shall be those Persons identified as Limited Partners on Exhibit A hereto, as amended from time to time. 2.04 Term and Dissolution. (a) The term of the Partnership shall continue in full force and effect until December 31, 2051, except that the General Partner, in its sole and absolute discretion, may extend the term of the Partnership and the Partnership shall be dissolved upon the first to occur of any of the following events: (i) The occurrence of an Event of Bankruptcy as to a General Partner or the dissolution, death or withdrawal of a General Partner unless the Partnership is continued pursuant to Section 2.04(c); provided, that if a General Partner is on the date of such occurrence a partnership, the dissolution of such General Partner as a result of the dissolution, death, withdrawal, removal or Event of Bankruptcy of a partner in such partnership shall not be an event of dissolution of the Partnership if the business of such General Partner is continued by the remaining partner or partners, either alone or with additional partners, and such General Partner and such partners comply with any other applicable requirements of this Agreement; 8 (ii) The passage of 90 days after the sale or other disposition of all or substantially all of the assets of the Partnership (provided that if the Partnership receives one or more obligations as consideration for such sale or other disposition, the Partnership shall continue, unless sooner dissolved under the provisions of this Agreement, until such time as all of such obligations are paid or satisfied in full); (iii) The redemption of all Limited Partnership Interests (other than any of such interests held by the Company or any Subsidiary thereof); or (iv) The election by the General Partner that the Partnership should be dissolved. (b) Upon dissolution of the Partnership (unless the Partnership is continued pursuant to Section 2.04(c)), the General Partner (or its trustee, receiver, successor or legal representative) shall amend or cancel the Certificate and liquidate the Partnership's assets and apply and distribute the proceeds thereof in accordance with Section 5.06. Notwithstanding the foregoing, the liquidating General Partner may either (i) defer liquidation of, or withhold from distribution for a reasonable time, any assets of the Partnership (including those necessary to satisfy the Partnership's debts and obligations), or (ii) distribute the assets to the Partners in kind. (c) Notwithstanding Section 2.04(a)(i), upon the occurrence of an Event of Bankruptcy as to a General Partner or the dissolution, death or withdrawal of a General Partner, the Limited Partners, within 90 days after such occurrence, may elect to continue the Partnership for the balance of the term specified in Section 2.04(a) by selecting, subject to Section 7.02 and any other provisions of this Agreement, a substitute General Partner by consent of a majority in interest of the Limited Partners. If the Limited Partners elect to continue the Partnership and admit a substitute General Partner, the relationship with the Partners and of any Person who has acquired an interest of a Partner in the Partnership shall be governed by this Agreement. 2.05 Filing of Certificate and Perfection of Limited Partnership. The General Partner shall execute, acknowledge, record and file at the expense of the Partnership, the Certificate and any and all amendments thereto and all requisite fictitious name statements and notices in such places and jurisdictions as may be necessary to cause the Partnership to be treated as a limited partnership under, and otherwise to comply with, the laws of each state or other jurisdiction in which the Partnership conducts business. 2.06 Certificates Describing Partnership Units. At the request of a Limited Partner, the General Partner, at its option, may issue a certificate summarizing the terms of such Limited Partner's interest in the Partnership, including the number of Partnership Units owned and the Percentage Interest represented by such Partnership Units as of the date of such certificate. Any such certificate (i) shall be in form and substance as approved by the General Partner, (ii) shall not be negotiable and (iii) shall bear the following legend: 9 This certificate is not negotiable. The Partnership Units represented by this certificate are governed by and transferable only in accordance with the provisions of the Agreement of Limited Partnership of United Dominion Realty, L.P., as amended from time to time. ARTICLE III. BUSINESS OF THE PARTNERSHIP 3.01 Business of the Partnership. The purpose and nature of the business to be conducted by the Partnership is (i) to conduct any business that may be lawfully conducted by a limited partnership organized pursuant to the Act, provided, however, that such business shall be limited to and conducted in such a manner as to permit the Company at all times to qualify as a REIT, unless the Company otherwise ceases to qualify as a REIT, (ii) to enter into any partnership, joint venture or other similar arrangement to engage in any of the foregoing or the ownership of interests in any entity engaged in any of the foregoing and (iii) to do anything necessary or incidental to the foregoing. In connection with the foregoing, and without limiting the Company's right in its sole and absolute discretion to cease qualifying as a REIT, the Partners acknowledge that the Company's current status as a REIT and the avoidance of income and excise taxes on the Company inures to the benefit of all the Partners and not solely to the Company. Notwithstanding the foregoing, the Limited Partners acknowledge that the Company may terminate its status as a REIT under the Code at any time to the full extent permitted by the Charter. Subject to Article XI hereof, the General Partner shall also be empowered (but shall not be required) to do any and all acts and things necessary or prudent to ensure that the Partnership will not be classified as a "publicly traded partnership" for purposes of Section 7704 of the Code. ARTICLE IV. CAPITAL CONTRIBUTIONS AND ACCOUNTS 4.01 Capital Contributions. The General Partner and the Limited Partners have contributed to the capital of the Partnership cash or property in an amount or having an Agreed Value set forth opposite their names on Exhibit A, as amended from time to time. 10 4.02 Additional Capital Contributions and Issuances of Additional Partnership Interests. Except as provided in this Section 4.02 or in Section 4.03, the Partners shall have no right or obligation to make any additional Capital Contributions or loans to the Partnership. The Partners, with the consent of the General Partner, which consent may be withheld in its sole and absolute discretion, may contribute additional capital to the Partnership, from time to time, and receive additional Partnership Interests in respect thereof, in the manner contemplated in this Section 4.02. (a) Issuances of Additional Partnership Interests. The General Partner is hereby authorized to cause the Partnership to issue such additional Partnership Interests in the form of Partnership Units for any Partnership purpose at any time or from time to time, to the Partners (including the General Partner) or to other Persons for such consideration and on such terms and conditions as shall be established by the General Partner in its sole and absolute discretion, all without the approval of any Limited Partners. Any additional Partnership Interests issued thereby may be issued in one or more classes, or one or more series of any of such classes, with such designations, preferences and relative, participating, optional or other special rights, powers and duties, including rights, powers and duties senior to Limited Partnership Interests, all as shall be determined by the General Partner in its sole and absolute discretion and without the approval of any Limited Partner, subject to Virginia law, including, without limitation, (i) the allocations of items of Partnership income, gain, loss, deduction and credit to each such class or series of Partnership Interests; (ii) the right of each such class or series of Partnership Interests to share in Partnership distributions; and (iii) the rights of each such class or series of Partnership Interests upon dissolution and liquidation of the Partnership. Without limiting the foregoing, the General Partner is expressly authorized to cause the Partnership to issue Partnership Units for less than fair market value, so long as the General Partner concludes in good faith that such issuance is in the best interests of the Company and the Partnership. Upon each issuance of Partnership Units hereunder, the General Partner shall amend Exhibit A attached hereto to reflect such issuance. (b) Certain Deemed Contributions of Proceeds of Issuance of Company Securities. If (i) the Company issues securities and contributes some or all the proceeds raised in connection with such issuance to the Partnership and (ii) the proceeds actually received and contributed by the Company to the Partnership are less than the Partnership's share (as determined by the General Partner, in its sole and absolute discretion) of the gross proceeds of such issuance as a result of any underwriter's discount or other expenses paid or incurred in connection with such issuance, then the Company shall be deemed to have made Capital Contributions to the Partnership in the aggregate amount of the Partnership's share of the gross proceeds of such issuance that are contributed to the Partnership and the Partnership shall be deemed simultaneously to have paid such offering expenses in connection with the issuance of additional Partnership Units to the Company for such Capital Contributions pursuant to Section 4.02(a). In any case in which the Company contributes less than all of the proceeds of such issuance to the Partnership, it shall be deemed to have contributed the gross proceeds of issuance of the number of units of the issued security (or the number of dollars of principal in the case of debt securities) equal to the quotient of the division of the amount of proceeds contributed by the net proceeds per unit (or per dollar), and the Partnership shall be deemed to have paid offering expenses equal to the product of such number of units (or dollars) times the per unit (or per dollar) offering expenses. 11 (c) Minimum Limited Partnership Interest. In the event that either a redemption pursuant to Section 8.05 or additional Capital Contributions by the General Partner and the Original Limited Partner would result in the Limited Partners (other than the Original Limited Partner), in the aggregate, owning less than the Minimum Limited Partnership Interest, the General Partner and the Limited Partners (other than the Original Limited Partner) shall form another partnership and contribute sufficient Limited Partnership Interests together with such other Limited Partners so that the Limited Partners (other than the Original Limited Partner), in the aggregate, own at least the Minimum Limited Partnership Interest. 4.03 Loans to the Partnership. If the General Partner determines that it is in the best interests of the Company and the Partnership to provide for additional Partnership funds ("Additional Funds") for any Partnership purpose, the General Partner may (i) cause the Partnership to obtain such funds from outside borrowings or (ii) elect to have the Company or a Subsidiary or Subsidiaries of the Company loan such Additional Funds to the Partnership. The loans to the Partnership shall be in exchange for such consideration and on such terms and conditions as shall be established by the General Partner in its sole and absolute discretion, all without the approval of any Limited Partners. Without limiting the foregoing, the General Partner is expressly authorized to cause the Partnership to issue debt securities for less than fair market value, so long as the General Partner concludes in good faith that such issuance is in the best interests of the Company and the Partnership. 4.04 Capital Accounts. A separate capital account (a "Capital Account") shall be established and maintained for each Partner in accordance with Regulations Section 1.704-1(b)(2)(iv). If (i) a new or existing Partner acquires an additional Partnership Interest in exchange for more than a de minimis Capital Contribution, (ii) the Partnership distributes to a Partner more than a de minimis amount of Partnership property as consideration for a Partnership Interest, or (iii) the Partnership is liquidated within the meaning of Regulation Section 1.704-1(b)(2)(ii)(g), the General Partner shall revalue the property of the Partnership to its fair market value (as determined by the General Partner, in its sole and absolute discretion, and taking into account Section 7701(g) of the Code) in accordance with Regulations Section 1.704-1(b)(2)(iv)(f). When the Partnership's property is revalued by the General Partner, the Capital Accounts of the Partners shall be adjusted in accordance with Regulations Sections 1.704-1(b)(2)(iv)(f) and (g), which generally require such Capital Accounts to be adjusted to reflect the manner in which the unrealized gain or loss inherent in such property (that has not been reflected in the Capital Accounts previously) would be allocated among the Partners pursuant to Section 5.01 if there were a taxable disposition of such property for its fair market value (as determined by the General Partner, in its sole and absolute discretion, and taking into account Section 7701(g) of the Code) on the date of the revaluation. 12 4.05 Percentage Interests. If the number of outstanding Partnership Units increases or decreases during a taxable year, each Partner's Percentage Interest shall be adjusted by the General Partner effective as of the effective date of each such increase or decrease to a percentage equal to the number of Partnership Units held by such Partner divided by the aggregate number of Partnership Units outstanding after giving effect to such increase or decrease. If the Partners' Percentage Interests are adjusted pursuant to this Section 4.05, the Profits and Losses for the taxable year in which the adjustment occurs shall be allocated between the several parts of the year (a) beginning on the first day of the year and ending on the next following Percentage Interest Adjustment Date, (b) beginning on the day following a Percentage Interest Adjustment Date and ending on the next following Percentage Interest Adjustment Date, and/or (c) beginning on the first day following the last Percentage Interest Adjustment Date occurring during the year and ending on the last day of the year, as may be appropriate, either (i) as if the taxable year had ended on the last day of each part or (ii) based on the number of days in each part. The General Partner, in its sole and absolute discretion, shall determine which method shall be used to allocate Profits and Losses for the taxable year in which the adjustment occurs. The allocation among the Partners of Profits and Losses allocated to any part of the year shall be based on the Percentage Interests determined as of the first day of such part. 4.06 No Interest on Contributions. No Partner shall be entitled to interest on its Capital Contribution. 4.07 Return of Capital Contributions. No Partner shall be entitled to withdraw any part of its Capital Contribution or its Capital Account or to receive any distribution from the Partnership, except as specifically provided in this Agreement. Except as otherwise provided herein, there shall be no obligation to return to any Partner or withdrawn Partner any part of such Partner's Capital Contribution for so long as the Partnership continues in existence. 4.08 No Third Party Beneficiary. No creditor or other third party having dealings with the Partnership shall have the right to enforce the right or obligation of any Partner to make Capital Contributions or loans or to pursue any other right or remedy hereunder or at law or in equity, it being understood and agreed that the provisions of this Agreement shall be solely for the benefit of, and may be enforced solely by, the parties hereto and their respective successors and assigns. None of the rights or obligations of the Partners herein set forth to make Capital Contributions or loans to the Partnership shall be deemed an asset of the Partnership for any purpose by any creditor or other third party, nor may such rights or obligations be sold, transferred or assigned by the Partnership or pledged or encumbered by the Partnership to secure any debt or other obligation of the Partnership or of any of the Partners. In addition, it is the intent of the parties hereto that no distribution to any Limited Partner shall be deemed a return of money or other property in violation of the Act. However, if any court of competent jurisdiction holds that, notwithstanding the provisions of this Agreement, any Limited Partner is obligated to return such money or property, such obligation shall be the obligation of such Limited Partner and not of the General Partner. Without limiting the generality of the foregoing, a deficit Capital Account of a Partner shall not be deemed to be a liability of such Partner nor an asset or property of the Partnership. 13 ARTICLE V. PROFITS AND LOSSES; DISTRIBUTIONS 5.01 Allocation of Profit and Loss. (a) General. Profit and Loss of the Partnership for each fiscal year of the Partnership shall be allocated among the Partners in accordance with their respective Percentage Interests. (b) Minimum Gain Chargeback. Notwithstanding any provision to the contrary, (i) any expense of the Partnership that is a "nonrecourse deduction" within the meaning of Regulations Section 1.704-2(b)(1) shall be allocated in accordance with the Partners' respective Percentage Interests, (ii) any expense of the Partnership that is a "partner nonrecourse deduction" within the meaning of Regulations Section 1.704-2(i)(2) shall be allocated in accordance with Regulations Section 1.704-2(i)(1), (iii) if there is a net decrease in Partnership Minimum Gain within the meaning of Regulations Section 1.704-2(f)(1) for any Partnership taxable year, items of gain and income shall be allocated among the Partners in accordance with Regulations Section 1.704-2(f) and the ordering rules contained in Regulations Section 1.704-2(j), and (iv) if there is a net decrease in Partner Nonrecourse Debt Minimum Gain within the meaning of Regulations Section 1.704-2(i)(4) for any Partnership taxable year, items of gain and income shall be allocated among the Partners in accordance with Regulations Section 1.704-2(i)(4) and the ordering rules contained in Regulations Section 1.704-2(j). A Partner's "interest in partnership profits" for purposes of determining its share of the nonrecourse liabilities of the Partnership within the meaning of Regulations Section 1.752-3(a)(3) shall be such Partner's Percentage Interest. (c) Qualified Income Offset. If a Limited Partner receives in any taxable year an adjustment, allocation, or distribution described in subparagraphs (4), (5), or (6) of Regulations Section 1.704-1(b)(2)(ii)(d) that causes or increases a negative balance in such Partner's Capital Account that exceeds the sum of such Partner's shares of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain, as determined in accordance with Regulations Sections 1.704-2(g) and 1.704-2(i), such Partner shall be allocated specially for such taxable year (and, if necessary, later taxable years) items of income and gain in an amount and manner sufficient to eliminate such negative Capital Account balance as quickly as possible as provided in Regulations Section 1.704-1(b)(2)(ii)(d). After the occurrence of an allocation of income or gain to a Limited Partner in accordance with this Section 5.01(c), to the extent permitted by Regulations Section 1.704-1(b) and Section 5.01(d), items of expense or loss shall be allocated to such Partner in an amount necessary to offset the income or gain previously allocated to such Partner under this Section 5.01(c). (d) Capital Account Deficits. Loss shall not be allocated to a Limited Partner to the extent that such allocation would cause a deficit in such Partner's Capital Account (after reduction to reflect the items described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6)) to exceed the sum of such Partner's shares of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain. Any Loss in excess of that limitation shall be allocated to the General Partner. After the occurrence of an allocation of Loss to the General Partner in accordance with this Section 5.01(d), to the extent permitted by Regulations Section 1.704-1(b), Profit shall be allocated to such Partner in an amount necessary to offset the Loss previously allocated to such Partner under this Section 5.01(d). 14 (e) Allocations Between Transferor and Transferee. If a Partner transfers any part or all of its Partnership Interest, the distributive shares of the various items of Profit and Loss allocable among the Partners during such fiscal year of the Partnership shall be allocated between the transferor and the transferee Partner either (i) as if the Partnership's fiscal year had ended on the date of the transfer, or (ii) based on the number of days of such fiscal year that each was a Partner without regard to the results of Partnership activities in the respective portions of such fiscal year in which the transferor and the transferee were Partners. The General Partner, in its sole and absolute discretion, shall determine which method shall be used to allocate the distributive shares of the various items of Profit and Loss between the transferor and the transferee Partner. (f) Definition of Profit and Loss. "Profit" and "Loss" and any items of income, gain, expense, or loss referred to in this Agreement shall be determined in accordance with federal income tax accounting principles, as modified by Regulations Section 1.704-1(b)(2)(iv), except that Profit and Loss shall not include items of income, gain and expense that are specially allocated pursuant to Section 5.01(b), 5.01(c), or 5.01(d). All allocations of income, Profit, gain, Loss, and expense (and all items contained therein) for federal income tax purposes shall be identical to all allocations of such items set forth in this Section 5.01, except as otherwise required by Section 704(c) of the Code and Regulations Section 1.704-1(b)(4). The General Partner shall have the authority to elect the method to be used by the Partnership for allocating items of income, gain, and expense as required by Section 704(c) of the Code (including a method that may result in a Partner receiving a disproportionately larger share of the Partnership's tax depreciation deductions) and such election shall be binding on all Partners. 5.02 Distribution of Cash. (a) The General Partner shall distribute cash on a quarterly (or, at the election of the General Partner, more frequent) basis, in an amount determined by the General Partner in its sole and absolute discretion, to the Partners who are Partners on the Partnership Record Date with respect to such quarter (or other distribution period) in accordance with their respective Percentage Interests on the Partnership Record Date; provided, however, that if a new or existing Partner acquires an additional Partnership Interest in exchange for a Capital Contribution on any date other than a Partnership Record Date, the cash distribution attributable to such additional Partnership Interest for the Partnership Record Date following the issuance of such additional Partnership Interest shall be reduced in the proportion that the number of days that such additional Partnership Interest is held by such Partner bears to the number of days between such Partnership Record Date and the immediately preceding Partnership Record Date. 15 (b) Notwithstanding any other provision of this Agreement, the General Partner is authorized to take any action that it determines to be necessary or appropriate to cause the Partnership to comply with any withholding requirements established under the Code or any other federal, state or local law including, without limitation, pursuant to Sections 1441, 1442, 1445, and 1446 of the Code. If the Partnership is required to withhold and pay over to any taxing authority any amount resulting from the allocation or distribution of income to a Partner or its assignee (including by reason of Section 1446 of the Code) and if the amount to be distributed to the Partner (the "Distributable Amount") equals or exceeds the amount required to be withheld by the Partnership (the "Withheld Amount"), the Withheld Amount shall be treated as a distribution of cash to such Partner. If, however, the Distributable Amount is less than the Withheld Amount, no amount shall be distributed to the Partner, the Distributable Amount shall be treated as a distribution of cash to such Partner, and the excess of the Withheld Amount over the Distributable Amount shall be treated as a loan (a "Partnership Loan") from the Partnership to the Partner on the day the Partnership pays over such excess to a taxing authority. A Partnership Loan may be repaid, at the election of the General Partner in its sole and absolute discretion, either (i) through withholding by the Partnership with respect to subsequent distributions to the applicable Partner or assignee, or (ii) at any time more than twelve (12) months after a Partnership Loan arises, by cancellation of Partnership Units with a value equal to the unpaid balance of the Partnership Loan (including accrued interest). Any amounts treated as a Partnership Loan pursuant to this Section 5.02(b) shall bear interest at the lesser of (i) the base rate on corporate loans at large United States money center commercial banks, as published from time to time in The Wall Street Journal (or an equivalent successor publication), or (ii) the maximum lawful rate of interest on such obligation, such interest to accrue from the date the Partnership is deemed to extend the loan until such loan is repaid in full. (c) In no event may a Partner receive a distribution of cash with respect to a Partnership Unit if such Partner is entitled to receive a cash dividend as the holder of record of a REIT Share for which all or part of such Partnership Unit has been or will be exchanged. 5.03 REIT Distribution Requirements. Notwithstanding anything to the contrary in this Agreement, the General Partner shall cause the Partnership to distribute amounts sufficient to enable the Company to pay shareholder dividends that will allow the Company to (i) meet its distribution requirement for qualification as a REIT as set forth in Section 857(a)(1) of the Code and (ii) avoid any federal income or excise tax liability imposed by the Code. 5.04 No Right to Distributions in Kind. No Partner shall be entitled to demand property other than cash in connection with any distributions by the Partnership. 5.05 Limitations on Return of Capital Contributions. Notwithstanding any of the provisions of this Article V, no Partner shall have the right to receive and the General Partner shall not have the right to make, a distribution that includes a return of all or part of a Partner's Capital Contributions, unless after giving effect to the return of a Capital Contribution, the sum of all Partnership liabilities, other than the liabilities to a Partner for the return of his Capital Contribution, does not exceed the fair market value of the Partnership's assets. 16 5.06 Distributions Upon Liquidation. (a) Upon liquidation of the Partnership, after payment of, or adequate provision for, debts and obligations of the Partnership, including any Partner loans, any remaining assets of the Partnership shall be distributed to all Partners with positive Capital Accounts in accordance with their respective positive Capital Account balances. For purposes of the preceding sentence, the Capital Account of each Partner shall be determined after all adjustments made in accordance with Sections 5.01 and 5.02 resulting from Partnership operations and from all sales and dispositions of all or any part of the Partnership's assets. Any distributions pursuant to this Section 5.06 shall be made by the end of the Partnership's taxable year in which the liquidation occurs (or, if later, within 90 days after the date of the liquidation). To the extent deemed advisable by the General Partner, appropriate arrangements (including the use of a liquidating trust) may be made to assure that adequate funds are available to pay any contingent debts or obligations. (b) If the General Partner has a negative balance in its Capital Account following a liquidation of the Partnership, as determined after taking into account all Capital Account adjustments in accordance with Sections 5.01 and 5.02 resulting from Partnership operations and from all sales and dispositions of all or any part of the Partnership's assets, the General Partner shall contribute to the Partnership an amount of cash equal to the negative balance in its Capital Account and such cash shall be paid or distributed by the Partnership to creditors, if any, and then to the Limited Partners in accordance with Section 5.06(a). Such contribution by the General Partner shall be made by the end of the Partnership's taxable year in which the liquidation occurs (or, if later, within 90 days after the date of the liquidation). 5.07 Substantial Economic Effect. It is the intent of the Partners that the allocations of Profit and Loss under the Agreement have substantial economic effect (or be consistent with the Partners' interests in the Partnership in the case of the allocation of losses attributable to nonrecourse debt) within the meaning of Section 704(b) of the Code as interpreted by the Regulations promulgated pursuant thereto. Article V and other relevant provisions of this Agreement shall be interpreted in a manner consistent with such intent. 17 ARTICLE VI. RIGHTS, OBLIGATIONS AND POWERS OF THE GENERAL PARTNER 6.01 Management of the Partnership. (a) Except as otherwise expressly provided in this Agreement, the General Partner shall have full, complete and exclusive discretion to manage and control the business of the Partnership for the purposes herein stated, and shall make all decisions affecting the business and assets of the Partnership. Subject to the restrictions specifically contained in this Agreement, the powers of the General Partner shall include, without limitation, the authority to take the following actions on behalf of the Partnership: (i) to acquire, purchase, own, operate, lease and dispose of any real property and any other property or assets, including, without limitation, equity interests in other REITs, mortgage loans and participations therein, that the General Partner determines are necessary or appropriate or in the best interests of the business of the Company and the Partnership; (ii) to construct buildings and make other improvements on the properties owned or leased by the Partnership; (iii) to authorize, issue, sell, redeem or otherwise purchase any Partnership Interests or any securities (including secured and unsecured debt obligations of the Partnership, debt obligations of the Partnership convertible into any class or series of Partnership Interests, or options, rights, warrants or appreciation rights relating to any Partnership Interests) of the Partnership; (iv) to borrow or lend money for the Partnership, issue or receive evidences of indebtedness in connection therewith, refinance, increase the amount of, modify, amend or change the terms of, or extend the time for the payment of, any such indebtedness, and secure such indebtedness by mortgage, deed of trust, pledge or other lien on the Partnership's assets; (v) to guarantee or become a comaker of indebtedness of the Company or any Subsidiary thereof, refinance, increase the amount of, modify, amend or change the terms of, or extend the time for the payment of, any such guarantee or indebtedness, and secure such guarantee or indebtedness by mortgage, deed of trust, pledge or other lien on the Partnership's assets; (vi) to use assets of the Partnership (including, without limitation, cash on hand) for any purpose consistent with this Agreement, including, without limitation, payment, either directly or by reimbursement, of all operating costs and general administrative expenses of the Company, the Partnership, or any Subsidiary of either to third parties or to the Company as set forth in this Agreement; 18 (vii) to lease all or any portion of any of the Partnership's assets, whether or not the terms of such leases extend beyond the termination date of the Partnership and whether or not any portion of the Partnership's assets so leased are to be occupied by the lessee, or, in turn, subleased in whole or in part to others, for such consideration and on such terms as the General Partner may determine; (viii) to prosecute, defend, arbitrate, or compromise any and all claims or liabilities in favor of or against the Partnership, on such terms and in such manner as the General Partner may reasonably determine, and similarly to prosecute, settle or defend litigation with respect to the Partners, the Partnership, or the Partnership's assets; provided, however, that the General Partner may not, without the consent of the Limited Partners (other than the Original Limited Partner) holding more than 50% of the Percentage Interests of the Limited Partners (other than the Original Limited Partner), confess a judgment against the Partnership; (ix) to file applications, communicate, and otherwise deal with any and all governmental agencies having jurisdiction over, or in any way affecting, the Partnership's assets or any other aspect of the Partnership business; (x) to make or revoke any election permitted or required of the Partnership by any taxing authority; (xi) to maintain such insurance coverage for public liability, fire and casualty, and any and all other insurance for the protection of the Partnership, for the conservation of Partnership assets, or for any other purpose convenient or beneficial to the Partnership, in such amounts and such types, as it shall determine from time to time; (xii) to determine whether or not to apply any insurance proceeds for any property to the restoration of such property or to distribute the same; (xiii) to establish one or more divisions of the Partnership, to hire and dismiss employees of the Partnership or any division of the Partnership, and to engage legal counsel, accountants, consultants, real estate brokers, and other professionals, as the General Partner may deem necessary or appropriate in connection with the Partnership business, on such terms (including provisions for compensation and eligibility to participate in employee benefit plans, stock option plans and similar plans funded by the Partnership) as the General Partner may deem reasonable and proper; 19 (xiv) to retain other services of any kind or nature in connection with the Partnership business, and to pay therefor such remuneration as the General Partner may deem reasonable and proper; (xv) to negotiate and conclude agreements on behalf of the Partnership with respect to any of the rights, powers and authority conferred upon the General Partner; (xvi) to maintain accurate accounting records and to file promptly all federal, state and local income tax returns on behalf of the Partnership; (xvii) to distribute Partnership cash or other Partnership assets in accordance with this Agreement; (xviii) to form or acquire an interest in, and contribute property to, any further limited or general partnerships, joint ventures or other relationships that it deems desirable (including, without limitation, the acquisition of interests in, and the contributions of property to, its Subsidiaries and any other Person in which it has an equity interest from time to time); (xix) to establish Partnership reserves for working capital, capital expenditures, contingent liabilities, or any other valid Partnership purpose; (xx) subject to Article XI, to merge, consolidate or combine the Partnership with or into another Person; (xxi) subject to Article XI, to do any and all acts and things necessary or prudent to ensure that the Partnership will not be classified as a "publicly traded partnership" for purposes of Section 7704 of the Code; and (xxii) to take such other action, execute, acknowledge, swear to or deliver such other documents and instruments, and perform any and all other acts that the General Partner deems necessary or appropriate for the formation, continuation and conduct of the business and affairs of the Partnership (including, without limitation, all actions consistent with allowing the General Partner at all times to qualify as a REIT unless the General Partner voluntarily terminates its REIT status) and to possess and enjoy all of the rights and powers of a general partner as provided by the Act. (b) Except as otherwise provided herein, to the extent the duties of the General Partner require expenditures of funds to be paid to third parties, the General Partner shall not have any obligations hereunder except to the extent that Partnership funds are reasonably available to it for the performance of such duties, and nothing herein contained shall be deemed to authorize or require the General Partner, in its capacity as such, to expend its individual funds for payment to third parties or to undertake any individual liability or obligation on behalf of the Partnership. 20 6.02 Delegation of Authority. The General Partner may delegate any or all of its powers, rights and obligations hereunder, and may appoint, employ, contract or otherwise deal with any Person for the transaction of the business of the Partnership, which Person may, under supervision of the General Partner, perform any acts or services for the Partnership as the General Partner may approve. 6.03 Indemnification and Exculpation of Indemnitees. (a) The Partnership shall indemnify an Indemnitee from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including reasonable legal fees and expenses), judgments, fines, settlements, and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, that relate to the operations of the Partnership as set forth in this Agreement in which any Indemnitee may be involved, or is threatened to be involved, as a party or otherwise, unless it is established that: (i) the act or omission of the Indemnitee was material to the matter giving rise to the proceeding and either was committed in bad faith or was the result of active and deliberate dishonesty; (ii) the Indemnitee actually received an improper personal benefit in money, property or services; or (iii) in the case of any criminal proceeding, the Indemnitee had reasonable cause to believe that the act or omission was unlawful. The termination of any proceeding by judgment, order or settlement does not create a presumption that the Indemnitee did not meet the requisite standard of conduct set forth in this Section 6.03(a). The termination of any proceeding by conviction or upon a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, creates a rebuttable presumption that the Indemnitee acted in a manner contrary to that specified in this Section 6.03(a). Any indemnification pursuant to this Section 6.03 shall be made only out of the assets of the Partnership. (b) The Partnership may reimburse an Indemnitee for reasonable expenses incurred by an Indemnitee who is a party to a proceeding in advance of the final disposition of the proceeding upon receipt by the Partnership of (i) a written affirmation by the Indemnitee of the Indemnitee's good faith belief that the standard of conduct necessary for indemnification by the Partnership as authorized in this Section 6.03 has been met, and (ii) a written undertaking by or on behalf of the Indemnitee to repay the amount if it shall ultimately be determined that the standard of conduct has not been met. (c) The indemnification provided by this Section 6.03 shall be in addition to any other rights to which an Indemnitee or any other Person may be entitled under any agreement, pursuant to any vote of the Partners, as a matter of law or otherwise, and shall continue as to an Indemnitee who has ceased to serve in such capacity. 21 (d) The Partnership may purchase and maintain insurance, on behalf of the Indemnitees and such other Persons as the General Partner shall determine, against any liability that may be asserted against or expenses that may be incurred by such Person in connection with the Partnership's activities, regardless of whether the Partnership would have the power to indemnify such Person against such liability under the provisions of this Agreement. (e) For purposes of this Section 6.03, the Partnership shall be deemed to have requested an Indemnitee to serve as fiduciary of an employee benefit plan whenever the performance by it of its duties to the Partnership also imposes duties on, or otherwise involves services by, it to the plan or participants or beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect to an employee benefit plan pursuant to applicable law shall constitute fines within the meaning of this Section 6.03; and actions taken or omitted by an Indemnitee with respect to an employee benefit plan in the performance of its duties for a purpose reasonably believed by it to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is not opposed to the best interests of the Partnership. (f) In no event may an Indemnitee subject the Limited Partners to personal liability by reason of the indemnification provisions set forth in this Agreement. (g) An Indemnitee shall not be denied indemnification in whole or in part under this Section 6.03 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement. (h) The provisions of this Section 6.03 are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons. 6.04 Liability of the General Partner. (a) Notwithstanding anything to the contrary set forth in this Agreement, the General Partner shall not be liable for monetary damages to the Partnership or any Partners for losses sustained or liabilities incurred as a result of errors in judgment or of any act or omission if the General Partner acted in good faith. The General Partner shall not be in breach of any duty that the General Partner may owe to the Limited Partners or the Partnership or any other Persons under this Agreement or of any duty stated or implied by law or equity provided the General Partner, acting in good faith, abides by the terms of this Agreement. (b) The Limited Partners expressly acknowledge that the General Partner is acting on behalf of the Partnership, the Company and the Company's shareholders collectively, that the General Partner is under no obligation to consider the separate interests of the Limited Partners (including, without limitation, the tax consequences to Limited Partners or the tax consequences of some, but not all, of the Limited Partners) in deciding whether to cause the Partnership to take (or decline to take) any actions. In any case in which the General Partner determines in good faith that the interests of the Limited Partners and the General Partner's shareholders may conflict, the Limited Partners further acknowledge and agree that the General Partner shall be deemed to have discharged its fiduciary duties to the Limited Partners by discharging such duties to the General Partner's shareholders. The General Partner shall not be liable for monetary damages for losses sustained, liabilities incurred, or benefits not derived by Limited Partners in connection with any such decisions, provided that the General Partner has acted in good faith. 22 (c) Subject to its obligations and duties as General Partner set forth in Section 6.01, the General Partner may exercise any of the powers granted to it under this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its agents. The General Partner shall not be responsible for any misconduct or negligence on the part of any such agent appointed by it in good faith. (d) Notwithstanding any other provisions of this Agreement or the Act, any action of the General Partner on behalf of the Partnership or any decision of the General Partner to refrain from acting on behalf of the Partnership, undertaken in the good faith belief that such action or omission is necessary or advisable in order (i) to protect the ability of the Company to continue to qualify as a REIT or (ii) to prevent the Company from incurring any taxes under Section 857, Section 4981, or any other provision of the Code, is expressly authorized under this Agreement and is deemed approved by all of the Limited Partners. (e) Any amendment, modification or repeal of this Section 6.04 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the General Partner's liability to the Partnership and the Limited Partners under this Section 6.04 as in effect immediately prior to such amendment, modification or repeal with respect to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when claims relating to such matters may arise or be asserted. 6.05 Partnership Expenses. In addition to the expenses that are directly attributable to the Partnership, the Partnership shall pay the REIT Expenses that are allocable to the Partnership. The General Partner, in its sole and absolute discretion, shall determine what portion of the REIT Expenses are allocable to the Partnership. If any REIT Expenses determined by the General Partner to be allocable to the Partnership are paid by the General Partner, the General Partner shall be reimbursed by the Partnership therefor. 6.06 Outside Activities. The Partners and any officer, director, employee, agent, trustee, Affiliate, Subsidiary, or shareholder of any Partner shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including business interests and activities substantially similar or identical to those of the Partnership. Neither the Partnership nor any of the Partners nor any other Person shall have any rights by virtue of this Agreement or the partnership relationship established hereby in any such business ventures, interests or activities, and the Partners shall have no obligation pursuant to this Agreement to offer any interest in any such business ventures, interests and activities to the Partnership or any Partner, even if such opportunity is of a character which, if presented to the Partnership or any Partner, could be taken by such Person. 23 6.07 Employment or Retention of Affiliates. (a) Any Affiliate of the General Partner may be employed or retained by the Partnership and may otherwise deal with the Partnership (whether as a buyer, lessor, lessee, manager, furnisher of goods or services, broker, agent, lender or otherwise) and may receive from the Partnership any compensation, price, or other payment therefor which the General Partner determines to be fair and reasonable. (b) The Partnership may lend or contribute to its Subsidiaries or other Persons in which it has an equity investment, and such Persons may borrow funds from the Partnership, on terms and conditions established in the sole and absolute discretion of the General Partner. The foregoing authority shall not create any right or benefit in favor of any Subsidiary or any other Person. (c) The Partnership may transfer assets to joint ventures, other partnerships, corporations or other business entities in which it is or thereby becomes a participant upon such terms and subject to such conditions as the General Partner deems are consistent with this Agreement and applicable law. 6.08 Title to Partnership Assets. Title to Partnership assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partner, individually or collectively, shall have any ownership interest in such Partnership assets or any portion thereof. Title to any or all of the Partnership assets may be held in the name of the Partnership, the General Partner or one or more nominees, as the General Partner may determine, including Affiliates of the General Partner. ARTICLE VII. CHANGES IN GENERAL PARTNER AND THE COMPANY 7.01 Transfer of a General Partner's Partnership Interest; Transactions Involving the Company. (a) Except as provided in Section 7.01(c), 7.01(d) or 7.03(a), a General Partner shall not transfer all or any portion of its General Partnership Interest or withdraw as General Partner. 24 (b) Except as provided in Section 7.01(c) or 7.01(d), the General Partner (or all General Partners if at any time there are two or more General Partners) and the Original Limited Partner will at all times own in the aggregate at least a 1% Percentage Interest. (c) Except as otherwise provided in Section 7.01(d), the Company shall not merge, consolidate or otherwise combine with or into another Person or sell all or substantially all of its assets (other than in connection with a change in the Company's state of incorporation or organizational form) (a "Transaction"), unless one of the following conditions is met: (i) the consent of Limited Partners (other than the Company or any Subsidiary of the Company) holding more than 50% of the Percentage Interests of the Limited Partners (other than those held by the Company or any Subsidiary of the Company) is obtained; (ii) the Transaction also includes a merger, consolidation or combination of the Partnership or sale of substantially all of the assets of the Partnership or other transaction as a result of which all Limited Partners (other than the Company or any Subsidiary) will receive for each Partnership Unit an amount of cash, securities, or other property (or a partnership interest or other security readily convertible into such cash, securities, or other property) no less than the product of the Conversion Factor and the greatest amount of cash, securities or other property (expressed as an amount per REIT Share) paid in the Transaction in consideration for REIT Shares, provided, that if, in connection with the Transaction, a purchase, tender or exchange offer ("Offer") shall have been made to and accepted by the holders of more than 50 percent of the outstanding REIT Shares, all Limited Partners (other than the Company or any Subsidiary) will receive no less than the amount of cash and the fair market value of securities or other consideration that they would have received had they (A) exercised their Redemption Right and (B) sold, tendered or exchanged pursuant to the Offer the REIT Shares received upon exercise of the Redemption Right immediately prior to the expiration of the Offer; (iii) the Company is the surviving entity in the Transaction and either (A) the holders of REIT Shares do not receive cash, securities, or other property in the Transaction or (B) all Limited Partners (other than the Company or any Subsidiary) receive an amount of cash, securities, or other property (expressed as an amount per Partnership Unit) that is no less than the product of the Conversion Factor and the greatest amount of cash, securities, or other property (expressed as an amount per REIT Share) received in the Transaction by any holder of REIT Shares; or (iv) the Company merges, consolidates, or combines with or into another entity and, immediately after such merger, (A) substantially all of the assets of the surviving entity, other than Partnership Units and the ownership interests in any wholly-owned Subsidiaries held by the Company, are contributed to the Partnership as a Capital Contribution in exchange for Partnership Units with a fair market value equal to the value of the assets so contributed as determined pursuant to Section 704(c) of the Code, (B) any successor or surviving corporation expressly agrees to assume all obligations of the Company hereunder, and (C) the Conversion Factor is adjusted appropriately to reflect the ratio at which REIT Shares are converted into shares of the surviving entity. 25 The General Partner shall give the Limited Partners notice of any Transaction at least 20 business days prior to the effective date of such Transaction, provided, however, that the General Partner need not give any such notice prior to the date on which the holders of REIT Shares are first notified of such Transaction by the Company. (d) Notwithstanding Sections 7.01(a), 7.01(b) and 7.01(c), (i) a General Partner may transfer all or any portion of its General Partnership Interest to (A) a wholly-owned Subsidiary of such General Partner or (B) the owner of all of the ownership interests of such General Partner, and following a transfer of all of its General Partnership Interest, may withdraw as General Partner; and (ii) the Company may engage in a Transaction not required by law or by the rules of any national securities exchange on which the REIT Shares are listed to be submitted to the vote of the holders of the REIT Shares and the General Partner shall not be required to give notice to the Limited Partners of any such Transaction as provided by Section 7.01(c). 7.02 Admission of a Substitute or Additional General Partner. A Person shall be admitted as a substitute or additional General Partner of the Partnership only if the following terms and conditions are satisfied: (a) the Person to be admitted as a substitute or additional General Partner shall have accepted and agreed to be bound by all the terms and provisions of this Agreement by executing a counterpart thereof and such other documents or instruments as may be required or appropriate in order to effect the admission of such Person as a General Partner, and a certificate evidencing the admission of such Person as a General Partner shall have been filed for recordation and all other actions required by Section 2.05 in connection with such admission shall have been performed; (b) if the Person to be admitted as a substitute or additional General Partner is a corporation or a partnership it shall have provided the Partnership with evidence satisfactory to counsel for the Partnership of such Person's authority to become a General Partner and to be bound by the terms and provisions of this Agreement; and 26 (c) counsel for the Partnership shall have rendered an opinion (relying on such opinions from other counsel and the state or any other jurisdiction as may be necessary) that the admission of the person to be admitted as a substitute or additional General Partner is in conformity with the Act, that none of the actions taken in connection with the admission of such Person as a substitute or additional General Partner will cause (i) the Partnership to be classified other than as a partnership for federal income tax purposes, or (ii) the loss of any Limited Partner's limited liability. 7.03 Effect of Bankruptcy, Withdrawal, Death or Dissolution of a General Partner. (a) Upon the occurrence of an Event of Bankruptcy as to a General Partner (and its removal pursuant to Section 7.04(a) hereof) or the withdrawal, removal or dissolution of a General Partner (except that, if a General Partner is on the date of such occurrence a partnership, the withdrawal, death, dissolution, Event of Bankruptcy as to or removal of a partner in such partnership shall be deemed not to be a dissolution of such General Partner if the business of such General Partner is continued by the remaining partner or partners), the Partnership shall be dissolved and terminated unless the Partnership is continued pursuant to Section 7.03(b) hereof. The merger of the General Partner with or into any entity that is admitted as a substitute or successor General Partner pursuant to Section 7.02 hereof shall not be deemed to be the withdrawal, dissolution or removal of the General Partner. (b) Following the occurrence of an Event of Bankruptcy as to a General Partner (and its removal pursuant to Section 7.04(a) hereof) or the withdrawal, removal or dissolution of a General Partner (except that, if a General Partner is on the date of such occurrence a partnership, the withdrawal, death, dissolution, Event of Bankruptcy as to or removal of a partner in such partnership shall be deemed not to be a dissolution of such General Partner if the business of such General Partner is continued by the remaining partner or partners), the Limited Partners, within 90 days after such occurrence, may elect to continue the business of the Partnership for the balance of the term specified in Section 2.04 hereof by selecting, subject to Section 7.02 hereof and any other provisions of this Agreement, a substitute General Partner by consent of the Limited Partners holding more than 50% of the Percentage Interests of the Limited Partners. If the Limited Partners elect to continue the business of the Partnership and admit a substitute General Partner, the relationship with the Partners and of any Person who has acquired an interest of a Partner in the Partnership shall be governed by this Agreement. 7.04 Removal of a General Partner. (a) Upon the occurrence of an Event of Bankruptcy as to, or the dissolution of, a General Partner, such General Partner shall be deemed to be removed automatically; provided, however, that if a General Partner is on the date of such occurrence a partnership, the withdrawal, death, dissolution, Event of Bankruptcy as to or removal of a partner in such partnership shall be deemed not to be a dissolution of the General Partner if the business of such General Partner is continued by the remaining partner or partners. The Limited Partners may not remove the General Partner, with or without cause. 27 (b) If a General Partner has been removed pursuant to this Section 7.04 and the Partnership is continued pursuant to Section 7.03 hereof, such General Partner shall promptly transfer and assign its General Partnership Interest in the Partnership (i) to the substitute General Partner approved by the Limited Partners in accordance with Section 7.03(b) hereof and otherwise admitted to the Partnership in accordance with Section 7.02 hereof. At the time of assignment, the removed General Partner shall be entitled to receive from the substitute General Partner the fair market value of the General Partnership Interest of such removed General Partner as reduced by any damages caused to the Partnership by such General Partner. Such fair market value shall be determined by an appraiser mutually agreed upon by the General Partner and a majority in interest of the Limited Partners within 10 days following the removal of the General Partner. In the event that the parties are unable to agree upon an appraiser, the General Partner and a majority in interest of the Limited Partners each shall select an appraiser, each of which appraisers shall complete an appraisal of the fair market value of the General Partner's General Partnership Interest within 30 days of the General Partner's removal, and the fair market value of the General Partner's General Partnership Interest shall be the average of the two appraisals; provided, however, that if the higher appraisal exceeds the lower appraisal by more than 20% of the amount of the lower appraisal, the two appraisers, no later than 40 days after the removal of the General Partner, shall select a third appraiser who shall complete an appraisal of the fair market value of the General Partner's General Partnership Interest no later than 60 days after the removal of the General Partner. In such case, the fair market value of the General Partner's General Partnership Interest shall be the average of the two appraisals closest in value. (c) The General Partnership Interest of a removed General Partner, during the time after default until transfer under Section 7.04(b), shall be converted to that of a special Limited Partner; provided, however, such removed General Partner shall not have any rights to participate in the management and affairs of the Partnership, and shall not be entitled to any portion of the income, expenses, Profit, gain or Loss, distributions or allocations, as the case may be, payable or allocable to the Limited Partners as such. Instead, such removed General Partner shall receive and be entitled to retain only distributions or allocations of such items which it would have been entitled to receive in its capacity as General Partner, until the transfer is effective pursuant to Section 7.04(b). (d) All Partners shall have given and hereby do give such consents, shall take such actions and shall execute such documents as shall be legally necessary and sufficient to effect all the foregoing provisions of this Section 7.04. 28 ARTICLE VIII. RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS 8.01 Management of the Partnership. The Limited Partners shall not participate in the management or control of Partnership business nor shall they transact any business for the Partnership, nor shall they have the power to sign for or bind the Partnership, such powers being vested solely and exclusively in the General Partner. 8.02 Power of Attorney. Each Limited Partner hereby irrevocably appoints the General Partner its true and lawful attorney-in-fact, who may act for each Limited Partner and in its name, place and stead, and for its use and benefit, to sign, acknowledge, swear to, deliver, file and record, at the appropriate public offices, any and all documents, certificates, and instruments as may be deemed necessary or desirable by the General Partner to carry out fully the provisions of this Agreement and the Act in accordance with their terms, which power of attorney is coupled with an interest and shall survive the death, dissolution or legal incapacity of the Limited Partner, or the transfer by the Limited Partner of any part or all of its Partnership Interest. 8.03 Limitation on Liability of Limited Partners. No Limited Partner shall be liable for any debts, liabilities, contracts or obligations of the Partnership. A Limited Partner shall be liable to the Partnership only to make payments of its Capital Contribution, if any, as and when due hereunder. After its Capital Contribution is fully paid, no Limited Partner shall, except as otherwise required by the Act, be required to make any further Capital Contributions or other payments or lend any funds to the Partnership. 8.04 Ownership by Limited Partner of Corporate General Partner or Affiliate. No Limited Partner shall at any time, either directly or indirectly, own any stock or other interest in the General Partner or in any Affiliate thereof, if such ownership by itself or in conjunction with other stock or other interests owned by other Limited Partners would, in the opinion of counsel for the Partnership, jeopardize the classification of the Partnership as a partnership for federal income tax purposes. The General Partner shall be entitled to make such reasonable inquiry of the Limited Partners as is required to establish compliance by the Limited Partners with the provisions of this Section. 8.05 Redemption Right. (a) Subject to Sections 8.05(b), 8.05(c), 8.05(d), and 8.05(e), and the provisions of any agreement between the Partnership and any Limited Partner with respect to Partnership Units held by such Limited Partners, each Limited Partner, other than the Original Limited Partner, shall have the right (the "Redemption Right") to require the Partnership to redeem on a Specified Redemption Date all or a portion of the Partnership Units held by such Limited Partner at a redemption price equal to and in the form of the Cash Amount to be paid by the Partnership, provided, that such Partnership Units shall have been outstanding for at least one year. The Redemption Right shall be exercised pursuant to a Notice of Redemption delivered to the Partnership (with a copy to the General Partner) by the Limited Partner who is exercising the Redemption Right (the "Redeeming Partner"); provided, however, that the Partnership shall not be obligated to satisfy such Redemption Right if the General Partner elects to purchase the Partnership Units subject to the Notice of Redemption pursuant to Section 8.05(b); and provided, further, that no Limited Partner may deliver more than two Notices of Redemption during each calendar year. A Limited Partner may not exercise the Redemption Right for less than 1,000 Partnership Units or, if such Limited Partner holds less than 1,000 Partnership Units, all of the Partnership Units held by such Partner. The Redeeming Partner shall have no right, with respect to any Partnership Units so redeemed, to receive any distribution paid with respect to Partnership Units if the record date for such distribution is on or after the Specified Redemption Date. 29 (b) Notwithstanding the provisions of Section 8.05(a), a Limited Partner that exercises the Redemption Right shall be deemed to have offered to sell the Partnership Units described in the Notice of Redemption to the General Partner, and the General Partner may, in its sole and absolute discretion but subject to the last sentence of this subsection (b), elect to purchase directly and acquire such Partnership Units by paying to the Redeeming Partner either the Cash Amount or the REIT Shares Amount, as elected by the General Partner (in its sole and absolute discretion), on the Specified Redemption Date, whereupon the General Partner shall acquire the Partnership Units offered for redemption by the Redeeming Partner and shall be treated for all purposes of this Agreement as the owner of such Partnership Units. If the General Partner shall elect to exercise its right to purchase Partnership Units under this Section 8.05(b) with respect to a Notice of Redemption, it shall so notify the Redeeming Partner within five Business Days after the receipt by the General Partner of such Notice of Redemption. Such notice shall indicate whether the General Partner will pay the Cash Amount or the REIT Shares Amount. Unless the General Partner (in its sole and absolute discretion) shall exercise its right to purchase Partnership Units from the Redeeming Partner pursuant to this Section 8.05(b), the General Partner shall not have any obligation to the Redeeming Partner or the Partnership with respect to the Redeeming Partner's exercise of the Redemption Right. In the event the General Partner shall exercise its right to purchase Partnership Units with respect to the exercise of a Redemption Right in the manner described in the first sentence of this Section 8.05(b), the Partnership shall have no obligation to pay any amount to the Redeeming Partner with respect to such Redeeming Partner's exercise of such Redemption Right, and each of the Redeeming Partner, the Partnership, and the General Partner shall treat the transaction between the General Partner and the Redeeming Partner for federal income tax purposes as a sale of the Redeeming Partner's Partnership Units to the General Partner. Each Redeeming Partner agrees to execute such documents as the Partnership may reasonably require in connection with the issuance of REIT Shares upon exercise of the Redemption Right. If Section 5.05 hereof shall prevent the Partnership from satisfying, in whole or in part, any exercise of the Redemption Right by a Redeeming Partner, then the Company (whether or not it is then the General Partner) shall be deemed to have elected pursuant to this Section 8.05(b) to purchase, and hereby agrees to purchase, directly from such Redeeming Partner, such number of Partnership Units as the Partnership is unable to redeem due to the operation of Section 5.05. 30 (c) Notwithstanding the provisions of Section 8.05(a) and 8.05(b), a Limited Partner shall not be entitled to exercise the Redemption Right if the delivery of REIT Shares to such Partner on the Specified Redemption Date by the Company pursuant to Section 8.05(b) (regardless of whether or not the Company would in fact exercise its rights under Section 8.05(b)) would (i) result in REIT Shares being owned by fewer than 100 persons (determined without reference to any rules of attribution), (ii) result in the Company being "closely held" within the meaning of Section 856(h) of the Code, (iii) cause the Company to own, directly or constructively, 10% or more of the ownership interests in a tenant of the Company's, the Partnership's or a Subsidiary's real property, within the meaning of Section 856(d)(2)(B) of the Code, (iv) in the good faith opinion of the Board of Directors of the Company, otherwise disqualify the Company as a REIT, or (v) in the opinion of counsel for the Company, constitute or result in a violation of Section 5 of the Securities Act of 1933, as amended (the "Securities Act"), or cause the acquisition of REIT Shares by such Partner to be "integrated" with any other distribution of REIT Shares for purposes of complying with the registration provisions of the Securities Act. The Company, in its sole and absolute discretion, may waive the restriction on redemption set forth in this Section 8.05(c); provided, however, that in the event such restriction is waived, the Redeeming Partner shall be paid the Cash Amount. (d) Any Cash Amount to be paid to a Redeeming Partner pursuant to this Section 8.05 shall be paid within 20 Business Days after the initial date of receipt by the General Partner of the Notice of Redemption relating to the Partnership Units to be redeemed; provided, however, that such 20-Business Day period may be extended for up to an additional 180-day period to the extent required for the Company to issue and sell securities the proceeds of which will be contributed to the Partnership to provide cash for payment of the Cash Amount. Notwithstanding the foregoing, the General Partner agrees to use its best efforts to cause the closing of the acquisition of redeemed Partnership Units hereunder to occur as quickly as reasonably possible. (e) Notwithstanding any other provision of this Agreement, the General Partner may place appropriate restrictions on the ability of the Limited Partners to exercise their Redemption Rights as and if deemed necessary to ensure that the Partnership does not constitute a "publicly traded partnership" under section 7704 of the Code. If and when the General Partner determines that imposing such restrictions is necessary, the General Partner shall give prompt written notice thereof (a "Restriction Notice") to each of the Limited Partners, which notice shall be accompanied by a copy of an opinion of counsel to the Partnership which states that, in the opinion of such counsel, such restrictions are necessary in order to avoid the Partnership being treated as a "publicly traded partnership" under Section 7704 of the Code. 31 (f) The Conversion Factor shall be adjusted from time to time as follows: (i) In the event that the Company (A) declares or pays a dividend on its outstanding REIT Shares in REIT Shares or makes a distribution to all holders of its outstanding REIT Shares in REIT Shares, (B) subdivides its outstanding REIT Shares, or (C) combines its outstanding REIT Shares into a smaller number of REIT Shares, the Conversion Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the numerator of which shall be the number of REIT Shares issued and outstanding on the record date for such dividend, distribution, subdivision or combination (assuming for such purposes that such dividend, distribution, subdivision or combination has occurred as of such time), and the denominator of which shall be the actual number of REIT Shares (determined without the above assumption) issued and outstanding on such date. (ii) In the event that the Company declares or pays a dividend or other distribution on its outstanding REIT Shares (other than (a) ordinary cash dividends or (b) dividends payable in REIT Shares that give rise to an adjustment in the Conversion Factor under subsection (i) hereof) and the Value of the REIT Shares on the 20th trading day following the record date ("Record Date") for such dividend or distribution (the "Post-Distribution Value") is less than the Value of the REIT Shares on the Business Day immediately preceding such Record Date (the "Pre-Distribution Value"), then the Conversion Factor in effect after the Record Date shall be adjusted by multiplying the Conversion Factor in effect prior to the Record Date by a fraction, the numerator of which is the Pre-Distribution Value and the denominator of which is the Post-Distribution Value, provided, however, that no adjustment shall be made if (a) with respect to any cash dividend or distribution with respect to REIT shares, the Partnership distributes with respect to each Partnership Unit an amount equal to the amount of such dividend or distribution multiplied by the Conversion Factor or (b) with respect to any dividend or distribution of securities or property other than cash, the Partnership distributes with respect to each Partnership Unit an amount of securities or other property equal to the amount distributed with respect to each REIT share multiplied by the Conversion Ratio or a partnership interest or other security readily convertible into such securities or other property. (iii) Any adjustment to the Conversion Factor shall become effective immediately after the effective date of any of the events described in subsections (i) and (ii), retroactive to the record date, if any, for such event, provided, however, that if the Partnership receives a Notice of Redemption after the record date, but prior to the payment date or effective date, of any dividend, distribution, subdivision or combination referred to in subsection (i) or (ii), the Conversion Factor shall be determined as if the Company had received the Notice of Exchange immediately prior to the record date for such dividend, distribution, subdivision or combination. 32 8.06 NYSE Listing and Securities Act Registration of REIT Shares. In the event that the General Partner elects to acquire a Redeeming Partner's Partnership Units by paying to such Partner the REIT Shares Amount, the REIT Shares issued to the Redeeming Partner if and to the extent provided in such Redeeming Partner's Registration Rights Agreement (a) registered under the Securities Act and/or entitled to rights to Securities Act registration and (b) listed on the NYSE. ARTICLE IX. TRANSFERS OF LIMITED PARTNERSHIP INTERESTS 9.01 Purchase for Investment. (a) Each Limited Partner hereby represents and warrants to the General Partner and to the Partnership that the acquisition of his Partnership Interest is made as a principal for his account for investment purposes only and not with a view to the resale or distribution of such Partnership Interest. (b) Each Limited Partner agrees that he will not sell, assign or otherwise transfer his Partnership Interest or any fraction thereof, whether voluntarily or by operation of law or at judicial sale or otherwise, to any Person who does not make the representations and warranties to the General Partner set forth in Section 9.01(a) above and similarly agree not to sell, assign or transfer such Partnership Interest or fraction thereof to any Person who does not similarly represent, warrant and agree. 9.02 Restrictions on Transfer of Limited Partnership Interests. (a) Except as otherwise provided in this Article IX, no Limited Partner may offer, sell, assign, hypothecate, pledge or otherwise transfer his Limited Partnership Interest, in whole or in part, whether voluntarily or by operation of law or at judicial sale or otherwise (collectively, a "Transfer") without the written consent of the General Partner, which consent may be withheld in the sole and absolute discretion of the General Partner. The General Partner may require, as a condition of any Transfer, that the transferor assume all costs incurred by the Partnership in connection therewith. (b) No Limited Partner may effect a Transfer of its Limited Partnership Interest, in whole or in part, if, in the opinion of legal counsel for the Partnership, such proposed Transfer would require the registration of the Limited Partnership Interest under the Securities Act or would otherwise violate any applicable federal or state securities or blue sky law (including investment suitability standards). (c) No Transfer by a Limited Partner of its Partnership Units, in whole or in part, may be made to any Person if (i) in the opinion of counsel for the Partnership, the Transfer would result in the Partnership's being treated as an association taxable as a corporation (other than a qualified REIT subsidiary within the meaning of Section 856(i) of the Code), (ii) in the opinion of counsel for the Partnership, the Transfer would adversely affect the ability of the Company to continue to qualify as a REIT or subject the Company to any additional taxes under Section 857 or Section 4981 of the Code, or (iii) such Transfer is effectuated through an "established securities market" or a "secondary market (or the substantial equivalent thereof)" within the meaning of Section 7704 of the Code. 33 (d) No transfer of any Partnership Units may be made to a lender to the Partnership or any Person who is related (within the meaning of Regulations Section 1.752-4(b)) to any lender to the Partnership whose loan constitutes a nonrecourse liability (within the meaning of Regulations Section 1.752-1(a)(2)), without the consent of the General Partner, which may be withheld in its sole and absolute discretion, provided that as a condition to such consent the lender will be required to enter into an arrangement with the Partnership and the General Partner to exchange or redeem for the Cash Amount any Partnership Units in which a security interest is held simultaneously with the time at which such lender would be deemed to be a partner in the Partnership for purposes of allocating liabilities to such lender under Section 752 of the Code. (e) Section 9.02(a) shall not apply to any Transfer by a Limited Partner pursuant to the exercise of its Redemption Right under Section 8.05 hereof. (f) Any Transfer in contravention of any of the provisions of this Article IX shall be void and ineffectual and shall not be binding upon, or recognized by, the Partnership. 9.03 Admission of Substitute Limited Partner. (a) Subject to the other provisions of this Article IX, an assignee of the Limited Partnership Interest of a Limited Partner (which shall be understood to include any purchaser, transferee, donee, or other recipient of any disposition of such Limited Partnership Interest) shall be deemed admitted as a Limited Partner of the Partnership only upon the satisfactory completion of the following: (i) The assignee shall have accepted and agreed to be bound by the terms and provisions of this Agreement by executing a counterpart or an amendment thereof, including a revised Exhibit A, and such other documents or instruments as the General Partner may require in order to effect the admission of such Person as a Limited Partner. (ii) To the extent required, an amended Certificate evidencing the admission of such Person as a Limited Partner shall have been signed, acknowledged and filed for record in accordance with the Act. 34 (iii) The assignee shall have delivered a letter containing the representation set forth in Section 9.01(a) and the agreement set forth in Section 9.01(b). (iv) If the assignee is a corporation, partnership or trust, the assignee shall have provided the General Partner with evidence satisfactory to counsel for the Partnership of the assignee's authority to become a Limited Partner under the terms and provisions of this Agreement. (v) The assignee shall have executed a power of attorney containing the terms and provisions set forth in Section 8.02. (vi) The assignee shall have paid all reasonable legal fees of the Partnership and the General Partner and filing and publication costs in connection with its substitution as a Limited Partner. (vii) The assignee has obtained the prior written consent of the General Partner to its admission as a Substitute Limited Partner, which consent may be given or denied in the exercise of the General Partner's sole and absolute discretion. (b) For the purpose of allocating Profits and Losses and distributing cash received by the Partnership, a Substitute Limited Partner shall be treated as having become, and appearing in the records of the Partnership as, a Partner upon the filing of the Certificate described in Section 9.03(a)(ii) or, if no such filing is required, the later of the date specified in the transfer documents or the date on which the General Partner has received all necessary instruments of transfer and substitution. (c) The General Partner shall cooperate with the Person seeking to become a Substitute Limited Partner by preparing the documentation required by this Section and making all official filings and publications. The Partnership shall take all such action as promptly as practicable after the satisfaction of the conditions in this Article IX to the admission of such Person as a Limited Partner of the Partnership. 9.04 Rights of Assignees of Partnership Interests. (a) Subject to the provisions of Sections 9.01 and 9.02, except as required by operation of law, the Partnership shall not be obligated for any purposes whatsoever to recognize the assignment by any Limited Partner of its Partnership Interest until the Partnership has received notice thereof. (b) Any Person who is the assignee of all or any portion of a Limited Partner's Limited Partnership Interest, but does not become a Substitute Limited Partner and desires to make a further assignment of such Limited Partnership Interest, shall be subject to all the provisions of this Article IX to the same extent and in the same manner as any Limited Partner desiring to make an assignment of its Limited Partnership Interest. 35 (c) The General Partner shall have the right, in its sole and absolute discretion, to redeem the Limited Partnership Interest assigned by any Limited Partner (an "Assigning Limited Partner") to any person who does not, within 20 business days following the date of such assignment, become a Substitute Limited Partner (an "Assignee"). In such case, the Assigning Limited Partner and the Assignee shall be deemed to have tendered irrevocably to the General Partner a Notice of Redemption with respect to all of the Limited Partnership Interest assigned. 9.05 Effect of Bankruptcy, Death, Incompetence or Termination of a Limited Partner. The occurrence of an Event of Bankruptcy as to a Limited Partner, the death of a Limited Partner or a final adjudication that a Limited Partner is incompetent (which term shall include, but not be limited to, insanity) shall not cause the termination or dissolution of the Partnership, and the business of the Partnership shall continue if an order for relief in a bankruptcy proceeding is entered against a Limited Partner, the trustee or receiver of his estate or, if he dies, his executor, administrator or trustee, or, if he is finally adjudicated incompetent, his committee, guardian or conservator, shall have the rights of such Limited Partner for the purpose of settling or managing his estate property and such power as the bankrupt, deceased or incompetent Limited Partner possessed to assign all or any part of his Partnership Interest and to join with the assignee in satisfying conditions precedent to the admission of the assignee as a Substitute Limited Partner. 9.06 Joint Ownership of Interests. A Partnership Interest may be acquired by two individuals as joint tenants with right of survivorship, provided that such individuals either are married or are related and share the same home as tenants in common. The written consent or vote of both owners of any such jointly held Partnership Interest shall be required to constitute the action of the owners of such Partnership Interest; provided, however, that the written consent of only one joint owner will be required if the Partnership has been provided with evidence satisfactory to the counsel for the Partnership that the actions of a single joint owner can bind both owners under the applicable laws of the state of residence of such joint owners. Upon the death of one owner of a Partnership Interest held in a joint tenancy with a right of survivorship, the Partnership Interest shall become owned solely by the survivor as a Limited Partner and not as an assignee. The Partnership need not recognize the death of one of the owners of a jointly-held Partnership Interest until it shall have received notice of such death. Upon notice to the General Partner from either owner, the General Partner shall cause the Partnership Interest to be divided into two equal Partnership Interests, which shall thereafter be owned separately by each of the former owners. 36 ARTICLE X. BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS 10.01 Books and Records. At all times during the continuance of the Partnership, the General Partner shall keep or cause to be kept at the Partnership's specified office true and complete books of account in accordance with generally accepted accounting principles, including: (a) a current list of the full name and last known business address of each Partner, (b) a copy of the Certificate of Limited Partnership and all certificates of amendment thereto, (c) copies of the Partnership's federal, state and local income tax returns and reports, (d) copies of the Agreement and any financial statements of the Partnership for the three most recent years and (e) all documents and information required under the Act. Any Partner or its duly authorized representative, upon paying the costs of collection, duplication and mailing, shall be entitled to inspect or copy such records during ordinary business hours. 10.02 Custody of Partnership Funds; Bank Accounts. (a) All funds of the Partnership not otherwise invested shall be deposited in one or more accounts maintained in such banking or brokerage institutions as the General Partner shall determine, and withdrawals shall be made only on such signature or signatures as the General Partner may, from time to time, determine. (b) All deposits and other funds not needed in the operation of the business of the Partnership may be invested by the General Partner in investment grade instruments (or investment companies whose portfolio consists primarily thereof), government obligations, certificates of deposit, bankers' acceptances and municipal notes and bonds. The funds of the Partnership shall not be commingled with the funds of any other Person except for such commingling as may necessarily result from an investment in those investment companies permitted by this Section 10.02(b). 10.03 Fiscal and Taxable Year. The fiscal and taxable year of the Partnership shall be the calendar year. 10.04 Annual Tax Information and Report. Within 75 days after the end of each fiscal year of the Partnership, the General Partner shall furnish to each person who was a Limited Partner at any time during such year the tax information necessary to file such Limited Partner's individual tax returns as shall be reasonably required by law. 10.05 Tax Matters Partner; Tax Elections; Special Basis Adjustments. (a) The General Partner shall be the Tax Matters Partner of the Partnership within the meaning of Section 6231(a)(7) of the Code. As Tax Matters Partner, the General Partner shall have the right and obligation to take all actions authorized and required, respectively, by the Code for the Tax Matters Partner. The General Partner shall have the right to retain professional assistance in respect of any audit of the Partnership by the Service and all out-of-pocket expenses and fees incurred by the General Partner on behalf of the Partnership as Tax Matters Partner shall constitute Partnership expenses. In the event the General Partner receives notice of a final Partnership adjustment under Section 6223(a)(2) of the Code, the General Partner shall either (i) file a court petition for judicial review of such final adjustment within the period provided under Section 6226(a) of the Code, a copy of which petition shall be mailed to all Limited Partners on the date such petition is filed, or (ii) mail a written notice to all Limited Partners, within such period, that describes the General Partner's reasons for determining not to file such a petition. 37 (b) All elections required or permitted to be made by the Partnership under the Code or any applicable state or local tax law shall be made by the General Partner in its sole and absolute discretion. (c) In the event of a transfer of all or any part of the Partnership Interest of any Partner, the Partnership, at the option of the General Partner, may elect pursuant to Section 754 of the Code to adjust the basis of the Properties. Notwithstanding anything contained in Article V of this Agreement, any adjustments made pursuant to Section 754 shall affect only the successor in interest to the transferring Partner and in no event shall be taken into account in establishing, maintaining or computing Capital Accounts for the other Partners for any purpose under this Agreement. Each Partner will furnish the Partnership with all information necessary to give effect to such election. 10.06 Reports to Limited Partners. (a) As soon as practicable after the close of each fiscal quarter (other than the last quarter of the fiscal year), the General Partner shall cause to be mailed to each Limited Partner a quarterly report containing financial statements of the Partnership, or of the Company if such statements are prepared solely on a consolidated basis with the Company, for such fiscal quarter, presented in accordance with generally accepted accounting principles. As soon as practicable after the close of each fiscal year, the General Partner shall cause to be mailed to each Limited Partner an annual report containing financial statements of the Partnership, or of the Company if such statements are prepared solely on a consolidated basis with the Company, for such fiscal year, presented in accordance with generally accepted accounting principles. The annual financial statements shall be audited by accountants selected by the General Partner. (b) Any Partner shall further have the right to a private audit of the books and records of the Partnership, provided such audit is made for Partnership purposes, at the expense of the Partner desiring it and is made during normal business hours. 38 ARTICLE XI. AMENDMENT OF AGREEMENT; MERGER; NOTICE 11.01 Amendment of Agreement; Merger. The General Partner's consent shall be required for any amendment to the Agreement or any merger, consolidation or combination of the Partnership. The General Partner, without the consent of the Limited Partners, may amend this Agreement in any respect or cause the Partnership to merge, consolidate or combine with or into any other partnership, limited partnership, limited liability company or corporation as contemplated in Section 7.01(c) or (d) hereof; provided, however, that the following amendments and any other such merger, consolidation or combination of the Partnership (a "Merger") shall require the consent of Limited Partners (other than the Company or any Subsidiary of the Company) holding more than 50% of the Percentage Interests of the Limited Partners (other than the Company or any Subsidiary of the Company): (a) any amendment affecting the operation of the Conversion Factor or the Redemption Right (except as provided in Sections 7.01(c) or 8.05(e)) in a manner adverse to the Limited Partners; (b) any amendment that would adversely affect the rights of the Limited Partners to receive the distributions payable to them hereunder, other than with respect to the issuance of additional Partnership Units pursuant to Section 4.02; or (c) any amendment that would alter the Partnership's allocations of Profit and Loss to the Limited Partners, other than with respect to the issuance of additional Partnership Units pursuant to Section 4.02. The consent of each Limited Partner shall be required for any amendment that would impose on the Limited Partners any obligation to make additional Capital Contributions to the Partnership. 11.02 Notice to Limited Partners. The General Partner shall notify the Limited Partners of the substance of any amendment or Merger requiring the consent of the Limited Partners pursuant to Section 11.01 at least 20 business days prior to the effective date of such amendment or Merger. ARTICLE XII. GENERAL PROVISIONS 12.01 Notices. All communications required or permitted under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or upon deposit in the United States mail, registered, postage prepaid return receipt requested, to the Partners at the addresses set forth in Exhibit A attached hereto; provided, however, that any Partner may specify a different address by notifying the General Partner in writing of such different address. Notices to the Partnership shall be delivered at or mailed to its specified office. 39 12.02 Survival of Rights. Subject to the provisions hereof limiting transfers, this Agreement shall be binding upon and inure to the benefit of the Partners and the Partnership and their respective legal representatives, successors, transferees and assigns. 12.03 Additional Documents. Each Partner agrees to perform all further acts and execute, swear to, acknowledge and deliver all further documents which may be reasonable, necessary, appropriate or desirable to carry out the provisions of this Agreement or the Act. 12.04 Severability. If any provision of this Agreement shall be declared illegal, invalid, or unenforceable in any jurisdiction, then such provision shall be deemed to be severable from this Agreement (to the extent permitted by law) and in any event such illegality, invalidity or unenforceability shall not affect the remainder hereof. 12.05 Entire Agreement. This Agreement and exhibits attached hereto constitute the entire Agreement of the Partners and supersede all prior written agreements and prior and contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof. 12.06 Rules of Construction. When the context in which words are used in the Agreement indicates that such is the intent, words in the singular number shall include the plural and the masculine gender shall include the neuter or female gender as the context may require. Unless the context otherwise indicates, references to particular Articles and Sections are references to Articles and Sections of this Agreement. 12.07 Headings. The Article headings or sections in this Agreement are for convenience only and shall not be used in construing the scope of this Agreement or any particular Article. 12.08 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original copy and all of which together shall constitute one and the same instrument binding on all parties hereto, notwithstanding that all parties shall not have signed the same counterpart. 12.09 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia. 40 IN WITNESS WHEREOF, the parties hereto have hereunder affixed their signatures to this Second Amended and Restated Agreement of Limited Partnership, all as of the ____ day of August, 1997. GENERAL PARTNER: UNITED DOMINION REALTY TRUST, INC. By: /s/ Katheryn E. Surface ----------------------- Katheryn E. Surface Its: Vice President LIMITED PARTNERS: UDRT OF NORTH CAROLINA, L.L.C. By: United Dominion Realty Trust, Inc., Sole Managing Member By: /s/ Katheryn E. Surface ----------------------- Katheryn E. Surface Its: Vice President EXHIBIT A
Agreed Value of Partner Cash Non-Cash Partnership Percentage and Address Contribution Contribution Units Interest General Partner: 1,300 772,834.29 52,948.98 1% 128,700 76,510,594.71 5,241,947.00 99% United Dominion Realty Trust, Inc. 10 South Sixth Street, Suite 203 Richmond, Virginia 23219 Limited Partners: UDRT of North Carolina, L.L.C. c/o United Dominion Realty Trust, Inc. 10 South Sixth Street, Suite 203 Richmond, Virginia 23219
[UPDATE TO COME FROM UDRT] EXHIBIT B NOTICE OF EXERCISE OF REDEMPTION RIGHT In accordance with Section 8.05 of the Second Amended and Restated Agreement of Limited Partnership (the "Agreement") of United Dominion Realty, L.P., the undersigned hereby irrevocably (i) presents for redemption ________ Partnership Units in United Dominion Realty, L.P. in accordance with the terms of the Agreement and the Redemption Right referred to in Section 8.05 thereof, (ii) surrenders such Partnership Units and all right, title and interest therein, and (iii) directs that the Cash Amount or REIT Shares Amount (as defined in the Agreement) as determined by the General Partner deliverable upon exercise of the Redemption Right be delivered to the address specified below, and if REIT Shares (as defined in the Agreement) are to be delivered, such REIT Shares be registered or placed in the name(s) and at the address(es) specified below. Dated:________ __, _____ Name of Limited Partner: ------------------------------ (Signature of Limited Partner) ------------------------------ (Mailing Address) ------------------------------ (City) (State) (Zip Code) Signature Guaranteed by: ------------------------------ If REIT Shares are to be issued, issue to: Please insert social security or identifying number: Name: EX-12 6 EXHIBIT 12 EXHIBIT 12 Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends (Dollars in thousands)
Three Months ended September 30, Nine Months Ended September 30, -------------------------------- --------------------------------- 1997 1996 1997 1996 ----------- ----------- ---------- --------- Net income before extraordinary item $23,309 $9,818 $55,099 $27,544 Add: Portion of rents representative of the interest factor 111 62 301 177 Interest on indebtedness 19,346 13,530 58,265 35,413 ----------- -------------- ------------- ----------- Earnings $42,766 $23,410 $113,665 $63,134 =========== ============== ============= =========== Fixed charges and preferred stock dividend: Interest on indebtedness $19,346 $13,530 $58,265 $35,413 Capitalized interest 852 143 2,082 397 Portion of rents representative of the interest factor 111 62 301 177 ------------ ---------------- -------------- ----------- Fixed charges 20,309 13,735 60,648 35,987 ------------ ---------------- -------------- ----------- Add: Preferred stock dividend 5,653 2,428 11,692 7,284 ------------ ---------------- -------------- ----------- Combined fixed charges and preferred stock dividend $25,962 $16,163 $72,340 $43,271 ============ ================ ============== =========== Ratio of earnings to fixed charges 2.11 x 1.70 x 1.87 x 1.75 x Ratio of earnings to combined fixed charges and preferred stock dividend 1.65 1.45 1.57 1.46
EX-27 7 EXHIBIT 27
5 9-MOS DEC-31-1997 SEP-30-1997 5,383 0 0 0 0 65,639 2,382,267 200,538 2,252,751 84,622 1,100,145 0 255,000 88,162 714,340 2,252,751 284,182 285,049 0 121,216 63,039 0 58,265 55,099 0 55,099 0 0 0 55,099 .50 .50
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