UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FORM 10-K
For Fiscal Year Ended: December 31, 1993 Commission File No.1-7533
FEDERAL REALTY INVESTMENT TRUST
(Exact name of registrant as specified in its charter)
District of Columbia 52-0782497
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
4800 Hampden Lane, Suite 500, Bethesda, Maryland 20814
(Address of principal executive offices) (Zip Code)
(301) 652-3360
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Common Shares of Beneficial Interest New York Stock Exchange
Common Stock Purchase Rights New York Stock Exchange
Preferred Shares of Beneficial Interest * New York Stock Exchange
Senior Securities * New York Stock Exchange
Subordinated Securities * New York Stock Exchange
* None issued, registered pursuant to a shelf registration
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes x No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
[ ]
At March 8, 1994, the aggregate market value of Common Shares of
Beneficial Interest of Federal Realty Investment Trust held by nonaffiliates
was $803 million based upon the closing price of such Shares on the New York
Stock Exchange.
Indicate the number of shares outstanding of each of the issuer's classes
of common stock.
Class Outstanding at March 8, 1994
Common Shares of Beneficial Interest 28,092,030
2
DOCUMENTS INCORPORATED BY REFERENCE
PART III
Portions of the Trust's Proxy Statement in connection with its Annual
Meeting to be held on May 4, 1994 (hereinafter called "1994 Proxy
Statement").
The Exhibit Index for this report is found on page 23.
This report, including Exhibits, contains 97 pages.
3
PART I & II
Item 1. Business
Federal Realty Investment Trust is an owner, operator and redeveloper of
community and neighborhood shopping centers. The Trust is a self-
administered real estate investment trust, founded in 1962. Since January
1989, the Trust has been managing, leasing, and supervising renovations of
most of its properties.
The Trust operates in a manner intended to enable it to qualify as a real
estate investment trust (REIT) under Sections 856-860 of the Internal
Revenue Code. Under those sections, a REIT which distributes at least 95%
of its real estate investment trust taxable income to its shareholders each
year and which meets certain other conditions will not be taxed on that
portion of its taxable income which is distributed to its shareholders. The
Trust intends to continue to qualify and to distribute substantially all of
its taxable income to its shareholders. Therefore, no provision for Federal
income taxes is required.
The Trust's real estate portfolio has increased from 42 properties as of
January 1989 to 49 properties as of December 31, 1993. During this five
year period the Trust acquired 11 shopping centers, containing approximately
2.5 million square feet, at a cost of $196.0 million and sold four shopping
centers containing 692,000 square feet. During this same period the Trust
spent over $130 million to renovate, expand and improve its properties. Two
of the 11 shopping centers acquired during the last five years were acquired
under capital leases with an original recorded value of $34.0 million; one
was acquired subject to a $2.5 million mortgage and the remainder were
acquired with cash. This growth was financed primarily through borrowings
and equity offerings, since each year the Trust has distributed all or the
majority of its cash provided by operating activities to its shareholders.
At December 31, 1993 the Trust owned or had a leasehold interest in 47
community and neighborhood shopping centers and one air-conditioned
partially enclosed mall. These 48 shopping centers contain in the aggregate
approximately 10.6 million net rentable square feet. The Trust's shopping
4
centers usually feature supermarket, drug or discount department store
chains. There are approximately 1,500 tenants providing a wide range of
retail products and services. These tenants range from sole proprietorships
to national retailers. Fourteen of the shopping centers are located in the
Maryland and Virginia suburbs of Washington, D.C., eleven are in
Pennsylvania, nine are in New Jersey, three are in Virginia, two are in the
Baltimore, Maryland suburbs, two are in Illinois and the remainder are in
North Carolina, Michigan, Georgia, New York, Tennessee, Louisiana and
Massachusetts. The Trust also owns one apartment development located in
Silver Spring, Maryland, containing 282 units. No single property or tenant
accounts for more than 10% of the Trust's revenues.
An important part of the Trust's investment strategy has been and is to
acquire older, well-located shopping centers and enhance their revenue
potential through a program of renovation, re-leasing and re-merchandising.
In addition the Trust is currently seeking to acquire sites to develop new
shopping centers. The Trust's policy is to execute tenant leases which
provide for additional rent based upon tenant sales revenue and annual rent
escalations. Tenants are typically required to pay their proportionate
share of on-site operating expenses and real estate taxes. During the years
ended December 31, 1993, 1992, and 1991, shopping centers have contributed
94%, 92% and 93%, respectively, of the Trust's total revenue.
The Trust intends to continue to invest substantially all of its assets in
shopping centers. The Trust is currently limited to investing east of the
Mississippi River; to change this limitation requires Trustee approval.
Investments are not required to be based on specific allocation by type of
property. The extent to which the Trust may mortgage or otherwise finance
investments varies with the investment involved and the economic climate.
The success of the Trust depends upon, among other factors, the trends of
the economy, construction costs, retailing trends, income tax laws,
increases or decreases in operating expenses, governmental regulations,
population trends, zoning laws, legislation and the ability of the Trust to
keep its properties leased at profitable levels. The Trust competes for
tenants with other real estate owners and the Trust's properties account for
only a small fraction of the shopping centers available for lease. The
5
Trust competes for investment opportunities and mortgage financing with
individuals, partnerships, corporations, financial institutions, life
insurance companies, pension funds and trust funds. The Trust engages in a
continuing program to identify desirable properties on which offers to
acquire are made from time to time. Similarly, the Trust regularly reviews
its portfolio and from time to time considers the sale of certain of its
properties.
Investments in real property create a potential for environmental
liability on the part of the current and previous owners of, or any mortgage
lender on, such real property. If hazardous substances are discovered on or
emanating from any properties, the owner or operator of the property may be
held liable for costs and liabilities relating to such hazardous substances.
The Trust's current policy is to obtain an environmental study on each
property it seeks to acquire. On recent acquisitions, any substances
identified prior to closing which present an immediate environmental hazard
have been or are in the process of remediation. Costs related to the
abatement of asbestos which increase the value of Trust properties are
capitalized. Other costs are expensed. In 1993 approximately $1.5 million,
of which $1.0 was capitalized abatement costs, was spent on environmental
matters. The Trust has budgeted a range of $1.5 million to $2.7 million for
1994 for environmental matters, a majority of which is projected for
asbestos abatement. (See Note 4 of Notes to Consolidated Financial
Statements.)
Current Developments
The Trust believes that now is an opportune time to acquire shopping
centers. The credit environment for real estate companies has improved and
with the recent recession ended, the Trust expects an increased demand for
retail space. During 1992 and 1993 in order to improve its capital
structure and to finance the expansion its real estate portfolio, the Trust
raised equity and debt. The Trust took advantage of the favorable interest
rate environment in 1993 by replacing higher rate debt with lower rate debt
and replaced near term maturing debt with longer term debt. As a result of
these transactions, the Trust's debt to equity ratio has dropped to 1.28 to
1 as of December 31, 1993.
6
In April 1993 the Trust sold 2.8 million shares of beneficial interest
("shares") in a public offering, raising net proceeds of $72.8 million. In
December 1993 another 220,000 shares were issued for $5.4 million in a
private placement in connection with the long term lease of a property.
The Trust called its 8 3/4% convertible subordinated debentures and its
8.65% Senior Notes for redemption in 1993. The Trust redeemed $173,000
principal amount of the 8 3/4% debentures at a price of $1017.50 per
debenture on March 15; the balance of the debentures that had been
outstanding, or $2.2 million, were converted to shares. The Senior Notes
were redeemed on May 14, 1993 at a price of $1010 per Note for a total
redemption price of $50.5 million.
During 1993 the Trust purchased $3.7 million of its 5 1/4% convertible
subordinated debentures due 2002, so that at December 31, 1993 there was
$40.2 million of the original $100.0 million outstanding.
In October 1993 the Trust took advantage of favorable financing rates and
issued in Europe $75.0 million of 5 1/4% convertible subordinated
debentures, raising cash proceeds of approximately $73.0 million. The
debentures, which mature in 2003, are convertible into shares at $36 per
share.
During 1993 the Trust prepaid $34.9 million of mortgage obligations whose
interest rates were higher than current rates.
The Trust acquired seven shopping centers in 1993. Pan Am Shopping Center
in Fairfax, Virginia was acquired for $21.6 million in cash; Gaithersburg
Square in Gaithersburg, Maryland was purchased for $11.0 million in cash and
the assumption of a $2.0 million liability which is the estimated cost to
remediate certain preexisting environmental issues; Quince Orchard Plaza in
Gaithersburg, Maryland and its adjoining office building were purchased for
$10.9 million in cash and the assumption of a liability of approximately
$250,000; Crossroads Shopping Center in Highland Park, Illinois was
purchased for $16.2 million in cash; Bala Cynwyd Shopping Center in
suburban Philadelphia, Pennsylvania was purchased for $17.0 million in cash;
Dedham Plaza in Dedham, Massachusetts was purchased for $25.0 million in
7
cash and the assumption of a $250,000 liability to remediate existing
environmental issues; and the leasehold interest in Bethesda Row in
Bethesda, Maryland was acquired with $6.2 million in cash.
The Trust continued its strategy of renovating, expanding and
reconfiguring its centers in 1993, spending approximately $34.3 million.
These improvements included $6.5 million to purchase and renovate a
department store building at The Shops at Willow Lawn, $4.6 million to begin
renovation and retenanting of Ellisburg Circle, $1.5 million for the first
phase of the redevelopment at Huntington Shopping Center, and $2.3 million
to begin the renovation and retenanting of Troy Shopping Center.
At December 31, 1993 the Trust had 178 full-time employees.
8
Item 2. Properties
Shopping Centers
The following table sets forth information concerning each shopping center in which the Trust owns an
equity interest or has a leasehold interest as of December 31, 1993. Except as otherwise noted, shopping
centers are 100% owned in fee by the Trust.
Year Year Square Feet Number of Acres Occupancy Principal Tenants
Completed Acquired (1) Tenants (1)
Allwood 1958 1988 52,000 8 5 97% Grand Union
Clifton, N.J. (2) Mandee Shop
Andorra 1953 1988 252,000 46 23 98% Acme Markets
Philadelphia, PA Andorra Theater
(3) Clover
Bala Cynwyd 1955 1993 228,000 26 22 94% Lord & Taylor
Bala Cynwyd, PA Olive Garden
Barracks Road 1958 1985 450,000 83 39 99% Rose's
Charlottesville, Safeway
VA (3) The Grocery Store
Bethesda Row 1991 1993 223,000 64 8 94% Giant Food
Bethesda, MD Giant Pharmacy
(2)(6)
Blue Star 1959 1988 398,000 32 55 100% Caldor
Watchung, N.J. (2) Shop Rite
Toys R Us
Brainerd Village 1960 1987 216,000 26 20 68% Office Depot
Chattanooga, TN 50 Off
9
Year Year Square Feet Number of Acres Occupancy Principal Tenants
Completed Acquired (1) Tenants (1)
Brick Plaza 1958 1989 314,000 34 42 100% A&P Supermarket
Brick Township, Steinbach's
N.J. (2)
Brunswick 1957 1988 261,000 23 22 100% Caldor
North Brunswick, Grand Union
N.J. (2)
Clifton 1959 1988 80,000 14 8 100% Acme Markets
Clifton, N.J. (2) Channel Home
Congressional 1965 1965 247,000 36 22 72% Fresh Fields
Plaza Tower Records
Rockville, MD (4)
Crossroads 1959 1993 197,000 30 15 97% Gold Standard
Highlands Park, Liquors
IL TJ Maxx
Dedham 1959 1993 255,000 38 18 99% Ames
Dedham, MA Workout Plus
Eastgate 1963 1986 159,000 33 17 98% Food Lion
Chapel Hill, N.C. Southern Season
Ellisburg Circle 1959 1992 255,000 34 27 98% Ross Dress for
Cherry Hill, N.J. Less
Shop Rite
Falls Plaza 1962 1967 67,000 10 6 100% Giant Food
Falls Church, VA Peoples Drug
Feasterville 1958 1980 98,000 16 12 96% Eric Theater
Feasterville, PA Genuardi Markets
(2) Officemax
10
Year Year Square Feet Number of Acres Occupancy Principal Tenants
Completed Acquired (1) Tenants (1)
Federal Plaza 1970 1989 243,000 40 18 98% Bed, Bath & Beyond
Rockville, MD Comp USA
T.J. Maxx
Flourtown 1957 1980 106,000 21 15 98% Channel Home
Flourtown, PA Genuardi Markets
Gaithersburg 1966 1993 162,000 34 17 88% Peoples Drug
Square Superfresh Food
Gaithersburg, MD Markets
Governor Plaza 1963 1985 269,000 21 26 97% Frank's Nursery
Glen Burnie, MD Office Depot
(3) Syms
Hamilton 1961 1988 180,000 14 18 100% Shop Rite
Hamilton, N.J. Steven's Furniture
(2)
Huntington 1962 1988 275,000 13 21 100% Bed, Bath and
Huntington, N.Y. Beyond
(2) Service
Merchandise
Toys R Us
Lancaster 1958 1980 106,000 17 11 93% Giant Eagle
Lancaster, PA (2)
Langhorne Square 1966 1985 189,000 32 21 98% Luxury Linens
Levittown, PA Marshalls
Laurel Centre 1956 1986 379,000 61 26 95% Giant Food
Laurel, MD Marshalls
Toys R US
11
Year Year Square Feet Number of Acres Occupancy Principal Tenants
Completed Acquired (1) Tenants (1)
Lawrence Park 1972 1980 334,000 41 28 98% Acme Markets
Broomall, PA (2) Best Products
Rickel Home Center
Loehmann's Plaza 1971 1983 245,000 47 18 95% Holiday Spa
Fairfax County, Linens N Things
VA (7)
Mid-Pike Plaza 1963 1982 301,000 23 20 100% Syms
Rockville, MD (2) Toys R Us
North City Plaza 1972 1987 111,000 13 26 92% Joseph's
(5) Supermarket
New Castle, PA K-Mart
Northeast 1959 1983 303,000 37 19 96% Burlington Coat
Philadelphia, PA Factory
(2) Marshalls
Northeast Plaza 1952 1986 446,000 47 44 92% Publix
Atlanta, GA Levitz Furniture
Old Keene Mill 1968 1976 92,000 21 11 95% Fresh Fields
Springfield, VA Sassafras
Pan Am 1979 1993 218,000 27 25 91% Micro Center
Fairfax, VA Safeway
Perring Plaza 1963 1985 413,000 14 27 96% Home Depot
Baltimore, MD (3) Metro Foods
Quince Orchard 1975 1993 241,000 31 16 91% Circuit City
Gaithersburg, MD M J Design
(6) U.S. Department of
Energy
12
Year Year Square Feet Number of Acres Occupancy Principal Tenants
Completed Acquired (1) Tenants (1)
Roseville 1964 1973 140,000 3 20 100% F & M Distributors
Roseville, MI Handy Andy
Rutgers 1973 1988 217,000 21 27 100% Foodtown
Franklin, N.J. K-Mart
(2)
Shillington 1956 1980 74,000 20 8 81% Homestyle Buffet
Shillington, PA Rite Aid
(2)
Town & Country 1968 1973 236,000 25 19 100% Burlington Coat
Springfield, IL Factory
National Super
Market
Town & Country 1974 1990 214,000 35 26 81% Weiner's
Hammond, La (6) Department Store
Winn-Dixie
Troy 1966 1980 205,000 19 19 97% Comp USA
Parsippany-Troy, K-Mart
N.J. (2) Pathmark
Tysons Station 1954 1978 50,000 15 4 100% Linens N Things
Falls Church, VA Sassafras
West Falls 1960 1972 60,000 15 5 100% Staples
Falls Church, VA
Wildwood 1958 1969 84,000 32 13 100% Peoples Drug
Bethesda, MD Sutton Place
Gourmet
13
Year Year Square Feet Number of Acres Occupancy Principal Tenants
Completed Acquired (1) Tenants (1)
Willimsburg 1961 1986 239,000 37 21 96% Food Lion
Williamsburg, VA Peebles
Rose's
Willow Grove 1953 1984 220,000 32 14 100% Marshalls
Shopping Center Toys R Us
Willow Grove, PA
The Shops at 1957 1983 451,000 106 37 95% Leggetts
Willow Lawn J.C. Penney
Richmond, VA (6)
(1) Occupancy is expressed as a percentage of rentable square feet and includes square feet covered
by leases for stores not yet opened.
(2) The Trust has a leasehold interest in this property.
(3) The Trust owns a 99.9% partnership interest in this center.
(4) The Trust owns a 49% equity interest in this center.
(5) The Trust owns an 88% partnership interest in this center.
(6) The Trust owns this property subject to a ground lease.
(7) The Trust has a 1% general partnership interest and manages the partnership. A 99% interest was
sold to a limited partner.
Apartments
The following table sets forth information concerning the Trust's apartment development as of December
31, 1993 which is 100% owned by the Trust in fee. This development is not subject to rent control.
14
Property Year Year Eff. and
Completed Acquired Acres 1-BR 2-BR 3-BR Total Occupancy
Rollingwood 1960 1971 14 58 163 61 282 95%
Silver Spring, MD
9 three-story buildings
15
Item 3. Legal Proceedings.
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
Market Quotations
Dividends
Quarter ended High Low Paid
December 31, 1993 $29 7/8 $24 1/8 $.39
September 30, 1993 30 1/4 25 1/2 .385
June 30, 1993 28 7/8 24 3/4 .385
March 31, 1993 29 23 7/8 .385
December 31, 1992 $25 1/4 $22 $.385
September 30, 1992 25 21 3/8 .38
June 30, 1992 21 3/4 20 .38
March 31, 1992 22 1/2 18 3/4 .38
The number of holders of record for Federal Realty's shares of
beneficial interest at December 31, 1993 was 4,564.
Dividends declared per quarter during the last two fiscal years were as
follows:
16
Quarter Ended 1993 1992
March 31 $.385 $.38
June 30 .385 $.38
September 30 .39 $.385
December 31 .39 $.385
The Trust's common shares of beneficial interest are listed on the New
York Stock Exchange.
Item 6. Selected Financial Data.
In thousands, except per share data
Year ended December 31,
1993 1992 1991 1990 1989
____________________________________________________________________________
Operating Data
Rental Income $105,948 $89,971 $88,350 $80,698 $72,771
Income before gain
on sale of real
estate and extra-
ordinary item 16,114 6,987 4,324 4,894 4,782
Gain on sale of real
estate --- 2,501 61 947 7,215
Extraordinary item -
gain (loss) on early
extinguishment of
debt 2,016 (58) 415 --- ---
Net income 18,130 9,430 4,800 5,841 11,997
Funds from Operations 41,489 30,020 26,246 23,985 20,956
Dividends declared 42,021 36,306 25,771 24,048 20,440
Weighted average
17
number of shares
outstanding 27,009 22,767 17,304 16,695 14,672
Per share:
Net income .67 .41 .28 .35 .82
Dividends declared 1.55 1.53 1.50 1.44 1.38
____________________________________________________________________________
Balance Sheet Data
Real estate at cost $758,088 $598,867 $566,056 $555,879 $514,552
Total assets 690,943 603,811 566,062 553,396 565,779
Mortgage and capital
lease obligations 218,545 245,694 225,859 203,287 204,616
Notes payable 30,519 6,117 11,665 31,222 29,357
Senior notes --- 50,000 50,000 50,000 50,000
8 3/4% convertible
subordinated
debentures --- 2,371 4,338 4,576 5,630
5 1/4% convertible
subordinated
debentures due 2002 40,167 43,847 87,665 100,000 100,000
5 1/4% convertible
subordinated
debentures due 2003 75,000 --- --- --- ---
Shareholders' equity 284,199 222,878 151,480 129,346 146,114
Number of shares
outstanding 28,018 24,718 19,687 16,716 16,642
18
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
Federal Realty meets its liquidity requirements through net cash
provided by operating activities, long-term borrowing through debt offerings
and mortgages, medium and short-term borrowing under lines of credit, and
equity offerings. Because all or a significant portion of the Trust's net
cash provided by operating activities is distributed to shareholders,
capital outlays for property acquisitions, renovation projects and debt
repayments require funding from borrowing or equity offerings.
In order to improve its capital structure and to finance and expand its
real estate portfolio, the Trust raised equity and debt during 1992 and
1993. The Trust took advantage of the favorable interest rate environment
by replacing higher rate debt with lower rate debt and replaced near term
maturing debt with longer term debt. Equity has increased to $284.2 million
at December 1993, while total debt was $364.2 million at December 31, 1993.
The Trust's debt to equity ratio has consequently dropped from 2.5 to 1 at
December 31, 1991 to 1.28 to 1 at December 31, 1993.
In June 1992 the Trust sold 3.4 million common shares of beneficial
interest ("shares") in a public offering, raising net proceeds of $66.5
million. In April 1993 another 2.8 million shares were issued in a public
offering, netting proceeds of $72.8 million. In December 1993 another
220,000 shares were issued for $5.4 million in a private placement in
connection with the long-term lease of a property.
In March 1992 the Trust exchanged $22.6 million principal amount of its
5 1/4% convertible subordinated debentures due 2002 for 1.3 million shares.
Another $21.2 million principal amount of these debentures were retired in
1992 when they were repurchased by the Trust with proceeds from the public
offerings. The Trust purchased an additional $3.7 million of these
debentures in 1993, so that at December 31, 1993 there was $40.2 million of
the original $100.0 million outstanding.
19
The Trust called its 8 3/4% convertible subordinated debentures and its
8.65% Senior Notes for redemption in 1993. The Trust redeemed $173,000
principal amount of the 8 3/4% debentures at a price of $1017.50 per
debenture on March 15; the balance of the debentures that had been
outstanding or $2.2 million were converted into shares. The Senior Notes
were redeemed on May 14, at a price of $1010 per note for a total redemption
price of $50.5 million.
In October 1993 the Trust took advantage of favorable financing rates
and issued in Europe $75.0 million of 5 1/4% convertible subordinated
debentures, realizing cash proceeds of approximately $73.0 million. The
debentures, which mature in 2003, are convertible into shares at $36 per
share. The debentures are redeemable by the Trust, in whole, at any time
after October 28, 1998 at 100% of the principal amount plus accrued
interest.
The Trust placed a $30.0 million mortgage on Federal Plaza in 1992;
the mortgage bears interest beginning at 8 1/4%, resetting every three
years, and matures in 2001. During 1992 the Trust prepaid $6.3 million of
mortgage obligations and then in 1993 the Trust prepaid another $34.9
million of mortgage obligations; the interest rates on these mortgages were
higher than current rates.
At December 31, 1993 the Trust had $70.0 million of unsecured medium-
term revolving credit facilities with three banks. All three facilities
require fees and have covenants requiring a minimum shareholders' equity and
a maximum ratio of debt to net worth. The Trust uses these facilities to
fund acquisitions and other cash requirements until conditions are favorable
for issuing equity or long term debt. The maximum drawn under these
facilities during 1993 was $64.1 million; at December 31, 1993 the Trust had
$24.4 million outstanding under these facilities. The average weighted
interest rate on borrowings during 1993 on these facilities was 4.2%. These
medium term facilities replace a $20.0 million unsecured line of credit
which was available at December 1992. The increase in the Trust's revolving
credit facilities are indicative of the improvement since 1991 in the
credit environment. The Trust obtained an additional unsecured revolving
20
credit facility of $15.0 million in February 1994, bringing its total
availability to $85.0 million.
In February 1994 the Trust borrowed $22.5 million, which was used to
pay down the December 1993 balances on the revolving credit facilities. The
loan, which is secured by the Northeast Plaza Shopping Center, bears
interest at 150 basis points over LIBOR, the London Interbank Offered Rate,
and is due on January 31, 1995.
In June 1993 Standard and Poor's raised the ratings on the Trust's
subordinated convertible debentures from BBB- to BBB, reflecting the
successful results of the Trust's restructuring of its debt and increasing
of its equity. In September 1993 Moody's Investors Service also upgraded
the Trust's subordinated debt, from Ba1 to Baa2.
The Trust's long term debt has varying maturity dates and in a number
of instances includes balloon payments or other contractual provisions that
could require significant repayments during a particular period. The
earliest balloon repayment is in April 1994, when the holders of the Trust's
5 1/4% convertible subordinated debentures due 2002 may require the Trust to
redeem the notes for $48.2 million (120% of the principal amount). The next
balloon repayment is in 1998 when approximately $41.3 million of mortgages
are due.
Major expenditures of capital by the Trust during 1993 included the
following: (1) $101.8 million to acquire six shopping centers; (2) $6.2
million incurred in connection with the long term lease of a seventh
shopping center; (3) $32.5 million to prepay mortgages; (4) $50.5 million to
redeem the Senior Notes; (5) $4.6 million to redeem portions of the
convertible subordinated debt; and (6) $34.3 million in improvements to
properties. These improvements included $6.5 million to purchase and
renovate a department store building at The Shops at Willow Lawn, $4.6
million to begin renovation and retenanting of Ellisburg Circle Shopping
Center, $1.5 million for the first phase of the redevelopment at Huntington
Shopping Center, $2.3 million to begin the renovation and retenanting at
Troy Shopping Center and $9.5 million in tenant work. Cash requirements for
21
these expenditures were met by the net proceeds of the recent equity and
debt offerings and from borrowings on the revolving credit facilities.
Major expenditures of capital by the Trust during 1992 included the
following: (1) $15.3 million to purchase Ellisburg Circle Shopping Center;
(2) $9.1 million to purchase the land underlying Wildwood Shopping Center
which had been subject to a long term ground lease; (3) $8.5 million to
repay short term borrowings; (4) $23.6 million to repurchase 5 1/4%
convertible subordinated debentures due 2002; (5) $8.0 million to prepay
mortgages; and (6) $15.2 million in improvements to properties. Cash
requirements for these expenditures were met by the net proceeds from the
sale of Sargent Road and 25th Street Shopping Centers, the net proceeds from
the mortgage on Federal Plaza and the proceeds of public offerings.
The Trust has budgeted $49.0 million for capital improvements to its
properties in 1994. These improvements include: (1) $14.0 million to begin
the renovation and redevelopment of Congressional Plaza; (2) $4.0 million to
begin renovation at Brick Plaza; (3) $6.0 million to begin renovation of
Gaithersburg Square; and (4) approximately $9.0 million for tenant work. In
addition the Trust has budgeted $48.2 million to redeem the 5 1/4%
convertible subordinated debentures due 2002, which the noteholders may
require the Trust to redeem in April 1994, and $4.1 million to exercise an
option to purchase the land at Northeast Shopping Center in December 1994.
These expenditures will be paid from proceeds from borrowings under its
medium-term revolving credit facilities and from the issuance of long term
debt or equity. In preparation for the future issuance of such long term
debt or equity, the Trust filed a shelf registration statement with the
Securities and Exchange Commission, which became effective in December 1993,
under which up to $300 million of debt securities, preferred shares or
common shares may be issued.
The State of New Jersey Division of Taxation has assessed the Trust
$364,000 in taxes, penalty and interest for the years 1985 through 1990,
since the State has disallowed the dividends paid deduction in computing New
Jersey taxable income. The Trust has filed a complaint in the Tax Court of
New Jersey contesting the assessment since the Trust believes that it is
22
entitled to the deduction. At this time, the outcome of this matter is
unknown.
The North Carolina Department of the Environment, Health and Natural
Resources issued a Notice of Violation ("NOV") against a dry cleaner tenant
at Eastgate Shopping Center in Chapel Hill, North Carolina concerning a
spill at the shopping center. As owner of the shopping center, the Trust
was named in and received a copy of the NOV. Estimates to remediate the
spill range from $300,000 to $500,000. An agreement is being drawn with two
previous owners of the shopping center to share the costs to remediate.
The Trust has recorded a liability of $120,000 as its estimated share of the
cleanup costs.
Contaminants at levels in excess of New Jersey cleanup standards were
identified at a shopping center in New Jersey. The Trust has retained an
environmental consultant to investigate the contamination. The Trust is
also evaluating whether it has insurance coverage for this matter. At this
time, the Trust is unable to determine what the range of remediation costs
might be. The Trust has also identified chlorinated solvent contamination
at two other properties. In each case, the contamination appears to be
linked to the current and/or previous dry cleaner. The Trust intends to
look to the responsible parties for any remediation effort. Evaluation of
these situations is preliminary and it is impossible to estimate the range
of remediation costs, if any.
The Trust reserved at closing $2.25 million for environmental issues
principally associated with the recently acquired Gaithersburg Square.
Pursuant to an indemnity agreement entered into with the seller at closing,
the Trust agreed to take certain actions with respect to identified
chlorinated solvent contamination. The seller indemnified the Trust for
certain third party claims and government requirements related to
contamination at adjacent properties.
Management believes that the combination of cash available at December
31, 1993, the revolving credit facilities, and the unencumbered value of the
Trust's properties provide the Trust with adequate capital resources and
liquidity for operating purposes in the near future. The Trust, however,
23
continues to renovate its existing centers and seeks to acquire more
shopping centers. The Trust will need to raise equity or issue additional
debt in order to fund its planned renovations in 1994 and to purchase any
additional shopping centers. The Trust believes that it has the ability to
raise this needed capital through the offering of equity and debt securities
so that it may pursue its growth plans as well as to meet its longer term
capital and debt financing needs, including scheduled loan payments and
contractual repayment obligations.
Results of Operations
Funds from operations is defined as income before depreciation and
amortization and extraordinary items less gains on sale of real estate.
Management believes that funds from operations is an appropriate
supplemental measure of the Trust's operating performance because it
believes that reductions for depreciation and amortization charges are not
meaningful in evaluating income-producing real estate, which have
historically been appreciating assets. The Trust acquires, evaluates and
sells income-producing properties based upon operating income without taking
into account property depreciation and amortization charges and utilizes
funds from operations, together with other factors in setting shareholder
distribution levels. Gains on sale of real estate and extraordinary items
are also excluded from this supplemental measure of performance because such
amounts are not part of the ongoing operations of the Trust's portfolio.
Funds from operations does not replace net income as a measure of
performance or net cash provided by operating activities as a measure of
liquidity.
Funds from operations increased 38% in 1993 to $41.5 million from $30.0
million in 1992. Funds from operations increased 14% in 1992 to $30.0
million from $26.2 million in 1991.
The Trust's shopping center leases generally provide for minimum rents,
with periodic increases. Most shopping center tenants pay a majority of on-
site operating expenses. Many leases also contain a percentage rent clause
which calls for additional rents based on tenant sales, so that at a given
24
sales volume if prices increase, so does rental income. These features in
the Trust leases reduce the Trust's exposure to higher costs caused by
inflation, although inflation has not been significant in recent years.
Rental income, which consists of minimum rent, percentage rent, and
cost recoveries, increased from $90.0 million in 1992 to $105.9 million in
1993. If centers acquired and sold in 1992 and 1993 are excluded, rental
income increased 8.8% from $88.5 million in 1992 to $96.3 million in 1993.
Perring Plaza, whose redevelopment was completed late in 1992, and
Huntington Shopping Center, whose first phase of retenanting and
redevelopment was completed in 1993, contributed 39% of this increase.
Rental income increased from $88.4 million in 1991 to $90.0 million in 1992;
if centers acquired and sold in 1992 and 1991 are excluded, rental income
increased 3.5% from $85.5 million to $88.8 million.
Minimum rents increased from $66.9 million in 1991 to $68.8 million in
1992 to $81.3 million in 1993. If centers acquired and sold during these
years are excluded, minimum rents increased from $64.7 million in 1991 to
$67.8 million in 1992 to $73.6 million in 1993. Forty-eight percent of the
increase from 1992 to 1993 was contributed by Perring Plaza and Huntington
Shopping Center. Of the 1992 increase, $400,000 was contributed by Perring
Plaza and $1.2 million was contributed by Federal Plaza which was under
redevelopment until May 1991.
Cost reimbursements, which generally increase as expenses increase,
rose from $14.7 million in 1991 to $14.9 million in 1992 to $18.2 million in
1993. Excluding centers acquired and sold during the three year period,
cost reimbursements increased from $14.3 million in 1991 to $14.6 million in
1992 to $16.4 million in 1993. The increase in 1993 recoveries relates to a
corresponding increase in expense in 1993 as discussed below, while the
small increase in 1992 from 1991 relates to the corresponding slight
increase in expense in 1992 as compared to 1991.
Percentage rents are a fluctuating source of revenue based on tenant
sales volume and lease rollovers. When leases are renewed the Trust seeks
to set minimum rent at levels that include the past year's percentage rents.
Percentage rents have decreased from $4.6 million in 1991 to $4.2 million in
25
1992 to $4.1 million in 1993. Excluding centers sold and acquired during
the three year period, percentage rents have decreased from $4.3 million in
1991 to $4.0 million in 1992 to $3.9 million in 1993. The decreases result
primarily from rolling percentage rent into minimum rents as leases renew
and from the expiration of certain leases.
Other property income, which includes items which tend to fluctuate
from period to period, such as utility reimbursements, telephone income,
merchant association dues, lease termination fees and temporary occupant
income, has risen from $4.6 million in 1991 to $4.7 million in 1992 to $5.5
million in 1993. Excluding centers bought and sold during the three year
period, other property income increased from $4.4 million in 1991 to $4.6
million in 1992 to $4.8 million in 1993. The increase in 1993 was due
primarily to an increase in lease termination fees.
Rental expenses have increased from year to year in dollar amount,
especially in 1993 where $2.1 million of the increase is due to newly
acquired centers. However, rental expenses have remained fairly stable as a
percentage of property income (rental income plus other income); 21.9% in
1991, 22.1% in 1992 and 23.8% in 1993. Of the expenses included in rental
expense, the greatest changes have been in repairs and maintenance and other
operating expenses. Snow removal expense is the primary reason for the
increase in repairs and maintenance. Other operating expenses have increased
due to an increase in bad debt, environmental expense and marketing expenses
for the centers. Real estate taxes have remained stable as a percentage of
property income, at approximately 9.3%.
Depreciation and amortization charges have increased from $21.9 million
in 1991 to $23.0 million in 1992 to $25.4 million in 1993. The increase in
1993 is due to depreciation on the recent acquisitions and renovations,
while in 1992 the increase was primarily due to increased depreciation on
Federal Plaza, depreciation on renovations and increased amortization of
lease costs.
Interest income decreased from $5.5 million in 1992 to $3.9 million in
1993 due primarily to lower cash balances, as cash was used for
acquisitions, renovations, and debt repayments. Interest income increased
26
from $4.7 million in 1991 to $5.5 million in 1992, despite lower interest
rates in 1992 since average cash balances were higher in 1992 due to the
temporary investment of the proceeds of public offerings.
Interest expense has decreased from $35.2 million in 1992 to $31.6
million in 1993, reflecting the redemption of the Senior Notes and the 8
3/4% convertible subordinated debentures, the reduction in the 5 1/4%
convertible subordinated debentures due 2002 and the prepayment of various
mortgages, partially offset by interest expense of the revolving credit
facilities and interest on the 5 1/4% convertible subordinated debentures
due 2003. Interest expense decreased from $38.1 million in 1991 to $35.2
million in 1992 due primarily to the exchange and repurchase of $56.2
million of the Trust's 5 1/4% convertible subordinated debentures due 2002
in 1991 and 1992.
Administrative expenses have ranged from 3.6% of property income
(rental income plus other income) in 1991 to 4.3% in 1992 to 4.2% in 1993.
During the worst of the recession in 1991 the Trust reduced overhead
expenses by reducing the number of employees and freezing or reducing many
salaries. Employment practices have now returned to normal.
Other charges of $682,000 in 1992 is comprised of two items. One is
the $960,000 writedown of an investment in Olympia and York notes, partially
offset by the recovery of $278,000 of a legal settlement.
Income before gain on sale of real estate and extraordinary item
increased $9.1 million from 1992 to 1993, primarily because of increased
revenue from recent acquisitions and redevelopments and because of the
decrease in interest expense. Income before gain on sale of real estate and
extraordinary item increased $2.7 million in 1992 from 1991 due to an
increase in revenue coupled with a decrease in interest expense partially
offset by higher depreciation and amortization, administrative expense and
net other charges.
Gain on sale of real estate is dependent on the extent and timing of
sales. The 1992 gain was primarily due to the sale of Sargent Road and 25th
27
Street Shopping Centers. The 1991 gain was on the sale of Lawrence Village
Shopping Center.
In 1993 the Trust had a net gain of $2.0 million on the early
extinguishment of debt, resulting from a $3.1 million gain on the
extinguishment of the mortgage at Northeast Plaza, offset by losses on the
redemption of the Senior Notes, convertible subordinated debentures and two
mortgages. In 1992 the Trust had a net loss of $58,000 on the early
extinguishment of debt, resulting from the prepayment of two mortgages and
the exchange and repurchase of its 5 1/4% convertible subordinated
debentures. In 1991 the Trust had a net gain of $415,000 on the early
extinguishment of debt, consisting of a gain on the repurchase of the
Trust's 5 1/4% convertible subordinated debentures due 2002 partially offset
by $587,000 in prepayment fees on the early extinguishment of three
mortgages.
As a result of the foregoing items net income was $18.1 million in
1993, $9.4 million in 1992 and $5.8 million in 1991.
Impact of New Accounting Standards
In May 1993 the Financial Accounting Standards Board (FASB) issued FASB
No. 115, "Accounting for Certain Investments in Debt and Equity Securities".
This standard will be effective for 1994 financial statements and requires
the classification of debt and equity investments into one of three
categories: held-to-maturity, trading or available-for-sale. The Trust does
not believe that the implementation of the standard in 1994 will have a
material effect on the Trust's financial statements since the Trust's
current accounting for debt and equity investments does not differ
materially from the standard.
Item 8. Financial Statements and Supplementary Data.
Included in Item 14.
28
Item 9. Disagreements on Accounting and Financial Disclosure.
None
29
Part III
Item 10. Directors and Executive Officers of the Registrant.
Executive Officers of the Registrant
The Executive Officers are:
Name Age Position with Trust
Steven J. Guttman 47 President and Chief Executive
Officer and Trustee
Ron D. Kaplan 31 Vice President-Capital Markets
Catherine R. Mack 49 Vice President-General Counsel
and Secretary
Mary Jane Morrow 41 Senior Vice President-Finance and
Treasurer
Hal A. Vasvari 50 Executive Vice President-Management
Cecily A. Ward 47 Vice President-Controller
Robert S. Wennett 33 Senior Vice President-Acquisitions
Steven J. Guttman has been the Trust's President and Chief Executive
Officer since April 1980. Mr. Guttman has been associated with the Trust
since 1972, became Chief Operating Officer in 1975 and became a Managing
Trustee in 1979.
30
Ron D. Kaplan joined the Trust in November 1992 as Vice President-
Capital Markets. Mr. Kaplan was formerly a Vice President of Salomon
Brothers Inc where he was responsible for capital raising and financial
advisory services for public and private real estate companies. While at
Salomon Brothers, he participated in the offering of the Trust's 5 1/4%
Euro-Convertible Debentures due 2002 and 8.65% Senior Notes.
Catherine R. Mack came to the Trust in January 1985 as General
Counsel and became a Vice President in February 1986. Before joining the
Trust, Ms. Mack was an Assistant United States Attorney for the District
of Columbia and, prior to that, an attorney with Fried, Frank, Harris,
Shriver and Jacobson in Washington, D.C. where she represented several
local real estate entities. She has practiced law since 1974.
Mary Jane Morrow joined the Trust in January 1987 as Vice President-
Finance and Treasurer. Before joining Federal Realty, Ms. Morrow was a
Partner with Grant Thornton, the Trust's independent accountants. She was
with Grant Thornton for over 10 years and has extensive experience in real
estate and accounting.
Hal A. Vasvari joined Federal Realty Management, Inc., the Trust's
former managing agent, in August 1985 as Executive Vice President. In
January 1989, Mr. Vasvari became Executive Vice President-Management of
the Trust. Prior to August 1985, he was director of leasing for Kravco Co.,
a developer of shopping malls and shopping centers.
Cecily A. Ward joined the Trust in April 1987 as Controller. Prior to
joining the Trust, Ms. Ward, a certified public accountant, was with Grant
Thornton, the Trust's independent accountants.
Robert S. Wennett joined the Trust's acquisitions department in April
1986. Prior to joining the Trust, Mr. Wennett was an associate with
Chemical Realty Corporation in New York where he was involved in real estate
financing for corporate clients.
31
The schedule identifying Trustees under the caption "Election of
Trustees" of the 1994 Proxy Statement is incorporated herein by reference
thereto.
Item 11. Executive Compensation.
The sections entitled "Summary Compensation Table", "Option Grants in
1993", and "Aggregated Option Exercises in 1993 and Option Values as of
December 31, 1993" of the 1994 Proxy Statement are incorporated herein by
reference thereto.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The section entitled "Ownership of Shares By Certain Beneficial Owners"
and the section entitled "Ownership of Shares by Trustees and Officers" of
the 1994 Proxy Statement are incorporated herein by reference thereto.
Item 13. Certain Relationships and Related Transactions.
The section entitled "Certain Transactions" of the 1994 Proxy Statement
is incorporated herein by reference thereto.
32
Part IV
Item 14. Exhibits, Financial Statement Page No.
Schedules, and Reports on
Form 8-K
(a) 1. Financial Statements
Report of Independent Certified F-2
Public Accountants
Consolidated Balance Sheets- F-3
December 31, 1993 and 1992
Consolidated Statements of F-4
Operations - years ended
December 31, 1993, 1992
and 1991
Consolidated Statements of F-5
Shareholders' Equity - years
ended December 31, 1993, 1992
and 1991
Consolidated Statements of F-6
Cash Flows - years ended
December 31, 1993, 1992 and
1991
Notes to Consolidated F-7 to F-18
Financial Statements
(Including Selected Quarterly
Data)
33
(a) 2. Financial Statement Schedules
Schedule I - Marketable Securities
and other Investments................................F-19
Schedule II - Summary of Amounts
Receivable from Related Parties
and Underwriters, Promoters and
Employees other than related parties.............F-20 to F-21
Schedule XI - Summary of Real Estate
and Accumulated Depreciation.....................F-22 to F-24
Schedule XII - Mortgage Loans on Real
Estate ..........................................F-25 to F-26
Report of Independent Certified
Public Accountants...................................F-27
34
(a) 3. Exhibits
(3) (i) The Trust's Third Amended and Restated Declaration of
Trust dated May 24, 1984, filed with the Commission on July 5,
1984 as Exhibit 4 to the Trust's Registration Statement on Form S-
2 (file No. 2-92057) is incorporated herein by reference thereto.
(ii) Bylaws of the Trust, filed with the Commission as an
exhibit to the Trust's Current Report on Form 8-K dated February
20, 1985, is incorporated herein by reference thereto.
(4) (i) Specimen Share of Beneficial Interest, filed with the
Commission on November 23, 1982 as Exhibit 4 to the Trust's
Registration Statement on Form S-2 (file No. 2-80524), is
incorporated herein by reference thereto.
(ii) Indenture dated March 15, 1985, relating to the Trust's 8
3/4 % Convertible Subordinated Debentures Due 2010, filed with the
Commission on March 1, 1985 as Exhibit 4 (a) (2) to the Trust's
Registration Statement on Form S-2 (File No. 2-96136) is
incorporated herein by reference thereto.
(iii) Indenture dated April 1, 1986, relating to the Trust's
8.65% Senior Notes due 1996, filed with the commission on March
27, 1986 as exhibit 4 (a) 1 to the Trust's Registration Statement
on Form S-3, (File No. 33-3934) is incorporated herein by
reference thereto.
(iv) The 5 1/4% Convertible Subordinated Debenture due 2002 as
described in Amendment No. 1 to Form S-3 (File No. 33-15264),
filed with the Commission on August 4, 1987 is incorporated herein
by reference thereto.
(v) Shareholder Rights Plan, dated April 13, 1989, filed with
the Commission as an exhibit to the Trust's Current Report on Form
35
8-K, dated April 13, 1989, is incorporated herein by reference
thereto.
(9) Voting Trust Agreement............................*
(10) (i) Consultancy Agreement with Samuel J. Gorlitz, as amended,
filed with the Commission as Exhibit 10 (v) to the Trust's Annual
Report on Form 10-K for the year ended December 31, 1983, is
incorporated herein by reference thereto.
(ii) The Trust's 1983 Stock Option Plan adopted May 12, 1983,
filed with the Commission as Exhibit 10 (vi) to the Trust's Annual
Report on Form 10-K for the year ended December 31, 1983, is
incorporated herein by reference.
(iii) Deferred Compensation Agreement with Steven J. Guttman
dated December 13, 1978, filed with the Commission as Exhibit 10
(iv) to the Trust's Annual Report on Form 10-K for the year ended
December 31, 1980 is incorporated herein by reference thereto.
The following documents, filed with the Commission as portions of
Exhibit 10 to the Trust's Annual Report on Form 10-K for the year ended
December 31, 1985, are incorporated herein by reference thereto.
(iv) The Trust's 1985 Non-Qualified Stock Option Plan, adopted
on September 13, 1985
The following documents, filed with the Commission as portions of Exhibit
10, to the Trust's Annual Report on Form 10-K for the year ended December
31, 1980, have been modified as noted below, and are incorporated herein by
reference thereto.
(v) Consultancy Agreement with Daniel M. Lyons dated February
22, 1980, as amended (modified as of December l, 1983, to provide
for an annual cost of living increase, not to exceed 10%).
36
The following documents filed as portions of Exhibit 10 to the Trust's
Annual Report on Form 10-K for the year ended December 31, 1988 are
incorporated herein by reference thereto:
(vi) The 1988 Share Bonus Plan.
(vii) Amendment No. 3 to Consultancy Agreement with Samuel J.
Gorlitz.
The following documents filed with the Commission as portions of Item 6
to the Trust's Quarterly Report on Form 10-Q for the quarter ended March 31,
1989 are incorporated herein by reference thereto;
(viii) Executive Agreement between the Trust and Steven J.
Guttman, dated April 13, 1989.
(ix) Executive Agreement between the Trust and Catherine R.
Mack, dated April 13, 1989.
(x) Executive Agreement between the Trust and Mary Jane Morrow,
dated April 13, 1989.
(xi) Executive Agreement between the Trust and Hal A. Vasvari,
dated April 13, 1989.
(xii) Employment Agreement between the Trust and Steven J.
Guttman, dated April 13, 1989.
(xiii) Employment Agreement between the Trust and Catherine R.
Mack, dated April 13, 1989.
(xiv) Employment Agreement between the Trust and Mary Jane
Morrow, dated April 13, 1989.
(xv) Employment Agreement between the Trust and Hal A. Vasvari,
dated April 13, 1989.
37
(xvi) Executive Agreement between the Trust and Robert S.
Wennett, dated April 13 ,1989, modified January 1, 1990, filed
with the Commission as a portion of Exhibit 10 to the Trust's
Annual Report on Form 10-K for the year ended December 31, 1989 is
incorporated herein by reference thereto.
(xvii) The 1991 Share Purchase Plan, dated January 31,
1991, filed with the Commission as a portion of Exhibit 10 to the
Trust's Annual Report on Form 10-K for the year ended December 31,
1990 is incorporated herein by reference thereto.
(xviii) Employment Agreement between the Trust and Robert S.
Wennett, dated January 1, 1992, filed with the Commission as an
exhibit to the Trust's Annual Report on Form 10-K for the year
ended December 31, 1991 is incorporated herein by reference
thereto.
(xix) Amendment No. 4 to Consultancy Agreement with Samuel J.
Gorlitz, filed with the Commission as an exhibit to the Trust's
Annual Report on Form 10-K for the year ended December 31, 1992 is
incorporated herein by reference thereto.
(xx) Employment and Relocation Agreement between the Trust and
Ron D. Kaplan, dated September 30, 1992, filed as an exhibit to
the Trust's Annual Report on Form 10-K for the year ended December
31, 1992 is incorporated herein by reference thereto.
(xxi) Employment Agreement between the Trust and Cecily A. Ward,
dated January 1, 1993, filed as an exhibit to the Trust's Annual
Report on Form 10-K for the year ended December 31, 1992 is
incorporated herein by reference thereto.
(xxii) Amendment dated October 1, 1992, to Voting Trust
Agreement dated as of March 3, 1989 by and between I. Wolford
Berman and Dennis L. Berman filed as an exhibit to the Trust's
Annual Report on Form 10-K for the year ended December 31, 1992 is
incorporated herein by reference thereto.
38
(xxiii) 1993 Long-Term Incentive Plan and Certified Resolution
Re: Amendment to 1993 Long-Term Incentive Plan, filed with the
Commission as portions of Item 6 to the Trust's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1993, are incorporated
herein by reference thereto.
The following documents, filed with the Commission as portions of Item 6 to
the Trust's Quarterly Report on Form 10-Q for the quarter ended September
30, 1993 are incorporated herein by reference thereto:
(xxiv) Revolving Credit Agreement dated as of September 1, 1993
among Federal Realty Investment Trust and Corestates Bank.
(xxv) Credit Agreement dated as of August 25, 1993 between
Federal Realty Investment Trust and First Union National Bank of
Virginia.
(xxvi) Revolving Credit Agreement dated as of June 22, 1993
between Federal Realty Investment Trust and Signet Bank/Maryland.
(xxvii) Consulting Agreement between Misner Development and
Federal Realty Investment Trust.
(xxviii) Fiscal Agency Agreement dated as of October 28, 1993
between Federal Realty Investment Trust and Citibank,N.A.
(xxix) Credit Agreement dated as of February 11, 1994 between
Federal Realty Investment Trust and Mellon Bank is filed herewith
as an exhibit.
(11) Statement regarding computation of per share
earnings.........................................*
(12) Statements regarding computation of ratios.......*
(13) Annual Report to Shareholders, Form 10Q or quarterly report to
shareholders...........................*
39
(18) Letter regarding change in accounting
principles.......................................*
(19) Previously unfiled documents.....................*
(22) Subsidiaries of the registrant...................*
(23) Published report regarding matters submitted to
vote of security holders.........................*
(24) Consent of Grant Thornton........................
(25) Power of attorney................................*
(28) Additional exhibits..............................*
(b) Reports on Form 8-K Filed during the Last Quarter
None
_________
* Not applicable.
40
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FEDERAL REALTY INVESTMENT TRUST
Date: March 18, 1994 By:/s/ Steven J. Guttman
_____________________________
Steven J. Guttman
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signatures Title Date
President and
Trustee (Chief
/s/Steven J. Guttman Executive Officer) March 18, 1994
Steven J. Guttman
Senior Vice-President
and Treasurer (Chief
/s/ Mary Jane Morrow Financial Officer) March 18, 1994
Mary Jane Morrow
Vice-President and
/s/Cecily A. Ward Controller (Principal
Cecily A. Ward Accounting Officer) March 18, 1994
/s/ Dennis L. Berman Trustee March 18, 1994
Dennis L. Berman
Trustee March , 1994
A. Cornet de Ways Ruart
41
/s/Samuel J. Gorlitz Trustee March 18, 1994
Samuel J. Gorlitz
/s/Arnold M. Kronstadt Trustee March 18, 1994
Arnold M. Kronstadt
/s/Morton S. Lerner Trustee March 18, 1994
Morton S. Lerner
/s/Walter F. Loeb Trustee March 18, 1994
Walter F. Loeb
/s/Donald H. Misner Trustee March 18, 1994
Donald H. Misner
/s/George L. Perry Trustee March 18, 1994
George L. Perry
42
SCHEDULES
F-1
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Trustees and Shareholders
Federal Realty Investment Trust
We have audited the accompanying consolidated balance sheets of Federal
Realty Investment Trust as of December 31, 1993 and 1992, and the related
consolidated statements of operations, shareholders' equity, and cash flows
for each of the three years in the period ended December 31, 1993. These
financial statements are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Federal Realty Investment Trust as of December 31, 1993 and 1992 and the
consolidated results of its operations and its consolidated cash flows for
each of the three years in the period ended December 31, 1993 in conformity
with generally accepted accounting principles.
Grant Thornton
Washington, D.C.
February 14, 1994
F-2
Federal Realty Investment Trust
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
1993 1992
------------- -------------
ASSETS (in thousands)
Investments
Real estate, at cost $758,088 $598,867
Less accumulated depreciation and amortization (135,045) (113,182)
--------- ---------
623,043 485,685
Mortgage notes receivable 13,871 16,693
-------- --------
636,914 502,378
Other Assets
Cash 9,635 36,316
Investments 4,008 35,594
Notes receivable - officers 1,890 1,227
Accounts receivable 15,681 10,336
Prepaid expenses and other assets, principally
property taxes, insurance, and lease commissions 19,499 16,268
Debt issue costs (net of accumulated amortization
of $3,862,000 and $3,364,000, respectively) 3,316 1,692
-------- --------
$690,943 $603,811
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Obligations under capital leases $137,308 $125,619
Mortgages payable 81,237 120,075
F-3
Notes payable 30,519 6,117
Accrued expenses 19,104 15,365
Accounts payable 5,785 1,811
Dividends payable 10,927 9,517
Security deposits 2,430 1,993
Prepaid rents 1,783 1,593
Senior notes - 50,000
8 3/4% Convertible subordinated debentures - 2,371
5 1/4% Convertible subordinated debentures, due 2003 75,000 -
5 1/4% Convertible subordinated debentures, due 2002 40,167 43,847
Investors' interest in consolidated assets 2,484 2,625
Commitments and contingencies - -
Shareholders' equity
Common shares of beneficial interest, no par
or stated value, unlimited authorization,
issued 28,077,999 and 24,777,831 shares,
respectively 408,005 322,903
Accumulated dividends in excess of Trust net income (116,823) (92,932)
Allowance for unrealized loss on marketable securities (364) (385)
------ ------
290,818 229,586
Less 60,200 common shares in treasury - at cost, deferred
compensation and subscriptions receivable (6,619) (6,708)
------ ------
284,199 222,878
------ ------
$690,943 $603,811
========= =========
The accompanying notes are an integral part of these statements.
F-4
Federal Realty Investment Trust
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31,
1993 1992 1991
--------- --------- ---------
(In thousands, except per share data)
Revenue
Rental income $105,948 $89,971 $88,350
Interest 3,894 5,514 4,675
Other property income 5,495 4,712 4,627
------- ------- -------
115,337 100,197 97,652
Expenses
Rental 26,519 20,919 20,386
Real estate taxes 10,324 8,876 8,868
Interest 31,550 35,201 38,147
Administrative 4,675 4,062 3,364
Other charges - 682 -
Depreciation and amortization 25,375 23,033 21,922
------- ------- -------
98,443 92,773 92,687
------- ------- -------
Operating income before investors' share
of operations, gain on sale of real estate and
extraordinary item 16,894 7,424 4,965
Investors' share of operations (780) (437) (641)
------- ------- -------
DC-135480.1 F-5
Income before gain on sale of real estate and
extraordinary item 16,114 6,987 4,324
Gain on sale of real estate - 2,501 61
--------- --------- ---------
Income before extraordinary item 16,114 9,488 4,385
Extraordinary item
Net gain (loss) on early extinguishment of debt 2,016 (58) 415
------- ------- -------
Net Income $18,130 $9,430 $4,800
======== ======== =======
Weighted Average Number of Common Shares 27,009 22,767 17,304
======== ======== ========
Earnings per share
Income before gain on sale of real estate and
extraordinary item $0.60 $0.30 $0.25
Gain on sale of real estate - 0.11 0.00
Extraordinary item 0.07 - 0.03
----- ----- -----
$0.67 $0.41 $0.28
===== ===== =====
The accompanying notes are an integral part of these statements.
F-6
FEDERAL REALTY INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Year Ended December 31,
1993 1992 1991
-------- -------- -------- -------- -------- --------
(In thousands, except share amounts) Shares Amount Shares Amount Shares Amount
Common Shares of Beneficial Interest
Balance, beginning of year 24,777,831 $322,903 19,747,134 $226,027 16,773,762 $176,630
Exercise of stock options 53,384 1,053 8,055 143 9,741 146
Shares issued under dividend 131,620 3,588 132,189 2,903 2,759 50
reinvestment plan
Conversion of 8 3/4% subordinated 137,364 2,209 122,934 1,924 14,872 233
debentures
Shares purchased under share purchase - - - - 446,000 6,746
plan
Shares issued in exchange for 5 1/4% - - 1,317,519 25,362 - -
convertible subordinated debentures
due 2002
Private placement of shares in 220,000 5,445
connection with long term lease of
real estate
Net proceeds of public offering 2,757,800 72,807 3,450,000 66,544 2,500,000 42,222
--------- -------- ---------- -------- ---------- --------
Balance, end of year 28,077,999 $408,005 24,777,831 $322,903 19,747,134 $226,027
========== ======== ========== ======== ========== ========
F-7
Common Shares of Beneficial Interest
in Treasury, Deferred Compensation
and Subscriptions Receivable
Balance, beginning of year (426,575) ($6,708) (504,825) ($8,026) (110,200) ($2,199)
Amortization of deferred compensation 4,000 89 78,250 1,318 51,375 919
Subscription of shares under share - - - - (446,000) (6,746)
purchase plan ---------- -------- ---------- -------- ---------- --------
Balance, end of year (422,575) ($6,619) (426,575) ($6,708) (504,825) ($8,026)
========== ======== ========== ======== ========== ========
Allowance for Unrealized Loss on
Marketable Securities
Balance, begining of year ($385) ($465) $0
Establish allowance for unrealized - - (465)
loss
Recovery of net unrealized loss 21 80 -
----- ----- -----
Balance, end of year ($364) ($385) ($465)
===== ===== =====
Accumulated Dividends in Excess of
Trust Net Income
Balance, beginning of year ($92,932) ($66,056) ($45,085)
Net income 18,130 9,430 4,800
Dividends declared to shareholders (42,021) (36,306) (25,771)
-------- -------- --------
Balance, end of year ($116,823) ($92,932) ($66,056)
======== ======== ========
F-8
The accompanying notes are an integral part of these statements.
F-9
Federal Realty Investment Trust
CONSOLIDATED STATEMENTS OF CASH FLOWS
Twelve months ended December 31,
(In thousands) 1993 1992 1991
---------- ---------- ----------
OPERATING ACTIVITIES
Net income $18,130 $9,430 $4,800
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 25,375 23,033 21,922
Rent abatements in lieu of leasehold improvements,
net of tenant improvements retired (1,185) (734) (831)
Imputed interest and amortization of debt cost 520 718 898
Amortization of deferred compensation and
forgiveness of officers' notes 591 956 1,095
Write-down of investments - 960 -
Gain on sale of real estate - (2,501) (61)
Payment of trustees' fees in shares of
beneficial interest 185 157 -
Net (gain) loss on early extinguishment of debt (2,016) 58 (415)
Changes in assets and liabilities
Increase in accounts receivable (5,345) (525) (126)
Increase in prepaid expenses and other
assets before depreciation and amortization (6,484) (4,454) (3,243)
Increase (decrease) in operating accounts payable,
security deposits and prepaid rent 3,221 (61) 34
Increase in accrued expenses, before
accretion of interest 2,191 1,199 2,038
------ ------ ------
Net cash provided by operating activities 35,183 28,236 26,111
INVESTING ACTIVITIES
Acquisition of real estate (108,007) (24,577) (215)
F-10
Capital expenditures (34,267) (15,201) (20,016)
(Issuance) payments of mortgage notes receivable, net 21 56 (73)
Issuance of notes receivable - officers, net (48) (330) (235)
Proceeds from sale of real estate - 10,057 1,841
Net decrease (increase) in temporary investments 31,607 (28,230) 19
-------- ------- -------
Net cash used in investing activities (110,694) (58,225) (18,679)
FINANCING ACTIVITIES
Proceeds of mortgage financings, net of costs - 29,449 43,915
Regular payments on mortgages, capital leases and
notes payable (2,225) (2,230) (1,821)
Balloon payments on mortgages and capital leases,
including prepayment fees (32,547) (7,962) (15,899)
Borrowings (repayments) of short-term debt, net 24,413 (8,500) (19,521)
Early retirement of 5 1/4% convertible debentures (4,416) (23,623) (12,607)
Redemption of 8 3/4% convertible debentures (176) - -
Redemption of senior notes (50,505) - -
Issuance of 5 1/4% convertible debentures due 2003, net 73,025 - -
Dividends paid (38,087) (31,088) (25,426)
Issuance of shares of beneficial interest 79,489 67,102 42,272
Decrease in minority interest (141) (230) (22)
------ ------ ------
Net cash (used) provided by financing activities 48,830 22,918 10,891
------ ------ ------
(Decrease) increase in cash (26,681) (7,071) 18,323
Cash at beginning of year 36,316 43,387 25,064
------ ------ -------
Cash at end of year $9,635 $36,316 $43,387
====== ======= =======
The accompanying notes are an integral part of these statements.
F-11
Federal Realty Investment Trust
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1993, 1992, and 1991
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Federal Realty Investment Trust invests predominantly in income-producing real
estate properties, primarily community and neighborhood shopping centers.
The Trust uses the straight-line method in providing for depreciation.
Estimated useful lives range from three to 25 years on apartment buildings
and improvements, and from three to 35 years on shopping centers and
improvements. Maintenance and repair costs are charged to operations as
incurred. Major improvements are capitalized. The gain or loss resulting
from the sale of properties is included in net income.
The Trust capitalizes certain costs directly related to the acquisition,
improvement and leasing of real estate including applicable salaries and
other related costs. The capitalized costs associated with unsuccessful
acquisitions are charged to operations when that determination is made. The
capitalized costs associated with improvements and leasing are depreciated
or amortized over the life of the improvement and lease, respectively.
Costs related to the issuance of debt instruments are capitalized and are
amortized over the life of the related issue using the interest method.
Upon conversion or in the event of redemption, applicable unamortized costs
are charged to shareholders' equity or to operations, respectively.
The Trust operates in a manner intended to enable it to qualify as a real
estate investment trust under Sections 856-860 of the Internal Revenue Code
(the "Code"). Under those sections, a trust which distributes at least 95%
of its real estate trust taxable income to its shareholders each year and
which meets certain other conditions will not be taxed on that portion of
its taxable income which is distributed to its shareholders. Therefore, no
provision for Federal income taxes is required.
F-12
The Trust consolidates the financial statements of nine partnerships and a
joint venture which are controlled by the Trust. The equity interests of
other investors are reflected as investors' interest in consolidated assets.
All significant intercompany transactions and balances are eliminated.
The Trust estimates the fair value of its financial instruments using the
following methods and assumptions: (1) quoted market prices are used to
estimate the fair value of investments in marketable debt and equity
securities; (2) quoted market prices are used to estimate the fair value of
the Trust's marketable senior notes and convertible subordinated debentures;
(3) discounted cash flow analyses are used to estimate the fair value of
long term notes and mortgage notes receivable and payable, using the Trust's
estimate of current interest rates for similar notes; (4) carrying amounts
in the balance sheet approximate fair value for cash and short term
borrowings. Notes receivable from officers are excluded from fair value
estimation since they have been issued in connection with employee stock
ownership programs.
The Trust defines cash as cash on hand, demand deposits with financial
institutions and short term liquid investments with an initial maturity
under three months. Cash balances may exceed insurable amounts.
Earnings per share are computed using the weighted average number of shares
outstanding during the respective periods, including options.
NOTE 1: REAL ESTATE AND ENCUMBRANCES
A summary of the Trust's properties at December 31, 1993 is as follows:
Accumulated
depreciation
and
Cost amortization Encumbrances
(In thousands)
Shopping centers $564,634 $93,923 $81,237
F-13
Shopping centers
under capital leases 187,674 37,867 137,308
Apartments 5,780 3,255 -
--------- --------- ---------
$758,088 $135,045 $218,545
========= ========= =========
The Trust's 48 shopping centers are located in twelve states, primarily
along the East Coast between the New York metropolitan area and Richmond,
Virginia. There are approximately 1,500 tenants providing a wide range of
retail products and services. These tenants range from sole proprietorships
to national retailers; no one tenant or corporate group of tenants accounts
for 5% or more of revenue.
The Trust acquired seven shopping centers and one office building in
1993. Pan Am Shopping Center in Fairfax, Virginia was acquired for $21.6
million in cash; Gaithersburg Square in Gaithersburg, Maryland was purchased
for $11.0 million in cash and the assumption of a $2.0 million liability
which is the estimated cost to remediate certain preexisting environmental
issues; Quince Orchard Plaza in Gaithersburg, Maryland and its adjoining
office building were purchased for $10.9 million in cash and the assumption
of a liability of approximately $250,000 to remediate preexisting
environmental issues; Crossroads Shopping Center in Highland Park, Illinois
was purchased for $16.2 million in cash; Bala Cynwyd Shopping Center in
suburban Philadelphia, Pennsylvania was purchased for $17.0 million in cash;
Dedham Plaza in Dedham, Massachusetts, was purchased for $25.0 million in
cash and the assumption of a $250,000 liability to remediate existing
environmental issues; and the leasehold interest in Bethesda Row in
Bethesda, Maryland was acquired with $6.2 million in cash.
In 1992 the Trust purchased Ellisburg Circle Shopping Center in Cherry
Hill, New Jersey for $15.3 million in cash. In June 1992 the Trust
terminated a long term ground lease by purchasing the land underlying
Wildwood Shopping Center, located in Bethesda, Maryland, for $9.1 million.
In 1992 the Trust purchased an additional .3% interest in Barracks Road
F-14
Shopping Center for $106,000, bringing the Trust's ownership percentage to
over 99%.
During 1992 the Trust sold two shopping centers, the Sargent Road
Shopping Center in Hyattsville, Maryland for $1.9 million and the 25th
Street Shopping Center in Easton, Pennsylvania for $9.7 million. The Trust
received cash proceeds of $10.3 million on these transactions, realizing a
gain of $2.7 million.
Mortgage notes receivable consist of three notes collateralized by
shopping centers. All three notes were issued in connection with either the
acquisition or sale of Trust properties. The Trust estimates that the fair
value of these notes at December 31, 1993 is $14.6 million compared to their
book value of $13.9 million, since the stated interest rate on these notes
is higher than current rates. The Trust estimated that the fair value of
these notes at December 31, 1992 approximated their carrying value of $16.7
million.
In 1992 the Trust placed a $30.0 million mortgage on Federal Plaza,
located in Rockville, Maryland. The mortgage bears interest beginning at 8
1/4%, which resets every three years, with a final maturity on March 10,
2001.
The Trust prepaid a number of mortgages in 1993 and 1992. In 1993 the
Trust prepaid the mortgages on the Laurel, Northeast and Northeast Plaza
shopping centers, resulting in a net gain of $2.9 million which has been
recorded as a component of the net gain on early extinguishment of debt. In
1992 the Trust prepaid mortgages on the Eastgate and Town & Country
(Louisiana) shopping centers; the prepayment fees on these transactions were
recorded as a component of the net loss on early extinguishment of debt.
Mortgages payable and capital lease obligations are due in installments
over various terms extending to 2060 with actual or imputed interest rates
ranging from 7.9% to 11.25%. Certain of the mortgage and capital lease
obligations require additional interest payments based upon property
performance.
F-15
The fair value of mortgages payable at December 31, 1993 is $86.7
million compared to the carrying value of $81.2 million since the current
estimated interest rate used to discount the cash flows is often less than
the stated rate. The fair value of mortgages payable at December 31, 1992
was $124.3 million, compared to the carrying value of $120.0 million.
Aggregate mortgage principal payments due during the next five years
are $955,000, $1.0 million, $1.1 million, $1.3 million and $43.7 million,
respectively.
Future minimum lease payments and their present value for property
under capital leases as of December 31, 1993 are as follows:
Year ending December 31, (in thousands)
1994 $14,031
1995 17,051
1996 13,651
1997 13,666
1998 13,699
Thereafter 603,065
---------
675,163
Less amount representing interest (537,855)
---------
Present value $137,308
=========
Leasing Arrangements
--------------------
The Trust's leases with shopping center and apartment tenants are
classified as operating leases. Leases on apartments are generally for a
period of one year, whereas shopping center leases generally range from
three to 10 years and usually provide for contingent rentals based on sales
and sharing of certain operating costs.
F-16
The components of rental income are as follows:
(in thousands) Year ended December 31,
1993 1992 1991
Shopping centers
Minimum rents $81,291 $68,784 $66,901
Cost reimbursements 18,171 14,878 14,733
Percentage rents 4,147 4,171 4,580
Apartments - rents 2,339 2,138 2,136
--------- --------- ---------
$105,948 $89,971 $88,350
========= ========= =========
The components of rental expense are as follows:
(in thousands) Year ended December 31,
1993 1992 1991
Management fees and costs $5,213 $3,957 $3,704
Repairs and maintenance 6,452 4,595 4,719
Utilities 3,944 3,595 3,752
Payroll - properties 3,205 2,567 2,298
Ground rent 375 362 937
Insurance 1,585 1,430 1,396
Other operating 5,745 4,413 3,580
--------- --------- ---------
$26,519 $20,919 $20,386
========= ========= =========
Minimum future shopping center rentals on noncancelable operating
leases as of December 31, 1993 are as follows:
Year ending December 31, (in thousands)
F-17
1994 $89,798
1994 80,695
1996 72,347
1997 62,508
1998 51,137
Thereafter 221,749
---------
$578,234
=========
NOTE 2. NOTES PAYABLE
At December 31, 1993 the Trust had notes payable of $30.5 million. Of
the $30.5 million, $6.1 million was issued in connection with renovations of
certain Trust properties. Of the $6.1 million, $3.0 million, issued in
connection with a lease at Perring Plaza, bears interest at 10% and is
payable in equal monthly installments with a final maturity in January
2013. The majority of the rest of the $6.1 million, incurred primarily to
fund the purchase and renovation of Federal Plaza, bears interest at 11% and
matures in 1996. Due to decreases in interest rates since these notes were
issued the fair value of these notes at December 31, 1993 is estimated to be
$6.8 million compared to the carrying value of $6.1 million. At December
31, 1992 the fair value of these notes was $6.5 million compared to a
carrying value of $6.1 million.
At December 31, 1993 the Trust had $70.0 million of unsecured medium-
term revolving credit facilities with three banks. All three facilities
require fees and have covenants requiring a minimum shareholders' equity and
a maximum ratio of debt to net worth. The maximum drawn under these
facilities during 1993 was $64.1 million and at December 31, 1993 there was
$24.4 million outstanding, bearing interest at rates from 4.2% to 5%. The
average weighted interest rate on borrowings during 1993 was 4.2%, and the
average amount outstanding was $6.6 million. The carrying value and fair
value of these short term borrowings are the same.
F-18
At December 31, 1992 the Trust had $20.0 million available under an
unsecured line of credit; there were no amounts drawn under the line at
December 31, 1992. The line, which was replaced by the medium-term
revolving facilities, bore interest at prime plus 1/2% (6.5% at December 31,
1992), and replaced a secured $20.0 million line. The maximum drawn under
the lines in 1992 was $8.5 million, the weighted average interest rate was
7.2%, and the average amount outstanding was $708,000.
At December 31, 1991, notes payable included $8.5 million borrowed
under the $20.0 million secured line of credit. The maximum drawn under
this secured line during 1991 was $20.0 million, with a weighted average
interest rate of 8.2% and an average amount outstanding of $19.6 million.
NOTE 3. DIVIDENDS
On November 18, 1993 the Trustees declared a quarterly cash dividend of
$.39 per share, payable January 14, 1994 to shareholders of record January
3, 1994. For the years ended December 31, 1993, 1992 and 1991, $.45, $.915
and $.66 of dividends paid per share, respectively, represented a return of
capital.
NOTE 4. COMMITMENTS AND CONTINGENCIES
Pursuant to the provisions of the Loehmann's Plaza Limited Partnership
Agreement, on or after September 1, 1995 the Limited Partner may require the
Trust to purchase his interest in the Partnership at its then fair market
value.
The Congressional Plaza Shopping Center Joint Venture Agreement
provides that the Trust may be required to purchase its pro-rata share of
one venturer's 22.5% or greater joint venture interest for a purchase price
based on the appraised fair market value of the shopping center, but no less
than the percentage of joint venture interest being sold multiplied by the
difference between $17.5 million and the remaining principal balance of any
liabilities of the Joint Venture.
F-19
The State of New Jersey Division of Taxation has assessed the Trust
$364,000 in taxes, penalty and interest for the years 1985 through 1990,
since the State has disallowed the dividends paid deduction in computing New
Jersey taxable income. The Trust has filed a complaint in the Tax Court of
New Jersey contesting the assessment, since the Trust believes that it is
entitled to the deduction. At this time, the outcome of this matter is
unknown.
The North Carolina Department of the Environment, Health and Natural
Resources issued a Notice of Violation ("NOV") against a dry cleaner tenant
at Eastgate Shopping Center in Chapel Hill, North Carolina concerning a
spill at the shopping center. As owner of the shopping center, the Trust
was named in and received a copy of the NOV. Estimates to remediate the
spill range from $300,000 to $500,000. An agreement is being drawn with two
previous owners of the shopping center to share the costs to remediate. The
Trust has recorded a liability of $120,000 as its estimated share of the
cleanup costs.
Contaminants at levels in excess of New Jersey cleanup standards were
identified at a shopping center in New Jersey. The Trust has retained an
environmental consultant to investigate the contamination. The Trust is
also evaluating whether it has insurance coverage for this matter. At this
time, the Trust is unable to determine what the range of remediation costs
might be. The Trust has also identified chlorinated solvent contamination
at two other properties. In each case, the contamination appears to be
linked to the current and/or previous dry cleaner. The Trust intends to
look to the responsible parties for any remediation effort. Evaluation of
these situations is preliminary and it is impossible to estimate the range
of remediation costs, if any.
The Trust reserved $2.25 million at closing for environmental issues
principally associated with the recently acquired Gaithersburg Square.
Pursuant to an indemnity agreement entered into with the seller at closing,
the Trust agreed to take certain actions with respect to identified
chlorinated solvent contamination. The seller indemnified the Trust for
certain third party claims and government requirements related to
contamination at adjacent properties.
F-20
The Trust's non real estate investments consist of $524,000 in
marketable equity securities and $3.5 million of Olympia and York Senior
First Mortgage Notes. The marketable equity securities are stated at
market. The Olympia and York notes were written down in 1992 to
management's best estimate of the net realizable value. The writedown was
recorded in the Consolidated Statements of Operations as a component of
other charges, which also included an insurance recovery of $278,000 of a
settlement of a personal injury lawsuit.
The Trust has entered into agreements with certain key employees
whereby if these employees voluntarily or involuntarily leave the employment
of the Trust within six months after a "change of control" (defined as
control of 35% or more of outstanding shares) of the Trust, they will be
entitled to a lump sum cash payment equal to one to three times their annual
salary as of the date of termination and have their health and welfare
benefits and executive privileges continued for a period of one to three
years. In the event of a change of control, the Trust also agreed that all
restrictions on the exercise or receipt of any stock options and stock
grants shall lapse upon termination of employment and that all shares owned
at termination shall be redeemed by the Trust at a formula price.
As of December 31, 1993 in connection with the renovation of certain
shopping centers, the Trust has contractual obligations of $2.0 million.
The Trust is also contractually obligated to provide up to $8.4 million for
tenant improvements and $1.8 million to buy out tenant leases.
The Trust is obligated under ground lease agreements on several
shopping centers requiring minimum annual payments as follows:
(in thousands)
1994 $ 2,758
1995 2,758
1996 2,758
1997 2,758
1998 2,758
Thereafter 157,502
---------
F-21
$171,292
=========
NOTE 5: SENIOR NOTES
In April 1993 the Trust called its 8.65% Senior Notes for redemption on
May 14, 1993 at a price of $1010 per note, for a total redemption price of
$50.5 million. The redemption premium and unamortized loan costs have been
recorded as a loss on the early extinguishment of debt. The market value of
these notes at December 31, 1992 was $50.8 million.
NOTE 6: 8 3/4% CONVERTIBLE SUBORDINATED DEBENTURES
The Trust redeemed $173,000 principal amount of its 8 3/4% convertible
subordinated debentures at a price of $1017.50 per debenture or a total
price of $176,000 on March 15, 1993. The balance of the debentures that had
been outstanding were converted into shares of beneficial interest at $16
per share. At December 31, 1992 $2.4 million of these debentures with a
market value of $3.7 million were outstanding.
NOTE 7: 5 1/4% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2002
At December 31, 1993 and 1992 the Trust had outstanding $40.2 million
and $43.8 million, respectively, of 5 1/4% convertible subordinated
debentures due 2002. The debentures which are convertible into shares of
beneficial interest at $30.625 per share were not registered under the
Securities Act of 1933 and were not publicly distributed within the United
States.
During 1993 the Trust purchased $3.7 million of these debentures,
resulting in a loss of $74,000 which has been recorded as a component of
the net gain on early extinguishment of debt. In 1992, the Trust exchanged
$22.6 million principal amount of the debentures for 1.3 million shares and
purchased an additional $21.2 million principal amount.
F-22
The debentures are redeemable at the option of the Trust; however, the
debentures may not be redeemed prior to April 30, 1994, unless the closing
market price per share has been at least 130% of the conversion price then
in effect for a specified period prior to notice of redemption. The
debentures are redeemable at the option of the holders on April 30, 1994 at
a redemption price equal to 120% of their principal amount. Interest
expense is accrued at 7.53% to record the premium put. The accretion of the
premium was approximately $1.5 million in 1993 and $1.6 million in 1992. In
1993 and 1992, $671,000 and $5.6 million, respectively, of the accrued
premium was retired upon the repurchase of the debentures. At December 31,
1993 the carrying value of the debentures plus the premium accrued to date
is $47.7 million; the market value is $48.0 million. At December 31, 1992
the carrying value of debentures plus the premium accrued to that date was
$50.6 million with a market value of $50.9 million.
NOTE 8: 5 1/4% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2003
In October 1993 the Trust issued $75.0 million of 5 1/4% convertible
subordinated debentures, realizing cash proceeds of approximately $73.0
million. The debentures were not registered under the Securities Act of
1933, and were not publicly distributed within the United States. The
debentures, which mature in 2003, are convertible into shares of beneficial
interest at $36 per share. The debentures are redeemable by the Trust, in
whole, at any time after October 28, 1998 at 100% of the principal amount
plus accrued interest. The market value of the debentures at December 31,
1993 was $71.5 million.
NOTE 9: SHAREHOLDERS' EQUITY
In April 1993 the Trust sold 2.8 million shares of beneficial interest
in a public offering, raising net proceeds of $72.8 million. In December
1993 the Trust sold 220,000 shares for $5.4 million in a private placement
in connection with the long-term lease of a property. In June 1992 the
Trust sold 3.4 million shares in a public offering, raising net proceeds of
$66.5 million, and in 1991 the Trust sold 2.5 million shares in a public
F-23
offering, receiving net proceeds of $42.2 million. The proceeds were used
for debt retirement and property acquisitions and renovations.
The Trust has a Dividend Reinvestment Plan, whereby shareholders may
use their dividends to purchase shares; the plan was amended in 1991 so that
shares purchased under the plan would be newly issued shares. In March 1993
the Trust registered an additional 500,000 shares with the Securities and
Exchange Commission in connection with the plan.
In January 1991 the Trustees adopted the Federal Realty Investment
Trust Share Purchase Plan. Under the terms of this plan, officers and
certain employees of the Trust purchased 446,000 common shares at $15.125
per share with the assistance of loans of $6.7 million from the Trust. One
sixteenth of the loan is forgiven each year for eight years, as long as the
officer or employee is still employed by the Trust. The Trust has loaned
participants $506,000 to pay the taxes due in connection with the plan. The
purchase loans and the tax loans bear interest at 9.39%. The shares
purchased under the plan may not be sold, pledged or assigned until both the
purchase and tax loans are satisfied and the eight year period has expired.
Under the terms of the 1988 Share Bonus Plan, 78,000 shares and 30,000
shares were granted to officers and key employees in 1988 and 1989,
respectively. During the years ended December 31, 1993, 1992 and 1991,
4,000 shares, 22,500 shares and 23,500 shares, respectively, were vested and
charged to operations. In connection with these shares, the Trust has made
loans to the participants to pay the taxes due in connection with the plan.
The notes bear interest at the lesser of (i) the Trust's borrowing rate or
(ii) the Trust's current indicated annual dividend rate divided by the
purchase price of such shares. Notes issued under this plan are being
forgiven over three years from issuance if the officer is still employed by
the Trust. During the years ended December 31, 1993, 1992, and 1991,
$80,000, $60,000 and $176,000, respectively, was forgiven.
In connection with a restricted share grant, the Trust accepted from
the President a non-interest bearing note for $210,000. One installment of
F-24
$105,000 was paid on the note in 1992 and the second installment is due
April 15, 1996.
The Trust owns shares of other real estate investment trusts as a long-
term investment. The Trust's cost of these shares was $887,000. Due to the
price decline of certain of these investments, the Trust established an
allowance for the unrealized loss which was $364,000 in 1993, $385,000 in
1992, and $465,000 in 1991.
At December 31, 1993, 1992 and 1991, the Trust had 60,200 shares in
treasury at a cost of $1.1 million.
On April 13, 1989, the Trustees adopted a Shareholder Rights Plan (the
Plan). Under the Plan, one right was issued for each outstanding share of
common stock held as of April 24, 1989, and a right will be attached to each
share issued in the future. The rights are exercisable into common shares
upon the occurrence of certain events, including acquisition by a person or
group of certain levels of beneficial ownership or a tender offer by such a
person or group. The Rights are redeemable by the Trust for $.01 and expire
on April 24, 1999.
F-25
NOTE 10: STOCK OPTION PLAN
The 1993 Long-Term Incentive Plan ("Plan") was approved by shareholders
in May 1993. On the date of approval, 472,500 options were awarded to
officers, employees and non-employee Trustees. Under the Plan, on each
annual meeting date during the term of the plan, each non-employee Trustee
will be awarded 2,500 options. On December 16, 1993, 69,000 options were
awarded to employees.
The option price to acquire shares under the 1993 Plan and previous
plans is required to be a least the fair market value at the date of grant.
As a result of the exercise of options, the Trust has outstanding from its
officers and employees notes for
$1.1 million. The notes bear interest at the lesser of (i) the Trust's
borrowing rate or (ii) the current indicated annual dividend rate on the
shares acquired pursuant to the option, divided by the purchase price of
such shares. The notes are collateralized by the shares and are with
recourse.
Shares available Options Outstanding
for future Price
option grants Shares per share
Balance
December 31, 1990 374,537 194,796
Options granted (15,000) 15,000 $17.25
Options exercised --- (9,741) $14.83 to $15.33
Options expired 13,500 (20,250) $15.00 to $24.125
--------- ---------
Balance
December 31, 1991 373,037 179,805
Options granted (202,500) 202,500 $20.50 to $22.625
Options exercised --- (8,055) $17.25 to $18.00
Options expired 1,000 (1,000) $22.625
--------- ---------
Balance
F-26
December 31, 1992 171,537 373,250
Expiration of 1989 plan(171,537) ___
Adoption of 1993 plan 6,000,000 ---
Options granted (541,500) 541,500 $25.75 to $26.00
Options exercised --- (53,384) $15.00 to $24.125
Options expired 2,500 (8,250) $20.875to $26.00
---------- ----------
December 31, 1993 5,461,000 853,116
========== ==========
NOTE 11: SAVINGS AND RETIREMENT PLAN
The Trust has a savings and retirement plan in accordance with the
provisions of Section 401(k) of the Internal Revenue Code. Under the plan,
the Trust out of its current net income, contributed 50% of each employee's
contribution. Employees' contributions range, at the discretion of each
employee, from 1% to 5% of compensation. In addition, the Trust may make
discretionary contributions within the limits of deductibility set forth by
the Code. All full-time employees of the Trust are eligible to become plan
participants. The Trust's expense for the years ended December 31, 1993,
1992, and 1991 was $133,000, $100,000, and $82,000, respectively.
NOTE 12: INTEREST EXPENSE
The Trust incurred interest expense totalling $31.8 million, $35.4
million and $39.0 million in 1993, 1992 and 1991, respectively, of which
$216,000, $237,000 and $892,000, respectively, was capitalized. Interest
paid was $31.4 million, $36.9 million and $37.1 million, respectively.
NOTE 13: SUBSEQUENT EVENTS
In February 1994 the Trust borrowed $22.5 million from a bank; the
loan, which is secured by Northeast Plaza, bears interest at 150 basis
F-27
points over LIBOR (London Interbank Offered Rate) and is due on January 31,
1995. Proceeds from this borrowing were used to pay down the borrowings on
the revolving credit facilities.
In February 1994 the Trust obtained a fourth revolving credit facility.
This facility, which is for $15.0 million and has terms substantially the
same as the Trust's other revolving credit facilities, brings the Trust's
total availability of revolving credit facilities to $85.0 million.
NOTE 14: QUARTERLY DATA (UNAUDITED)
The following summary represents the results of operations for each
quarter in 1993 and 1992:
Net Earnings
Revenue income per share
1993
March 31 $26,644 $2,521 $.10
June 30 28,444 2,825 .10
September 30 28,898 4,538 .16
December 31 31,351 8,246 .31
1992
March 31 $25,109 $1,703 $.08
June 30 24,114 2,244 .10
September 30 24,493 3,580 .15
December 31 26,481 1,903 .08
(a) Quarterly per share results are affected by the market price of common
share equivalents in the calculation of earnings per share.
The increases in revenue in 1993 over 1992 are primarily due to the
acquisition of new properties in late 1992 and 1993 and due to the
contributions of recently renovated centers. These increases in revenue as
well as decreases in interest expense are the principal reasons for the
increases in net income and earnings per share in 1993 as compared to 1992.
The 1993 increases in net income and earnings per share in the second and
F-28
third quarters would have been larger but for the fact that in 1992 there
was a gain on sale of real estate of $642,000 ($.03 per share) in the second
quarter and of $1.9 million ($.08 per share) in the third quarter. In
addition during the fourth quarter of 1993, the Trust had a gain on the
early retirement of debt of $3.0 million ($.11 per share).
F-29
FEDERAL REALTY INVESTMENT TRUST
SCHEDULE I
MARKETABLE SECURITIES AND OTHER INVESTMENTS
December 31, 1993
Column A Column B Column C Column D Column E
Name of Issuer and Principal Cost of Market Value Carrying Value
Title of Each Issue Amount Issue at December 31, at December 31,
1993 1993 (1)
Olympia and York,
Senior First Mortgage Notes, $4,758,000 $4,752,000 $3,485,000(2) $3,485,000
due March 20, 1999
Shares of Real Estate
Investment Trusts --- 887,000 523,000 523,000
---------- ---------- ---------- ----------
$4,758,000 $5,639,000 $4,008,000 $4,008,000
========== ========== ========== ==========
(1) The components of this balance are reflected as investments in the consolidated
balance sheet of the Trust as of December 31, 1993.
F-30
(2) This balance, which is net of a 1992 writedown of $960,000, is management's best
estimate of the realizable value of these notes.
F-31
FEDERAL REALTY INVESTMENT TRUST
SCHEDULE II
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
Years ended December 31, 1993, 1992 and 1991
Column A Column B Column C Column D Column E
----------------------------- ---------- ---------- ---------- ----------
Balance at
January 1, December 31,
Name of Debtor 1993 Additions Deductions 1993
----------------------------- ---------- ---------- ---------- ----------
Steven J. Guttman (President $405,000 $405,000 (1)
of the Trust) 2,685,000 2,685,000 (2)
Other officers 316,000 745,000 82,000 979,000 (1)
3,303,000 3,303,000 (2)
---------- ---------- ---------- ----------
$6,709,000 $745,000 $82,000 $7,372,000
========== ========== ========== ==========
Balance at
January 1, December 31,
Name of Debtor 1992 Additions Deductions 1992
----------------------------- ---------- ---------- ---------- ----------
Steven J. Guttman (President $410,000 (1) $100,000 $105,000 $405,000 (1)
of the Trust) 2,911,000 (2) 152,000 378,000 2,685,000 (2)
Other officers 278,000 (1) 98,000 60,000 316,000 (1)
F-32
3,582,000 (2) 186,000 465,000 3,303,000 (2)
---------- ---------- ---------- ----------
$7,181,000 $536,000 $1,008,000 $6,709,000
========== ========== ========== ==========
Balance at
January 1, December 31,
Name of Debtor 1991 Additions Deductions 1991
----------------------------- ---------- ---------- ---------- ----------
Steven J. Guttman (President $534,000 --- $124,000 $410,000 (1)
of the Trust) --- 3,100,000 189,000 2,911,000 (2)
Other officers 118,000 220,000 60,000 278,000 (1)
--- 3,814,000 232,000 3,582,000 (2)
---------- ---------- ---------- ----------
$652,000 $7,134,000 $605,000 $7,181,000
========== ========== ========== ==========
F-20
F-33
SCHEDULE II
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
Years ended December 31, 1993, 1992 and 1991
FEDERAL REALTY INVESTMENT TRUST FOOTNOTES
(1) These notes receivable from Mr. Guttman and other officers were issued
in connection with various stock grants and exercises of stock options.
Certain notes are interest free and certain notes bear interest at the
lesser of (i) the Trust's borrowing rate or (ii) the Trust's current
indicated annual dividend rate divided by the purchase price of the
shares. The notes, which are collateralized by common shares of the
Trust, have maturity dates ranging from April 1994 through September
1998. The notes that were issued in connection with shares granted
under the 1988 Share Bonus Plan are being forgiven over three years
from issuance if the officer is still employed by the Trust. In 1991,
1992 and 1993, notes for $176,000, $60,000 and $80,000 respectively,
were forgiven.
(2) In 1991 the Share Purchase Plan was adopted by the Trustees; under the
terms of this plan officers and certain employees of the Trust were
offered the opportunity to purchase 446,000 common shares of the Trust
with the assistance of loans of $6.7 million from the Trust. One
sixteenth or $421,000, of the loans will be forgiven each year for
eight years. The first sixteenth was forgiven upon purchase in January
1991, another 16th in January 1992 and the next 16th was accelerated to
December 1992 from January 1993. These notes are reflected as
subscriptions receivable in the consolidated balance sheet of the Trust
as of December 31, 1993 and 1992. In connection with this plan, the
Trust loaned the participants an additional $338,000 in 1992 and
$169,000 in 1991 to pay the taxes due in connection with the plan. The
purchase loans and the tax loans, which are collateralized by the
common shares purchased, bear interest at 9.39% and are due
approximately eight years from issuance.
F-34
FEDERAL REALTY INVESTMENT TRUST
SUMMARY OF REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1993
COLUMN A COLUMN B COLUMN C COLUMN D
-------------------------------------------------------------------------------------------------
Initial cost to company Cost Capitalized
Building and Subsequent to
Descriptions Encumbrance Land Improvements Acquisition
-------------------------------------------------------------------------------------------------
ALLWOOD (New Jersey) $3,579,000 $ $3,920,000 $94,000
ANDORRA (Pennsylvania) 2,432,000 12,346,000 1,235,000
BALA CYNWYD (Pennsylvania) 2,986,000 14,000,000 298,000
BARRACKS ROAD (Virginia) 22,377,000 4,363,000 16,459,000 8,121,000
BETHESDA ROW (Maryland) 12,576,000 18,823,000
BLUESTAR (New Jersey) 27,314,000 29,922,000 680,000
BRAINERD VILLAGE (Tennessee) 1,920,000 8,006,000 1,707,000
BRICK PLAZA (New Jersey) 21,362,000 24,715,000 2,459,000
BRUNSWICK (New Jersey) 11,370,000 12,456,000 529,000
CLIFTON (New Jersey) 3,328,000 3,646,000 69,000
CONGRESSIONAL PLAZA (Maryland) 2,793,000 7,424,000 2,857,000
CROSSROADS (Illinois) 4,635,000 11,611,000 187,000
DEDHAM PLAZA (Massachusetts) 12,369,000 12,918,000
EASTGATE (North Carolina) 1,608,000 5,775,000 4,040,000
ELLISBURG CIRCLE (New Jersey) 4,028,000 11,309,000 5,021,000
FALLS PLAZA (Virginia) 4,449,000 530,000 735,000 1,179,000
FEASTERVILLE (Pennsylvania) 1,032,000 1,600,000 2,144,000
FEDERAL PLAZA (Maryland) 29,457,000 10,216,000 17,895,000 31,046,000
FLOURTOWN (Pennsylvania) 347,000 1,806,000 788,000
GAITHERSBURG SQUARE (Maryland) 7,701,000 5,271,000 219,000
GOVERNOR PLAZA (Maryland) 2,068,000 4,905,000 9,817,000
HAMILTON (New Jersey) 4,933,000 5,405,000 1,105,000
HUNTINGTON (New York) 14,612,000 16,008,000 2,871,000
LANCASTER (Pennsylvania) 1,462,000 2,103,000 1,850,000
F-35
LANGHORNE SQUARE (Pennsylvania) 720,000 2,974,000 8,060,000
LAUREL (Maryland) 7,458,000 22,525,000 10,248,000
LAWRENCE PARK (Pennsylvania) 4,898,000 7,160,000 4,534,000
LOEHMANN'S PLAZA (Virginia) 6,642,000 1,237,000 15,096,000 4,099,000
MID PIKE PLAZA (Maryland) 10,041,000 10,335,000 4,670,000
NORTH CITY PLAZA (Pennsylvania) 325,000 2,175,000 455,000
NORTHEAST (Pennsylvania) 4,900,000 1,152,000 10,596,000 6,710,000
NORTHEAST PLAZA (Georgia) 6,930,000 26,236,000 5,085,000
OLD KEENE MILL (Virginia) 7,294,000 638,000 998,000 1,806,000
PAN AM SHOPPING CENTER (Virginia) 8,694,000 12,929,000 1,051,000
PERRING PLAZA (Maryland) 2,800,000 6,461,000 13,583,000
ROSEVILLE (Michigan) 525,000 1,601,000 1,958,000
QUINCE ORCHARD PLAZA (Maryland) 3,197,000 7,949,000 644,000
ROLLINGWOOD APTS. (Maryland) 552,000 2,246,000 2,982,000
RUTGERS (New Jersey) 13,171,000 14,429,000 95,000
SHILLINGTON (Pennsylvania) 884,000 1,387,000 1,566,000
TOWN & COUNTRY (Louisiana) 1,326,000 3,440,000 506,000
TOWN & COUNTRY (Illinois) 904,000 2,483,000 4,913,000
TROY (New Jersey) 3,346,000 5,193,000 4,506,000
TYSONS STATION (Virginia) 4,412,000 388,000 453,000 2,237,000
WESTFALLS (Virginia) 5,106,000 538,000 535,000 1,781,000
WILDWOOD (Maryland) 9,135,000 1,061,000 4,669,000
WILLIAMSBURG (Virginia) 2,758,000 7,160,000 1,935,000
WILLOW GROVE (Pennsylvania) 1,600,000 6,643,000 15,127,000
WILLOW LAWN (Virginia) 3,192,000 7,723,000 35,641,000
-----------------------------------------------------------------------------------------------
TOTALS $218,545,000 $112,065,000 $428,846,000 $217,177,000
============ ============ ============ ============
F-36
FEDERAL REALTY INVESTMENT TRUST
SUMMARY OF REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1993
(cont'd)
COLUMN A COLUMN E COLUMN F
--------------------------------------------------------------------------------------------------------
Gross amount at which
carried at close of period Accumulated
Building and Depreciation and
Descriptions Land Improvements Total Amortization
--------------------------------------------------------------------------------------------------------
ALLWOOD (New Jersey) $ $4,014,000 $4,014,000 $575,000
ANDORRA (Pennsylvania) 2,432,000 13,581,000 16,013,000 2,224,000
BALA CYNWYD (Pennsylvania) 2,986,000 14,298,000 17,284,000 111,000
BARRACKS ROAD (Virginia) 4,363,000 24,580,000 28,943,000 6,581,000
BETHESDA ROW (Maryland) 18,823,000 18,823,000
BLUESTAR (New Jersey) 30,602,000 30,602,000 4,438,000
BRAINERD VILLAGE (Tennessee) 1,920,000 9,713,000 11,633,000 2,007,000
BRICK PLAZA (New Jersey) 27,174,000 27,174,000 3,115,000
BRUNSWICK (New Jersey) 12,985,000 12,985,000 1,866,000
CLIFTON (New Jersey) 3,715,000 3,715,000 521,000
CONGRESSIONAL PLAZA (Maryland) 2,793,000 10,281,000 13,074,000 7,276,000
CROSSROADS (Illinois) 4,635,000 11,798,000 16,433,000 150,000
DEDHAM PLAZA (Massachusetts) 12,369,000 12,918,000 25,287,000
EASTGATE (North Carolina) 1,608,000 9,815,000 11,423,000 2,359,000
ELLISBURG CIRCLE (New Jersey) 4,028,000 16,330,000 20,358,000 426,000
FALLS PLAZA (Virginia) 530,000 1,914,000 2,444,000 1,345,000
FEASTERVILLE (Pennsylvania) 3,744,000 3,744,000 2,265,000
FEDERAL PLAZA (Maryland) 10,216,000 48,941,000 59,157,000 4,295,000
FLOURTOWN (Pennsylvania) 347,000 2,594,000 2,941,000 1,041,000
GAITHERSBURG SQUARE (Maryland) 7,701,000 5,490,000 13,191,000 105,000
GOVERNOR PLAZA (Maryland) 2,068,000 14,722,000 16,790,000 3,342,000
HAMILTON (New Jersey) 6,510,000 6,510,000 996,000
F-37
HUNTINGTON (New York) 18,879,000 18,879,000 2,443,000
LANCASTER (Pennsylvania) 3,953,000 3,953,000 2,090,000
LANGHORNE SQUARE (Pennsylvania) 720,000 11,034,000 11,754,000 2,433,000
LAUREL (Maryland) 7,458,000 32,773,000 40,231,000 6,519,000
LAWRENCE PARK (Pennsylvania) 11,694,000 11,694,000 6,985,000
LOEHMANN'S PLAZA (Virginia) 1,248,000 19,184,000 20,432,000 6,092,000
MID PIKE PLAZA (Maryland) 15,005,000 15,005,000 4,647,000
NORTH CITY PLAZA (Pennsylvania) 325,000 2,630,000 2,955,000 598,000
NORTHEAST (Pennsylvania) 1,152,000 17,306,000 18,458,000 3,839,000
NORTHEAST PLAZA (Georgia) 6,933,000 31,318,000 38,251,000 7,000,000
OLD KEENE MILL (Virginia) 638,000 2,804,000 3,442,000 1,571,000
PAN AM SHOPPING CENTER (Virginia) 8,694,000 13,980,000 22,674,000 332,000
PERRING PLAZA (Maryland) 2,800,000 20,044,000 22,844,000 2,969,000
ROSEVILLE (Michigan) 525,000 3,559,000 4,084,000 1,329,000
QUINCE ORCHARD PLAZA (Maryland) 3,197,000 8,593,000 11,790,000 162,000
ROLLINGWOOD APTS. (Maryland) 572,000 5,208,000 5,780,000 3,255,000
RUTGERS (New Jersey) 14,524,000 14,524,000 2,071,000
SHILLINGTON (Pennsylvania) 2,953,000 2,953,000 1,447,000
TOWN & COUNTRY (Louisiana) 1,326,000 3,946,000 5,272,000 340,000
TOWN & COUNTRY (Illinois) 904,000 7,396,000 8,300,000 4,901,000
TROY (New Jersey) 9,699,000 9,699,000 4,408,000
TYSONS STATION (Virginia) 475,000 2,603,000 3,078,000 2,069,000
WESTFALLS (Virginia) 559,000 2,295,000 2,854,000 1,409,000
WILDWOOD (Maryland) 9,135,000 5,730,000 14,865,000 3,849,000
WILLIAMSBURG (Virginia) 2,758,000 9,095,000 11,853,000 2,282,000
WILLOW GROVE (Pennsylvania) 1,600,000 21,770,000 23,370,000 5,282,000
WILLOW LAWN (Virginia) 3,192,000 43,364,000 46,556,000 9,685,000
------------------------------------------------------------------------------------------------------
TOTALS $112,207,000 $645,881,000 $758,088,000 $135,045,000
============ ============ ============ ============
F-38
FEDERAL REALTY INVESTMENT TRUST
SUMMARY OF REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1993
(cont'd)
COLUMN A COLUMN G COLUMN H COLUMN I
-----------------------------------------------------------------------------------------
Life on which
Date depreciation in latest
of Date income statements
Descriptions Construction Acquired is computed
-----------------------------------------------------------------------------------------
ALLWOOD (New Jersey) 1958 12/12/88 35 years
ANDORRA (Pennsylvania) 1953 01/12/88 35 years
BALA CYNWYD (Pennsylvania) 1955 09/22/93 35 years
BARRACKS ROAD (Virginia) 1958 12/31/85 35 years
BETHESDA ROW (Maryland) 1945-1991 12/31/93 35 years
BLUESTAR (New Jersey) 1959 12/12/88 35 years
BRAINERD VILLAGE (Tennessee) 1960 12/31/87 35 years
BRICK PLAZA (New Jersey) 1958 12/28/89 35 years
BRUNSWICK (New Jersey) 1957 12/12/88 35 years
CLIFTON (New Jersey) 1959 12/12/88 35 years
CONGRESSIONAL PLAZA (Maryland) 1965 04/01/65 20 years
CROSSROADS (Illinois) 1959 07/19/93 35 years
DEDHAM PLAZA (Massachusetts) 1959 12/31/93 35 years
EASTGATE (North Carolina) 1963 12/18/86 35 years
ELLISBURG CIRCLE (New Jersey) 1959 10/16/92 35 years
FALLS PLAZA (Virginia) 1962 09/30/67 22 3/4 years
FEASTERVILLE (Pennsylvania) 1958 07/23/80 20 years
FEDERAL PLAZA (Maryland) 1970 06/29/89 35 years
FLOURTOWN (Pennsylvania) 1957 04/25/80 30 years
GAITHERSBURG SQUARE (Maryland) 1966 04/22/93 35 years
GOVERNOR PLAZA (Maryland) 1963 10/01/85 35 years
HAMILTON (New Jersey) 1961 12/12/88 35 years
F-39
HUNTINGTON (New York) 1962 12/12/88 35 years
LANCASTER (Pennsylvania) 1958 04/24/80 22 years
LANGHORNE SQUARE (Pennsylvania) 1966 01/31/85 35 years
LAUREL (Maryland) 1956 08/15/86 35 years
LAWRENCE PARK (Pennsylvania) 1972 07/23/80 22 years
LOEHMANN'S PLAZA (Virginia) 1971 07/21/83 35 years
MID PIKE PLAZA (Maryland) 1963 05/18/82 35 years
NORTH CITY PLAZA (Pennsylvania) 1972 10/01/87 35 years
NORTHEAST (Pennsylvania) 1959 08/30/83 35 years
NORTHEAST PLAZA (Georgia) 1952 12/31/86 35 years
OLD KEENE MILL (Virginia) 1968 06/15/76 33 1/3 years
PAN AM SHOPPING CENTER (Virginia) 1979 02/05/93 35 years
PERRING PLAZA (Maryland) 1963 10/01/85 35 years
ROSEVILLE (Michigan) 1964 03/29/73 25 3/4 years
QUINCE ORCHARD PLAZA (Maryland) 1975 04/22/93 35 years
ROLLINGWOOD APTS. (Maryland) 1960 01/15/71 25 years
RUTGERS (New Jersey) 1973 12/12/88 35 years
SHILLINGTON (Pennsylvania) 1956 07/23/80 20 years
TOWN & COUNTRY (Louisiana) 1974 12/31/90 35 years
TOWN & COUNTRY (Illinois) 1968 10/15/73 25 years
TROY (New Jersey) 1966 07/23/80 22 years
TYSONS STATION (Virginia) 1954 01/17/78 17 years
WESTFALLS (Virginia) 1960 10/05/72 25 years
WILDWOOD (Maryland) 1958 05/05/69 33 1/3 years
WILLIAMSBURG (Virginia) 1961 04/30/86 35 years
WILLOW GROVE (Pennsylvania) 1953 11/20/84 35 years
WILLOW LAWN (Virginia) 1957 12/05/83 35 years
F-40
FEDERAL REALTY INVESTMENT TRUST
SCHEDULE XI
SUMMARY OF REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
Three Years Ended December 31, 1993
Reconciliation of Total Cost
----------------------------
Balance, January 1, 1991 $555,879,000
Additions during period
Acquisitions 281,000
Improvements 20,725,000
Deduction during period - condemnation of
land and miscellaneous retirements (10,829,000)
------------
Balance, December 31, 1991 566,056,000
Additions during period
Acquisitions 24,591,000
Improvements 18,991,000
Deduction during period - disposition
of property and miscellaneous retirements (10,771,000)
------------
Balance, December 31, 1992 598,867,000
Additions during period
Acquisitions 123,083,000
Improvements 37,110,000
Deduction during period - disposition
of property and miscellaneous retirements (972,000)
------------
Balance, December 31, 1993 $758,088,000
============
F-41
(A) For Federal tax purposes, the aggregate cost basis is approximately
$654,138,000 as of December 31, 1993.
F-42
FEDERAL REALTY INVESTMENT TRUST
SCHEDULE XI
SUMMARY OF REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
Three Years Ended December 31, 1993
Reconciliation of Accumulated Depreciation and Amortization
Balance, January 1, 1991 $78,596,000
Additions during period
Depreciation and amortization expense 19,946,000
Deductions during period - disposition of
property and miscellaneous retirements (2,853,000)
------------
Balance, December 31, 1991 95,689,000
Additions during period
Depreciation and amortization expense 20,589,000
Deductions during period - disposition of
property and miscellaneous retirements (3,096,000)
-------------
Balance, December 31, 1992 113,182,000
Additions during period
Depreciation and amortization expense 22,643,000
Deductions during period - miscellaneous
retirements (780,000)
------------
Balance, December 31, 1993 $135,045,000
============
F-43
FEDERAL REALTY INVESTMENT TRUST
SCHEDULE XII
MORTGAGE LOANS ON REAL ESTATE
Year Ended December 31, 1993
Column A Column B Column C Column D Column E Column F Column G
--------------- -------------- -------------- --------------- ----------- ------------ ----------
Carrying
Description of Interest Rate Maturity Date Periodic Payment Face Amount Amount of
Lien -------------- -------------- Terms Prior Liens of Mortgages Mortgages (1)
--------------- --------------- ----------- ------------ ----------
Second mortgage 11% on $700,000 May 1996 Interest accrues --- $700,000 $700,000
on shopping monthly with
center in payment deferred
Delaware
Leasehold 10% December 2003 Interest only --- 10,000,000 10,000,000(2)
mortgage on monthly;
shopping center $10,000,000
in New Jersey balloon payment
December 2003
Mortgage on 10% January 1994 Interest only --- 4,020,000 3,171,000(3)
shopping center monthly; balloon
in New Jersey payment January ---------- -------------- ----------
1994
--- $14,720,000 $13,871,000
========== ============== ===========
F-44
1) For Federal tax purposes, the aggregate tax basis is approximately $13,803,000 as of December 31,
1993.
2) This mortgage is extendable for up to 45 years with interest increasing to a maximum of 11%.
3) This mortgage is available for up to $4,020,000. At December 31, 1992, $3,124,000 was
outstanding.
F-45
FEDERAL REALTY INVESTMENT TRUST
SCHEDULE XII
MORTGAGE LOANS ON REAL ESTATE - CONTINUED
Three Years Ended December 31, 1993
Reconciliation of Carrying Amount
Balance, January 1, 1991 $16,676,000
Additions during period
Increase in existing loan 135,000
Deductions during period
Collections of principal (62,000)
------------
Balance, December 31, 1991 16,749,000
Additions during period
Increase in existing loan 11,000
Deductions during period
Collections of principal (67,000)
------------
Balance, December 31, 1992 16,693,000
Additions during period
Increase in existing loan 47,000
Deductions during period
First trust on wrap mortgage
transferred to borrower (2,801,000)
Collections of principal (68,000)
------------
Balance, December 31, 1993 $13,871,000
============
F-46
Report of Independent Certified Public Accountants
on Supplemental Information
Trustees and Shareholders
Federal Realty Investment Trust
In connection with our audit of the consolidated financial statements of
Federal Realty Investment Trust referred to in our report dated February 14,
1994 which is incorporated by reference in Part II of this form, we have
also audited Schedule I as of December 31, 1993 and Schedules II, XI and XII
as of December 31, 1993 and for each of the three years then ended. In our
opinion, these schedules present fairly, in all material respects, the
information required to be set forth therein.
Grant Thornton
Washington, D.C.
February 14, 1994
F-47
CREDIT AGREEMENT
dated as of February 11, 1994
between
FEDERAL REALTY INVESTMENT TRUST
and
MELLON BANK, N.A.
___________________________________________________________________________
F-48
TABLE OF CONTENTS
Page No.
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . 1
Section 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Accounting Term and Determinations. . . . . . . . . . 6
ARTICLE II
THE ADVANCES . . . . . . . . . . . . . . . . 6
Section 2.1. The Advances . . . . . . . . . . . . . . . . . . . . . 6
Section 2.2. Method of Borrowing. . . . . . . . . . . . . . . . . . 6
Section 2.3. The Note. . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.4. Interest Rates . . . . . . . . . . . . . . . . . . . . 7
Section 2.5. Method of Electing Interest Rates . . . . . . . . . . 7
Section 2.6. Prepayment of Advances . . . . . . . . . . . . . . . . 9
Section 2.7. Late Charges . . . . . . . . . . . . . . . . . . . . . 9
Section 2.8. Non-Usage Fee . . . . . . . . . . . . . . . . . . . . 10
Section 2.9. General Provisions as to Payments . . . . . . . . . . 10
Section 2.10. Extension of the Line of Credit Period . . . . . . . . 10
Section 2.11. Funding Losses . . . . . . . . . . . . . . . . . . . . 10
Section 2.12. Optional Termination or Reduction of the Line
of Credit Commitment . . . . . . . . . . . . 11
Section 2.13. Incorporation by Reference . . . . . . . . . . . . . . 11
ARTICLE III
CONDITIONS TO ADVANCES . . . . . . . . . . . 11
Section 3.1. Conditions to the First Advance . . . . . . . . . . . 11
Section 3.2. Conditions to Each Advance . . . . . . . . . . . . . . 13
ARTICLE IV
F-49
Page No.
REPRESENTATIONS AND WARRANTIES . . . . . . . 13
Section 4.1. Existence and Power . . . . . . . . . . . . . . . . . 13
Section 4.2. Authorization; Non-Contravention . . . . . . . . . . . 13
Section 4.3. Binding Effect . . . . . . . . . . . . . . . . . . . . 14
Section 4.4. Litigation . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.5. Filings . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.6. Financial Information . . . . . . . . . . . . . . . . 14
Section 4.7. ERISA Compliance . . . . . . . . . . . . . . . . . . . 15
Section 4.8. Environmental Compliance . . . . . . . . . . . . . . . 15
Section 4.9. Regulation U . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE V
FINANCIAL COVENANTS . . . . . . . . . . . . 16
Section 5.1. Certain Definitions. . . . . . . . . . . . . . . . . . 16
Section 5.2. Minimum Shareholders' Equity . . . . . . . . . . . . . 17
Section 5.3. Total Liabilities to Shareholders' Equity Ratio . . . 17
Section 5.4. Minimum Funds From Operations . . . . . . . . . . . . 17
Section 5.5 Limitation on Dividends . . . . . . . . . . . . . . . 17
ARTICLE VI
ADDITIONAL COVENANTS OF THE BORROWER . . . . 17
Section 6.1. Information . . . . . . . . . . . . . . . . . . . . . 17
Section 6.2 Payment of Obligations . . . . . . . . . . . . . . . . 19
Section 6.3. Maintenance of Property; Insurance . . . . . . . . . . 20
Section 6.4. Conduct of Business and Maintenance of Existence . . . 20
Section 6.5. Compliance with Laws . . . . . . . . . . . . . . . . . 20
Section 6.6. Accounting; Inspection of Property, Books and Records 20
Section 6.7. Restriction on Debt . . . . . . . . . . . . . . . . . 21
Section 6.9. Consolidations, Mergers and Sales of Assets . . . . . 21
Section 6.10 Transactions with Affiliates . . . . . . . . . . . . . 21
Section 6.11. Transactions with Other Persons . . . . . . . . . . . 22
Section 6.12 ERISA Matters . . . . . . . . . . . . . . . . . . . . 22
F-50
Page No.
Section 6.13 Environmental Matters . . . . . . . . . . . . . . . . 22
Section 6.14 Pro-Rata Borrowing and Repayment . . . . . . . . . . . 23
Section 6.15 Confession of Judgment . . . . . . . . . . . . . . . . 23
Section 6.16 Use of Proceeds. . . . . . . . . . . . . . . . . . . . 23
Section 6.17 Independence of Covenants . . . . . . . . . . . . . . 23
ARTICLE VII
DEFAULTS . . . . . . . . . . . . . . . . . . 23
Section 7.1 Events of Default . . . . . . . . . . . . . . . . . . 23
Section 7.2. Other Remedies . . . . . . . . . . . . . . . . . . . . 26
Section 7.3. Inspection of Properties . . . . . . . . . . . . . . . 26
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
AFFECTING EURO-DOLLAR-BASED ADVANCES . . . . 27
Section 8.1. Basis for Determining Adjusted London Interbank Offered
Rate Inadequate or Unfair . . . . . . . . . 27
Section 8.2. Illegality . . . . . . . . . . . . . . . . . . . . . . 27
Section 8.3. Increased Cost and Reduced Return . . . . . . . . . . 28
Section 8.4. Suspension of Advances . . . . . . . . . . . . . . . . 30
ARTICLE IX
MISCELLANEOUS . . . . . . . . . . . . . . . 30
Section 9.1. Notices . . . . . . . . . . . . . . . . . . . . . . . 30
Section 9.2. No Waivers . . . . . . . . . . . . . . . . . . . . . . 30
Section 9.3. Expenses . . . . . . . . . . . . . . . . . . . . . . . 30
Section 9.4. Indemnification . . . . . . . . . . . . . . . . . . . 31
Section 9.5. Right of Set-Off . . . . . . . . . . . . . . . . . . . 32
Section 9.6. Amendments and Waivers . . . . . . . . . . . . . . . . 33
Section 9.7. Successors and Assigns . . . . . . . . . . . . . . . . 33
Section 9.8. Governing Law. . . . . . . . . . . . . . . . . . . . . 34
F-51
Page No.
Section 9.9. Counterparts; Effectiveness . . . . . . . . . . . . . 34
Section 9.10. Waiver of Jury Trial; Submission to Jurisdiction . . . 34
Section 9.11. Waiver of Personal Liability . . . . . . . . . . . . . 35
Section 9.12. Entire Agreement . . . . . . . . . . . . . . . . . . . 35
SCHEDULE 1.1- AUTHORIZED PERSONS
SCHEDULE 4.8- . . . . . . . . .
EXHIBIT A-FORM OF NOTE
EXHIBIT B-FORM OF BORROWER'S COUNSEL OPINION
F-52
A6431.A(BF)
CREDIT AGREEMENT
This CREDIT AGREEMENT (as amended, supplemented or modified from time to
time, this "Agreement") is dated as of February 11, 1994 and is between
FEDERAL REALTY INVESTMENT TRUST, a District of Columbia unincorporated
business trust (the "Borrower"), and MELLON BANK, N.A., a national banking
association (the "Bank").
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. The following terms, as used herein, have the
following meanings:
"Adjusted London Interbank Offered Rate" means, for any Interest Period,
a rate per annum equal to the quotient obtained (rounded upwards, if
necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable
London Interbank Offered Rate by (ii) 1.00 minus the applicable Euro-Dollar
Reserve Percentage.
"Advances" has the meaning set forth in Section 2.1.
"Affiliate" means (i) any Person that directly, or indirectly through one
or more intermediaries, controls the Borrower or (ii) any Person (other than
the Borrower) that is controlled by or is under common control with such
controlling Person (the term "control" meaning the possession, directly or
indirectly, of the power to direct or cause the direction of the management
F-53
or policies of a Person, whether through the ownership of voting securities,
by contract or otherwise).
"Authorized Person" means any of the officers of the Borrower identified
on Schedule 1.1 or any other officer of the Borrower identified in a
borrowing resolution delivered to and accepted by the Bank.
"Available Amount" means, as of any date, $15,000,000 minus the aggregate
unpaid principal amount of Advances outstanding on such date.
"Business Day" means (i) when used with respect to Advances that bear or
are to bear interest at the Prime-Based Rate, any day except a Saturday,
Sunday or other day on which commercial banks in Pittsburgh, Pennsylvania
are authorized by law to close and (ii) when used with respect to Advances
that bear or are to bear interest at the Euro-Dollar-Based Rate, any day
described in clause (i) above on which commercial banks are open for
international business (including dealings in dollar deposits) in London.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C. Section 9601 et seq.), as amended by the
Superfund Amendment and Reauthorization Act of 1986 and as otherwise amended
from time to time.
"Code" means the Internal Revenue Code of 1986, as amended.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated)
under common control which, together with the Borrower, are treated as a
single employer under Section 414(b) or 414(c) of the Code.
"Debt" means, with respect to any Person 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, (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
F-54
connection with the sale of the same or substantially similar securities or
property, (vi) the stated amount of all letters of credit and similar
instruments issued for the account of such Person (including all
unreimbursed draws), (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, and (viii) all obligations of others guaranteed by such Person.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Effective Date" means the date on which this Agreement becomes effective
in accordance with Section 9.9.
"Environmental Requirements" means all federal, state and local
environmental laws (including, without limitation, CERCLA), rules,
regulations and orders regulating, relating to or imposing liability or
standards of conduct concerning any Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Euro-Dollar-Based Advance" means an Advance that bears interest at the
Euro-Dollar-Based Rate.
"Euro-Dollar-Based Rate" means a rate of interest based on the Adjusted
London Interbank Offered Rate as provided in Section 2.4(b).
"Euro-Dollar Reserve Percentage" for any day shall mean the percentage
(expressed as a decimal, rounded upward to the nearest 1/100 of 1%), as
determined in good faith by the Bank (which determination shall be
conclusive), which is in effect on such day as prescribed by the Board of
Governors of the Federal Reserve System (or any successor) representing the
maximum reserve requirement (including, without imitation, supplemental,
marginal and emergency reserve requirements) with respect to eurocurrency
funding (currently referred to as "Eurocurrency liabilities") of a member
bank in such System. The Adjusted London Interbank Offered Bank shall be
F-55
adjusted automatically as of the effective date of each change in the Euro-
Dollar Reserve Percentage.
"Euro-Rate Interest Period" shall mean a period of one, two, three or six
months for which maker has selected the Euro-Rate Option to apply to a Euro-
Rate Segment. Each Euro-Rate Interest Period shall begin on a London
Business Day, and the term "month", when used in connection with a Euro-Rate
Interest Period shall be construed in accordance with prevailing practices
in the Interest Period, as determined in good faith by Bank (which
determination shall be conclusive).
"Event of Default" has the meaning set forth in Section 7.1.
"GAAP" means generally accepted accounting principles in the United
States.
"Hazardous Material" means (i) "hazardous wastes," as defined by the
Resource Conservation and Recovery Act of 1976, as amended from time, (ii)
"hazardous substances," as defined by CERCLA, (iii) "toxic substances," as
defined by the Toxic Substances Control Act, as amended from time to time,
(iv) "hazardous materials," as defined by the Hazardous Materials
Transportation Act, as amended from time to time, (v) asbestos, oil or other
petroleum products, radioactive materials, urea formaldehyde foam
insulation, radon gas and transformers or other equipment that contains
dielectric fluid containing polychlorinated biphenyls and (vi) any substance
whose presence is detrimental or hazardous to health or the environment.
"Interest Period" means, with respect to each election of the Euro-
Dollar-Based Rate, the period commencing on the effective date of such
borrowing and ending one, two, three or six months thereafter, as specified
in the notice of such election; provided, however, that (i) any such period
that would otherwise end on a day that is not a Business Day shall be
extended to the next succeeding Business Day unless such Business Day falls
in another calendar month (in which case such period shall end on the next
preceding Business Day), (ii) any such period that begins on the last
Business Day of a calendar month shall, subject to clause (iii) below, end
F-56
on the last Business Day of a calendar month and (iii) no such period shall
end after the Termination Date.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset (including the interest of a vendor or lessor under any conditional
sale agreement, capital lease or other title retention agreement relating to
such asset).
"Line of Credit Commitment" has the meaning set forth in Section 2.1.
"Line of Credit Period" means the period from and including the Effective
Date to but excluding the Termination Date.
"London Interbank Offered Rate" means, for any Interest Period, the rate
of interest designated as the British Banker's Association settlement rate
that appears on the display on page 3750 (under the caption "USD" of the
Telerate Services, Incorporated screen or on such other display as may
replace such page) as of 11:00 A.M. (London Time) two Business Days before
the first day of such Interest Period as the rate per annum for deposits in
dollars in the London interbank market for a period of time comparable to
such Interest Period; provided, however, that if no offered quotations
appear on the Telerate Services, Incorporated screen or if quotations are
not given on such screen for a period of time comparable to such Interest
Period, then the London Interbank Offered Rate applicable to such Interest
Period shall be the rate of interest determined by the Bank to be the
prevailing rate per annum quoted to it at approximately 10:00 A.M. (Eastern
Time) two Business Days before the first day of such Interest Period by two
or more New York Euro-Dollar deposit dealers of recognized standing selected
by the Bank for the offering of dollar deposits to the Bank by leading banks
in the London interbank market for a period of time comparable to such
Interest Period and in an amount approximately equal to the principal amount
of the Advance to which such Interest Period is to apply.
"Note" has the meaning set forth in Section 2.3.
F-57
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, an
association, a trust, a limited liability company or any other entity or
organization, including a government or political subdivision or an agency
or instrumentality thereof.
"Plan" means, at any time, an employee pension benefit plan that is
covered by Title IV of ERISA or is subject to the minimum funding standards
under Section 412 of the Code and is either (i) maintained by a member of
the Controlled Group for employees of a member or members of the Controlled
Group or (ii) maintained pursuant to a collective bargaining agreement or
any other arrangement under which more than one employer makes contributions
and to which a member of the Controlled Group is then making or accruing an
obligation to make contributions or has within the preceding five plan years
made contributions.
"Prime-Based Advance" means an Advance that bears or is to bear interest
at the Prime-Based Rate.
"Prime-Based Rate" means a rate of interest based on the Prime Rate as
provided in Section 2.4(a).
"Prime Rate" means the interest rate per annum announced from time to
time by the Bank as its prime rate. The prime rate may be greater or less
than other interest rates charged by the Bank to other borrowers and is not
solely based or dependent upon the interest rate which the Bank may charge
any particular borrower or class of borrowers.
"Release" means any disposing of, discharging, injecting, spilling,
leaking, pumping, pouring, leaching, dumping, emitting, escaping, emptying,
seeping, placing or the like onto or upon any land, water or air or
otherwise entering the environment.
"Revolving Credit Bank" has the meaning set forth in Section 6.8.
F-58
"Termination Date" means the later of (i) three years from the Effective
Date or (ii) the date to which the Line of Credit Period has been extended
pursuant to Section 2.10.
"Unfunded Vested Liabilities" means, with respect to any Plan at any
time, the amount, if any, by which (i) the present value of all vested
nonforfeitable benefits under such Plan exceeds (ii) the fair market value
of all Plan assets allocable to such benefits, all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the Controlled Group
to the PBGC or the Plan under Title IV or ERISA.
Section 1.2. Accounting Term and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, and
all accounting determinations required hereunder shall be made and all
financial statements delivered hereunder shall be prepared in accordance
with GAAP as in effect from time to time, applied on a basis consistent
(except for changes concurred in by the Borrower's independent public
accountants) with the most recent financial statements of the Borrower
delivered to the Bank.
ARTICLE II
THE ADVANCES
Section 2.1. The Advances. The Bank agrees, on the terms and conditions
set forth in this Agreement, from time to time on any Business Day during
the Line of Credit Period, to make one or more loans to the Borrower in an
aggregate principal amount not to exceed the Available Amount as of such
Business Day (the "Line of Credit Commitment"). Each of the loans made to
the Borrower pursuant to this Section 2.1 (the "Advances") shall be in an
amount equal to $5,000 or an integral multiple thereof. The Borrower may,
within the foregoing limits, borrow amounts under this Section 2.1, repay
such amounts at maturity in accordance with Section 2.5, prepay such amounts
in accordance with Section 2.6 and reborrow amounts under this Section 2.1.
F-59
Section 2.2. Method of Borrowing. The Borrower may request loans
pursuant to Section 2.1 by giving the Bank notice (which notice may be given
by telephone by an Authorized Person if promptly confirmed in writing by an
Authorized Person) not later than 10:00 A.M. (Eastern Time) at least two
Business Days before the date of the proposed loan specifying (i) the date
of the proposed loan (which must be a Business Day), (ii) the amount to be
borrowed, (iii) whether the proposed loan is to bear interest at the Prime-
Based Rate of the Euro-Dollar-Based Rate and (iv) in the case of a proposed
loan that is to bear interest at the Euro-Dollar Based Rate, the Interest
Period applicable thereto. The Bank shall (unless it determines that any
applicable condition specified in this Agreement has not been satisfied)
make the amount to be borrowed available to the Borrower not later than 2:00
P.M. (Eastern Time) on the date of the proposed loan by wire transfer of
such funds to such account as the Borrower shall specify in its request for
such Advance.
Section 2.3. The Note. The Advances shall be evidenced by, and shall be
repayable with interest in accordance with, a single note substantially in
the form of Exhibit A hereto and appropriately completed (the "Note"). The
Bank shall record on its books, and prior to any transfer of the Note shall
make on the schedule forming a part thereof appropriate notations to
evidence, the date and amount of each Advance and the date and amount of
each payment of principal made by the Borrower with respect thereto;
provided, however, that any failure of the Bank to make such a notation or
any error therein shall not in any manner affect the obligation of the
Borrower to repay the Advances in accordance with the terms of the Note.
The Borrower hereby irrevocably authorizes the Bank to record such
information and to make such notations.
Section 2.4. Interest Rates.
(a) If the Borrower elects, or this Agreement otherwise provides, that
an Advance shall bear interest at the Prime-Based Rate, such Advance shall
bear interest on the outstanding principal amount thereof, for each day from
and including the date on which such Advance is made to but excluding the
date on which such Advance is due, at a rate per annum equal to the Prime
Rate for such day minus 1.00%. The Prime-Based Rate shall be adjusted
F-60
automatically on and as of the effective date of any change in the Prime
Rate. All such interest shall be payable on the first day of each month.
(b) If the Borrower elects that an Advance shall bear interest at the
Euro-Dollar-Based Rate, such Advance shall bear interest on the outstanding
principal amount thereof, for each day during the applicable Interest
Period, at a rate per annum equal to the sum of 1.00% plus the applicable
Adjusted London Interback Offered Rate. All such interest shall be payable
on the first day of each month.
(c) At maturity (whether upon acceleration or otherwise), or upon the
occurrence and during the continuation of an Event of default, the unpaid
principal amount of and all accrued but unpaid interest on the Advances
shall automatically bear interest for each day at a rate per annum equal to
the sum of 4.75% plus the Adjusted London Interbank Offered Rate (assuming a
one-month Interest Period) for such day.
Section 2.5. Method of Electing Interest Rates.
(a) Each Advance shall bear interest initially at the type of rate
specified by the Borrower in the applicable notice delivered to the Bank
pursuant to Section 2.2. Thereafter, the Borrower may from time to time
elect to change or continue the type of interest rate applicable to such
Advance (subject in each case to the provisions of Article VIII) as follows:
(i) if such Advance is bearing interest at the Prime-Based Rate, the
Borrower may elect to change the applicable rate to the Euro-Dollar-Based
Rate as of any Business Day;
(ii) if such Advance is bearing interest at the Euro-Dollar-Based
Rate, the Borrower may elect to change the applicable rate to the Prime-
Based Rate, or may elect to continue such Advance at the Euro-Dollar-Based
Rate for an additional Interest Period, in each case beginning on the last
day of the then applicable Interest Period;
(iii) if such Advance is bearing interest at the Prime-Based Rate, the
Borrower may elect to designate such Advance as any combination of Prime-
F-61
Based Advances or Euro-Dollar-Based Advances as of any Business Day
(subject to the definition of Interest Period); and
(iv) if such Advance is bearing interest at the Euro-Dollar-Based
Rate, the Borrower may elect to designate such Advance as any combination
of Prime-Based Advances or Euro-Dollar-Based Advances as of the last day
of the then applicable Interest Period (subject to the definition of
Interest Period).
The Borrower shall make each such election by delivering a notice to the
Bank not later than 10:00 A.M. (Eastern Time) at least two Business Days
before the new type of interest rate or the additional Interest Period
selected in such notice is to begin.
(b) Each notice of interest rate election delivered pursuant to
subsection (a) above shall specify with respect to each outstanding Advance
to which such notice applies:
(i) the date on which the new type of interest rate or additional
Interest Period selected in such notice is to begin, which shall comply
with the applicable clauses of subsection (a) above;
(ii) if the type of interest rate applicable to such Advance is to be
changed, the new type of interest rate selected and, if the new rate is a
Euro-Dollar-Based Rate, the duration of the initial Interest Period;
(iii) if such Advance is currently bearing interest at the Euro-
Dollar-Based Rate and such type of interest rate is to be continued for an
additional Interest Period, the duration of such additional Interest
Period; and
(iv) if such Advance is to be designated as a combination of Prime-
Based Advances and Euro-Dollar-Based Advances, the information specified
in clauses (i) through (iii) above as to each such Prime-Based Advance and
each such Euro-Dollar Based Advance.
F-62
Each Interest Period specified in such notice of interest rate election
shall comply with the provisions of the definition of Interest Period.
(c) If the Borrower fails to deliver a timely notice of interest rate
election pursuant to subsection (a) above selecting a new type of interest
rate for an additional Interest Period for any Euro-Dollar-Based Advance,
such Euro-Dollar-Based Advance shall bear interest at the Euro-Dollar-Based
Rate (assuming a one-month Interest Period) commencing on the last day of
the then current Interest Period (and continuing until the Borrower elects a
different type of interest rate for such Euro-Dollar-Based Advance as
provided in this Section 2.5).
Section 2.6. Prepayment of Advances.
(a) The Borrower may prepay the Prime-Based Advances in whole or in
part at any time or from time to time by paying the principal amount to be
prepaid plus accrued interest thereon to the date of prepayment.
(b) The Borrower may prepay the Euro-Dollar-Based Advances in whole or
in part at any time or from time by paying the principal amount to be
prepaid plus accrued interest thereon to the date of prepayment; provided,
however, that the Borrower shall reimburse the Bank on demand in accordance
with Section 2.11 for any actual loss or reasonable expense incurred by the
Bank as a result of the Borrower's repayment of a Euro-Dollar-Based Advance
other than on the last day of the applicable Interest Period.
(c) If on any date the aggregate unpaid principal amount of Advances
outstanding on such date exceeds $15,000,000, the Borrower shall immediately
prepay the Advances in an amount equal to such excess.
Section 2.7. Late Charges. If the Borrower fails to make any payment of
interest on the Advances, or fails to pay any fee or other amount due with
respect to the Advances, within 10 Business Days after the date such payment
was due, the Borrower shall pay to the Bank on demand a late charge equal to
5.00% of the amount of such payment. If the Borrower has not received, on
or before the last day of any calendar month, a statement from the Bank
setting forth the interest then due with respect to the Advances, the
F-63
Borrower shall estimate the amount of such interest in good faith and shall
pay such amount to the Bank (and the Borrower shall not incur a late charge
if such amount is paid within 10 Business Days after the date such interest
payment was due). If the Borrower thereafter receives a statement from the
Bank setting forth the interest then due with respect to the Advances and
the amount of such interest exceeds the estimated payment made by the
Borrower, the Borrower shall, upon its receipt of such statement, pay an
amount equal to such excess to the Bank. This charge shall be in addition
to, and not in lieu of, any other remedy the Bank may have and is in
addition to any reasonable fees and charges of any agents or attorneys which
the Bank is entitled to employ on any default hereunder, whether authorized
herein, or by law.
Section 2.8. Non-Usage Fee. The Borrower shall pay to the Bank on the
fifteenth day of January, April, July and October of each year, commencing
April 15, 1994, a non-usage fee equal to 0.25% per annum of the average
daily Available Amount during the preceding calendar quarter.
Section 2.9. General Provisions as to Payments. The Borrower shall make
each payment of principal of and interest on the Advances (and each payment
of a non-usage fee or late charge) not later than 11:00 A.M. (Eastern Time)
on the date when due, in federal or other immediately available funds, to
the Bank at the Bank's address specified in Section 9.1. Whenever any
payment of principal of or interest on the Advances (or any payment of a
non-usage fee or late charge) is due on a day which is not a Business Day,
the date for payment thereof shall be extended to the next succeeding
Business Day. If the date for any payment of principal of the Advances (or
the date for any payment of a non-usage fee or late charge) is extended by
operation of law or otherwise, interest thereon shall be payable for such
extended time.
Section 2.10. Extension of the Line of Credit Period. The Bank shall
review the Line of Credit Commitment on or before January 1 of each year,
commencing January 1, 1995, and may, in its sole and absolute discretion,
extend the Line of Credit Period from time to time for an additional one
year period. The Bank shall have the unconditional right not to extend the
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Line of Credit Period, notwithstanding that no Event of Default exists. The
Bank shall notify the Borrower on or before January 1 of each
year, commencing January 1, 1995, whether the Bank has elected to extend the
Line of Credit Period.
Section 2.11. Funding Losses. If (i) the Borrower makes any principal
payment with respect to the Euro-Dollar-Based Advances on any day other than
the last day of the applicable Interest Period (pursuant to Article II or
VIII or otherwise), (ii) the Borrower converts Euro-Dollar-Based Advances to
Prime-Based Advances on any day other than the last day of the applicable
Interest Period (pursuant to Article VIII or otherwise) or (iii) the
Borrower fails to borrow a Euro-Dollar-Based Advance in accordance with any
loan request delivered to the Bank in accordance with Section 2.2, the
Borrower shall reimburse the Bank on demand for any actual loss or
reasonable expense incurred by the Bank as a result of such event,
including, without limitation, any loss incurred in obtaining, liquidating
or employing deposits from third parties. The Bank shall deliver to the
Borrower a certificate showing the calculation of the amount of such loss or
reasonable expense, which certificate shall be conclusive in the absence of
manifest error. The Bank may use any reasonable averaging and attribution
methods in calculating such loss or reasonable expense.
Section 2.12. Optional Termination or Reduction of the Line of Credit
Commitment. The Borrower may, upon at least 45 days' notice to the Bank,
(i) terminate the Line of Credit Commitment or (ii) reduce the unused
portion of the Line of Credit Commitment from time to time by an aggregate
amount of $3,000,000 or any integral multiple of $1,000,000 in excess
thereof; provided, however, that the Borrower may not terminate or reduce
the Line of Credit Commitment on or before January 1, 1995; and, provided,
further, that the Borrower may not terminate the Line of Credit Commitment
at any time that any Euro-Dollar-Based Advance is outstanding and may not
reduce the Line of Credit Commitment on any date below an amount equal to
the aggregate unpaid principal amount of Euro-Dollar-Based Advances
outstanding on such date.
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Section 2.13. Incorporation by Reference. The terms and conditions of
the Note are hereby incorporated by reference into this Agreement with the
same force and effect as if fully set forth herein.
ARTICLE III
CONDITIONS TO ADVANCES
Section 3.1. Conditions to the First Advance. The obligations of the
Bank to make the first Advance is subject to the satisfaction of the
following conditions:
(i) receipt by the Bank of a duly executed Note, dated on or before the
date of such Advance, complying with the provisions of Section 2.3;
(ii) all legal matters incident to this Agreement, the Note and the
transactions contemplated hereby and thereby shall be reasonably
satisfactory to Ballard Spahr Andrews & Ingersoll;
(iii) receipt by the Bank of a certificate of the Secretary of the Borrower
dated the date of such Advance and certifying (A) that attached thereto is
a true and complete copy of the declaration of trust of the Borrower as in
effect on the date of such certification, (B) as to the absence of
dissolution or liquidation proceedings by or against the Borrower, (C)
that attached thereto is a true and complete copy of the bylaws of the
Borrower as in effect on the date of such certification, (D) that attached
thereto is a true and complete copy of resolutions adopted by the board of
trustees of the Borrower authorizing the execution, delivery and
performance of this Agreement and the Note and that such resolutions have
not been amended and are in full force and effect on the date of such
certification and (E) as to the incumbency and specimen signatures of each
officer of the Borrower executing this Agreement, the Note or any other
document delivered in connection herewith or therewith;
(iv) receipt by the Bank of an opinion of counsel for the Borrower
substantially in the form of Exhibit B hereto and covering such additional
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matters relating to the transactions contemplated hereby as the Bank may
reasonably request;
(v) receipt by the Bank of a certificate of an Authorized Person, dated
the date of such Advance, certifying that, to the best of the Borrower's
knowledge, no Default has occurred and is continuing or would result from
such Advance and that the representations and warranties of the Borrower
set forth in this Agreement are true and correct on and as of the date of
such Advance;
(vi) receipt by the Bank of such evidence as it may reasonably request
confirming that the financial institutions described in Section 6.7(iii)
do not have the right to confess judgment against the Borrower;
(vii) receipt by the Bank of a charge fee in the amount of $37,500; and
(viii) receipt by the Bank of all documents it may reasonably request
relating to the existence of the Borrower and its authority to execute,
deliver and perform this Agreement and the Note and the validity of this
Agreement and the Note and any other matters relevant hereto or thereto,
all in form and substance satisfactory to the Bank and its counsel.
Section 3.2. Conditions to Each Advance. The obligation of the Bank to
make such Advance is subject to the satisfaction of the following
conditions:
(i) the fact that no Default has occurred and is continuing or would
result from such Advance;
(ii) the fact that the representations and warranties of the
Borrower set forth in this Agreement are true and correct on and as of the
date of such Advance; and
(iii) the fact that the amount of such Advance does not exceed the
Available Amount.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
Section 4.1. Existence and Power. The Borrower is an unincorporated
business trust, validly existing and in good standing under the laws of the
District of Columbia, has all powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as
now conducted and is not a "foreign person" within the meaning of sections
1445 and 7701 of the Code. The Borrower is duly qualified or licensed to do
business in each jurisdiction where qualification or licensing is required
by the nature of its business or the character and location of its property,
business or customers and in which the failure to so qualify or be licensed,
as the case may be, in the aggregate, could have a material adverse effect
on the business, financial position, results of operations or properties of
the Borrower.
Section 4.2. Authorization; Non-Contravention. The execution, delivery
and performance by the Borrower of this Agreement and the Note are within
its power, have been duly authorized by all necessary action, require no
action by or in respect of, or filing with, any governmental body, agency or
official and do not contravene, or constitute (with or without the giving of
notice or lapse of time or both) a default under, any provision of
applicable law or of the declaration of trust or bylaws of the Borrower or
of any agreement, judgment, injunction, order, decree or other instrument
binding upon or affecting the Borrower or result in the creation or
imposition of any Lien on any of its assets.
Section 4.3. Binding Effect. This Agreement constitutes a valid and
binding agreement of the Borrower and the Note, when executed and delivered
in accordance with this Agreement, will constitute a valid and binding
obligation of the Borrower, in each case enforceable against the Borrower in
accordance with its terms, except as (i) the enforceability hereof and
thereof may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (ii) rights of acceleration and the
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availability of equitable remedies may be limited by equitable principles of
general applicability.
Section 4.4. Litigation. Except as disclosed in the Borrower's Form 10-
Q for the quarter ended September 30, 1993 filed with the Securities and
Exchange Commission, there is no action, suit or proceeding pending against,
or to the knowledge of the Borrower threatened against or affecting, the
Borrower or any of its subsidiaries before any federal, state or local
government, authority, agency, court or other body, officer or entity, or
before any arbitrator with authority to bind a party at law, in which there
is a reasonable possibility of a decision which could materially adversely
affect the business, financial position, results of operations or properties
of the Borrower or which in any manner draws into question the validity of
this Agreement or the Note, and there is no basis known to the Borrower for
any such action, suit or proceeding.
Section 4.5. Filings. All actions by or in respect of, and all filings
with, any governmental body, agency or official required in connection with
the execution, delivery and performance of this Agreement and the Note, or
necessary for the validity or enforceability hereof and thereof or for the
protection or perfection of the rights and interests of the Bank hereunder
and thereunder, will, prior to the date of delivery hereof or thereof, have
been duly taken or made, as the case may be, and will at all times
thereafter remain in full force and effect.
Section 4.6. Financial Information.
(a) The audited balance sheet of the Borrower as of December 31, 1992
and the related audited statements of operations, cash flows and
shareholders' equity for the fiscal year then ended, copies of which have
been delivered to the Bank, fairly present, in conformity with GAAP, the
financial position of the Borrower as of such date and its results of
operations and cash flows for such fiscal year. As of the date of such
financial statements, the Borrower did not have any material contingent
obligation, contingent liability, liability for taxes, long-term lease or
unusual forward or long-term commitment which is not reflected in any of
such financial statements or in the notes thereto.
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(b) The unaudited balance sheet of the Borrower as of September 30, 1993
and the related unaudited statements of operations, cash flows and
shareholders' equity for the calendar quarter then ended, copies of which
have been delivered to the Bank, fairly present, in conformity with GAAP
applied on a basis consistent with the financial statements referred to in
subsection (a) above, the financial position of the Borrower as of such date
and its results of operations and cash flows for each calendar quarter
(subject to normal year-end adjustments).
(c) Since September 30, 1993, there has been no material adverse change
in the business, financial position, results of operations or properties of
the Borrower.
Section 4.7. ERISA Compliance. Each member of the Controlled Group has
fulfilled its obligations under the minimum funding standards of ERISA and
the Code with respect to each Plan and is in compliance in all material
respects with the provisions of ERISA and the Code presently applicable to
each Plan, and has not incurred or does not reasonably expect to incur any
liability to the PBGC or a Plan under Title IV of ERISA. The execution and
delivery of this Agreement and the issuance of the Note will not involve any
transaction which is subject to the prohibitions of Section 406 of ERISA or
in connection with which a tax would be imposed pursuant to section 4975 of
the Code. No Lien has been attached, and no Person has threatened to attach
a Lien, on any property of the Borrower as a result of the Borrower's
failure to comply with ERISA.
Section 4.8. Environmental Compliance.
(a) Except as described in Schedule 4.8 or disclosed in the Borrower's
Form 10-Q for the quarter ended September 30, 1993 filed with the Securities
and Exchange Commission, neither the Borrower nor any of its subsidiaries is
(i) in default with respect to any order, writ, injunction or decree of any
court or (ii) in default in any respect under any Environmental Requirement,
which default is likely to materially adversely affect the business,
financial position, results of operations or properties of the Borrower and
its subsidiaries.
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(b) Except as described in Schedule 4.8 or disclosed in the Borrower's
Form 10-Q for the quarter ended September 30, 1993 filed with the Securities
and Exchange Commission, (i) the Borrower and each of its subsidiaries is in
compliance in all material respects with all applicable Environmental
Requirements and state and federal health and safety statutes and
regulations, other than violations that are unlikely to materially adversely
affect the business, financial position, results of operations or properties
of the Borrower and its subsidiaries, and (ii) to the best of the Borrower's
knowledge, neither the Borrower nor any of its subsidiaries is the subject
of any evaluation under any Environmental Requirement or any other federal,
state or local investigation to evaluate whether any remedial action is
needed to respond to a Release of Hazardous Material or any other
environmental matter, other than investigations that are unlikely to
materially adversely affect the business, financial position, results of
operations or properties of the Borrower and its subsidiaries.
Section 4.9. Regulation U. The Advances will not be used by the
Borrower, directly or indirectly, for the purpose of purchasing or carrying
any margin stock or for the purpose of reducing or retiring any indebtedness
that was originally incurred to purchase or carry margin stock or for any
other purpose that might constitute the Advances a "purpose credit" within
the meaning of Regulation U or Regulation X of the Board of Governors of the
Federal Reserve System.
ARTICLE V
FINANCIAL COVENANTS
The Borrower agrees that so long as the Bank is committed to make
Advances hereunder or any amount payable hereunder or under the Note remains
unpaid:
Section 5.1. Certain Definitions. As used in this Article V and
elsewhere in this Agreement, the following terms have the following
meanings:
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"Funds From Operations" means, for any calendar quarter, the Borrower's
net income (or net loss) for such quarter before depreciation of real estate
owned, amortization, gains on sales of investments and extraordinary items.
"Shareholders' Equity" means, at any date, (i) shareholders' equity of
the Borrower (as set forth in the Borrower's most recent statement of
shareholders' equity) plus (ii) the sum as of such date of subscriptions
receivable, deferred compensation, treasury stock (valued at cost) and
changes in accumulated dividends in excess of the Borrower's net income
(utilizing a base amount of $79,434,000 per the June 30, 1992 financial
statements of the Borrower).
"Total Liabilities" means, at any date, all obligations of the Borrower
on such date in respect of capital leases, mortgages payable, notes payable,
senior notes, convertible debentures and secured or unsecured bank debt.
Section 5.2. Minimum Shareholders' Equity. The Borrower will not permit
Shareholders' Equity to be less than $225,000,000 as of the last day of any
calendar quarter.
Section 5.3. Total Liabilities to Shareholders' Equity Ratio. The
Borrower will not permit the ratio of (i) Total Liabilities to (ii)
Shareholders' Equity to exceed 2.00 to 1.00 as of the last day of any
calendar quarter.
Section 5.4. Minimum Funds From Operations. The Borrower will not
permit Funds From Operations to be less than (i) $7,000,000 for any calendar
quarter or (ii) $30,000,000 in the aggregate for any period of four
consecutive calendar quarters.
Section 5.5 Limitation on Dividends. The Borrower will not (i) during
any six consecutive calendar quarters pay dividends which exceed 135% of the
Funds From Operations for such six quarter period or (ii) during any two
consecutive calendar quarters pay dividends which exceed 175% of the Funds
From Operation for such two quarter period.
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ARTICLE VI
ADDITIONAL COVENANTS OF THE BORROWER
The Borrower agrees that so long as the Bank is committed to make
Advances hereunder or any amount payable hereunder or under the Note remains
unpaid:
Section 6.1. Information. The Borrower will deliver or cause to be
delivered to the Bank:
(i) within 120 days after the end of each fiscal year of the Borrower,
copies of the Borrower's Annual Report to Shareholders and Annual Report
on Form 10-K for such fiscal year, such reports to include a balance sheet
of the Borrower as of the end of such fiscal year and the related
statements of operations, cash flows and shareholders' equity for such
fiscal year, setting forth in each case in comparative form the figures
for the previous fiscal year, all in reasonable detail and accompanied by
an opinion thereon by independent public accountants satisfactory to the
Bank, which opinion shall state that such financial statements present
fairly the financial position of the Borrower as of the date of such
financial statements and the results of its operations and cash flows for
the period covered by such financial statements in conformity with GAAP
applied on a consistent basis (except for changes in the application of
which such accountants concur) and shall not contain any "going concern"
or like qualification or exception or qualifications arising out of the
scope of the audit;
(ii) within 60 days after the end of each of the first three quarters of
each fiscal year of the Borrower, a copy of the Borrower's Quarterly
Report on Form 10-Q for such quarter, such report to include all financial
statements and financial information required by Rule 10-01 of Regulation
S-X (which includes a balance sheet of the Borrower as of the end of such
quarter and the related statements of operations, shareholders' equity and
cash flows for such quarter and for the portion of such fiscal year ended
at the end of such quarter, setting forth in each case in comparative form
the figures for the corresponding quarter of the previous fiscal year and
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for the corresponding portion of the previous fiscal year), all certified
(subject to normal year-end audit adjustments) as complete and correct by
the chief financial officer or chief accounting officer of the Borrower;
(iii) simultaneously with the delivery of each set of financial statements
referred to in clauses (i) and (ii) above, a certificate of the chief
financial officer or chief accounting officer of the Borrower (A) setting
forth in reasonable detail the calculations necessary to confirm whether
the Borrower is in compliance with the financial covenants set forth in
Sections 5.2, 5.3, 5.4 and 5.5, (B) stating whether there exists on the
date of such certificate any Default and, if any Default then exists,
setting forth the details thereof and the action that the Borrower is
taking or proposes to take with respect thereto and (C) stating whether,
since the date of the most recent previous delivery of financial
statements pursuant to clause (i) or (ii) above, there has been any
material adverse change in the business, financial position, results of
operations or properties of the Borrower, and, if so, the nature of such
material adverse change;
(iv) forthwith upon the occurrence of any Default, a certificate of the
chief financial officer or chief accounting officer of the Borrower
setting forth the details thereof and the action that the Borrower is
taking or proposes to take with respect thereto;
(v) promptly after obtaining actual knowledge of the commencement of, or
of a material threat of the commencement of, any action, suit or
proceeding against the Borrower or any of its subsidiaries before any
federal, state or local government, authority, agency, court or other
body, officer or entity, or before any arbitrator with authority to bind a
party at law, in which there is a reasonable possibility of a decision
which could materially adversely affect the business, financial position,
results of operations or properties of the Borrower (or, in the case of a
material threat of the commencement of any such action, suit or
proceeding, in which a decision which could materially adversely affect
the business, financial position, results of operations or properties of
the Borrower is probable) or which in any manner draws into question the
validity of this Agreement or the Note, a certificate of an officer of the
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Borrower setting forth the nature of such action, suit or proceeding and
such additional information as may be reasonably requested by the Bank;
(vi) within 60 days after the end of each fiscal quarter of the Borrower,
a certificate of an officer of the Borrower setting forth the nature of
each environmental problem affecting any of the properties of the Borrower
or any of its subsidiaries as to which there is a reasonable possibility
of a material adverse affect on the business, financial position, results
of operations or properties of the Borrower, a summary of any remediation
efforts or other actions taken or proposed to be taken with respect
thereto and such additional information as may be reasonably requested by
the Bank;
(vii) promptly upon transmission thereof, copies of all press releases and
other statements made available generally by the Borrower to the public
concerning material developments in its business, financial position,
results of operations or properties; and
(viii) from time to time such additional information regarding the business,
financial position, results of operations or properties of the Borrower as
the Bank may reasonably request (including, without limitation, rent rolls
on all of the properties of the Borrower (to be delivered no more
frequently than twice during any calendar year) and a schedule of payments
for all debt instruments of the Borrower).
Section 6.2 Payment of Obligations. The Borrower will, and will cause
each of its subsidiaries to, pay and discharge, as the same shall become due
and payable, (i) all its obligations and liabilities, including all claims
or demands of materialmen, mechanics, carriers, warehousemen, landlords and
other like persons which, in any such case, if unpaid, might by law give
rise to a Lien upon any of the Borrower's or any such subsidiary's property
or assets, and (ii) all lawful taxes, assessments and charges or levies made
upon it or its, or any such subsidiary or any such subsidiary's, properties
or assets by any governmental body, agency or official (except where any of
the items in clause (i) or (ii) of this Section 6.2 is being diligently
contested in good faith and the Borrower has set aside on its books, if
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required under GAAP, appropriate reserves for the accrual of any such
items).
Section 6.3. Maintenance of Property; Insurance. The Borrower will, and
will cause each of its subsidiaries to, keep all its properties in good
working order and condition, subject to ordinary wear and tear, maintain
with financially sound and reputable insurance companies insurance on all
its properties in at least such amounts and against at least such risks (and
with such risk retentions) as are usually insured against by companies
engaged in the same or a similar business and furnish to the Bank upon
request full information as to the insurance carried.
Section 6.4. Conduct of Business and Maintenance of Existence. The
Borrower will continue to engage in business of the same general type as now
conducted by the Borrower and will preserve, renew and keep in full force
and effect its existence as a real estate investment trust and its rights,
privileges and franchises necessary or desirable in the normal conduct of
its business.
Section 6.5. Compliance with Laws. The Borrower will, and will cause
each of its subsidiaries to, (i) comply in all material respects with all
applicable laws, ordinances, rules, regulations, and requirements of
governmental authorities (including, without limitation, ERISA and the rules
and regulations thereunder and all Environmental Requirements (subject to
Section 6.13)), except where the necessity of compliance therewith is
contested in good faith by appropriate proceedings and (ii) at all times
cause to be done those things necessary to maintain, preserve and renew its
qualification as a real estate investment trust under the Code and all
applicable regulations thereunder.
Section 6.6. Accounting; Inspection of Property, Books and Records. The
Borrower will keep proper books of record and account in which full, true
and correct entries in conformity with GAAP shall be made of all dealings
and transactions in relation to its business and activities, will maintain
its fiscal reporting periods on the present basis and will permit
representatives of the Bank, at the Borrower's expense (not to exceed $1,500
in the aggregate during any calendar year), to visit and inspect any of the
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Borrower's properties, to examine and make abstracts from any of the
Borrower's books and records and to discuss the Borrower's affairs, finances
and accounts with the Borrower's executive officers (who, on the Effective
Date, are those officers identified in Section 7.1(xi) and independent
public accountants, all at such reasonable times and as often as the Bank
may reasonably request.
Section 6.7. Restriction on Debt. The Borrower will not incur or at any
time be liable with respect to any Debt except Debt which meets any one of
the following criteria: (i) Debt outstanding under this Agreement and the
Note; (ii) Debt having an original term in excess of three years; and (iii)
unsecured Debt owing to financial institutions and having an aggregate
unpaid principal balance of $100,000,000 or less.
Section 6.8. Restrictions on Liens. The Borrower will not enter into
any agreement, or permit any of its subsidiaries to enter into any
agreement, with any third party which would prohibit the Borrower or any
such subsidiary from creating a Lien on any of its properties in favor of
the Bank to secure the Borrower's obligations to the Bank hereunder and
under the Note. The Borrower will maintain or cause its subsidiaries to
maintain free and clear of all Liens that portion of its and such
subsidiaries' real property assets which at all times shall have a book
value plus depreciation (each as determined in accordance with GAAP) equal
to or greater than the aggregate amount of the commitments of all banks now
or hereafter providing an unsecured revolving line of credit ("Revolving
Credit Banks") to the Borrower from time to time. The Borrower further
agrees that if at any time it creates a Lien in favor of any theretofore
unsecured Revolving Credit Bank, that it will create such Lien in favor of
all such Revolving Credit Banks, including the Bank, on a pari passu basis
based on the commitments of such Revolving Credit Banks.
Section 6.9. Consolidations, Mergers and Sales of Assets. The Borrower
will not (i) consolidate or merge with or into any other Person or (ii)
sell, lease or otherwise transfer all or any substantial part of its assets
to any other Person; provided, however, that the Borrower may merge with
another real estate investment trust or company if the Borrower is the
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surviving entity in such merger and no Default shall have occurred and be
continuing immediately after giving effect to such merger.
Section 6.10 Transactions with Affiliates. The Borrower will not
directly or indirectly pay any funds to or to the account of, make any
investment in, engage in any transaction with or effect any transaction in
connection with any joint enterprise or other joint arrangement with any
Affiliate except in the ordinary course of business pursuant to the
reasonable requirements of the business of the Borrower and upon fair and
reasonable terms no less favorable to the Borrower than would be obtained in
a comparable arms-length transaction with a Person not an Affiliate.
Section 6.11. Transactions with Other Persons. The Borrower will not
enter into any agreement with any Person whereby any of them shall agree to
any restriction on the Borrower's right to amend or waive any of the
provisions of this Agreement.
Section 6.12 ERISA Matters. The Borrower will not at any time permit
any Plan to (i) engage in any "prohibited transaction" (as such term is
defined in section 4975 of the Code or in Section 406 of ERISA), (ii) incur
any "accumulated funding deficiency" (as such term is defined in Section 302
of ERISA), whether or not waived, or (iii) be terminated in a manner that
could result in the imposition of a Lien on the property of the Borrower
pursuant to Section 4068 of ERISA. The Borrower will deliver or cause to be
delivered to the Bank if and when any member of the Controlled Group (i)
gives or is required to give notice to the PBGC of any "reportable event"
(as defined in Section 4043 of ERISA) with respect to any Plan which might
constitute grounds for a termination of such Plan under Title IV of ERISA,
or knows that the plan administrator of any Plan has given or is required to
give notice of any such reportable event, a copy of the notice of such
reportable event given or required to be given to the PBGC, (ii) receives
notice of complete or partial withdrawal liability under Title IV of ERISA,
a copy of such notice, or (iii) receives notice from the PBGC under Title IV
of ERISA of an intent to terminate or appoint a trustee to administer any
Plan, a copy of such notice.
Section 6.13 Environmental Matters.
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(a) Except as set forth in subsection (b) below, the Borrower will, and
will cause each of its subsidiaries to, (i) comply with all Environmental
Requirements, (ii) obtain, maintain and comply with all permits, licenses,
registrations and authorizations required under all Environmental
Requirements and (iii) comply with all court orders, consent orders,
settlement agreements or other settlement documents issued by, or entered
into with, any administrative or governmental agency or entity concerning
compliance with all Environmental Requirements.
(b) The Borrower shall not be deemed to be in violation of subsection
(a) above if (i) the Borrower, its subsidiaries and/or its tenants or other
potentially responsible parties have initiated and are diligently pursuing
in good faith appropriate measures satisfactory to the court or agency
having jurisdiction over the matter to cure or eliminate the compliance
failure, (ii) there has been set aside on the Borrower's consolidated
financial statements a reserve deemed by the Borrower in its reasonable
business judgment to be sufficient to cover the noncompliance liability or
such greater amount as may be required by GAAP and (iii) such non-compliance
will not materially adversely affect the business, financial position,
results of operations or properties of the Borrower and its subsidiaries.
Section 6.14 Pro-Rata Borrowing and Repayment. Borrower will use its
best efforts (i) to borrow on an aggregate basis over the course of any
consecutive twelve month period from all Revolving Credit Banks, including
the Bank, on an approximately pro-rata basis based on the commitments of the
Revolving Credit Banks and (ii) to make any principal repayment (which at
any one time is equal to or greater than $10,000,000) of the amounts
borrowed from the Revolving Credit Banks to all Revolving Credit Banks on an
approximately pro-rata basis based on the outstanding principal balances of
the loans to the Borrower from the Revolving Credit Banks.
Section 6.15 Confession of Judgment. The Borrower will not grant any
other Revolving Credit Bank the right to confess judgment against the
Borrower.
Section 6.16 Use of Proceeds. The Borrower will use the Advances to
provide working capital for investment activities, for construction,
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renovation and tenant fit-up for the shopping centers and other properties
acquired by the Borrower, for debt reduction, for the payment of dividends
and for other similar purposes permissible for real estate investment
trusts.
Section 6.17 Independence of Covenants. All covenants contained herein
shall be given independent effect. If a particular action or condition is
not permitted by any of such covenants, the fact that such action or
condition would be permitted by an exception to, or otherwise be within the
limitations of, another covenant shall not avoid the occurrence of a Default
if such action is taken or such condition exists.
ARTICLE VII
DEFAULTS
Section 7.1 Events of Default. If one or more of the following events
("Events of Default") shall have occurred and be continuing:
(i) the Borrower shall fail to pay when due or within 10 Business Days
thereafter any principal of or interest on the Advances or any other
amount payable hereunder or under the Note;
(ii) the Borrower shall fail to observe or perform any covenant
contained in Article V or Section 6.7, 6.8, 6.9, 6.10, 6.11, 6.12, 6.13,
6.14, 6.15 or 6.16 of this Agreement;
(iii) the Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by clause
(i) or (ii) above) for 10 Business Days after written notice thereof
shall have been given to the Borrower by the Bank; provided, however,
that the Borrower shall be entitled to a reasonable period of time (not
to exceed 60 days following the Borrower's receipt of such written
notice) to cure such failure if (A) the Bank reasonably determines that
such failure cannot be remedied within such 10 Business Day period, (B)
the Borrower initiates action to cure such failure within such 10
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Business Day period, (C) the Borrower proceeds diligently and in good
faith to cure such failure and (D) the Bank determines that such failure
will not impair the ability of the Borrower to pay when due or within 10
Business Days thereafter any principal of or interest on the Advances or
any other amount payable hereunder or under the Note;
(iv) any representation, warranty, certification or statement made
by the Borrower in this Agreement, or in any certificate, financial
statement or other document delivered pursuant hereto or thereto, shall
prove to have been incorrect in any material respect when made;
(v) the Borrower shall fail to make any payment in respect of any Debt
(other than the Note) owing to the Bank or any other recourse Debt when
due or within any applicable grace period;
(vi) any event or condition shall occur which results in the
acceleration of the maturity of any Debt of the Borrower owing to the
Bank or any other recourse Debt of the Borrower or enables the holder of
such Debt or any Person acting on such holder's behalf to accelerate the
maturity thereof;
(vii) the Borrower shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it
or any substantial part of its property, or shall consent to any such
relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against it, or shall
make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any action
to authorize any of the foregoing;
(viii) an involuntary case or other proceeding shall be commenced
against the Borrower seeking liquidation, reorganization or other relief
with respect to it or its debts under an bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a
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trustee, receiver, liquidator, custodian or other similar official of it
or any substantial part of its property, and such involuntary case or
other proceeding shall remain undismissed and unstayed for a period of 30
days, or an order for relief shall be entered against the Borrower under
the federal bankruptcy laws as now or hereafter in effect;
(ix) one or more judgments or orders for the payment of money in
excess of $1,000,000 individually or $2,500,000 in the aggregate shall be
rendered against the Borrower and such judgment or order shall continue
unsatisfied for a period of 30 days during which execution thereof shall
not be effectively stayed;
(x) the Internal Revenue Service shall make a final determination that
the Borrower has failed to maintain its qualification as a real estate
investment trust, the Internal Revenue Service shall make a preliminary
determination that Borrower has failed to maintain its qualification as a
real estate investment trust and the Borrower shall fail promptly to
contest or remedy such determination by appropriate proceedings or the
stock of the Borrower shall cease to be publicly traded;
(xi) Steven J. Guttman and a majority of the vice presidents of
Borrower as of the date hereof shall cease to participate actively as
senior managers of the Borrower; or
(xii) the Bank shall determine in good faith that a material adverse
change has occurred in the financial condition of the Borrower since the
date of this Agreement, and the Borrower shall fail to correct such change
to the satisfaction of the Bank within 10 days after written notice
thereof shall have been given to the Borrower by the Bank;
then, and in every such event, the Bank may, at its option, by notice to the
Borrower, terminate the Line of Credit Commitment and declare the Note
(together with accrued but unpaid interest thereon) to be immediately due
and payable (and the Note shall thereupon become immediately due and payable
without presentment, demand, protest or other notice of any kind, all of
which are hereby waived by the Borrower); provided, however, that upon the
occurrence of any of the Events of Default specified in clause (vii) or
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(viii) above, without any notice to the Borrower or any other act by the
Bank, the Line of Credit Commitment shall terminate and the Note (together
with accrued but unpaid interest thereon) shall immediately become due and
payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower.
Section 7.2. Other Remedies. If a Default or an Event of Default occur
and be continuing, the Bank may proceed to protect and enforce its rights
under this Agreement and the Note by exercising such remedies as are
available to the Bank in respect thereof under applicable law, either by
suit in equity or by action at law or both, for specific performance of any
covenant or other agreement contained in this Agreement or in aid of the
exercise of any power granted in this Agreement. No failure or delay by the
Bank in exercising any right, power or privilege hereunder or under the Note
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of
any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 7.3. Inspection of Properties. The Bank, upon obtaining any
judgment against the Borrower, shall have the right to enter upon, and the
Borrower hereby specifically grants to the Bank a license (effective only
upon the entry of a judgment) to enter upon, any of the Borrower's
properties that the Bank may seek to acquire in connection with the
enforcement of such judgment for the purpose of inspecting, testing and
assessing the properties for the presence of Hazardous Materials. The
Borrower shall reimburse the Bank upon demand for all costs and expenses of
any and all inspections, testing and assessing. If the Borrower fails to
reimburse the Bank upon demand for such costs, then the Bank may pursue all
its legal remedies to recover such costs.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
AFFECTING EURO-DOLLAR-BASED ADVANCES
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Section 8.1. Basis for Determining Adjusted London Interbank Offered
Rate Inadequate or Unfair. If on or prior to the first day of any Interest
Period:
(i) the Bank is advised that deposits in dollars (in the applicable
amounts) are not being offered in the relevant market for such Interest
Period; or
(ii) the Bank determines that the Adjusted London Interbank Offered
Rate will not adequately and fairly reflect the cost to the Bank of
maintaining or funding the Euro-Dollar-Based Advances for such Interest
Period (and such determination is also made with respect to all or
substantially all other borrowers from the Bank that pay interest at a
rate based on the Adjusted London Interbank Offered Rate);
then the Bank shall promptly give notice thereof to the Borrower, whereupon,
until such circumstances no longer exist, the right of the Borrower to elect
to have the Advances bear interest at the Euro-Dollar-Based Rate shall be
suspended and the
Euro-Dollar-Based Advances then outstanding shall begin bearing interest at
the Prime-Based Rate at the end of the Interest Period(s) applicable to such
Euro-Dollar-Based Advances.
Section 8.2. Illegality. If, after the date of this Agreement, the
adoption of any applicable law, rule or regulation, or any change therein,
or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with any
interpretation or administration thereof, or compliance by the Bank with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall make it unlawful or
impossible for the Bank to make, maintain or fund the Euro-Dollar-Based
Advances, the Bank shall promptly give notice thereof to the Borrower.
Before giving any notice to the Borrower pursuant to this Section 8.2, the
Bank shall designate a different lending office if such designation will
avoid the need for giving such notice and will not, in the reasonable
judgment of the Bank, be otherwise disadvantageous to the Bank. If such
notice is given, the Euro-Dollar-Based Advances then outstanding shall begin
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bearing interest at the Prime-Based Rate either (i) on the last day of the
applicable Interest Period if the Bank may lawfully continue to maintain and
fund such Advances at the Euro-Dollar-Based Rate to such day or
(ii) immediately if the Bank may not lawfully continue to maintain and fund
such Advances at the Euro-Dollar-Based Rate to such day (in which case the
Borrower shall reimburse the Bank on demand for any resulting loss or
reasonable expense in accordance with Section 2.11).
Section 8.3. Increased Cost and Reduced Return.
(a) If, after the date of this Agreement, the adoption of any applicable
law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with any interpretation or
administration thereof, or compliance by the Bank with any request or
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency:
(i) shall subject the Bank to any tax, duty or other charge with
respect to the Euro-Dollar-Based Advances or the Bank's obligation to make
the Euro-Dollar-Based Advances, or shall change the basis of taxation of
payments to the Bank of the principal of or interest on the
Euro-Dollar-Based Advances or any other amounts due under this Agreement
or the Note in respect of the
Euro-Dollar-Based Advances or the Bank's obligation to make the Euro-
Dollar-Based Advances (except for changes in the rate of tax on the
overall net income of the Bank imposed by the jurisdiction in which the
Bank's principal executive office is located); or
(ii) shall impose, modify or deem applicable any reserve, special
deposit or similar requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve
System, but excluding any such requirement included in the applicable
Euro-Dollar Reserve Percentage) against assets of, deposits with or for
the account of, or credit extended by, the Bank, or shall impose on the
Bank or on the London interbank market any other condition affecting the
Euro-Dollar-Based Advances or the Bank's obligation to make the
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Euro-Dollar-Based Advances;
and the result of any of the foregoing is to increase the cost to the Bank
of making or maintaining the Euro-Dollar-Based Advances, or to reduce the
amount of any sum received or receivable by the Bank under this Agreement or
under the Note, then the Borrower shall pay to the Bank in accordance with
subsection (c) below such additional amount or amounts as will compensate
the Bank for such increased cost or reduction.
(b) If the Bank shall determine that any applicable law, rule,
regulation or guideline or the adoption after the date of this Agreement of
any law, rule, regulation or guideline regarding capital adequacy, or any
change in any of the foregoing or in the interpretation or administration of
any of the foregoing by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof,
or compliance by the Bank 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 the Bank's capital or the capital of any Person
controlling the Bank as a consequence of the Bank's obligations under this
Agreement to a level below that which the Bank or such controlling Person
could have achieved but for such law, adoption, change or compliance (taking
into consideration the Bank's policies with respect to capital adequacy) by
an amount deemed by the Bank to be material, then from time to time the
Borrower shall pay to the Bank in accordance with subsection (c) below such
additional amount or amounts as will compensate the Bank for such reduction.
(c) The Bank will promptly notify the Bank of any event of which it has
knowledge, occurring after the date of this Agreement, which will entitle
the Bank to compensation pursuant to this Section 8.3 and will deliver to
the Borrower with each demand for payment a certificate, signed by an
officer of the Bank, setting forth the amount or amounts to be paid to it
hereunder, explaining in reasonable detail the calculation of such amount or
amounts and setting forth in reasonable detail the method by which the Bank
allocated any such amount or amounts to the Borrower. Any such certificate
shall be conclusive in the absence of manifest error. In determining such
amount, the Bank may use any reasonable averaging and attribution methods
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generally used by the Bank for the purpose of calculating increased costs
and reduced returns and allocating increased costs and reduced returns to
borrowers. The Bank will designate a different lending office if such
designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the reasonable judgment of the Bank, be
otherwise disadvantageous to it.
(d) All payments required by this Section 8.3 shall be made by the
Borrower within 30 days after demand by the Bank. All such payments not
made on or before the tenth Business Day after such demand shall be
accompanied by interest thereon for each day from and including such tenth
Business Day to but excluding payment in full thereof at a rate equal to the
Prime Rate minus 1.00% per annum. The Borrower shall not be obligated to
reimburse the Bank for any increased cost or reduced return incurred more
than 90 days after the date that the Bank receives actual notice of such
increased cost or reduced return unless the Bank gives notice thereof to the
Borrower in accordance with this Section 8.3 during such 90 day period.
Section 8.4. Suspension of Advances. If notice has been given pursuant
to Section 8.2 requiring that the Euro-Dollar-Based Advances cease to bear
interest at the Euro-Dollar-Based Rate, then, unless and until the Bank
notifies the Borrower that the circumstances giving rise to such notice no
longer apply or that the Bank has elected to continue such Euro-Dollar-Based
Advances at the Euro-Dollar-Based Rate through the end of the Interest
Period(s) applicable to such Euro-Dollar-Based Advances, the Euro-Dollar-
Based Advances then outstanding shall begin bearing interest at the Prime-
Based Rate from and including the date of such notice (notwithstanding any
prior election by the Borrower to the contrary).
ARTICLE IX
MISCELLANEOUS
Section 9.1. Notices. All notices, requests and other communications to
a party hereunder shall be in writing and shall be given to such party at
its address set forth on the signature page hereof or such other address as
such party may hereafter specify for that purpose by notice to the other.
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Each such notice, request or other communication shall be effective (i) if
given by mail, two Business Days after such communication is deposited in
the mails with first class postage prepaid, addressed as aforesaid or
(ii) if given by any other means, when delivered at the address specified in
this Section 9.1, provided that any notice given to the Bank pursuant to
Section 2.2 shall only be effective upon receipt.
Section 9.2. No Waivers. No failure or delay by the Bank in exercising
any right, power or privilege hereunder (except as set forth in
Section 8.3(d)) or under the Note shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
Section 9.3. Expenses. The Borrower shall pay (i) all out-of-pocket
expenses of the Bank, including the reasonable fees and disbursements of its
counsel, in connection with the preparation of this Agreement, any waiver or
consent hereunder, any amendment hereof or any Default hereunder and (ii) if
an Event of Default occurs, all out-of-pocket expenses incurred by the Bank,
including the reasonable fees and disbursements of its counsel, in
connection with such Event of Default and any collection or other
enforcement proceedings resulting therefrom. The Borrower shall indemnify
the Bank against any transfer taxes, documentary taxes, assessments or
charges made by any governmental authority by reason of the execution and
delivery of this Agreement or the Note.
Section 9.4. Indemnification. In consideration of the execution and
delivery of this Agreement by the Bank, the Borrower hereby indemnifies,
exonerates and holds the Bank and its Affiliates, officers, directors,
employees and agents (collectively, the "Indemnified Parties") free and
harmless from and against any and all actions, causes of action, suits,
losses, costs, liabilities, obligations, penalties, fines, demands,
defenses, damages, disbursements or expenses of any kind or nature
whatsoever (including attorneys' fees and costs and experts' fees and
disbursements and expenses incurred in investigating, settling, defending
against or prosecuting any litigation, claim or proceeding) which may at any
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time be imposed upon, incurred by or asserted or awarded against any
Indemnified Party (irrespective of whether any such Indemnified Party is a
party to the action of which indemnification hereunder is sought), whether
incurred in connection with actions between or among the parties hereto or
the parties hereto and third parties (collectively, the "Indemnified
Liabilities"), incurred by the Indemnified Parties or any of them as a
result of, or arising out of, or relating to:
(i) the actual or alleged presence of any Hazardous Material on, in,
under or affecting, the transportation of any Hazardous Material to or
from, or the Release of any Hazardous Material from or in connection with,
all or any portion of any property, owned, leased or operated by the
Borrower or any of its subsidiaries, the ground water or any surrounding
areas (provided that there is a nexus to the Borrower's or such
subsidiary's property);
(ii) any misrepresentation, inaccuracy or breach of any warranty
contained in or referred to in Section 4.7;
(iii) the failure of the Borrower to comply with any Environmental
Requirement during or after the term of this Agreement;
(iv) the imposition of any Lien for damages caused by or the recovery of
any costs for the clean-up, Release or threatened Release of Hazardous
Material by the Borrower, or in connection with any property owned or
formerly owned by the Borrower; or
(v) any actual or alleged prohibited transaction or any actual or
alleged sale of a prohibited loan under ERISA or under any state statute
regulating investments of, and fiduciary obligations with respect to,
governmental plans relating to Section 3(32) of ERISA, and in obtaining
any individual prohibited transaction exemption under ERISA or any
administrative exemption under any state statute that may be required (in
the Bank's sole discretion) that the Bank or any of the Bank's affiliates
or Indemnified Parties may incur, directly or indirectly, as a result of
any misrepresentation, inaccuracy or breach of any warranty contained in
or referred to in Section 4.7.
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The obligations of the Borrower in respect of Indemnified Liabilities shall
survive repayment of the Note or any transfer of the Borrower's property by
foreclosure or by a deed in lieu of foreclosure, regardless of whether
caused by or within the control of the Borrower. Notwithstanding any of the
foregoing, the Borrower shall not be responsible, or otherwise liable for,
any Indemnified Liabilities arising for the account of a particular
Indemnified Party by reason of the relevant Indemnified Party's gross
negligence or wilful misconduct or breach of this Agreement. The Borrower
and its successors and assigns hereby waive, release and agree not to make
any claim or bring any cause or recovery action against the Bank or any
other Indemnified Party in respect of claims arising under clauses (i)
through (v) above. It is expressly understood and agreed that to the extent
that any such Person is strictly liable in respect of any such claim, the
Borrower's obligations to such Person under this Section 9.4 shall likewise
be without regard to fault on the part of the Borrower with respect to the
violation or condition which results in liability of such Person. If and to
the extent that the foregoing undertaking may be unenforceable for any
reason, the Borrower hereby agrees to make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.
Section 9.5. Right of Set-Off. Upon the occurrence and during the
continuance of any Event of Default, the Bank is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time
owing by the Bank to or for the credit or the account of the Borrower
against any and all of the obligations now or hereafter existing under this
Agreement or the Note, irrespective of whether or not the Bank shall have
made any demand hereunder or under the Note and although such obligation may
be unmatured. The rights of the Bank under this Section 9.5 are in addition
to other rights and remedies (including, without limitation, other rights of
set-off) which the Bank may have. The Bank agrees to notify the Borrower
promptly after it exercises any such right of set-off.
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Section 9.6. Amendments and Waivers. Any provision of this Agreement or
the Note may be amended or waived if, but only if, such amendment or waiver
is in writing and is signed by the Borrower and the Bank.
Section 9.7. Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and
assigns, except that the Borrower may not assign or otherwise transfer any
of its rights under this Agreement without the prior written consent of the
Bank.
(b) The Bank may at any time grant to one or more affiliates of the Bank
(each, a "Participant") participating interests in the Line of Credit
Commitment or in any or all of the Advances. In the event of any such grant
by the Bank of a participating interest to a Participant, whether or not
upon notice to the Borrower, the Bank shall remain responsible for the
performance of its obligations hereunder, and the Bank shall continue to
deal solely and directly with the Borrower in connection with the Bank's
rights and obligations under this Agreement. Any agreement pursuant to
which the Bank may grant such a participating interest shall provide that
the Bank shall retain the sole right and responsibility to enforce the
obligations of the Borrower under this Agreement including, without
limitation, the right to approve any amendment, modification or waiver of
any provision of this Agreement or the Note.
(c) The Bank may at any time assign to one or more banks or other
institutions (each, an "Assignee") all or part of its rights and obligations
under this Agreement and the Note, and such Assignee shall assume such
rights and obligations, pursuant to an instrument executed by such Assignee
and the Bank with (and subject to) the consent of the Borrower (which may be
withheld in the Borrower's sole discretion); provided, however, that any
partial assignment shall be in the amount of at least $500,000 or integral
multiples thereof. Upon execution and delivery of such an instrument and
payment by such Assignee to the Bank of an amount equal to the purchase
price agreed between such Assignee and the Bank, such Assignee shall become
a party to this Agreement and shall have all the rights and obligations of a
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bank with a Line of Credit Commitment as set forth in such instrument of
assumption, and the Bank shall be released from its obligations hereunder to
a corresponding extent, and no further consent or action by any party shall
be required. Upon the consummation of any assignment pursuant to this
Section 9.7(c), the Bank and the Borrower shall make appropriate
arrangements so that, if required, a new Note is issued to such Assignee.
The cost of the preparation of such new Note shall be borne by the Bank. In
the event that such Assignee is not incorporated under the laws of the
United States of America or any jurisdiction thereof, such Assignee shall,
prior to the first date on which interest or fees are payable hereunder for
its account deliver to the Borrower certification as to exemption from
deduction or withholding of any United States federal income taxes.
(d) The Bank may furnish any information concerning the Borrower in its
possession from time to time to Participants and Assignees (including
prospective Participants and Assignees) and may, with the prior written
consent of the Borrower, furnish such information in response to credit
inquiries consistent with general banking practice.
(e) No Participant, Assignee or other transferee of the Bank's rights
shall be entitled to receive any greater payment under Section 8.3 than such
transferee would have been entitled to receive with respect to the rights
assigned or otherwise transferred, unless such assignment or transfer is
made with the Borrower's prior written consent or by reason of the
provisions of Section 8.2 or 8.3 requiring the Bank to designate a different
lending office under certain circumstances or at a time when the
circumstances giving rise to such greater payment did not exist.
Section 9.8. Governing Law. This Agreement and the Note shall be deemed
to be contracts made under seal and shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania, except as
otherwise provided herein.
Section 9.9. Counterparts; Effectiveness. This Agreement may be signed
in counterparts, each of which shall be an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument. This
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Agreement shall become effective when the Bank shall have received
counterparts hereof signed by both parties.
Section 9.10. Waiver of Jury Trial; Submission to Jurisdiction. The
Borrower and the Bank hereby irrevocably and unconditionally waive all right
to trial by jury in any action, proceeding, or counterclaim arising out of
or related to this Agreement or the Notes or any of the transactions
contemplated hereby or thereby. Any legal action or proceeding with respect
to this Agreement or the Notes or any document related hereto or thereto
shall be brought in a federal court or Commonwealth of Pennsylvania state
court sitting in Philadelphia, Pennsylvania, and by execution and delivery
of this Agreement the Borrower and the Bank hereby accept for themselves and
in respect of their property, generally and unconditionally, the
jurisdiction of the aforesaid courts. The Borrower and the Bank hereby
irrevocably and unconditionally waive any objection, including, without
limitation, any objection to the laying of venue or based on the grounds of
the forum non conveniens which they now or hereafter may have to the
bringing of any action or proceeding in such respective jurisdictions.
Section 9.11. Waiver of Personal Liability. The Borrower's Third
Amended and Restated Declaration of Trust on file in the Office of the
Recorder of Deeds of the District of Columbia provides that neither the
shareholders nor the trustees of the Borrower, nor any officer, employee,
representative or agent of the Borrower, shall be personally liable for the
satisfaction of the obligations of the Borrower under this Agreement or the
Note. The Bank hereby agrees to look solely to the Borrower and the
property of the Borrower for the satisfaction of any claim arising from this
Agreement, and shall not seek to impose personal liability on any
shareholder, trustee, officer, employee, representative or agent of the
Borrower in connection with any such claim. As used in this Section 9.11,
the term "trustee" shall mean, collectively, the individuals currently
serving as trustees of the Borrower, as long as they continue in office, and
all other individuals then in office who have been duly elected or appointed
as trustees of the Borrower.
Section 9.12. Entire Agreement. This Agreement and the Note set forth
the entire agreement of the parties with respect to the subject matter
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hereof and therefor and supersede all previous understandings, written or
oral, in respect thereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
FEDERAL REALTY INVESTMENT TRUST
By:/s/ Ron D. Kaplan
--------------------------
Ron D. Kaplan
Vice President - Capital Markets
4800 Hampden Lane
Bethesda, Maryland 20814
Attention: Legal Department
MELLON BANK, N.A.
By:/s/ Frederick A. Felter
---------------------------
Frederick A. Felter
Vice President
1735 Market Street
Philadelphia, Pennsylvania 19103
F-95
D15340.A(RE)
Exhibit A - Note
$15,000,000 Philadelphia, Pennsylvania
February __, 1994
For Value Received, FEDERAL REALTY INVESTMENT TRUST, a District of
Columbia unincorporated business trust (the "Borrower"), promises to pay to
the order of MELLON BANK, N.A. (the "Bank"), the unpaid principal amount of
each Advance made by the Bank to the Borrower pursuant to the Credit
Agreement referred to below on the Termination Date provided, or as
otherwise provided, in the Credit Agreement. The Borrower promises to pay
interest on the unpaid principal amount of each such Advance on the dates
and at the rate or rates provided for in the Credit Agreement. All such
payments of principal and interest shall be made in lawful money of the
United States in Federal or other immediately available funds at the office
of the Bank, Philadelphia, Pennsylvania.
All Advances made by the Bank, the respective types and maturities
thereof and all repayments of the principal thereof shall be recorded by the
Bank and, prior to any transfer hereof, appropriate notations to evidence
the foregoing information with respect to each such Advance then outstanding
shall be endorsed by the Bank on the schedule attached hereto, or on a
continuation of such schedule attached to and made a part hereof; provided
that the failure of the Bank to make any such recordation or endorsement
shall not affect the obligations of the Borrower hereunder or under the
Credit Agreement.
This note is the Note referred to in the Credit Agreement dated as of
January __, 1994 between the Borrower and the Bank (as the same may be
amended from time to time, the "Credit Agreement"). Terms defined in the
Credit Agreement are used herein with the same meanings. Reference is made
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to the Credit Agreement for provisions for the prepayment hereof, the
accelerationof the maturityhereof and forthe rights and remediesof the Bank.
FEDERAL REALTY INVESTMENT TRUST
By:_____________________________
Name:___________________________
Title:__________________________
F-97
NOTE (cont'd)
ADVANCES AND PAYMENTS OF PRINCIPAL
____________________________________________________________________________
Amount of
Amount of Type of Principal Maturity Notation
Date Advance Advance Repaid Date Made By
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
F-98
Exhibit 24
Consent of Independent Accountants
We have issued our reports dated February 14, 1994 accompanying the
consolidated financial statements and schedules included in the Annual
Report of Federal Realty Investment Trust on Form 10K for the year ended
December 31, 1993. We hereby consent to the incorporation by reference of
said reports in the Registration Statement of Federal Realty Investment
Trust on Form S-3 (File No. 33-51029, effective December 31, 1993).
Grant Thornton
Washington, D.C.
March 16, 1994
F-99
