SECOND AMENDED AND RESTATED SECURED REVOLVING CREDIT AGREEMENT

 

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                                                                    EXHIBIT 10.1

 

                           SECOND AMENDED AND RESTATED

                       SECURED REVOLVING CREDIT AGREEMENT

 

     THIS SECOND AMENDED AND RESTATED SECURED REVOLVING CREDIT AGREEMENT, dated

as of this 30th day of September, 2005 by and among WINDROSE MEDICAL PROPERTIES,

L.P., a Virginia limited partnership and THE HUNTINGTON NATIONAL BANK, a

national banking association and each of the Lenders (as hereinafter defined)

made a party hereto from time to time, and each of their respective successors

and assigns;

 

                                   WITNESSETH:

 

     The parties hereto, in consideration of their mutual covenants hereinafter

set forth and intending to be legally bound hereby, agree as follows:

 

                                    ARTICLE I

                                   DEFINITIONS

 

     1.01. Certain Definitions. The following words and terms shall have the

following meanings, respectively, unless the context hereof clearly otherwise

requires:

 

          "Acquisition Price" shall mean the total costs (including, but not

     limited to the purchase price, due diligence costs, legal fees, accounting

     fees, loan assumption costs and expenses, closing costs and other customary

     costs and expenses of closing) paid by Borrower or a Special Purpose Entity

     to acquire a Real Estate Asset.

 

          "Adjusted EBITDA" shall mean EBITDA, plus Loss on Interest Rate Swap

     plus corporate general and administrative expenses.

 

          "Affiliate" of any Person means any other Person directly or

     indirectly controlling, controlled by or under common control with such

     Person. A Person shall be deemed to control another Person if such Person

      owns 10% or more of any class of voting securities (or other ownership

     interests) of the controlled Person or possesses, directly or indirectly,

     the power to direct or cause the direction of the management or policies of

     the controlled Person, whether through ownership of stock, by contract or

     otherwise.

 

          "Agent" shall mean The Huntington National Bank and any successor

     Agent appointed hereunder.

 

          "Adjusted LIBOR Interest Rate" shall mean a rate per annum equal to

     the quotient obtained (rounded upwards, if necessary, to the nearest

     1/100th of 1%) by dividing (i) the applicable LIBOR Interest Rate by (ii)

     1.00 minus the Reserve Percentage.

 

          "Advance" shall mean an advance to the Borrower on the account of a

     Loan.

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          "Agreement" shall mean this Second Amended and Restated Secured

     Revolving Credit Agreement, as the same may be supplemented, modified or

     amended from time to time.

 

          "Appraised Value" shall mean, with respect to a Mortgaged Property,

     the fair market value of such Mortgaged Property, as determined by the

     appraisal or any update thereof for such Mortgaged Property, as provided in

     Section 4.02 (l) hereof.

 

          "Assignee" shall have the meaning assigned thereto in Section 10.02

     hereof.

 

          "Assignment and Acceptance" shall mean an Assignment and Acceptance

     Agreement in the form attached hereto as Exhibit A.

 

          "Assignment of Rents" shall mean an Assignment of Rents and Leases in

     the form attached hereto as Exhibit B, with blanks completed appropriately,

     given by the Borrower or a Special Purpose Entity, as applicable, to the

     Lenders with respect to a Mortgaged Property as security for the Borrower's

     obligations under the Loans, subject to such changes as may be required to

     comply with the requirements of the law of the state in which such

     Mortgaged Property is located, as the same may be supplemented, modified or

     amended from time to time.

 

          "Borrower" shall mean Windrose Medical Properties, L.P., a Virginia

     limited partnership.

 

          "Borrower's Affidavit" shall mean a Borrower's Closing Affidavit in

     the form of Exhibit C attached hereto, with blanks completed appropriately,

     given by the Borrower or a Special Purpose Entity to the Lenders with

     respect to a Mortgaged Property.

 

          "Borrowing Base" shall mean, with respect to Facility 1 only,

     sixty-five percent (65%) of the aggregate Appraised Value of the Mortgaged

     Properties, subject to the provisions of Section 2.01 hereof, and with

     respect to Facility 1 and Facility 2, on a combined basis, eighty percent

     (80%) of the aggregate Appraised Value of the Mortgaged Properties, subject

     to the provisions of Section 2.01 hereof.

 

          "Borrowing Base Certificate" shall mean a certificate in the form of

     Exhibit D attached hereto executed by the Chief Executive Officer or Chief

     Financial Officer of the Borrower.

 

          "Business Day" shall mean each day excluding Saturdays, Sundays and

     any other day on which Agent is closed for business to the public.

 

          "Capital Expenditure Reserve" shall mean an amount equal to the

     product of (a) $0.15 multiplied by (b) the gross rentable square footage of

     the Real Estate Assets as determined from time to time by the Compliance

     Certificate and identified as item E thereon.

 

          "Capital Expenditure Reserve Factor" shall mean $0.15 per rentable

     square foot.

 

 

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          "Closing" shall mean the execution and delivery by the Borrower to the

     Lenders of this Agreement, the Notes and the other Loan Documents.

 

          "Closing Date" shall mean the date of the Closing.

 

          "Collateral Assignment of Mortgaged Property Sale Agreement" shall

     mean a Collateral Assignment of Mortgaged Property Sale Agreement in the

     form attached hereto as Exhibit E, with blanks completed appropriately,

     given by the Borrower or a Special Purpose Entity, as applicable, to the

     Lenders with respect to a Mortgaged Property as security for the Borrower's

     obligations under the Loans as the same may be supplemented, modified or

     amended from time to time.

 

          "Commitment" shall mean the maximum amount each Lender has agreed to

     lend to Borrower as part of the Loans, as set forth below the signature

     line of each Lender, subject to modification by each Assignment and

     Acceptance.

 

          "Compliance Certificate" shall mean a certificate in the form of

     Exhibit F annexed hereto, executed by the chief executive officer or chief

     financial officer of Borrower.

 

          "Conditional Default" shall mean any condition, event, act or omission

     which, with the giving of notice or passage of time or both, would

     constitute an Event of Default.

 

          "Consolidated Group" shall mean Guarantor, Borrower and all

     Subsidiaries of Guarantor or Borrower which are consolidated with Guarantor

     and/or Borrower for financial reporting purposes under GAAP. Consolidated

     Group shall not include an Investment Affiliate or any other Affiliate

     which is not owned 50% or more by the Borrower, Guarantor, or their

     respective Subsidiaries.

 

          "Construction Loans" shall mean financing obtained by Borrower,

     Guarantor or a Special Purpose Entity to finance the costs set forth in the

     Real Estate Asset Budget Amount for the construction of a Real Estate

     Asset.

 

          "Current Asset Value of Existing Real Estate Asset" shall mean, for

     any calendar quarter, the current asset value of Real Estate Assets, other

     than Real Estate Assets acquired during such calendar quarter, determined

     from time to time by the Compliance Certificate and identified as item H

     thereon.

 

          "Debt Service Coverage Ratio" shall mean the ratio of EBITDA plus Loss

     on Interest Rate Swap during the then-ending calendar quarter determined as

     of the last day of such calendar quarter, annualized (multiplied by 4), to

     the aggregate sum of all Interest payments and principal payments

     (excluding principal payments upon maturity of a loan or voluntary

     prepayments of principal) on Indebtedness of the Consolidated Group, and

     the Consolidated Group's pro rata share of any Indebtedness of any

     Investment Affiliate due and payable during such then-ending calendar

     quarter determined as of the last day of such calendar quarter, annualized

     (multiplied by 4). The first test shall be conducted for the quarter ended

     September 30, 2005, and tested at each quarter end thereafter.

 

 

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          "Default Rate" shall mean a rate of interest from time to time which

     is Two Percent (2%) per annum above the applicable Interest Rates otherwise

     then in effect.

 

          "Defaulting Lender" shall have the meaning set forth in Section

     11.5(b) hereof.

 

           "Deposit" shall mean an earnest money deposit made by a buyer under a

     Mortgaged Property Sale Agreement and held by a Title Company or by the

     Borrower or Special Purpose Entity, as applicable.

 

          "Disbursement Request" shall mean a statement of the Borrower setting

     forth the amount of an Advance being requested and containing such other

     information as is required by Paragraph (a) of Section 5.01 hereof.

 

          "EBITDA" shall mean for any period, with respect to the Consolidated

     Group on a consolidated basis, determined in accordance with GAAP, the sum

     of the net income (or net loss) for the then-ending calendar quarter,

     including the Consolidated Group's pro rata share of net income (or net

     loss) in any Investment Affiliate, plus the sum of all expenses determined

     in accordance with GAAP for the then-ending calendar quarter for (a)

     Interest, including interest on the Mezzanine Debt upon achievement of

     Stabilized Occupancy of the Real Estate Asset for which the Mezzanine Debt

     has been incurred, (b) depreciation, (c) amortization, (d) all accrued or

     paid taxes on or measured by income to the extent included in the

     determination of such net income (or net loss), and (e) amounts

     attributable to the minority interest of members of Special Purpose

     Entities and other minority members or partners of Borrower, Special

     Purpose Entities or Guarantor). Net income (or net loss) shall be computed

     without giving effect to extraordinary losses or gains.

 

          "Environmental Indemnity Agreement" shall mean an Environmental

     Indemnity Agreement in the form attached hereto as Exhibit G, with blanks

     completed appropriately, to be executed and delivered with respect to a

     Mortgaged Property by a Special Purpose Entity, the Borrower and the

     Guarantor to the Lenders, as the same may be supplemented, modified or

     amended from time to time.

 

          "ERISA" shall mean the Employee Retirement Income Security Act of

     1974, as amended.

 

          "ERISA Affiliate" shall mean any trade or business, whether or not

     incorporated, which together with the Borrower would be treated as a single

     employer under ERISA.

 

          "Event of Default" shall mean any of the events of default described

     in Section 8.01 hereof.

 

          "FEMA" shall mean the Federal Emergency Management Agency, or any

     successor entity.

 

          "Facility 1" shall mean the revolving loan under the Loan Documents

      from the Lenders to the Borrower in a principal amount not to exceed Fifty

     Million Dollars ($50,000,000) at any time outstanding.

 

 

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          "Facility 1 and Facility 2 Combined Mortgaged Properties Debt Service"

     shall mean the sum of all Interest payments and principal payments on the

     outstanding aggregate principal balance of the Loans due and payable during

     the then-ending calendar quarter, annualized (multiplied by 4), assuming

      the level amortization of the then outstanding aggregate principal balance

     of the Loans over a period of twenty-five (25) years, at a per annum

     interest rate equal to One and One-Half Percent (1 1/2%) above the most

     recent weekly average yield on United States Treasury Securities adjusted

     to a constant maturity of ten (10) years as measured on the first day of

     each calendar quarter.

 

          "Facility 1 and Facility 2 Combined Mortgaged Properties Debt Service

     Coverage Ratio" shall mean the Mortgaged Properties Net Operating Income

     divide by the Facility 1 and Facility 2 Combined Mortgaged Property Debt

     Service.

 

          "Facility 1 Extended Maturity Date" shall mean September 30, 2008.

 

          "Facility 1 Maturity Date" shall mean (a) the Facility 1 Original

     Maturity Date, or (b) the Facility 1 Extended Maturity Date if the term of

     Facility 1 is extended in accordance with Section 2.05 hereof.

 

          "Facility 1 Mortgaged Properties Debt Service" shall mean the sum of

     all Interest payments and principal payments on the outstanding principal

     balance of Facility 1 due and payable during the then-ending calendar

     quarter, annualized (multiplied by 4), assuming the level amortization of

      the then outstanding principal balance of Facility 1 over a period of

     twenty-five (25) years, at a per annum interest rate equal to One and

     One-Half Percent (1 1/2%) above the most recent weekly average yield on

     United States Treasury Securities adjusted to a constant maturity of ten

     (10) years as measured on the first day of each calendar quarter.

 

          "Facility 1 Mortgaged Properties Debt Service Coverage Ratio" shall

     mean the Mortgaged Properties Net Operating Income divide by the Facility 1

     Mortgaged Property Debt Service.

 

          "Facility 1 Note" shall mean that certain Second Replacement Credit

     Note in the original principal amount of Fifty Million Dollars

     ($50,000,000) executed and delivered by Borrower to The Huntington National

     Bank of even date herewith, as the same may be renewed, extended,

     supplemented, replaced, modified or amended from time to time.

 

          "Facility 1 Original Maturity Date" shall mean September 30, 2007.

 

           "Facility 2" shall mean the revolving loan under the Loan Documents

     from the Lenders to the Borrower in a principal amount not to exceed Ten

     Million Dollars ($10,000,000) at any time outstanding.

 

          "Facility 2 Maturity Date" shall mean June 30, 2006.

 

          "Facility 2 Note" shall mean that certain Second Replacement Credit

     Note in the original principal amount of Ten Million Dollars ($10,000,000)

     executed and delivered

 

 

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     by Borrower to The Huntington National Bank of even date herewith, as the

     same may be renewed, extended, supplemented, replaced, modified or amended

     from time to time.

 

          "Facility 3" shall have the meaning set forth in Section 2.10 hereof.

 

          "Facility 3 Note" shall mean that certain Reimbursement Note in the

     original principal amount of Three Million Dollars ($3,000,000) executed

     and delivered by Borrower to The Huntington National Bank of even date

     herewith, as the same may be renewed, extended, supplemented, replaced,

     modified or amended from time to time.

 

          "Fixtures" shall mean all personal property now or hereafter owned by

     the Borrower or a Special Purpose Entity and now or hereafter affixed to,

     incorporated into or to be incorporated into, or used or useful in

     connection with, a Mortgaged Property or any part thereof, all replacements

     thereof, additions thereto and substitutions therefor.

 

          "GAAP" shall mean generally accepted accounting principles in the

     United States of America in effect from time to time as promulgated by the

     Financial Accounting Standards Board and recognized and interpreted by the

     American Institute of Certified Public Accountants as of the end of the

     first full quarter following the promulgation of such standards.

 

          "Governmental Authorities" shall mean the United States of America,

     the state and local jurisdictions in which a Mortgaged Property is located

      and any political subdivision thereof, and any agency, department,

     commission, board, bureau or instrumentality of any of them.

 

          "Governmental Requirement" shall mean any law, ordinance, order, rule

     or regulation of any Governmental Authority, including but not limited to

     laws, ordinances, orders, rules or regulations with regard to zoning,

     subdivision, building, safety, fire protection or environmental matters

     applicable to a Mortgaged Property.

 

          "Guarantor" shall mean Windrose Medical Properties Trust, a Maryland

     real estate investment trust.

 

          "Guaranty" shall mean the Second Amended and Restated Unconditional

     Guaranty executed and delivered by Guarantor to the Lenders of even date

     herewith, pursuant to which the Guarantor guarantees the Borrower's

     obligations under the Loan Documents and the Facility 3 Note, as the same

     may be supplemented, modified or amended from time to time.

 

          "Hazardous Constituent" shall have the meaning assigned thereto under

     40 C.F.R. Section 260.10.

 

          "Hazardous Materials" shall mean, collectively, Hazardous Substances,

     Hazardous Constituent and Solid Wastes.

 

          "Hazardous Materials Laws" shall mean all laws, statutes, ordinances,

     rules, regulations, permits, licenses, judgments, writs, injunctions,

     decrees, orders,

 

 

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     determinations, directives and standards promulgated by any governmental

     authority concerning Hazardous Materials or concerning the protection of,

     or regulation of the discharge of substances into, the environment or

     concerning the health or safety of persons with respect to environmental

     hazards, and includes, without limitation, the Comprehensive Environmental

     Response, Compensation and Liability Act of 1980, as amended by the

     Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. Sections

     9601 et seq., Solid Waste Disposal Act, as amended by the Resource

     Conservation and Recovery Act of 1976 and Solid and Hazardous Waste

     Amendments of 1984, 42 U.S.C. Sections 6901 et seq., Federal Water

     Pollution Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C.

     Sections 1251 et seq., Clean Air Act of 1966, as amended, 42 U.S.C.

     Sections 7401 et seq., Toxic Substances Control Act of 1976, 15 U.S.C.

     Sections 2601 et seq., Occupational Safety and Health Act of 1970, as

     amended, 29 U.S.C. Sections 651 et seq., Emergency Planning and Community

     Right-to-Know Act of 1986, 42 U.S.C. Sections 11001 et seq., National

     Environmental Policy of 1975, 42 U.S.C. Sections 4321 et seq., Safe

     Drinking Water Act of 1974, as amended, 42 U.S.C. Section 300(f) et seq.,

      the Hazardous Materials Transportation Act, 42, U.S.C. Section 1801 et

     seq., the Federal Insecticide, Fungicide, and Rodenticide Act, U. S.C.

     Section 7401 et seq., and any similar or implementing law of the state in

     which a Mortgaged Property is located, and all amendments, rules, and

     regulations promulgated thereunder or implementing the same.

 

          "Hazardous Substances" shall mean at any time any substance, waste,

     pollutant, contaminant or material, in solid, liquid or gaseous form,

     which: (i) is a substance regulated or defined or designated as hazardous,

     extremely or imminently hazardous, objectionable, dangerous, or toxic

     pursuant to any law, by any local, state, territorial or federal

     governmental authority; (ii) is a substance with respect to which such a

     governmental authority otherwise requires environmental compliance,

     investigation, monitoring, reporting, or remediation; including but not

     limited to, (A) all substances, wastes, pollutants, contaminants and

     materials regulated, or defined or designated as hazardous, extremely or

     imminently hazardous, dangerous, objectionable or toxic, under any

     Hazardous Materials Law; (B) petroleum and petroleum based products

     including crude oil, used oil and any fractions thereof; (C) natural gas,

     synthetic gas, and any mixtures thereof; (D) radon; (E) radioactive

     substances and materials; (F) asbestos; (G) urea formaldehyde; (H)

     polychlorinated biphenyls; (I) lead; (J) methane; (K) flammable substances

     and materials; and (L) explosives.

 

          "Improvements" shall mean the improvements located upon a Mortgaged

     Property.

 

          "Indebtedness" shall mean all obligations, contingent and otherwise,

     that in accordance with GAAP should be classified upon a Person's balance

     sheet as liabilities, or to which reference should be made by footnotes

     thereto, including, without limitation, all of the following, whether or

     not so classified: (a) all debt and similar monetary obligations, whether

     direct or indirect; (b) all liabilities secured by any mortgage, pledge,

     negative pledge, security interest, lien, negative lien, charge, or other

     encumbrance existing on property owned or acquired subject thereto, whether

     or not the liability secured thereby shall have been assumed; (c) all

     guarantees, endorsements and other contingent obligations whether direct or

     indirect in respect of indebtedness or obligations

 

 

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     of others, including any liability as the general partner of a partnership,

     any obligation to supply funds to or in any manner to invest in, directly

     or indirectly, any Person, to purchase indebtedness, or to assure the owner

     of indebtedness against loss, through an agreement to purchase goods,

     supplies, or services for the purpose of enabling the debtor to make

     payment of the indebtedness held by such owner or otherwise, and the

      obligations to reimburse the issuer in respect of any letters of credit;

     (d) obligations as a lessee under any "capitalized lease" (as determined in

     accordance with GAAP); (e) all subordinated debt; (f) all obligations in

     respect of deferred purchase prices; (g) all obligations to contribute

     money; (h) all obligations under interest rate swaps and similar

     agreements; and (i) such Person's liabilities, contingent or otherwise of

     the type set forth in (a) through (h) above, under any joint venture,

     limited liability company or partnership agreement. Indebtedness shall not

     include proceeds from the issuance of preferred stock if such proceeds are

     classified as equity under GAAP.

 

          "Inspecting Architect" shall mean an independent architectural or

     engineering firm employed by the Agent with respect to a Mortgaged

     Property. The Borrower may submit to the Agent a list of suggested

     architectural and engineering firms for consideration by the Agent. The

     Agent shall not, however, be obligated to select or retain an Inspecting

     Architect from such list.

 

          "Interest" shall mean, for any period, the sum of all interest due and

     payable for such period (including amortization of original issue discount

     and debt issuance costs on any Indebtedness and the interest portion of any

     deferred payment obligation, calculated in accordance with generally

     accepted accounting principles), capitalized interest and non-cash interest

     expenses, all commissions, discounts and other fees and expenses owed with

     respect to letters of credit and bankers' acceptance financing, the net

     costs associated with any type of interest rate protection agreements

     (including caps, swaps, options, futures or similar agreements or

     arrangements with respect to interest rates), and all but the principal

     component of rentals in respect of "capitalized leases" (determined in

     accordance with GAAP) paid, accrued or due to be paid or to be accrued

     during such period.

 

          "Interest Rate" shall mean, as to each Advance, a rate per annum equal

     to (i) for Prime Advances, the Prime Interest Rate and (ii) for LIBOR

     Advances, the Adjusted LIBOR Interest Rate.

 

           "Interest Rate Protection Product" shall mean an interest rate hedging

     program through the purchase of an interest rate swap, cap or other such

     interest rate protection product with respect to any Indebtedness during

     the term of the Loans plus one (1) day.

 

          "Investment Affiliate" shall mean any Person in which the Consolidated

     Group, directly or indirectly, has an ownership interest, whose financial

     results are not consolidated under GAAP with the financial results of the

     Consolidated Group.

 

          "Lease" shall mean a lease of all or a portion of a Mortgaged Property

     (excluding any incidental real estate which is contiguous to the leased

     real estate and improvements and which the Borrower or a Special Purpose

     Entity is or was required to purchase as part

 

 

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     of the acquisition of the leased real estate and improvements) entered into

     in the ordinary course of business by and between the Borrower or a Special

     Purpose Entity, as applicable, as landlord, and a Tenant, as tenant.

 

          "Lenders" shall mean The Huntington National Bank, a national banking

     association, and any successor thereto or any holder(s) of the Loans (or

     any portion thereof) from time to time who is an Assignee.

 

          "Letters of Credit" shall mean Standby Letters of Credit issued by

     Agent on behalf of Lenders at the request of Borrower and Guarantor not

     exceeding the aggregate sum of Three Million Dollars ($3,000,000) pursuant

     to Section 2.10 hereof.

 

          "Leverage Ratio" shall mean the ratio of (a) Total Current Value of

     Assets to (b) Total Liabilities as such ratio shall be determined from time

     to time in accordance with this Agreement and calculated in the manner set

     forth in the Compliance Certificate.

 

          "LIBOR" shall mean the average (rounded upward to the nearest 1/16 of

     1%) of the per annum rates at which deposits in immediately available funds

     in U.S. dollars for the applicable LIBOR Interest Period and in the amount

     of the applicable LIBOR Advance are offered to the Agent by prime banks in

     the London interbank Eurodollar market, determined as of 11:00 a.m. London

     time (or as soon thereafter as practicable) two (2) London Banking Days

     prior to the beginning of the applicable LIBOR Interest Period.

 

          "LIBOR Advance" shall mean any Advance which is determined with

     reference to the Adjusted LIBOR Interest Rate.

 

          "LIBOR Interest Period" shall mean a period of one (1) month, two (2)

     months, three (3) months, or six (6) months as selected by the Borrower.

 

          "LIBOR Interest Rate" shall mean, (a) with respect to Facility 1, a

     rate per annum equal to (i) one hundred fifty (150) basis points above

     LIBOR at such time as the Leverage Ratio is less than Forty Percent (40%),

     (ii) one hundred sixty-five (165) basis points above LIBOR at such time as

     the Leverage Ratio equals or exceeds Forty Percent (40%) but is less than

     Fifty-Five Percent (55%), (iii) two hundred (200) basis points above LIBOR

     at such time as the Leverage Ratio equals or exceeds fifty-five percent

     (55%), but is less than sixty-five percent (65%), and (iv) two hundred

     fifty (250) basis points above LIBOR at such time as the Leverage Ratio

     equals or exceeds Sixty-Five Percent (65%) or in the event Borrower fails

     to provide Agent with the Compliance Certificate in accordance with the

     terms hereof; and (b) with respect to Facility 2, a rate per annum equal to

     two hundred seventy-five (275) basis points above LIBOR.

 

          "Loan Documents" shall mean, this Agreement, the Notes, Mortgages,

     Assignments of Rents, Collateral Assignments of Mortgaged Property Sale

     Agreements, Guaranty, Borrower's Affidavits, Environmental Indemnities, the

     Pledge Agreements and other documents executed and/or delivered by or on

     behalf of the Borrower, the Guarantor or a Special Purpose Entity in

     connection with the Loans or any Advance

 

 

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     which are in effect from time to time, as the same may be supplemented,

     modified or amended from time to time.

 

          "Loan" shall mean, singly, Facility 1 or Facility 2.

 

          "Loans" shall mean, together, Facility 1 and Facility 2.

 

          "London Banking Day" shall mean a day on which commercial banks are

     open for business in London, England, and quoting deposit rates for U.S.

     dollar deposits.

 

          "Loss on Interest Rate Swap" shall mean the loss recognized currently

     in earnings pursuant to compliance with Statement of Financial Accountings

     Standard No. 133, "Accounting for Derivative Instruments and Hedging

     Activities."

 

          "Major Lease" shall mean a Lease between Borrower or a Special Purpose

     Entity, as applicable, and a Major Tenant.

 

          "Major Tenant" shall mean any Tenant occupying twenty-five percent

     (25%) or more of a Mortgaged Property.

 

          "Material Adverse Effect" shall mean any fact or circumstance which

     (a) materially and adversely effects the business, operation, property or

     financing conditions of the Borrower and Guarantor taken as a whole, or (b)

     has a material adverse effect on the ability of the Borrower, Guarantor or

     a Special Purpose Entity to perform their respective obligations under this

     Agreement, the Notes or the other Loan Documents.

 

          "Mezzanine Debt" shall mean Indebtedness of Borrower to The Huntington

     Real Estate Investment Company or to other financial institutions

     acceptable to Agent not to exceed the sum of Fifteen Million Dollars

     ($15,000,000) in the aggregate, which Indebtedness is secured by equity

     interests in entities having Indebtedness secured by mortgages and which

     Indebtedness is subordinate to such mortgage debt and which Indebtedness

     shall have terms not to exceed the Facility 2 Maturity Date.

 

          "Monetary Event of Default" shall mean an Event of Default under

     Section 8.01(a) hereof or any other Event of Default which can be cured by

     the payment of money.

 

          "Mortgage" shall mean a Real Estate Mortgage and Security Agreement

     substantially in the form of Exhibit H-1 attached hereto, with blanks

     completed appropriately, or a Deed of Trust and Security Agreement

     substantially in the form of Exhibit H-2 attached hereto, with blanks

     completed appropriately, given by the Borrower or a Special Purpose Entity,

     as applicable, to the Lenders with respect to a Mortgaged Property as

     security for the Borrower's obligations under the Loans, subject to such

     changes as may be required to comply with the requirements of the laws of

     the state in which the Mortgaged Property is located, as the same may be

     supplemented, modified or amended from time to time.

 

 

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          "Mortgage Release Price" shall mean with respect to a Mortgaged

     Property, an amount equal to the principal reduction required to allow

     Borrower to remain in compliance with the Borrowing Base and the Debt

     Service Coverage Ratio as set forth in this Agreement determined in

     accordance with Section 2.07 (b) hereof.

 

          "Mortgaged Property" shall mean all Real Estate Assets securing the

     Loans by virtue of a Mortgage.

 

          "Mortgaged Properties Net Operating Income" shall mean the total

     rental income during the then-ending calendar quarter, annualized

     (multiplied by 4) (including minimum rent, additional rent, common area

     maintenance, real estate tax and insurance reimbursements and other tenant

     reimbursements, including tenant expense reimbursements and tenant

     improvement reimbursements, recurring parking income), received by Borrower

     and each Special Purpose Entity, as applicable, and arising from the

     ownership and operation of the Mortgaged Properties (excluding tenant

     security deposits, rents from tenants that are subject to a voluntary or

     involuntary petition for relief under any federal or state bankruptcy codes

     or insolvency laws, and rents from tenants that are not in possession of

     its demised premises, except rents and other payments from tenants under

     master leases or occupancy agreements approved by Agent), less the sum of

     all actual costs, taxes, expenses and disbursements paid or due and payable

     during such then-ending calendar quarter, annualized (multiplied by 4), in

     connection with the ownership, leasing, management, operation, maintenance

     and repair of the Mortgaged Properties and of the personal property,

     fixtures, machinery, equipment, systems and apparatus located therein or

     used in connection therewith, but excluding (i) non-cash expenses, such as

     depreciation and amortized costs, (ii) state and federal income taxes,

     (iii) the non-current portion of capital expenditures, (iv) any expenses

     paid directly by tenants to third parties, (v) any adjustments made for

     straight lining of rents, (vi) extraordinary income or expense, and (vii)

     debt service payments on all Indebtedness of Borrower with respect to the

     Mortgaged Properties; all determined in accordance with GAAP, as measured

     on the last day of each calendar quarter.

 

          "Mortgaged Property Sale Agreement" shall mean with respect to a

     Mortgaged Property, an agreement between the Borrower or a Special Purpose

     Entity, as applicable, and a buyer not affiliated with the Borrower or the

     Guarantor which is approved by the Agent in a form reasonably acceptable to

     the Agent, pursuant to which agreement the Borrower or a Special Purpose

     Entity, as applicable, agrees to sell, and such buyer agrees to purchase, a

     Mortgaged Property. Such sale agreement shall require the buyer thereunder

     to deposit a Deposit with the Borrower or a Special Purpose Entity, as

     applicable, or a Title Company or other escrow agent. Such term shall also

     include the exercise of a right of first refusal or purchase option in a

     lease of a Mortgaged Property held by a Major Tenant.

 

          "Mortgaged Property Site" shall mean the real estate portion of a

     Mortgaged Property.

 

          "Non-Monetary Event of Default" shall mean any Event of Default, other

     than a Monetary Event of Default.

 

 

                                       11

<PAGE>

          "Notes" shall mean. together, the Facility 1 Note and the Facility 2

     Note.

 

          "PBGC" shall mean the Pension Benefit Guaranty Corporation established

     pursuant to ERISA, or any successor entity.

 

          "Percentage" shall mean, with respect to each Lender, the percentage

     which its Commitment constitutes of the maximum aggregate amount of the

     Loans as set forth below the signature line of each Lender as the same may

     be adjusted from time to time.

 

          "Person" shall mean an individual, a partnership, a joint venture, a

     corporation, a limited liability company, a trust, an unincorporated

     organization or a Governmental Authority.

 

          "Personal Property" shall mean all tangible personal property owned by

     the Borrower or a Special Purpose Entity and now or at any time hereafter

     located on or at a Mortgaged Property or used in connection therewith or

     with the improvements forming a part of such Mortgaged Property.

 

          "Plan" shall mean an Employee Benefit Plan which is covered by Title 4

     of ERISA or subject to the minimum lending standards under Section 412 of

     the Internal Revenue Service as to which the Borrower may have any

     liability.

 

          "Plans and Specifications" shall mean the plans and specifications for

     the construction of the Improvements forming part of an applicable

     Mortgaged Property prepared by the architect therefor approved by Borrower.

 

          "Pledge Agreements" shall mean certain Membership Pledge Agreements

     now or hereafter executed by Borrower in favor of Lenders pursuant to which

     Borrower pledges its membership interest in Special Purpose Entities.

 

          "Prime Advance" shall mean any Advance which is determined with

     reference to the Prime Rate.

 

          "Prime Interest Rate" shall mean a rate per annum equal to the Prime

     Rate.

 

          "Prime Rate" shall mean the interest rate per annum announced from

     time to time by the Agent as its prime rate. Each interest rate determined

     by reference to the Prime Rate shall change automatically from time to

     time, effective as of the effective date of each change in the Prime Rate.

     The Agent's Prime Rate is not necessarily the lowest rate at which the

     Agent lends its funds. The Prime Rate is only an index rate from which

     interest rates actually charged to the Agent's customers may be measured.

     The use of the Prime Rate does not constitute a commitment by the Agent to

     lend money at a preferred rate.

 

          "Prohibited Transaction" shall have the meaning ascribed thereto by

     ERISA.

 

          "Project Agreement" shall mean a Project Agreement in the form of

     Exhibit I attached hereto, with blanks completed appropriately, to be

     entered into by the Agent and

 

 

                                        12

<PAGE>

     the Borrower and a Special Purpose Entity, pursuant to which the Required

     Lenders approve a Mortgaged Property.

 

          "Real Estate Asset" shall mean the real estate and all improvements

     thereon for use as a medical related facility owned by the Consolidated

     Group, together with any incidental real estate which is contiguous to the

     leased real estate and improvements and which Consolidated Group is or was

     required to purchase as part of the acquisition of the leased real estate

     and improvements.

 

          "Real Estate Asset Budget Amount" shall mean the total budgeted cost

     (as such budget shall be updated from time to time) of all projects under

     construction owned by the Consolidated Group plus the Consolidated Group's

     pro rata share of the total budgeted cost (as such budget shall be updated

     from time to time) of all projects under construction owned by any

     Investment Affiliate or by any Subsidiary of the Consolidated Group that is

     not a wholly owned Subsidiary provided, however, that with respect to (i)

     projects owned by any such Investment Affiliate or Subsidiary for which the

     respective financial responsibilities of the other owners of such

     Investment Affiliate or Subsidiary on the one hand and the Consolidated

     Group and its wholly owed Subsidiaries on the other hand are not in

     proportion to the respective ownership interests in the applicable

     Investment Affiliate or Subsidiary, then the portion of budgeted cost of

     such project included in the Real Estate Asset Budget Amount shall be

     adjusted to reflect the Consolidated Group's actual financial

     responsibility related to such project. Such costs shall include, without

     limitation, all land acquisition costs (but may exclude costs of land used

     for expansion projects which was not purchased for the purpose of such

     expansion project), design and permitting costs, construction period real

     estate taxes, leasing costs including brokers' commissions and tenant

     improvements, allowances or reimbursements, construction costs and opening

     costs. With respect to any projects financed with Indebtedness other than

     the Loans, such costs shall also include construction period interest and

     all fees and expenses associated with such Indebtedness.

 

          "Recourse Indebtedness" shall mean any Indebtedness of the Borrower,

     Guarantor or Special Purpose Entity, including the Borrower's, Guarantor's

     or Special Purpose Entity's respective recourse pro rata share of any

     Indebtedness in any Investment Affiliate, for which the lender thereof does

     not agree to look solely to a Real Estate Asset for the payment of the

     indebtedness subject to usual and customary exculpation carve out

     provisions and environmental indemnification agreements.

 

          "Regulation U" shall mean Regulation U of the Board of Governors of

     the Federal Reserve System, as amended from time to time.

 

          "Reportable Event" shall have the meaning ascribed thereto by ERISA.

 

          "Restricted Assets" shall have the meaning set forth in Section 7.07

     hereof.

 

          "Required Lenders" shall mean Lenders holding Percentages aggregating

      at least Sixty-Six and Two-Thirds Percent (66-2/3%) or greater.

 

 

                                       13

<PAGE>

          "Reserve Percentage" shall mean for any day that percentage (expressed

     as a decimal) which is in effect on such day, as prescribed by the Board of

     Governors of the Federal Reserve System (or any successor) for determining

     the maximum reserve requirement (including, without limitation, all basic,

     supplemental, marginal and other reserves and taking into account any

     transitional adjustments or other scheduled changes in reserve

     requirements) for a member of the Federal Reserve System in Cleveland,

     Ohio, in respect of "Eurocurrency Liabilities." The Adjusted LIBOR Interest

     Rate shall be adjusted automatically on and as of the effective date of any

     change in the Reserve Percentage.

 

          "Single Mortgaged Property Debt Service" shall mean the total sum of

     all Interest payments and principal payments which would be due and payable

      during the then-ending calendar quarter, annualized (multiplied by 4), with

     respect to a single Mortgaged Property assuming the level amortization of a

     principal loan balance equal to Sixty-Five Percent (65%) of the Appraised

     Value of such Mortgaged Property over a period of twenty-five (25) years,

     at a per annum interest rate equal to One and One-Half Percent (1 1/2%)

     above the most recent weekly average yield on United States Treasury

     Securities adjusted to a constant maturity of ten (10) years as measured on

     the last day of each calendar quarter.

 

          "Single Mortgaged Property Debt Service Coverage Ratio" shall mean the

     Single Mortgaged Property Net Operating Income divided by the Single

     Mortgaged Property Debt Service.

 

          "Single Mortgaged Property Net Operating Income" shall mean the total

     rental income, with respect to a Mortgaged Property during the then-ending

     calendar quarter, annualized (multiplied by 4) (including minimum rent,

     additional rent, common area maintenance, real estate tax and insurance

     reimbursements and other tenant reimbursements, including tenant expense

     reimbursements and tenant improvement reimbursements, recurring parking

     income), received by Borrower and each Special Purpose Entity, as

     applicable, arising from the ownership and operation such Mortgaged

     Property (excluding tenant security deposits, rents from tenants that are

     subject to a voluntary or involuntary petition for relief under any federal

     or state bankruptcy codes or insolvency laws and rents from tenants that

     are not in possession in its demised premises at such Mortgaged Property,

     except rents and other payments from tenants under master leases or

      occupancy agreements approved by Agent), less the sum of actual costs,

     taxes, expenses and disbursements paid or due and payable during such

     then-ending calendar quarter, annualized (multiplied by 4), in connection

     with the ownership, leasing, management, operation, maintenance and repair

     of such Mortgaged Property and of the personal property, fixtures,

     machinery, equipment, systems and apparatus located therein or used in

     connection therewith, but excluding (i) non-cash expenses, such as

     depreciation and amortized costs, (ii) state and federal income taxes,

     (iii) the non-current portion of capital expenditures, (iv) any expenses to

     be paid directly by tenants to third parties, (v) any adjustments made for

      straight lining of rents, (vi) extraordinary income or expense, and (vii)

     the Single Mortgaged Property Debt Service for such Mortgaged Property, all

     determined in accordance with GAAP, as measured on the last day of each

     calendar quarter.

 

 

                                       14

<PAGE>

          "Solid Wastes" shall have the meaning assigned thereto in 40

     C.F.R. Section 261.2.

 

          "Special Purpose Entities" shall mean limited liability companies or

     limited partnerships which own a Mortgaged Property and in which Borrower

     holds a controlling interest.

 

          "Stabilized Occupancy" shall mean, with respect to a Real Estate Asset

     under construction, the time when such Real Estate Asset has received a

     certificate of occupancy (or similar permit or approval).

 

          "Storage Containers" shall mean existing and future containers for

     Hazardous Materials and above ground and underground storage tank systems

     (including underground piping, conduits or sumps).

 

          "Subordination, Non-Disturbance and Attornment Agreement" shall mean a

     Subordination, Non-Disturbance and Attornment Agreement in the form of

     Exhibit J attached hereto, with blanks completed appropriately, entered

     into by the Agent, the Borrower or a Special Purpose Entity, as applicable,

     and a Major Tenant with respect to a Mortgaged Property, subject to such

     changes as may be required to comply with the requirements of the law of

     the state in which the Mortgaged Property is located and such other

     revisions as may be reasonably acceptable to Agent, as the same may be

     supplemented, modified or amended from time to time.

 

          "Subsidiary" shall mean, with respect to any Person, (i) any

     corporation more than 50% of the outstanding securities having ordinary

     voting power of which shall at the time be owned or controlled, directly or

     indirectly, by such Person or by one or more of its Subsidiaries or by such

     Person and one or more of its Subsidiaries, or (ii) any partnership,

     limited liability company, association, joint venture or similar business

     organization more than 50% of the ownership interests having ordinary

     voting power of which shall at the time be so owned or controlled. Unless

     otherwise expressly provided, all references herein to a "Subsidiary" shall

     mean a Subsidiary of the Borrower and/or Guarantor. Subsidiaries of a

     Person shall not include an Investment Affiliate or any other Affiliate

     which is not owned 50% or more directly by a Person.

 

          "Tangible Net Worth" shall mean the sum of capital surplus, earned

     surplus, capital stock, accumulated depreciation and amortization minus

     deferred charges, intangibles (excluding lease intangibles and deferred

     loan fees) and treasury stock, all as determined in accordance with GAAP

     consistently applied.

 

          "Tenant" shall mean any tenant of a Mortgaged Property.

 

          "Title Company" shall mean with respect to a Mortgaged Property, any

     title insurer designated by the Borrower and approved by the Agent which

     agrees to insure the priority of the lien of the Mortgage on such Mortgaged

     Property.

 

          "Title Policy" shall mean with respect to a Mortgaged Property, the

     policy of title insurance issued by a Title Company to the Lenders insuring

     the priority of the lien of the Mortgage on such Mortgaged Property.

 

 

                                       15

<PAGE>

          "Total Current Value of Assets" shall be the amount determined from

     time to time by the Compliance Certificate and identified as item N

     thereon.

 

          "Total Current Value of Real Estate Assets" shall be the amount

     determined from time to time by the Compliance Certificate and identified

     as item K thereon.

 

          "Total Liabilities" shall mean all liabilities of the Consolidated

     Group, including the pro rata share of any liabilities of the Consolidated

     Group in any Investment Affiliate, all as determined in accordance with

     GAAP.

 

          "Unrestricted Cash and Cash Equivalents" shall mean unencumbered cash

     on hand plus cash reserved for the payment of taxes, tenant improvements,

     capital expenditures, lease commissions or other reserves available to

     offset expenditures generally recognized as property operating expenses, or

     other general and administrative expenses.

 

          "Variable Rate Indebtedness" shall mean Indebtedness which does not

     bear interest at a fixed rate of interest and is not covered by an Interest

     Rate Protection Product.

 

          "Wetlands" shall mean any wetlands area or other area which is subject

     to the regulatory jurisdiction of the United States Environmental

      Protection Agency and/or Army Corps of Engineers and/or any other

     Governmental Authority, under any Governmental Requirement, including,

     without limitation, the Clean Water Act, 33 U.S.C. Section 1251, et. seq.

 

     Unless the context clearly otherwise requires, the foregoing definitions

shall be equally applicable to both the singular and plural forms.

 

                                   ARTICLE II

                                    THE LOANS

 

     2.01. Facility 1. Subject to the terms and conditions hereof, and relying

upon the representations and warranties herein set forth, the Lenders agree to

make Facility 1 to the Borrower. The principal amount of Facility 1 outstanding

at any time shall not exceed the lesser of: (a) Fifty Million Dollars

($50,000,000), or (b) the Borrowing Base (as the same may be adjusted as set

forth below in this Section 2.01). The proceeds of Facility 1 will be used

solely for the acquisition and development by the Borrower, as applicable, of

Real Estate Assets and for working capital purposes as described herein. The

proceeds of Facility 1 will be advanced to the Borrower in accordance with and

subject to the requirements and limitations set forth herein. Advances of

Facility 1 will be made to Borrower for working capital purposes provided such

Advances shall not exceed Five Million Dollars ($5,000,000) at any one time. If

prior to the Facility 1 Maturity Date, the Borrower repays any Advance(s) of

Facility 1, or any portion thereof, loan proceeds in an amount equal to the

amount of the repayment will again be made available to the Borrower for

Advances, subject to the terms and conditions hereof.

 

     In the event a Single Mortgaged Property Debt Service Coverage Ratio is

less than 1.25 to 1.00, the Borrowing Base shall be reduced to an amount

sufficient to support a 1.40 to 1.0

 

 

                                       16

<PAGE>

Single Mortgaged Property Debt Service Coverage Ratio with respect to the

subject Mortgaged Property until such time as such Mortgaged Property achieves a

1.40 to 1.0 Single Mortgaged Property Debt Service Coverage Ratio. By way of

illustration, assume a Single Mortgaged Property has (i) an Appraised Value of

$1,000,000; (ii) an initial Borrowing Base Value of $650,000 (65% of Appraised

Value); (iii) an initial Single Mortgaged Property Debt Service of $50,256

(assuming an interest rate of six percent (6%) for this example); and (iv)

single Mortgaged Property Net Operating Income of $62,820 (or, 1.25 to 1.0 of

the Single Mortgaged Property Debt Service Ratio). If the Single Mortgaged

Property Net Operating Income decreases to $55,000 (a Single Mortgaged Property

Debt Service Ratio below 1.25 to 1.0 using a Borrowing Base Value of $650,000

and a debt constant of $50,256), then the required Single Mortgaged Property

Debt Service Ratio is adjusted to 1.4 to 1.0 Assuming net operating income to

$55,000, then the Borrowing Base value for this property is reduced to $508,117.

At 1.40 to 1.0, net operating income of $55,000 supports a Single Mortgaged

Property Debt Service of $39,285, which is a Borrowing Base Value of $508,117

(at the assumed interest rate). The Single Mortgaged Property Debt Service Ratio

will remain at 1.40 to 1.0 until the Borrowing Base Value for such property

equals $650,000. Thereafter, the Borrowing Base Value (subject to the 65%)

limit) shall be calculated based on the actual Single Mortgaged Property Debt

Service unless and until the Single Mortgaged Property Debt Service falls below

1.25 to 1.0 at which time the Single Mortgaged Property Debt Service Ratio shall

return to 1.4 to 1.0.

 

     In the event of an occurrence of an event which has a Material Adverse

Effect upon a Special Purpose Entity and the same is not cured within sixty (60)

days after notice by Agent to Borrower, the Borrowing Base will be reduced by

sixty percent (60%) of the Appraised Value of the applicable Mortgaged Property.

 

     2.02. Facility 2. Subject to the terms and conditions hereof, and relying

upon the representations and warranties herein set forth, the Lenders agree to

make Facility 2 to the Borrower. The principal amount of Facility 2 outstanding

at any time shall not exceed Ten Million Dollars ($10,000,000) and the principal

amount of Facility 2 on a combined basis with Facility 1 shall not exceed the

Borrowing Base. The proceeds of Facility 2 will be used solely for the

acquisition and development by the Borrower of Real Estate Assets as described

herein. The proceeds of Facility 2 will be advanced to the Borrower in

accordance with and subject to the requirements and limitations set forth

herein. If prior to the Facility 2 Maturity Date, the Borrower repays any

Advance(s) of Facility 2, or any portion thereof, loan proceeds in an amount

equal to the amount of the repayment will again be made available to the

Borrower for Advances, subject to the terms and conditions hereof.

 

     2.03. Notes. Facility 1 and all Advances thereunder shall be evidenced by

the Borrower's receipts and the Facility 1 Note, and Facility 2 and all Advances

thereunder shall be evidenced by the Borrower's receipts and the Facility 2

Note. Borrower agrees that if after the Closing Date an Assignee becomes a

Lender in accordance with the terms of this Agreement, Borrower shall execute

Notes payable to the order of such Lender in the principal amount of its

Commitment (i.e., its share of the Loans). Borrower further agrees that if a

Lender's Commitment hereafter increases or decreases pursuant to an assignment

complying with the terms of Article X hereof, Borrower agrees to execute

replacement Notes (substantially in the form of the Notes executed by Borrower

payable to The Huntington National Bank of even date

 

 

                                       17

<PAGE>

herewith) payable to the order of such Lender in the principal amount of such

revised Commitment.

 

     2.04. Rate of Interest. During the term of a Loan, the unpaid principal

amount thereof shall, subject to the terms and conditions hereinafter set forth,

bear interest on a basis selected by the Borrower from the following interest

rate selections: (a) the Adjusted LIBOR Interest Rate; and (b) the Prime

Interest Rate.

 

     Each Advance of a Loan shall be made as either a Prime Advance or a LIBOR

Advance, as selected by the Borrower. The Borrower may have Prime Advances and

LIBOR Advances outstanding simultaneously; provided, however, the Borrower may

not have more than five (5) LIBOR Advances of a Loan in existence at any time

and each LIBOR Advance must be in an amount which is greater than or equal to

$1,000,000. The Borrower may convert any Prime Advances aggregating at least

$1,000,000 in principal amount into a LIBOR Advance on the first day of a

calendar month. At the end of the LIBOR Interest Period applicable to a LIBOR

Advance, the Borrower may renew the LIBOR Advance or may convert the LIBOR

Advance to a Prime Advance. If the Borrower fails to renew any LIBOR Advance or

if the Borrower shall receive any new Advance without designating whether such

Advance is a LIBOR Advance or a Prime Advance, such Advance shall automatically

be deemed to be a Prime Advance. At any time that the Borrower desires a LIBOR

Advance or intends to renew a LIBOR Advance or convert a Prime Advance into a

LIBOR Advance, the Borrower must notify the Agent by a Notice of Pricing

Election in the form attached hereto as Exhibit L at least three (3) London

Banking Days prior to the day on which the Borrower desires such Advance,

renewal or conversion to be effective. The Borrower shall have no right to

designate a new Advance as, or convert an existing Prime Rate Advance to, a

LIBOR Advance if an Event of Default is then continuing. The Borrower shall have

no right to select a LIBOR Interest Period for a LIBOR Advance if such LIBOR

Interest Period would extend beyond the Maturity Date.

 

     While and so long as no Event of Default is continuing, interest shall

accrue at the applicable Interest Rates upon the daily principal balance of each

Loan, based on a three hundred sixty (360) day year, for the actual number of

days elapsed since the date to which interest has been paid.

 

     If a Lender shall determine, after the date hereof, that the adoption of

any applicable law, rule, regulation or guideline regarding capital adequacy, or

any change therein, or any change in the interpretation or administration

thereof by any governmental authority, central bank or comparable agency charged

with the interpretation or administration thereof, or compliance by such Lender

(or such Lender's lending office) with any request or directive regarding

capital adequacy (whether or not having the force of law) of any such authority,

central bank or comparable agency, has or would have the effect of reducing the

rate of return on such Lender's capital (or on the capital of a Lender's holding

company) as a consequence of the Loan to a level below that such Lender (or such

Lender's holding company) could have achieved but for such adoption, change or

compliance (taking into consideration such Lender's policies or the policies of

such Lender's holding company with respect to capital adequacy) by an amount

deemed by such Lender to be material, then from time to time, within fifteen

(15) days after demand by such Lender, the Borrower shall either (a) pay to such

Lender such additional amount or amounts as will compensate such Lenders (or

such Lender's holding company) for such reduction, or (b)

 

 

                                       18

<PAGE>

convert all LIBOR Advances to a Prime Advance. If the Borrower elects the option

provided in the foregoing subparagraph (b), the Borrower shall not be subject to

the requirement hereunder that the Borrower reimburse such Lender for any loss,

cost or expense incurred by such Lender as a result of the Borrower paying a

LIBOR Advance prior to the end of the applicable LIBOR Interest Period,

provided, however, thereafter the Borrower may not elect for any Advances to be

LIBOR Advances. A Lender 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 judgment of such Lender, be otherwise disadvantageous to

such Lender. In determining such amount, a Lender may use any reasonable

averaging and attribution methods. Failure on the part of a Lender to demand

compensation for any reduction in return on capital with respect to any period

shall not constitute a waiver of such Lender's rights to demand compensation for

any reduction in return on capital in such period or in any other period. The

protection of this Section shall be available to the Lenders regardless of any

possible contention of the invalidity of the law, regulation or other condition

which shall have been imposed.

 

     2.05. Maturity Dates. If not sooner paid, all Advances of Facility 1 shall

be due and payable on the Facility 1 Original Maturity Date. Borrower shall have

the option to extend the term of Facility 1 from the Facility 1 Original

Maturity Date to the Facility 1 Extended Maturity Date upon satisfaction of the

following conditions: (a) Borrower shall give the Agent written notice of

Borrower's election to extend the term of Facility 1 no earlier than thirty (30)

days prior to the Facility 1 Original Maturity Date; (b) no Event of Default or

Conditional Default is then continuing; and (c) Borrower shall pay to Agent on

the Facility 1 Original Maturity Date an extension fee in an amount equal to

twenty-five (25) basis points of the maximum principal amount of Facility 1.

 

     If not sooner paid, all Advances of Facility 2 shall be due and payable on

the Facility 2 Maturity Date.

 

     2.06. Interest Payments. The Borrower shall pay interest to the Agent at

the applicable Interest Rates on the outstanding principal balance of a Loan on

the first (1st) day of each calendar month while proceeds of such Loan remain

outstanding, commencing on the first (1st) day of the first (1st) calendar month

following the first Advance of such Loan.

 

     2.07. Principal Payments. Except as set forth herein, all payments of

principal shall be first applied to the reduction of Advances for working

capital purposes or as otherwise directed by Borrower. Upon the sale of a

Mortgaged Property, the Borrower shall pay to the Agent an amount equal to the

Mortgage Release Price payable in respect thereof, and such Mortgage Release

Price payment when received by the Agent, shall be applied in reduction of the

principal balance of the Loans in such order as Agent may determine in its sole

discretion. Notwithstanding the foregoing provisions, during the continuance of

an Event of Default, any Mortgage Release Price payment received by the Agent

may be applied, in the discretion of the Lenders, in reduction of any accrued

and unpaid interest on the Loans or any outstanding Advance made pursuant to

Section 5.01(c) hereof, so long as the Agent provides to Borrower all documents

necessary to release the Mortgaged Property being sold.

 

     At the request of the Agent, the Borrower will furnish to the Agent copies

of any closing statement, purchase agreement and similar documents relating to

the sale of a Mortgaged

 

 

                                        19

<PAGE>

Property prior to the release by the Agent of the security with respect to such

Mortgaged Property.

 

     During the term of the Loans, upon the Agent's receipt of the Mortgage

Release Price with respect to a Mortgaged Property, the Agent will release the

applicable Mortgaged Property and all other security of the Lenders encumbering

such Mortgaged Property by the prompt delivery of appropriate documents duly

authorized and executed and in accordance with the law of the State in which the

Mortgaged Property is located to fully and completely release any security

interest of Lenders encumbering such Mortgaged Property.

 

     Notwithstanding anything contained herein to the contrary, as a condition

to any release Borrower shall have satisfied the following conditions prior to

the Agent's release of a Mortgaged Property:

 

          a. No Conditional Default or Event of Default shall exist;

 

          b. Borrower shall have provided to Agent a proforma Borrowing Base

     Certificate as of the end of the previous calendar month and a proforma

     Compliance Certificate as of the end of the previous calendar quarter,

     demonstrating Borrower's compliance with the terms of this Agreement after

     giving effect to the release of such Mortgaged Property; and

 

          c. Borrower shall pay all costs and expenses reasonably incurred by

     Agent in connection with the release of such Mortgaged Property.

 

     2.08. Loan Prepayments. The Borrower may prepay the principal amount of any

Prime Advance in whole or in part from time to time without any prepayment

penalty. The Borrower may not prepay any LIBOR Advance before the expiration of

the LIBOR Interest Period applicable to such LIBOR Advance, except upon the

payment of the amount provided for below.

 

     If any LIBOR Advance becomes due and payable or is prepaid prior to the

last day of the applicable LIBOR Interest Period (including any prepayment

resulting from the acceleration of the Loan(s) by the Lenders as a consequence

of an Event of Default), the Borrower also promises to reimburse the Lenders on

demand for any resulting loss, cost, or expense incurred by the Lenders as a

result thereof including, without limitation, any loss incurred in obtaining,

liquidating, or employing deposits from third parties, but excluding the

Lenders' loss of margin for the period after any such payment. If, because of

the introduction of or any change in, or because of any judicial,

administrative, or other governmental interpretation of, any law or regulation,

there shall be any increase in the cost to the Lenders of making, funding,

maintaining, or allocating capital to LIBOR Advances, then from time to time,

within fifteen (15) days after demand by the Agent, the Borrower shall either

(a) pay to the Lenders additional amounts sufficient to compensate the Lenders

for such increased cost; or (b) convert all LIBOR Advances to a Prime Advance.

If the Borrower elects the option provided in the foregoing subparagraph (b),

the Borrower shall not be subject to the requirement hereunder that the Borrower

reimburse the Lenders for any loss, cost or expense incurred by the Lenders as a

result of the Borrower paying a LIBOR Advance prior to the end of the applicable

LIBOR Interest Period; provided, however, thereafter the Borrower may not elect

for any Advances to be LIBOR Advances. If,

 

 

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because of the introduction of or any change in, or because of any judicial,

administrative, or other governmental interpretation of, any law or regulation,

it becomes unlawful for the Lenders to make, fund, or maintain any LIBOR

Advance, then the Lenders' obligation to make, fund, or maintain any LIBOR

Advance shall terminate.

 

     2.09. Late Fee. If any sum of principal or interest in respect of a Loan is

not paid within five (5) days after the date when due, then, in addition to and

not in lieu of any other rights or remedies available to the Lenders, the

Borrower shall pay to the Lenders, on demand, a late fee in an amount equal to

the greater of five percent (5%) of such sum or Twenty-Five Dollars ($25.00),

but not to exceed Two Thousand Dollars ($2,000.00). In no event, however, shall

a late fee be payable under this Section 2.09 in respect of an Advance and the

interest thereon if the Borrower fails to pay such Advance and interest on the

Advance Maturity Date therefor or on the date on which such Advance and interest

are payable as a result of the acceleration of a Loan pursuant to the terms of

this Agreement.

 

      2.10. Facility 3/Letters of Credit. Subject to the terms, provisions and

conditions hereof, The Huntington National Bank agrees to make available to

Borrower an unsecured line of credit in an amount not to exceed Three Million

Dollars ($3,000,000) for the issuance of Letters of Credit ("Facility 3"). Each

Letter of Credit shall be irrevocable and shall have an expiration date not

later than the Facility 1 Maturity Date. Any draw upon the Letters of Credit

issued hereunder shall be (a) evidenced by the Facility 3 Note, (b) due and

payable on demand, and (c) shall bear interest at the Prime Rate.

 

     Borrower shall pay to The Huntington National Bank a fee for issuance of a

Letter of Credit in an amount equal to 125 basis points per annum (computed on

the basis of a year of 360-days and the actual number of days of the stated term

of the applicable Letter of Credit) of the aggregate stated amount of the

applicable Letter of Credit. Such fee shall be payable in advance on the date of

issuance of the applicable Letter of Credit. Borrower shall also pay to The

Huntington National Bank when due all usual and customary administrative fees

associated with the issuance of the Letters of Credit.

 

     2.11. Increase in Facility 1. If no Conditional Default or Event of Default

shall have occurred and be continuing at such time, the Borrower may request, if

it so elects, an increase in the aggregate principal amount of Facility 1 by

making a written request to Agent that the aggregate principal amount of

Facility 1 be increased; provided that (i) the aggregate principal amount shall

at no time exceed Seventy Million Dollars ($70,000,000), (ii) the Agent shall

have approved such increase in writing, and (iii) any Lender increasing its

Commitment, as appropriate, shall have received any required customary closing

conditions, including, without limitation, the Borrower's authorizing

resolutions and opinions of counsel. Any request received by the Agent from the

Borrower to increase the aggregate principal amount of Facility 1 shall be

delivered to each Lender and shall be implemented by one or more existing

Lenders agreeing to increase their Commitments; provided that no Lender shall

have any obligation to increase its Commitment but each Lender shall have the

right to elect to increase its Commitment in its sole discretion pro rata with

any Lender hereunder or by any combination of the foregoing, as determined by

the Agent in consultation with the Borrower. An increase in the aggregate

principal amount of Facility 1 and any amendments to this Agreement made solely

to evidence such increase shall not require the consent of any Lender not

participating in such increase.

 

 

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                                   ARTICLE III

                          REPRESENTATIONS AND WARRANTIES

 

     The Borrower represents and warrants to the Lenders that as of the Closing

Date:

 

     3.01. Organization and Qualification. The Borrower is a duly formed and

validly existing limited partnership under the laws of the Commonwealth of

Virginia. The Guarantor is a duly formed and validly existing real estate

investment trust under the laws of the State of Maryland.

 

     3.02. Right and Power; Corporate Authority. The Borrower has full right,

power and authority to execute and deliver this Agreement and the other Loan

Documents and to perform its obligations thereunder. The Borrower has taken the

necessary corporate action to authorize the execution and delivery of the

Agreement and the other Loan Documents and the borrowings thereunder.

 

     3.03. Conflict With Other Instruments. The execution and delivery of this

Agreement and the other Loan Documents, the consummation of the transactions

contemplated thereby, and the compliance with the terms, conditions and

provisions thereof will not conflict with or result in a breach of any of the

terms, conditions or provisions of the partnership agreement of the Borrower,

or, to the Borrower's actual knowledge, any law or any regulation, order, writ,

injunction or decree of any court or Governmental Authority or any agreement or

instrument to which the Borrower is a party or by which the Borrower or its

properties or assets are subject to or bound, or constitute a default thereunder

or result in the creation or imposition of any lien, charge, security interest

or encumbrance of any nature whatsoever upon any of the property of the Borrower

pursuant to the terms of any such agreement or instrument, except as created by

the Loan Documents.

 

     3.04. Authority, Validity and Binding Effect. The execution and delivery of

this Agreement and the other Loan Documents, and the making of the borrowings

contemplated by the provisions hereof and thereof, have been duly authorized by

all necessary action on the part of the Borrower, and no authorization, approval

or consent by, or filing with, any Governmental Authority or public regulatory

authority is necessary therefor except for disclosures as required with the

Securities and Exchange Commission. This Agreement and the other Loan Documents

have been duly and validly executed and delivered by the Borrower and constitute

a legal, valid and binding obligation of the Borrower, enforceable in accordance

with their terms, except as the enforceability thereof may be limited by

bankruptcy, insolvency or other laws of general application affecting the

enforcement of creditors' rights generally and by principles of equity.

 

     3.05. Financial Condition. The financial statements of the Borrower and the

Guarantor furnished to the Lenders are complete and correct in all material

respects. Such financial statements were prepared in accordance with GAAP

consistently applied. The financial statements of the Borrower and the Guarantor

fairly present their respective financial condition at the respective dates

indicated therein. Since the dates of such financial statements, there has been

no material adverse change in the assets, liabilities or financial condition of

the Borrower and the Guarantor from that reflected thereon.

 

 

                                        22

<PAGE>

     3.06. Litigation. There are no actions, suits or proceedings pending or, to

the Borrower's actual knowledge, threatened, against or affecting the Borrower,

a Special Purpose Entity or the Guarantor before any court or Governmental

Authority which might have a Material Adverse Effect.

 

     3.07. ERISA. The Borrower and each ERISA Affiliate is in compliance in all

material respects with all applicable provisions of ERISA, and neither the

Borrower nor any ERISA Affiliate has incurred any liability to the PBGC. Neither

a Reportable Event nor a Prohibited Transaction, has occurred under, nor has

there occurred any complete or partial withdrawal from, nor has there occurred

any other event which would constitute grounds for termination of or the

appointment of a trustee to administer any "employee benefit plan" (including

any "multi-employer plan") maintained for employees of Borrower or any ERISA

Affiliate, all within the meanings ascribed by ERISA.

 

     3.08. Regulation U. The Borrower is not engaged in the business of

extending credit for the purpose of purchasing or carrying margin stock (within

the meaning of Regulation U) and the Borrower does not hold any margin stock (as

defined in Regulation U).

 

     3.09. Investment Company Act. Neither the Borrower nor the Guarantor is an

"investment company" or a company "controlled" by an "investment company,"

within the meaning of the Investment Company Act of 1940, as amended.

 

     3.10. Public Utility Holding Company. Neither the Borrower nor the

Guarantor is a "holding company" or a "subsidiary company" of a "holding

company," or an "affiliate" of a "holding company" or of a "subsidiary company"

of a "holding company," within the meaning of the Public Utility Holding Company

Act of 1935, as amended.

 

     3.11. Insolvency. Neither the Borrower, a Special Purpose Entity nor the

Guarantor is "insolvent" within the meaning of that term as defined in the

Federal Bankruptcy Code and the Borrower and the Guarantor are each able to pay

their debts as they mature.

 

     3.12. Organization and Qualification. To the extent required by

Governmental Requirement, the Borrower and each Special Purpose Entity is duly

qualified to conduct business in the state in which the Mortgaged Property is

located.

 

     3.13. Right and Power; Corporate Authority. The Borrower and each Special

Purpose Entity has full right, power and authority to execute and deliver the

Loan Documents contemplated by the provisions hereof for such Advance and to

perform its obligation thereunder. The Borrower has taken the necessary

corporate action to authorize the execution and deliver of such Loan Documents.

 

     3.14. Conflict With Other Instruments. The execution and delivery of the

Loan Documents contemplated by the provisions hereof for such Advance, the

consummation of the transactions contemplated thereby, and the compliance with

the terms, conditions and provisions thereof will not conflict with or result in

a breach of any of the terms, conditions or provisions of the limited

partnership agreement of the Borrower and the operating agreement of each

Special Purpose Entity, or, to the Borrower's actual knowledge, any law or any

regulation, order, writ, injunction or decree of any court or Governmental

Authority or any agreement or instrument

 

 

                                       23

<PAGE>

(except to the extent required under ground leases applicable to future

Mortgaged Properties) to which the Borrower and each Special Purpose Entity is a

party or by which the Borrower and each Special Purpose Entity or their

properties or assets are subject to or bound, or constitute a default thereunder

or result in the creation or imposition of any lien, charge, security interest

or encumbrance of any nature whatsoever upon the Mortgaged Properties or any

other property of the Borrower and each Special Purpose Entity pursuant to the

terms of any such agreement or instrument, except as created by the Loan

Documents.

 

     The execution and delivery of the Guaranty, the Guarantor's guarantee

contemplated thereby, and the compliance with the terms, conditions and

provisions thereof will not conflict with or result in a breach of any of the

terms, conditions or provisions of the trust agreement of the Guarantor, or, to

the Guarantor's actual knowledge, any law or any regulation, order, writ,

injunction or decree of any court or Governmental Authority or any agreement or

instrument to which the Guarantor is a party or by which the Guarantor or its

properties or assets are subject to or bound.

 

     3.15. Authority, Validity and Binding Effect. The execution and delivery of

the Loan Documents contemplated by the provisions hereof for such Advance, have

been duly authorized by all necessary action on the part of the Borrower and

each Special Purpose Entity, and no authorization, approval or consent by, or

filing with, any Governmental Authority or public regulatory authority is

necessary therefor. Such Loan Documents have been duly and validly executed and

delivered by the Borrower and each Special Purpose Entity and constitute legal,

valid and binding obligations of the Borrower and each Special Purpose Entity,

enforceable in accordance with their terms, except as the enforceability thereof

may be limited by bankruptcy, insolvency or other laws of general application

affecting the enforcement of creditors' rights generally and by principles of

equity.

 

     3.16. Litigation. There are no actions, suits or proceedings pending or, to

the Borrower's actual knowledge, threatened, against or affecting the Mortgaged

Properties before any court or Governmental Authority which might have a

Material Adverse Effect.

 

     3.17. Compliance With Governmental Requirements. To Borrower's knowledge,

the intended use of the Mortgaged Properties complies in all material respects

with all applicable Governmental Requirements, as the same may be modified by

any applicable variances and exceptions, to Borrower's knowledge, and all

material provisions of any applicable restrictive covenants, and to Borrower's

knowledge, the Borrower has obtained all material required permits with respect

to the operation and use of such Mortgaged Properties.

 

     3.18. Utility Services. To Borrower's knowledge, all utility services

necessary for the use and operation of the Mortgaged Property for such Mortgaged

Property are available at the boundaries of the Mortgaged Property and are

located within a public right of way adjacent to the Mortgaged Property or

within an easement benefiting the Mortgaged Property, which easement is

contiguous to the Mortgaged Property and a public right of way, and, to the

actual knowledge of Borrower, such utilities have sufficient capacity to serve

such Mortgaged Property.

 

     3.19. Hazardous Materials; Storage Containers; Wetlands. The Borrower and

each Special Purpose Entity have not used Hazardous Materials on, from or

affecting the Mortgaged

 

 

                                       24

<PAGE>

Property in any manner which violates any Governmental Requirements or Hazardous

Materials Laws, and, to the best of the Borrower's knowledge, except as

disclosed in any written reports and data provided to the Lenders, no prior

owner of such Mortgaged Property or prior occupant thereof, has used Hazardous

Materials on, from or affecting the Mortgaged Property in any manner which

violates any Governmental Requirements or Hazardous Materials Laws. The Borrower

further represents to the Lenders that, except as disclosed in any written

reports and data provided to the Lenders, the Borrower and each Special Purpose

Entity have not received any notice of any violations of Governmental

Requirements or Hazardous Materials Laws governing the use, storage, treatment,

transportation, manufacture, refinement, handling, production or disposal of

Hazardous Materials at such Mortgaged Property and, to the best of the

Borrower's knowledge, there have been no actions commenced or threatened by any

party for non-compliance with any such laws or regulations at such Mortgaged

Property. The Borrower further represents that, except as disclosed in any

written reports and data provided to the Lenders, no Storage Containers are

located on or under such Mortgaged Property, except in compliance with all

applicable Hazardous Materials Laws, and such Mortgaged Property does not

contain any Wetlands.

 

     3.20. Covenants and Restrictions. Except as disclosed in writing to Agent

or in any Title Policy delivered to Agent hereunder, there are no covenants,

conditions or restrictions of record or of which the Borrower has knowledge that

prohibit the Mortgaged Property from being used and operated as contemplated by

the Lease for such Mortgaged Property.

 

     3.21. Flood Hazard. To Borrower's knowledge, except as may be disclosed in

any survey or flood hazard certificate provided to Agent, no part of the

Improvements forming a part of the Mortgaged Property are located in or on an

"area having special flood hazards" ("Special Flood Hazard Area"), as that term

is defined in the Flood Disaster Protection Act of 1973, as amended by the 1994

National Flood Insurance Reform Act, and as otherwise amended. If such

Improvements (or any portion thereof) are located in a Special Flood Hazard

Area, to Borrower's knowledge, the building floor elevations of such

Improvements are located at the height prescribed (if any) by Governmental

Requirements above the designated flood plain elevation for the Special Flood

Hazard Area, as determined by FEMA. For purposes of this Section 3.21, the

defined term Improvements shall include only walled and roofed buildings.

 

     The representations and warranties contained above and in the other Loan

Documents shall be true on and as of the date of each Advance with the same

effect as though such representations and warranties had been made on and as of

each such date.

 

                                    ARTICLE IV

                              CONDITIONS OF LENDING

 

     The Borrower agrees that the obligation of the Lenders to make an Advance

is subject to the accuracy in all material respects, as of the date hereof and

the date of such Advance of the representations and warranties contained herein

and under the other Loan Document, to performance by the Borrower of its

agreements to be performed hereunder and under the other Loan Document on or

before the date of such Advance, and to the satisfaction of the following

further conditions:

 

 

                                       25

<PAGE>

     4.01. Initial Advance. Prior to the initial Advance by the Lenders:

 

          a. Organizational Documents. There shall have been furnished to the

     Agent by the Borrower:

 

               i. A copy of the certificate of limited partnership of the

          Borrower, together with any and all amendments thereto, filed with the

          appropriate Governmental Authorities of the Commonwealth of Virginia;

 

               ii. A copy of the limited partnership agreement of the Borrower,

          together with any and all amend