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UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER 1-12269
HOMESTEAD VILLAGE INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 74-2770966
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2030 POWERS FERRY ROAD, SUITE 222
ATLANTA, GA 30339
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
(770) 303-2200
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
125 LINCOLN AVENUE
SANTA FE, NEW MEXICO 87501
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing for the past 90 days.
Yes X No
The number of shares outstanding of the Registrant's common stock as of
November 8, 1996 was: 18,249,735
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HOMESTEAD VILLAGE INCORPORATED
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
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<C> <S> <C>
PART I. Financial Information
Item 1. Financial Statements
Condensed Balance Sheet--September 30, 1996 (Unaudited)...... 3
Condensed Statement of Operations--Three Months Ended
September 30, 1996 and the Period from Inception (January 26,
1996) through September 30, 1996 (Unaudited)................. 4
Condensed Statement of Cash Flows--Period from Inception
(January 26, 1996) through September 30, 1996 (Unaudited).... 5
Notes to Condensed Financial Statements (Unaudited).......... 6
Independent Accountants' Review Report....................... 10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 11
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K............................. 12
</TABLE>
2
<PAGE>
HOMESTEAD VILLAGE INCORPORATED
CONDENSED BALANCE SHEET
SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
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<S> <C>
Cash and cash equivalents.......................................... $3,014,618
----------
Total current assets........................................... 3,014,618
----------
Real estate investment--development in planning.................... 1,586,390
Capitalized pre-acquisition costs, including $1,516,000 of funds
with title companies for property acquisitions.................... 2,095,010
Other assets....................................................... 98,773
----------
Total assets................................................... $6,794,791
==========
<CAPTION>
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
----------------------------------------------
<S> <C>
Current liabilities:
Note payable to affiliate........................................ $6,162,179
Due to affiliates................................................ 683,735
Accrued interest payable to affiliate............................ 28,086
Accrued expense.................................................. 10,000
----------
Total current liabilities...................................... 6,884,000
----------
Commitments and contingencies
Shareholder's equity (deficit):
Common Stock, $.01 par value, 250,000,000 shares authorized,
1,000 shares issued and outstanding............................. 10
Additional paid in capital....................................... 990
Deficit.......................................................... (90,209)
----------
Total shareholder's equity (deficit)........................... (89,209)
----------
Total liabilities and shareholder's equity (deficit)........... $6,794,791
==========
</TABLE>
See accompanying notes.
3
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HOMESTEAD VILLAGE INCORPORATED
CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996
AND
THE PERIOD FROM INCEPTION (JANUARY 26, 1996)
THROUGH SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
Interest income...................................................... $ 6,390
--------
Expenses:
General and administrative expense................................. 10,000
Interest expense, net of amounts capitalized....................... 21,755
Pursuit costs written off.......................................... 64,844
--------
Total expenses................................................... 96,599
--------
Loss before taxes.................................................... (90,209)
Income taxes......................................................... --
--------
Net loss............................................................. $(90,209)
========
Weighted average shares outstanding.................................. 1,000
========
Net loss per share................................................... $ (90.21)
========
</TABLE>
See accompanying notes.
4
<PAGE>
HOMESTEAD VILLAGE INCORPORATED
CONDENSED STATEMENT OF CASH FLOWS
PERIOD FROM INCEPTION (JANUARY 26, 1996)
THROUGH SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
Operating activities:
Net loss........................................................ $ (90,209)
Reconciliation of net loss to net cash used in operating
activities:
Increase in accrued interest payable to affiliate............. 28,086
Increase in accrued expense................................... 10,000
-----------
Net cash used in operating activities....................... (52,123)
-----------
Investing activities:
Increase in capitalized pre-acquisition costs................... (1,510,048)
Real estate investment--development in planning................. (1,586,390)
-----------
Net cash used in investing activities....................... (3,096,438)
-----------
Financing activities:
Proceeds from note payable to affiliate......................... 6,162,179
Sale of common stock............................................ 1,000
-----------
Net cash provided by financing activities................... 6,163,179
-----------
Net increase in cash and cash equivalents......................... 3,014,618
Cash and cash equivalents at beginning of period.................. --
-----------
Cash and cash equivalents at end of period........................ $ 3,014,618
===========
Noncash investing and financing activities:
Capitalized pre-acquisition costs and other assets paid by
affiliates..................................................... $ 683,735
===========
</TABLE>
See accompanying notes.
5
<PAGE>
HOMESTEAD VILLAGE INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
1. ORGANIZATION AND BASIS OF FINANCIAL PRESENTATION
Homestead Village Incorporated (formerly Homestead Village Properties
Incorporated), a Maryland corporation ("Homestead"), was formed on January 26,
1996 to develop, own and manage extended-stay lodging facilities under the
Homestead Village(R) trademark. Homestead's extended-stay lodging rooms are
designed to appeal to guests such as business travelers, professionals and
others on a weekly basis, with most guests staying multiple weeks. The
issuance of the initial shares was funded on April 18, 1996. There were no
operations from the date of inception through June 30, 1996. Subsequent to
June 30, 1996, Homestead was in pursuit of development opportunities outside
of those projects which are the subject of the merger described hereinafter.
As of September 30, 1996, Homestead had acquired and commenced development
activities on one parcel of land.
Homestead was formed to acquire, through a series of merger transactions,
all of the extended-stay lodging assets operating or to be operated under the
Homestead Village trademark. The net assets related to the Homestead Village
properties were acquired through the merger of various wholly-owned
subsidiaries of Security Capital Group Incorporated ("SCG"), Security Capital
Pacific Trust ("PTR") and Security Capital Atlantic Incorporated ("ATLANTIC"),
all affiliates of Homestead, in exchange for common stock of Homestead. PTR
had 28 operating Homestead Village properties, 11 under construction and 15 in
planning (or the rights to acquire such properties) as of September 30, 1996.
ATLANTIC had one Homestead Village property in operation, 8 under construction
and 17 in planning (or the rights to acquire such properties) as of September
30, 1996. The merger agreement closed on October 17, 1996. SCG provided the
trademark and development and property management expertise as well as
operating systems necessary to develop, own and operate the properties.
Homestead was initially capitalized through the issuance to SCG of 1,000
shares of common stock, $.01 par value, for $1,000. As of September 30, 1996,
Homestead had 250,000,000 shares of common stock authorized.
Cash and Cash Equivalents
Homestead considers all cash on hand, demand deposits with financial
institutions and short term, highly liquid investments with original
maturities of three months or less to be cash equivalents.
Real Estate
Real estate is carried at cost. Costs directly related to the development of
real estate are capitalized. Costs incurred in connection with the pursuit of
unsuccessful developments are expensed at the time the pursuit is abandoned.
Income Taxes
Under the asset and liability method of accounting for income taxes,
deferred tax assets and liabilities are recognized for the estimated future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets, including net operating loss
carryforwards, and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates in effect for the
year in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
6
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HOMESTEAD VILLAGE INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
Homestead is unable to estimate when it will realize the benefits of its
deferred tax asset from the net loss carryforward generated in the period ended
September 30, 1996. Accordingly, Homestead has established a valuation
allowance to reflect this uncertainty.
General
In the opinion of management, the accompanying unaudited condensed financial
statements contain all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of Homestead's condensed
financial statements for the interim period presented. The results of
operations for the three month period ended September 30, 1996 are not
necessarily indicative of the results to be expected for the entire year,
especially as in regards to the effects of the mergers discussed herein.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. TRANSACTIONS WITH AFFILIATES
Homestead has entered into various agreements with affiliated companies in
order to complete the transaction discussed below and to conduct the business
of developing, owning and operating Homestead Village properties.
Merger and Distribution Agreement
On May 21, 1996, Homestead entered into a Merger and Distribution Agreement
(the "Merger Agreement") with PTR, ATLANTIC and SCG (collectively, the
"Affiliated Companies") which provided for certain subsidiaries of the
Affiliated Companies to be merged with and into Homestead in exchange for
common stock. The Merger Agreement was approved by the shareholders of PTR and
ATLANTIC in September 1996 and the closing of the transaction occurred October
17, 1996. The subsidiaries of the Affiliated Companies developed, owned and
managed the Homestead Village properties prior to the closing of the mergers.
Pursuant to the Merger Agreement, PTR contributed to Homestead the net assets
related to Homestead Village properties in exchange for 9,485,727 shares of
Homestead common stock. ATLANTIC contributed to Homestead net assets related to
Homestead Village properties (as well as approximately $16.8 million in cash)
in exchange for 4,201,220 shares of Homestead common stock. Homestead issued
4,062,788 shares of Homestead common stock in exchange for certain net assets
of SCG which consisted primarily of the Homestead Village trademark, and
development and management expertise, as well as operating systems utilized in
the ongoing development and operations of the extended-stay lodging facilities.
Homestead did not assume any obligations related to the employees of the SCG
subsidiaries including unpaid salaries, wages, benefits and any expense
reimbursements.
PTR and ATLANTIC received all of their shares of Homestead common stock at
the closing of the transaction. SCG received 1,911,896 shares of Homestead
common stock based on the ratio of actual funding provided at the closing of
the transaction by PTR and ATLANTIC to the total expected funding of PTR and
ATLANTIC. The remaining 2,150,892 shares of Homestead common stock were issued
to and are held in escrow by an escrow agent. The escrowed shares will be
transferred to SCG pro rata upon the completion of PTR's and ATLANTIC's
remaining funding commitments. In the event not all of the funding commitments
are provided to Homestead by PTR and ATLANTIC, the remaining shares of
Homestead common stock not transferred to SCG will be returned to Homestead
along with the dividends, if any, paid on such shares. The escrow agent will
vote all shares of Homestead common stock held in the escrow account
proportionately in accordance with the vote of all other Homestead shareholders
as instructed by Homestead. In the event that instructions are not received,
the escrow agent will not vote such shares.
7
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HOMESTEAD VILLAGE INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
In conjunction with the Merger Agreement, Homestead, SCG, PTR and ATLANTIC
entered into a Warrant Purchase Agreement dated May 21, 1996 whereby SCG, PTR
and ATLANTIC received warrants based on the relative fair value of the assets
each contributed in the transaction. A total of 10,000,000 warrants were
issued. The Homestead warrants may be used to purchase Homestead common stock
for $10 per share, may be exercised at any time and will expire October 29,
1997. As consideration for the Homestead warrants issued, PTR and ATLANTIC
agreed to provide additional funding to Homestead for the development of
properties and SCG has provided financing for the purchase of properties to be
used as extended-stay facilities for the period from the date of the Merger
Agreement through October 17, 1996 and the use of office facilities for one
year.
All shares of Homestead common stock and Homestead warrants issued to PTR and
ATLANTIC in connection with the transaction were issued directly to a
distribution agent for the benefit of the holders of PTR and ATLANTIC common
stock on October 29, 1996, the record date of the distribution, and are to be
distributed to their respective shareholders on November 12, 1996.
The costs associated with the transaction are to be paid by the party
incurring the expense, except for those costs related to filing, printing and
distributing proxy and prospectus materials which will be paid 63.64%, 28.18%,
and 8.18% by PTR, ATLANTIC and SCG, respectively.
In conjunction with the Merger Agreement, Homestead assumed contractual
obligations including development contracts. At September 30, 1996, the PTR
subsidiary had approximately $39.3 million, and the ATLANTIC subsidiary had
approximately $34.4 million, of unfunded development commitments for
developments under construction.
Funding Commitment Agreements
Pursuant to funding commitment agreements dated as of the closing (the
"Funding Commitment Agreements") each of PTR and ATLANTIC agreed to make
mortgage loans to Homestead of up to approximately $142,000,000 and
$98,000,000, respectively. The obligations of PTR and ATLANTIC are limited to a
specific dollar amount for each property identified in the respective Funding
Commitment Agreements. Upon any determination by Homestead to commence
development of property identified in the Funding Commitment Agreement,
Homestead is required to notify PTR and ATLANTIC, as the case may be, and PTR
and ATLANTIC, as the case may be, is required to endeavor in good faith to fund
up to the full amount of its obligation with respect to such property.
Homestead is required to complete the development of such property consistent
with the development plans for such property. Each mortgage loan issued by
Homestead pursuant to a Funding Commitment Agreement will be convertible into
shares of Homestead common stock on the basis of one share of Homestead common
stock for every $11.50 of principal outstanding on the mortgage loan. The
obligation of Homestead to call for funding of, and the obligations of PTR and
ATLANTIC to provide funding for, the mortgage loans expires on March 31, 1998,
except with respect to properties for which Homestead has given notice that it
intends to develop. Interest on the mortgage loans accrues at the rate of 9% on
the unpaid principal balance, payable every six months. The mortgages are
scheduled to mature on October 31, 2006, and are not callable until May 28,
2001. Homestead has pledged substantially all of its assets as collateral for
the mortgage loans.
Pursuant to each Funding Commitment Agreement, PTR and ATLANTIC will provide
Homestead aggregate funding on such developments in the amounts of up to
approximately $128 million and $111 million, respectively, which amounts are
anticipated to be sufficient to complete the development of the respective
Homestead Village(R) properties contributed by them. PTR and ATLANTIC will
receive convertible mortgage notes in respect of such fundings in stated
amounts of up to approximately $142 million and $98 million, respectively. The
effect of these provisions is that PTR will fund $898,340 for each $1,000,000
principal amount of convertible mortgage loans and ATLANTIC will fund
$1,133,535 for each $1,000,000 principal amount of convertible mortgage loans.
8
<PAGE>
HOMESTEAD VILLAGE INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
Due to Affiliates
Amounts due to affiliates were due to ATLANTIC for $398,292 and to PTR for
$186,670 and were reimbursed subsequent to the balance sheet date. Such amounts
represent pre-acquisition costs for projects under pursuit by Homestead outside
the properties subject to the mergers. A total of $98,773 was due to SCG for
offering and organizational costs and was reimbursed subsequent to the balance
sheet date.
Note Payable to Affiliate
The note payable to affiliate was an unsecured demand note due to a wholly-
owned subsidiary of SCG, which provided for up to $10,000,000 in total
borrowings. The note bore interest at prime plus .25% per annum (8.50% at
September 30, 1996), payable on demand. Interest of $16,841 was previously paid
by advances on the note. On October 17, 1996 the note and all accrued interest
were paid in full.
Interest Expense
Interest paid in cash on all outstanding debt for the period from inception
(January 26, 1996) through September 30, 1996 was $16,841. Interest incurred on
all outstanding debt for the period from inception (January 26, 1996) through
September 30, 1996 was $44,928, of which $23,173 was capitalized during
development.
3. COMMITMENTS AND CONTINGENCIES
Finder's Agreements
In conjunction with the Merger Agreement, PTR assigned its rights and
obligations pursuant to a series of agreements with an unaffiliated person
("Finder") who developed the Homestead Village(R) concept, and has performed
certain services. The agreements which expire February 5, 2043, provide for the
payment of fees to Finder as follows: (i) $535,000 annually with respect to the
four properties for which Finder assisted in the location, development and
initial operations; (ii) an annual amount of $7,500 per property (subject to
certain conditions as defined in the agreements) for assistance in site
location with respect to the first 35 properties constructed (other than the
four properties referred to in (i) above); (iii) 20% of the net proceeds as
defined per the agreements, upon the sale of the four properties noted in (i)
above to an unaffiliated third party; and (iv) 10% of the net proceeds as
defined per the agreement, upon the sale of the additional 35 properties to an
unaffiliated third party. No such sales have occurred to date. Effective
December 1994, the agreement to assist in the site location of any additional
properties beyond the 35 properties was terminated. Additionally, Finder has
agreed not to compete, directly or indirectly, with the Homestead Village(R)
properties in certain states in which PTR and ATLANTIC do business through
December 31, 1996.
Rights Agreement
On May 16, 1996 the Homestead Board of Directors declared and paid a dividend
of one purchase right as defined per the Rights Agreement for each share of
Homestead common stock outstanding to the holders of Homestead common stock of
record on that date. The shares of Homestead common stock issued after May 16,
1996 and before the expiration of the purchase rights (May 16, 2006), will also
be entitled to one purchase right for each share issued. Each purchase right
entitles the holder to purchase one-hundredth of a participating preferred
share of Homestead at $50, subject to adjustment as defined in the Rights
Agreement. The Board of Directors of Homestead through its Articles of
Incorporation is authorized to issue one or more series and to determine the
number of preferred shares of each series and the rights of each series. The
purchase rights will be exercisable only after a person or group of affiliated
persons other than SCG, PTR, or ATLANTIC acquires 20% or more of the
outstanding shares of Homestead common stock or offers to acquire 25% or more.
9
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INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Board of Directors and Shareholder
Homestead Village Incorporated:
We have reviewed the accompanying condensed balance sheet of Homestead
Village Incorporated as of September 30, 1996, the condensed statement of
operations and condensed statement of cash flows for the three months ended
September 30, 1996 and the period from inception (January 26, 1996) through
September 30, 1996. These financial statements are the responsibility of the
company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, which will
be performed for the full year with the objective of expressing an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying condensed financial statements for them to
be in conformity with generally accepted accounting principles.
Ernst & Young LLP
Dallas, Texas
November 8, 1996
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The statements contained in this report that are not historical facts are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Among the
important factors that could cause Homestead's actual results to differ
materially from those expressed in the forward-looking statements are (i)
changes in general economic conditions in the markets that could impact demand
for Homestead's product and (ii) changes in financial markets and interest
rates that could adversely affect Homestead's cost of capital and its ability
to meet its financing needs and obligations.
OVERVIEW
Homestead was formed on January 26, 1996 to develop, own and manage
extended-stay lodging facilities under the Homestead Village(R) trademark. The
issuance of the initial shares was funded on April 18, 1996. There were no
operations from the date of funding through June 30, 1996. Subsequent to June
30, 1996 Homestead was in pursuit of development opportunities outside of
those projects which were the subject of the merger described below. As of
September 30, 1996 Homestead had acquired and commenced development activities
on one parcel of land.
On May 21, 1996, Homestead entered into a Merger and Distribution Agreement
with Security Capital Group Incorporated ("SCG"), Security Capital Pacific
Trust ("PTR") and Security Capital Atlantic Incorporated ("ATLANTIC")
(collectively, the "Affiliated Companies") which provided for certain
subsidiaries of the Affiliated Companies to be merged with and into Homestead
in exchange for common stock. The subsidiaries of the Affiliated Companies
developed, owned and managed Homestead Village(R) properties. On September 12,
and 13, 1996 the shareholders of PTR and ATLANTIC, respectively, approved the
Merger and Distribution Agreement.
Homestead's acquisition of all of the extended-stay lodging assets operating
or to be operated under the Homestead Village(R) trademark occurred October
17, 1996. PTR had 28 operating Homestead Village(R) properties, 11 under
construction and 15 in planning as of September 30, 1996. ATLANTIC had one
Homestead Village property in operation, 8 under construction and 17 in
planning as of September 30, 1996. SCG provided the trademark and development
and property management expertise as well as operating systems necessary to
develop, own and operate the properties.
LIQUIDITY AND CAPITAL RESOURCES
Homestead assumed approximately $79 million in convertible mortgage loans at
the closing which were owed by PTR subsidiaries to PTR. Subsequent to the
closing of the transaction, Homestead expects to finance future construction,
development and land acquisitions primarily from convertible mortgage loans
from PTR and ATLANTIC for Homestead Village(R) properties acquired in the
merger (up to approximately $128 million and $111 million total remaining
funding commitments, respectively); exercise of Homestead warrants with an
aggregate exercise price of approximately $47 million by SCG; from a cash
payment by ATLANTIC at the date of the closing of the merger of approximately
$16.8 million; possible exercise of approximately $53 million of Homestead
warrants by other warrant holders at an exercise price of $10 per share; cash
from operations; and cash from potential securities offerings.
11
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PART II--OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<C> <S> <C>
(a)4.1 Warrant Agreement, dated as of October 17, 1996, by and
between Homestead Village Incorporated and The First Na-
tional Bank of Boston, as warrant agent, including form of
warrant certificate
4.3 Amended and Restated Promissory Note by PTR Homestead Vil-
lage Incorporated in favor of Security Capital Pacific
Trust
4.4 Amended and Restated Promissory Note by PTR Homestead Vil-
lage Limited Partnership in favor of Security Capital Pa-
cific Trust
4.5 Additional Corporate Promissory Note by Atlantic Homestead
Village Incorporated in favor of Security Capital Atlantic
Incorporated
4.6 Consolidated Amended and Restated Promissory Note by At-
lantic Homestead Village Incorporated in favor of Security
Capital Atlantic Incorporated
4.7 Amended and Restated Promissory Note by Atlantic Homestead
Village Limited Partnership in favor of Security Capital
Atlantic Incorporated
10.1 Protection of Business Agreement, dated as of October 17,
1996, by and among Security Capital Atlantic Incorporated,
Security Capital Pacific Trust, Security Capital Group In-
corporated and Homestead Village Incorporated
10.2 Investor Agreement, dated as of October 17, 1996, by and
between Homestead Village Incorporated and Security Capi-
tal Group Incorporated
10.3 Funding Commitment Agreement, dated October 17, 1996, by
and between Security Capital Pacific Trust and Homestead
Village Incorporated
10.4 Funding Commitment Agreement dated October 17, 1996 by and
between Security Capital Atlantic Incorporated and Home-
stead Village Incorporated
10.5 Guaranty of Completion and Payment, dated as of October
17, 1996, by Homestead Village Incorporated to Security
Capital Pacific Trust
10.7 Investor and Registration Rights Agreement, dated as of
October 17, 1996, between Homestead Village Incorporated
and Security Capital Atlantic Incorporated
10.8 Investor and Registration Rights Agreement, dated as of
October 17, 1996, between Homestead Village Incorporated
and Security Capital Pacific Trust
10.9 Escrow Agreement, dated October 17, 1996, among Homestead
Village Incorporated, Security Capital Group Incorporated
and State Street Bank and Trust Company
10.10 Guaranty of Completion and Payment, dated as of October
17, 1996, by Homestead Village Incorporated to Security
Capital Atlantic Incorporated
10.11 Administrative Services Agreement, dated as of October 17,
1996, by and between Homestead Village Incorporated and SC
Group Incorporated
27 Financial Data Schedule
</TABLE>
(b) No reports on Form 8-K were filed during this period.
12
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
Homestead Village Incorporated
/s/ Robert E. Clark
-------------------------------------
Robert E. Clark, Vice President
(Duly
Authorized Officer), Treasurer and
Controller (Principal Financial and
Accounting Officer)
Date: November 14, 1996
13
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================================================================================
Exhibit 4.1
WARRANT AGREEMENT
Dated as of October 17, 1996
by and between
Homestead Village Incorporated
and
The First National Bank of Boston
as Warrant Agent
================================================================================
<PAGE>
WARRANT AGREEMENT
TABLE OF CONTENTS/1/
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SECTION 1. Appointment of Warrant Agent............................... 1
SECTION 2. Issuance of Warrants....................................... 1
SECTION 3. Warrant Certificates....................................... 1
SECTION 4. Execution of Warrant Certificates.......................... 2
SECTION 5. Registration and Countersignature.......................... 2
SECTION 6. Registration of Transfers and Exchanges.................... 3
SECTION 7. Terms of Warrants; Exercise of Warrants.................... 3
SECTION 8. Reports.................................................... 6
SECTION 9. Payment of Taxes........................................... 7
SECTION 10. Mutilated or Missing Warrant Certificates.................. 7
SECTION 11. Reservation of Warrant Shares.............................. 7
SECTION 12. Registration and Listing of Common Stock................... 8
SECTION 13. Adjustment of Exercise Rate................................ 8
SECTION 14. Fractional Interests....................................... 16
SECTION 15. Notices to Warrant Holders................................. 16
SECTION 16. Merger, Consolidation or Change of Name of Warrant Agent 17
SECTION 17. Warrant Agent.............................................. 18
SECTION 18. Change of Warrant Agent.................................... 20
SECTION 19. Notices to the Company and Warrant Agent................... 21
SECTION 20. Supplements and Amendments................................. 21
SECTION 21. Successors................................................. 22
SECTION 22. Termination................................................ 22
SECTION 23. Governing Law; Jurisdiction................................ 22
SECTION 24. Benefits of This Agreement................................. 22
SECTION 25. Counterparts............................................... 22
SECTION 26. Further Assurances......................................... 22
</TABLE>
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/1/ This Table of Contents does not constitute a part of this Agreement or have
any bearing upon the interpretation of any of its terms or provisions.
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WARRANT AGREEMENT
WARRANT AGREEMENT ("Agreement"), dated as of October 17, 1996, between
Homestead Village Incorporated, a Maryland corporation (the "Company"), and
The First National Bank of Boston, a national banking association, as
Warrant Agent (the "Warrant Agent").
WHEREAS, the Company, Security Capital Group Incorporated, a Maryland
corporation ("SCG"), Security Capital Pacific Trust, a Maryland real estate
investment trust ("PTR"), and Security Capital Atlantic Incorporated, a
Maryland corporation ("Atlantic"), have entered into a Warrant Purchase
Agreement (the "Purchase Agreement"), dated May 21, 1996, pursuant to
which, among other things, Homestead has agreed to issue, on the terms and
conditions set forth in the Purchase Agreement, to each of SCG, PTR and
Atlantic, Warrants, as hereinafter described (collectively, the "Warrants"
and the certificates evidencing the Warrants hereinafter referred to as the
"Warrant Certificates"), to purchase up to an aggregate of 10,000,000
shares of Common Stock, par value $.01 per share (the "Common Stock"), of
the Company (the Common Stock issuable on exercise of the Warrants being
referred to herein as the "Warrant Shares" and, where appropriate, such
term shall also mean the other securities or property purchasable and
deliverable upon exercise of a Warrant as provided in Section 13 hereof);
each Warrant entitles the holder of the Warrant upon exercise to receive
from the Company, as adjusted as provided herein, one (1) fully paid,
registered and nonassessable Warrant Share at the Exercise Price (as
defined herein);
WHEREAS, the Warrants are being issued by the Company as part of a
public distribution registered under the Securities Act of 1933, as
amended; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
issuance of Warrant Certificates and other matters as provided herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. Appointment of Warrant Agent. The Company hereby appoints
the Warrant Agent to act as agent for the Company in accordance with the
instructions set forth hereinafter in this Agreement, and the Warrant Agent
hereby accepts such appointment.
SECTION 2. Issuance of Warrants. The Warrants shall be originally
issued by the Company at the time and in the manner specified in the
Purchase Agreement.
SECTION 3. Warrant Certificates. The Warrant Certificates to be
delivered pursuant to this Agreement shall be in registered form only and
shall be substantially in the form set forth in Exhibit A attached hereto.
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SECTION 4. Execution of Warrant Certificates. Warrant Certificates
shall be signed on behalf of the Company by its Chairman of the Board (or
any Co-Chairman of the Board), Chief Executive Officer, President, any
Managing Director or any Senior Vice President and by its Secretary or an
Assistant Secretary. Each such signature upon the Warrant Certificates may
be in the form of a facsimile signature of the present or any future
Chairman of the Board, Chief Executive Officer, President, Vice President,
Secretary or Assistant Secretary and may be imprinted or otherwise
reproduced on the Warrant Certificates and for that purpose the Company may
adopt and use the facsimile signature of any person who shall have been
Chairman of the Board (or any Co-Chairman of the Board), Chief Executive
Officer, President, Managing Director, Senior Vice President, Secretary or
Assistant Secretary, notwithstanding the fact that at the time the Warrant
Certificates shall be countersigned and delivered or disposed of such
officer shall have ceased to hold such office. The seal of the Company may
be in the form of a facsimile thereof and may be impressed, affixed,
imprinted or otherwise reproduced on the Warrant Certificates.
In case any officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such officer before the Warrant
Certificates so signed shall have been countersigned by the Warrant Agent
pursuant to Section 5 hereof, or disposed of by the Company, such Warrant
Certificates nevertheless may be countersigned and delivered or disposed of
as though such person had not ceased to be such officer of the Company; and
any Warrant Certificate may be signed on behalf of the Company by any
person who, at the actual date of the execution of such Warrant
Certificate, shall be a proper officer of the Company to sign such Warrant
Certificate, although at the date of the execution of this Agreement any
such person was not such officer.
Warrant Certificates shall be dated the date of countersignature by
the Warrant Agent pursuant to Section 5 hereof.
SECTION 5. Registration and Countersignature. The Warrant Agent, on
behalf of the Company, shall number and register the Warrant Certificates
in a register as they are issued by the Company.
Warrant Certificates shall be manually countersigned by the Warrant
Agent and shall not be valid for any purpose unless so countersigned. The
Warrant Agent shall, upon written instructions of the Chairman of the Board
(or any Co-Chairman of the Board), Chief Executive Officer, President, any
Managing Director, any Senior Vice President, the Chief Financial Officer
or the Secretary of the Company, initially countersign and deliver Warrants
entitling the holders thereof to purchase not more than the number of
Warrant Shares referred to above in the first recital hereof and shall
countersign and deliver Warrants as otherwise provided in this Agreement.
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The Company and the Warrant Agent may deem and treat the registered
holder(s) of the Warrant Certificates as the absolute owner(s) thereof
(notwithstanding any notation of ownership or other writing thereon made by
anyone), for all purposes.
SECTION 6. Registration of Transfers and Exchanges. The Warrant
Agent shall from time to time register the transfer of any outstanding
Warrant Certificates upon the records to be maintained by it for that
purpose, upon surrender thereof accompanied by a written instrument or
instruments of transfer in form satisfactory to the Warrant Agent, duly
executed by the registered holder or holders thereof or by the duly
appointed legal representative thereof or by a duly authorized attorney.
Upon any such registration of transfer, a new Warrant Certificate shall be
issued to the transferee(s) and the surrendered Warrant Certificate shall
be cancelled by the Warrant Agent. Cancelled Warrant Certificates shall
thereafter be disposed of by the Warrant Agent in a manner satisfactory to
the Company.
Warrant Certificates may be exchanged at the option of the holder(s)
thereof, when surrendered to the Warrant Agent at its corporate trust
office in the Borough of Manhattan, The City of New York or at such other
location as it may notify the holders of Warrants that it maintains as its
principal office for trust administration (the "Warrant Agent Office") for
another Warrant Certificate or other Warrant Certificates of like tenor and
representing in the aggregate a like number of Warrants. Warrant
Certificates surrendered for exchange shall be cancelled by the Warrant
Agent. Such cancelled Warrant Certificates shall then be disposed of by the
Warrant Agent in a manner satisfactory to the Company.
No service charge shall be made for any exercise, exchange or
registration of transfer of Warrant Certificates or any issuance of Warrant
Certificates, but the Company may require payment of a sum sufficient to
cover any stamp or other governmental charge or tax that may be imposed in
connection with any such transfer or exchange.
The Warrant Agent is hereby authorized to countersign, in accordance
with the provisions of this Section 6, the new Warrant Certificates
required pursuant to the provisions of this Section 6.
SECTION 7. Terms of Warrants; Exercise of Warrants. (a) Subject to
the terms of this Agreement, the Warrants shall expire at 5:00 p.m., New
York, New York time on _________, 1997 (the "Expiration Date"). Each
Warrant may be exercised on any Business Day (as defined below) on or after
the date of this Warrant Agreement (the "Exercisability Date") and on or
prior to the Expiration Date. Each Warrant not exercised prior to 5:00
p.m., New York, New York time, on the Expiration Date shall become void and
all rights thereunder and all rights in respect thereof under this
Agreement shall cease as of such time.
(b) Subject to the provisions of this Agreement, the holder of each
Warrant shall have the right to purchase from the Company on or after the
Exercisability Date and on or prior to the Expiration Date, one (1) fully
paid, registered and nonassessable Warrant Share, subject to
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adjustment in accordance with Section 13 hereof, at the purchase price of ten
dollars ($10.00) for each Warrant exercised (the "Exercise Price"). The number
or amount of Warrant Shares for which a Warrant may be exercised, as adjusted
pursuant hereto, is referred to herein as the "Exercise Rate."
For purposes of this Section 7 and elsewhere in this Agreement, the
following terms shall have the meanings provided hereafter:
"Affiliate" means, with respect to another Person, any Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such other Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), when used with respect to any Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise.
"Board of Directors" means the Board of Directors of the Company.
"Business Day" shall mean any day other than a Saturday or a Sunday or
a day on which commercial banking institutions in The City of New York are
authorized by law to be closed.
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of corporate stock.
"Equity Interests" means Capital Stock or warrants, options or other
rights to acquire Capital Stock (but excluding any publicly traded debt security
that is convertible into, or exchangeable for, Capital Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Person" means any individual, corporation, partnership, joint
venture, trust, estate, unincorporated organization or government or any agency
or political subdivision thereof.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" of any specified Person means (i) a corporation a
majority of whose outstanding Voting Stock is at the time, directly or
indirectly, owned by such Person or by such Person and a Subsidiary or
Subsidiaries of such Person or by a Subsidiary or Subsidiaries of such Person or
(ii) any other Person (other than a corporation) in which such Person or such
Person and a Subsidiary or Subsidiaries of such Person or a Subsidiary or
Subsidiaries of such Person, directly or indirectly, at the date of
determination thereof, has at least majority ownership interest.
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"Voting Stock" of any Person means Capital Stock of such Person with
voting power, under ordinary circumstances, to elect directors of such Person.
(c) Warrants may be exercised on and after the Exercisability Date
and on or prior to the Expiration Date by (i) surrendering at any office or
agency maintained by the Company for that purpose, which will initially be the
Warrant Agent Office (each a "Warrant Exercise Office"), the Warrant Certificate
evidencing such Warrants with the form of election to purchase Warrant Shares
set forth on the reverse side of the Warrant Certificate (the "Election to
Exercise") duly completed and signed by the registered holder or holders thereof
or by the duly appointed legal representative thereof or by a duly authorized
attorney, and in the case of a transfer, such signature shall be guaranteed by
an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Exchange Act (each an "Eligible Guarantor Institution"), and (ii) paying in full
the Exercise Price for each such Warrant exercised and any other amounts
required to be paid pursuant to this Agreement. Each Warrant may be exercised
only in whole.
(d) Simultaneously with the exercise of each Warrant, payment in full
of the Exercise Price shall be made in cash, certified or official bank check or
wire transfer to be delivered to the office or agency where the Warrant
Certificate is being surrendered. No adjustment shall be made hereunder on
account of any Warrant Shares issued upon exercise of a Warrant under this
Agreement after the exercise of such Warrant. Except for certain adjustments as
set forth in Section 13, no payment shall be made on Warrant Shares on account
of any dividend or distribution declared on Common Stock to holders of such
Common Stock of record as of a date prior to the Exercise Date.
(e) Upon such surrender of a Warrant Certificate and payment and
collection of the Exercise Price at any Warrant Exercise Office, such Warrant
Certificate and payment shall be promptly delivered to the Warrant Agent. The
"Exercise Date" for a Warrant shall be the date when all of the items referred
to in the first sentence of each of paragraphs (c) and (d) of this Section 7 are
received by the Warrant Agent at or prior to 2:00 p.m., New York, New York time,
on a Business Day and the exercise of the Warrants will be effective as of such
Exercise Date. If any items referred to in the first sentence of paragraphs (c)
and (d) are received after 2:00 p.m., New York, New York time, on a Business
Day, the exercise of the Warrants to which such item relates will be effective
on the next succeeding Business Day. Notwithstanding the foregoing, in the case
of an exercise of Warrants on the Expiration Date, if all of the items referred
to in the first sentence of each of paragraphs (c) and (d) of this Section are
received by the Warrant Agent at or prior to 5:00 p.m. New York, New York time,
on such Expiration Date, the exercise of the Warrants to which such items relate
will be effective on the Expiration Date.
(f) Upon the exercise of a Warrant in accordance with the terms
hereof, the receipt of a Warrant Certificate and payment of the Exercise Price,
the Warrant Agent shall: (i) cause an amount equal to the Exercise Price to be
paid to the Company by crediting the same to the account designated by the
Company in writing to the Warrant Agent for that purpose; (ii) advise
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the Company immediately by telephone of the amount so deposited to the Company's
account and promptly confirm such telephonic advice in writing; and (iii) as
soon as practicable, advise the Company in writing of the number of Warrants
exercised in accordance with the terms and conditions of this Agreement and the
Warrant Certificates, the instructions of each exercising holder of the Warrant
Certificates with respect to delivery of the Warrant Shares to which such holder
is entitled upon such exercise, and such other information as the Company shall
reasonably request.
(g) Subject to the provisions of Section 14 hereof, upon such
surrender of Warrants and payment of the Exercise Price, the Company shall issue
and cause to be delivered with all reasonable dispatch to or upon the written
order of the registered holder of the Warrant Certificate evidencing such
exercised Warrant or Warrants, a certificate or certificates for the number of
full Warrant Shares issuable upon the exercise of such Warrants, in fully
registered form, registered in such name or names as may be directed by such
holder pursuant to the Election to Exercise, as set forth on the reverse of the
Warrant Certificate or on the Warrant Endorsement, together with cash as
provided in Section 14 hereof; provided, however, that if any consolidation,
merger or lease or sale of assets is proposed to be effected by the Company as
described in subsection (k) of Section 13 hereof, or a tender offer or an
exchange offer for shares of Common Stock of the Company shall be made, upon
such surrender of Warrants and payment of the Exercise Price as aforesaid, the
Company shall, as soon as possible, but in any event not later than two business
days thereafter, issue and cause to be delivered the full number of Warrant
Shares issuable upon the exercise of such Warrant in the manner described in
this sentence together with cash as provided in Section 14 hereof. Such
certificate or certificates shall be deemed to have been issued and any person
so designated to be named therein shall be deemed to have become a holder of
record or such Warrant Shares as of the date of the surrender of such Warrants
and payment of the Exercise Price. No fractional shares shall be issued upon
exercise of any Warrants in accordance with Section 14 hereof.
All Warrant Certificates surrendered upon exercise of Warrants shall
be cancelled by the Warrant Agent and be disposed of in a manner satisfactory to
the Company.
The Warrant Agent shall keep copies of this Agreement and any notices
given or received hereunder available for inspection by the holders during
normal business hours at its office. The Company shall supply the Warrant Agent
from time to time with such numbers of copies of this Agreement as the Warrant
Agent may request.
SECTION 8. Reports. Whether or not required by the rules and
regulations of the SEC, so long as any Warrants are outstanding, the Company
will furnish to the holders of Warrants all financial information that would be
required to be contained in an annual report prepared in compliance with Rule
14a-3 under the Exchange Act, including a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and a report thereon by the
Company's independent certified public accountants. In addition, whether or not
required by
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the rules and regulations of the SEC, the Company will make such information
available to investors, securities analysts and broker-dealers who request it in
writing.
SECTION 9. Payment of Taxes. The Company will pay all documentary
stamp taxes attributable to the initial issuance of Warrants and of Warrant
Shares upon the exercise of Warrants; provided, however, that the Company shall
not be required to pay any tax or taxes which may be payable in respect of any
transfer involved in the issuance of any Warrant Certificates or any
certificates for Warrant Shares in a name other than that of the registered
holder of a Warrant Certificate surrendered upon the exercise of a Warrant, and
the Company shall not be required to issue or deliver such Warrant Certificates
unless or until the person or persons requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
SECTION 10. Mutilated or Missing Warrant Certificates. If any of the
Warrant Certificates shall be mutilated, lost, stolen or destroyed, the Company
shall issue and the Warrant Agent shall countersign, in exchange and
substitution for and upon cancellation of the mutilated Warrant Certificate, or
in lieu of and substitution for the Warrant Certificate lost, stolen or
destroyed, a new Warrant Certificate of like tenor and representing an
equivalent number of Warrants, but only upon receipt of evidence satisfactory to
the Company and to the Warrant Agent of such loss, theft or destruction of such
Warrant Certificate and indemnity and security therefor, if requested, also
satisfactory to them. Applicants for such substitute Warrant Certificates shall
also comply with such other reasonable regulations and pay such other reasonable
charges as the Company or the Warrant Agent may prescribe.
SECTION 11. Reservation of Warrant Shares. The Company will at all
times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock, for the purpose of
enabling it to satisfy any obligation to issue Warrant Shares upon exercise of
Warrants, the maximum number of shares of Common Stock which may then be
deliverable upon the exercise of all outstanding Warrants.
The Company or the transfer agent for the Common Stock (the "Transfer
Agent") and every subsequent transfer agent for any shares of the Company's
capital stock issuable upon the exercise of any of the rights of purchase
aforesaid will be irrevocably authorized and directed at all times to reserve
such number of authorized shares as shall be required for such purpose. The
Company will keep a copy of this Agreement on file with the Transfer Agent and
with every subsequent transfer agent for any shares of the Company's capital
stock issuable upon the exercise of the rights of purchase represented by the
Warrants. The Warrant Agent is hereby irrevocably authorized to requisition
from time to time from such Transfer Agent the stock certificates required to
honor outstanding Warrants upon exercise thereof in accordance with the terms of
this Agreement. The Company will supply such Transfer Agent with duly executed
certificates for such purposes and will provide or otherwise make available any
cash which may be payable as provided in Section 14 hereof. The Company will
furnish such Transfer Agent
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a copy of all notices of adjustments and certificates related thereto,
transmitted to each holder pursuant to Section 15 hereof.
Before taking any action which would cause an adjustment pursuant to
Section 13 hereof to reduce the Exercise Price below the then par value (if any)
of the Warrant Shares, the Company will take any corporate action which may, in
the opinion of its counsel (which may be counsel employed by the Company), be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable Warrant Shares at the Exercise Price as so adjusted.
The Company covenants that all Warrant Shares which may be issued upon
exercise of Warrants will, upon payment of the Exercise Price and issue, be
fully paid, nonassessable, free of preemptive rights and free from all taxes,
liens, charges and security interests with respect to the issue thereof.
SECTION 12. Registration and Listing of Common Stock. The Company
hereby represents and warrants that the Warrants and the Warrant Shares have
been duly registered or approved, as the case may be, with the appropriate
governmental authorities under applicable federal and state laws. The Warrants
and the Warrant Shares have been approved for listing or quotation on each
national securities exchange or inter-dealer quotation system on which the
Common Stock is listed or quoted, and the Company shall maintain the listing or
quotation of such Warrants and Warrant Shares; and the Company, upon official
notice of issuance, will list or quote on such national securities exchange,
will register under the Exchange Act and will maintain such listing or quotation
of, any Other Securities (as defined below) that at any time are issuable upon
exercise of the Warrants, if and at the time that any securities of the same
class shall be listed or quoted on such national securities exchange or inter-
dealer quotation system by the Company.
"Other Securities" means any stock (other than Common Stock) and other
securities of the Company or any other Person (corporate or otherwise) which the
holders of the Warrants at any time shall be entitled to receive, or shall have
received, upon the exercise of the Warrants, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities pursuant to
Section 13 hereof or otherwise.
SECTION 13. Adjustment of Exercise Rate. The Exercise Rate is
subject to adjustment from time to time upon the occurrence of the events
enumerated in this Section 13. For purposes of this Section 13, "Common Stock"
means the Common Stock and any other stock of the Company, however designated,
for which the Warrants may be exercisable.
(a) Adjustment for Change in Capital Stock.
If the Company:
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(1) pays a dividend or makes a distribution on its Common Stock in
shares of its Common Stock;
(2) subdivides its outstanding shares of Common Stock into a greater
number of shares;
(3) combines its outstanding shares of Common Stock into a smaller
number of shares;
(4) makes a distribution on its Common Stock in shares of its capital
stock other than Common Stock; or
(5) issues by reclassification of its Common Stock any shares of its
capital stock,
then the Exercise Rate in effect immediately prior to such action shall be
proportionately adjusted so that the holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of capital stock of the
Company which such holder would have owned immediately following such action if
such Warrant had been exercised immediately prior to such action or immediately
prior to the record date applicable thereto, if any.
The adjustment shall become effective immediately after the record date in
the case of a dividend or distribution and immediately after the effective date
in the case of a subdivision, combination or reclassification.
If, after an adjustment, a holder of a Warrant upon exercise may receive
shares of two or more classes of capital stock of the Company, the Exercise Rate
of each class of capital stock shall thereafter be subject to adjustment on
terms comparable to those applicable to Common Stock in this Section 13.
Such adjustment shall be made successively whenever any event listed above
shall occur.
(b) Adjustment for Rights Issue or Sale of Common Stock Below
Current Market Value.
If the Company (i) distributes any rights, warrants or options to all
holders of its Common Stock entitling them to subscribe for or purchase shares
of Common Stock at a price per share less than 94% (100% if a stand-by
underwriter is used and charges the Company a commission) of the Current Market
Value at the Time of Determination (each as defined in paragraph (d) of this
Section 13) or (ii) sells any Common Stock or any securities convertible into or
exchangeable or exercisable for the Common Stock (other than pursuant to (1) the
exercise of the Warrants, (2) any security convertible into, or exchangeable or
exercisable for, the Common Stock as to which the issuance thereof has
previously been the subject of any required adjustment (whether or not actually
made) pursuant to this Section 13 or (3) the
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conversion of any convertible notes issued or issuable in connection with the
transactions contemplated by the Merger Agreement) at a price per share less
than the Current Market Value, the Exercise Rate shall be adjusted in accordance
with the formula:
E ' = E x (O + N)
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(O + (N x P/M))
where:
E' = the adjusted Exercise Rate;
E = the current Exercise Rate;
O = the number of shares of Common Stock outstanding on the record date for the
distribution to which this paragraph (b) is being applied or on the date of
sale of Common Stock at a price per share less than the Current Market
Value to which this paragraph (b) applies, as the case may be;
N = the number of additional shares of Common Stock issuable upon exercise of
all rights, warrants and options so distributed or the number of shares of
Common Stock so sold or the maximum stated number of shares of Common Stock
issuable upon the conversion, exchange or exercise of any such convertible,
exchangeable or exercisable securities, as the case may be;
P = the offering price per share of the additional shares of Common Stock upon
the exercise of any such rights, options or warrants so distributed or
pursuant to any such convertible, exchangeable or exercisable securities so
sold or the sale price of the shares so sold, as the case may be; and
M = the Current Market Value as of the Time of Determination or at the time of
sale, as the case may be.
The adjustment shall be made successively whenever any such rights,
warrants or options are issued and shall become effective immediately after the
record date for the determination of stockholders entitled to receive the
rights, warrants or options. If at the end of the period during which such
rights, warrants or options are exercisable, not all rights, warrants or options
shall have been exercised, the Exercise Rate shall be immediately readjusted to
what it would have been if "N" in the above formula had been the number of
shares actually issued.
No adjustment shall be made under this paragraph (b) if the application of
the formula stated above in this paragraph (b) would result in a value of E '
that is lower than the value of E.
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(c) Adjustment for Other Distributions.
If the Company distributes to all holders of its Common Stock any of its
assets or debt securities or any rights, warrants or options to purchase any of
its debt securities or assets, the Exercise Rate shall be adjusted in accordance
with the formula:
E ' = E x M
---
M-F
where:
E ' = the adjusted Exercise Rate;
E = the current Exercise Rate;
M = the Current Market Value; and
F = the fair market value (on the record date for the distribution to which
this paragraph (c) applies) of the assets, securities, rights, warrants
or options to be distributed in respect of each share of Common Stock in
the distribution to which this paragraph (c) is being applied
(including, in the case of cash dividends or other cash distributions
giving rise to an adjustment, all such cash distributed concurrently).
The adjustment shall be made successively whenever any such distribution is
made and shall become effective immediately after the record date for the
determination of stockholders entitled to receive the distribution. If at the
end of the period during which such rights, warrants or options are exercisable,
not all rights, warrants or options shall have been exercised, the Exercise Rate
shall be immediately readjusted to what it would have been if such rights,
warrants or options which are not exercised had not been issued.
This subsection (c) does not apply to cash dividends or cash distributions
paid out of consolidated retained earnings as shown on the books of the Company
prepared in accordance with generally accepted accounting principles other than
any Extraordinary Cash Dividend (as defined below). An "Extraordinary Cash
Dividend" shall be that portion, if any, of the aggregate amount of all cash
dividends paid in any fiscal year which exceeds the sum of (A) the Company's
cumulative undistributed earnings on the date of this Agreement, plus (B) the
cumulative amount of earnings, as determined by the Board of Directors, after
such date, minus (C) the cumulative amount of dividends accrued or paid in
respect of the Common Stock. In all cases, the Company shall give the Warrant
holders advance notice of a record date for any dividend payment on the Common
Stock which notice is delivered on a date at least as early as the date of
notice to the holders of Common Stock.
(d) Current Market Value at the Time of Determination.
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"Current Market Value" per share of Common Stock or of any other security
at any date shall be the average of the daily market price, for the twenty (20)
consecutive trading days immediately preceding the day of such determination.
The market price for each such trading day shall be: (i) the last reported sales
price, regular way on such day, or, if no sale takes place on such day, the
average of the reported closing bid and asked prices on such day, regular way,
in either case as reported on the New York Stock Exchange ("NYSE") or, (ii) if
such security is not listed or admitted for trading on the NYSE, on the
principal national securities exchange on which such security is listed or
admitted for trading or, (iii) if not listed or admitted for trading on any
national securities exchange, on the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ")
or, (iv) if such security is not quoted on such National Market System, the
average of the closing bid and asked prices on such day in the over-the-counter
market as reported by NASDAQ or, (v) if bid and asked prices for such security
on such day shall not have been reported through NASDAQ, the average of the bid
and asked prices on such day as furnished by any NYSE member firm regularly
making a market in such security selected for such purpose by the Chairman of
the Board or the Board of Directors or, (vi) if such bid and asked prices are
not so furnished, then the fair market value of the security as established by
the Board of Directors acting in their good faith reasonable judgment.
"Time of Determination" means the time and date of the earlier of (i) the
determination of stockholders entitled to receive rights, warrants, or options
or a distribution, in each case, to which paragraphs (b) or (c) apply and (ii)
the time ("Ex-Dividend Time") immediately prior to the commencement of "ex-
dividend" trading for such rights, warrants or distribution on such national or
regional exchange or market on which the Common Stock is then listed or quoted.
(e) Consideration Received.
For purposes of any computation respecting consideration received pursuant
to subsection (b) of this Section 13, the following shall apply:
(1) in the case of the issuance of shares of Common Stock for cash,
the consideration shall be the amount of such cash, provided that in no case
shall any deduction be made for any commissions, discounts or other expenses
incurred by the Company for any underwriting of the issue or otherwise in
connection therewith;
(2) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair market value thereof as determined in good
faith by the Board of Directors (irrespective of the accounting treatment
thereof), whose determination shall be conclusive, and described in a Board
resolution which shall be filed with the Warrant Agent; and
(3) in the case of the issuance of securities convertible into or
exchangeable for shares, the aggregate consideration received therefor shall be
deemed to be the
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consideration received by the Company for the issuance of such securities plus
the additional minimum consideration, if any, to be received by the Company upon
the conversion or exchange thereof (the consideration in each case to be
determined in the same manner as provided in clauses (1) and (2) of this
subsection).
(f) When De Minimis Adjustment May Be Deferred.
No adjustment in the Exercise Rate need be made unless the adjustment would
require an increase or decrease of at least 1% in the Exercise Rate. Any
adjustments that are not made shall be carried forward and taken into account in
any subsequent adjustment.
All calculations under this Section 13 shall be made to the nearest 1/100th
of a share.
(g) When No Adjustment Required.
No adjustment need be made for a transaction referred to in subsections
(a), (b) or (c) of this Section 13 if Warrant holders are offered the
opportunity to participate in the transaction on a basis and with notice that
the Board of Directors determines to be fair and appropriate in light of the
basis and notice on which holders of Common Stock participate in the
transaction.
To the extent the Warrants become convertible into cash, no adjustment need
be made thereafter as to the cash. Interest will not accrue on the cash.
(h) Notice of Adjustment.
Whenever the Exercise Rate is adjusted, the Company shall provide the
notices required by Section 15 hereof.
(i) Voluntary Adjustment.
The Company from time to time may, as the Board of Directors deems
appropriate, increase the Exercise Rate by any amount for any period of time if
the period is at least 20 days and if the increase is irrevocable during the
period.
Whenever the Exercise Rate is increased, the Company shall mail to Warrant
holders a notice of the increase. The Company shall mail the notice at least 15
days before the date the increased Exercise Rate takes effect. The notice shall
state the increased Exercise Rate and the period it will be in effect.
An increase of the Exercise Rate pursuant to this Section 13(i), other than
an increase which the Company has irrevocably committed will be in effect for so
long as any Warrants are outstanding, does not change or adjust the Exercise
Rate otherwise in effect for purposes of subsections (a), (b) or (c) of this
Section 13.
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(j) Notice of Certain Transactions.
If:
(1) The Company takes any action that would require an adjustment in
the Exercise Rate pursuant to subsections (a), (b) or (c) of this Section 13 and
if the Company does not arrange for Warrant holders to participate pursuant to
subsection (g) of this Section 13;
(2) The Company takes any action that would require a supplemental
Warrant Agreement pursuant to subsection (k) of this Section 13; or
(3) there is a liquidation or dissolution of the Company,
the Company shall mail to Warrant holders a notice stating the proposed record
date for a dividend or distribution or the proposed effective date of a
subdivision, combination, reclassification, consolidation, merger, transfer,
lease, liquidation or dissolution. The Company shall mail the notice at least 15
days before such date. Failure to mail the notice or any defect in it shall not
affect the validity of the transaction.
(k) Reorganization of the Company.
If the Company consolidates or merges with or into, or transfers or leases
all or substantially all its assets to, any Person, upon consummation of such
transaction the Warrants shall automatically become exercisable for the kind and
amount of securities, cash or other assets which the holder of a Warrant would
have owned immediately after the consolidation, merger, transfer or lease if the
holder had exercised the Warrant immediately before the effective date of the
transaction. Concurrently with the consummation of such transaction, the
corporation formed by or surviving any such consolidation or merger if other
than the Company, or the Person to which such sale or conveyance shall have been
made (any such Person, the "Successor Guarantor"), shall enter into a
supplemental Warrant Agreement so providing and further providing for
adjustments which shall be as nearly equivalent as may be practical to the
adjustments provided for in this Section 13. The Successor Guarantor shall mail
to Warrant holders a notice describing the supplemental Warrant Agreement.
If the issuer of securities deliverable upon exercise of Warrants under the
supplemental Warrant Agreement is an Affiliate of the formed, surviving,
transferee or lessee corporation, that issuer shall join in the supplemental
Warrant Agreement.
If this subsection (k) applies, subsections (a), (b) or (c) of this Section
13 do not apply.
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(l) The Company Determination Final.
Any determination that the Company or the Board of Directors must make
pursuant to subsection (a), (b), (c), (d), (e) or (g) of this Section 13 is
conclusive.
(m) Warrant Agent's Disclaimer.
The Warrant Agent has no duty to determine when an adjustment under this
Section 13 should be made, how it should be made or what it should be. The
Warrant Agent has no duty to determine whether any provisions of a supplemental
Warrant Agreement under subsection (k) of this Section 13 are correct. The
Warrant Agent makes no representation as to the validity or value of any
securities or assets issued upon exercise of Warrants. The Warrant Agent shall
not be responsible for the Company's failure to comply with this Section 13.
(n) When Issuance or Payment May Be Deferred.
In any case in which this Section 13 shall require that an adjustment in
the Exercise Rate be made effective as of a record date for a specified event,
the Company may elect to defer until the occurrence of such event (i) issuing to
the holder of any Warrant exercised after such record date the Warrant Shares
and other capital stock of the Company, if any, issuable upon such exercise over
and above the Warrant Shares and other capital stock of the Company, if any,
issuable upon such exercise on the basis of the Exercise Rate and (ii) paying to
such holder any amount in cash in lieu of a fractional share pursuant to Section
14 hereof; provided, however, that the Company shall deliver to such holder a
due bill or other appropriate instrument evidencing such holder's right to
receive such additional Warrant Shares, other capital stock and cash upon the
occurrence of the event requiring such adjustment.
(o) Form of Warrants.
Irrespective of any adjustments in the Exercise Rate, Warrants theretofore
or thereafter issued may continue to express the same price and number and kind
of shares as are stated in the Warrants initially issuable pursuant to this
Agreement.
(p) Adjustments to Par Value.
The Company shall from time to time make such adjustments to the par value
of the Common Stock as may be necessary so that at all times, upon exercise of
the Warrants, the Warrant Shares will be fully paid and nonassessable.
(q) Priority of Adjustments. If this Section 13 requires adjustments
to the Exercise Rate under more than one of paragraphs (a), (b) or (c), and the
record dates for the distributions giving rise to such adjustments shall occur
on the same date, then such adjustments
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shall be made by applying, first, the provisions of paragraph (a), second, the
provisions of paragraph (c) and, third, the provisions of paragraph (b).
(r) Multiple Adjustments. After an adjustment to the Exercise Rate
under this Section 13, any subsequent event requiring an adjustment under this
Section 13 shall cause an adjustment to the Exercise Rate as so adjusted.
SECTION 14. Fractional Interests. The Company shall not be required to
issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 14,
be issuable on the exercise of any Warrants (or specified portion thereof), the
Company shall notify the Warrant Agent in writing of the amount to be paid in
lieu of the fraction of a Warrant Share and concurrently pay or provide to the
Warrant Agent for payment to the Warrant holder an amount in cash equal to the
product of (i) such fraction of a Warrant Share and (ii) the difference of the
Current Market Value of a share of Common Stock as of the date of exercise of
the Warrants and the Exercise Price.
SECTION 15. Notices to Warrant Holders. Upon any adjustment of the
Exercise Rate pursuant to Section 13 hereof, the Company shall promptly
thereafter (i) cause to be filed with the Warrant Agent a certificate of a firm
of independent public accountants of recognized standing selected by the Company
(who may be the regular auditors of the Company) setting forth the Exercise Rate
after such adjustment and setting forth in reasonable detail the method of
calculation and the facts upon which such calculations are based and setting
forth the number of Warrant Shares (or portion thereof) issuable after such
adjustment in the Exercise Rate, upon exercise of a Warrant and payment of the
Exercise Price, which certificate shall be conclusive evidence of the
correctness of the matters set forth therein, and (ii) cause to be given to each
of the registered holders of the Warrant Certificates at such registered
holder's address appearing on the Warrant register written notice of such
adjustments by first-class mail, postage prepaid. Where appropriate, such notice
may be given in advance and included as a part of the notice required to be
mailed under the other provisions of this Section 15.
In the event:
(a) the Company shall authorize the issuance to all holders of shares
of Common Stock of rights, options or warrants to subscribe for or purchase
shares of Common Stock or of any other subscription rights or warrants (other
than rights, options or warrants issued to all holders of its Common Stock
entitling them to subscribe for or purchase shares of Common Stock at a price
per share not less than 94% (100% if a stand-by underwriter is used and charges
the Company commission) of the Current Market Value); or
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(b) the Company shall authorize the distribution to all holders of
shares of Common Stock of evidences of its indebtedness or assets (other than
cash dividends or cash distributions payable out of consolidated earnings or
earned surplus or dividends payable in shares of Common Stock or distributions
referred to in subsection (a) of Section 13 hereof); or
(c) of any consolidation or merger to which the Company is a party or
of the conveyance or transfer of the properties and assets of the Company
substantially as an entirety, or of any reclassification or change of Common
Stock issuable upon exercise of the Warrants (other than a change in par value,
or from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), or a tender offer or exchange offer for
shares of Common Stock; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(e) the Company proposes to take any action (other than actions of
the character described in Section 13(a)) which would require an adjustment of
the Exercise Rate pursuant to Section 13;
then the Company shall cause to be filed with the Warrant Agent and shall cause
to be given to each of the registered holders of the Warrant Certificates at its
address appearing on the Warrant register, at least 20 days (or 15 days in any
case specified in clauses (a) or (b) above) prior to the applicable record date
hereinafter specified, or promptly in the case of events for which there is no
record date, by first-class mail, postage prepaid, a written notice stating (i)
the date as of which the holders of record of shares of Common Stock to be
entitled to receive any such rights, options, warrants or distribution are to be
determined, or (ii) the initial expiration date set forth in any tender offer or
exchange offer for shares of Common Stock, or (iii) the date on which any such
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up is expected to become effective or consummated, and
the date as of which it is expected that holders of record of shares of Common
Stock shall be entitled to exchange such shares for securities or other
property, if any, deliverable upon such reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up. The failure to
give the notice required by this Section 15 or any defect therein shall not
affect the legality or validity of any distribution, right, option, warrant,
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up, or the vote upon any action.
Nothing contained in this Agreement or in any of the Warrant Certificates
shall be construed as conferring upon the holders thereof the right to vote or
to consent or to receive notice as shareholders in respect of the meetings of
shareholders or the election of directors of the Company or any other matter, or
any rights whatsoever as shareholders of the Company.
SECTION 16. Merger, Consolidation or Change of Name of Warrant Agent. Any
corporation into which the Warrant Agent may be merged or with which it may be
consolidated,
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or any corporation resulting from any merger or consolidation to which the
Warrant Agent shall be a party, or any corporation succeeding to the business of
the Warrant Agent, shall be the successor to the Warrant Agent hereunder without
the execution or filing of any paper or any further act on the part of any of
the parties hereto, provided that such corporation would be eligible for
appointment as a successor warrant agent under the provisions of Section 18
hereof. In case at the time such successor to the Warrant Agent shall succeed to
the agency created by this Agreement, and in case at that time any of the
Warrant Certificates shall have been countersigned but not delivered, any such
successor to the Warrant Agent may adopt the countersignature of the original
Warrant Agent; and in case at that time any of the Warrant Certificates shall
not have been countersigned, any successor to the Warrant Agent may countersign
such Warrant Certificates either in the name of the predecessor Warrant Agent or
in the name of the successor to the Warrant Agent; and in all such cases such
Warrant Certificates shall have the full force and effect provided in the
Warrant Certificates and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and at
such time any of the Warrant Certificates shall have been countersigned but not
delivered, the Warrant Agent whose name has been changed may adopt the
countersignature under its prior name, and in case at that time any of the
Warrant Certificates shall not have been countersigned, the Warrant Agent may
countersign such Warrant Certificates either in its prior name or in its changed
name, and in all such cases such Warrant Certificates shall have the full force
and effect provided in the Warrant Certificates and in this Agreement.
SECTION 17. Warrant Agent. The Warrant Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms and conditions,
by all of which the Company and the holders of Warrants, by their acceptance
thereof, shall be bound:
(a) The statements contained herein and in the Warrant Certificates
shall be taken as statements of the Company and the Warrant Agent assumes no
responsibility for the correctness of any of the same except such as describe
the Warrant Agent or action taken or to be taken by it. The Warrant Agent
assumes no responsibility with respect to the distribution of the Warrant
Certificates except as herein otherwise provided.
(b) The Warrant Agent shall not be responsible for any failure of the
Company to comply with any of the covenants contained in this Agreement or in
the Warrant Certificates to be complied by the Company.
(c) The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the Warrant Agent
shall incur no liability or responsibility to the Company or to any holder of
any Warrant Certificate in respect of any action taken, suffered or omitted by
it hereunder in good faith and in accordance with the opinion or the advice of
such counsel.
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(d) The Warrant Agent shall incur no liability or responsibility to
the Company or to any holder of any Warrant Certificate for any action taken in
reliance on any Warrant Certificate, certificate of shares, notice, resolution,
waiver, consent, order, certificate, or other paper, document or instrument
believed by it to be genuine and to have been signed, sent or presented by the
proper party or parties. The Warrant Agent shall not be bound by any notice or
demand, or any waiver, modification, termination or revision of this Agreement
or any of the terms hereof, unless evidenced by a writing between the Company
and the Warrant Agent.
(e) The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the execution of
this Agreement, to reimburse the Warrant Agent for all expenses, taxes
(including withholding taxes) and governmental charges and other charges of any
kind and nature incurred by the Warrant Agent in the execution, delivery and
performance of its responsibilities under this Agreement and to indemnify the
Warrant Agent and save it harmless against any and all liabilities, including
judgments, costs and reasonable counsel fees, for anything done or omitted by
the Warrant Agent in the execution, delivery and performance of its
responsibilities under this Agreement except as a result of its negligence or
bad faith.
(f) The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action likely to involve
expense unless the Company or one or more registered holders of Warrant
Certificates shall furnish the Warrant Agent with reasonable security and
indemnity for any costs and expenses which may be incurred, but this provision
shall not affect the power of the Warrant Agent to take such action as it may
consider proper, whether with or without any such security or indemnity. All
rights of action under this Agreement or under any of the Warrants may be
enforced by the Warrant Agent without the possession of any of the Warrant
Certificates or the production thereof at any trial or other proceeding relative
thereto, and any such action, suit or proceeding instituted by the Warrant Agent
shall be brought in its name as Warrant Agent and any recovery or judgment shall
be for the ratable benefit of the registered holders of the Warrants, as their
respective rights or interests may appear.
(g) Except as may be limited by applicable law, the Warrant Agent,
and any stockholder, director, officer or employee of it, may buy, sell or deal
in any of the Warrants or other securities of the Company or become pecuniarily
interested in any transaction in which the Company may be interested, or
contract with or lend money to the Company or otherwise act as fully and freely
as though it were not Warrant Agent under this Agreement. Nothing herein shall
preclude the Warrant Agent from acting in any other capacity for the Company or
for any other legal entity.
(h) The Warrant Agent shall act hereunder solely as agent for the
Company, and its duties shall be determined solely by the provisions hereof. The
Warrant Agent shall not be liable for anything which it may do or refrain from
doing in connection with this Agreement except for its own negligence or bad
faith.
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(i) The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of any Warrant Certificate to make or cause to be
made any adjustment of the Exercise Rate or other securities or property
deliverable as provided in this Agreement, or to determine whether any facts
exist which may require any of such adjustments, or with respect to the nature
or extent of any such adjustments, when made, or with respect to the method
employed in making the same. The Warrant Agent shall not be accountable with
respect to the validity or value or the kind or amount of any Warrant Shares or
of any securities or property which may at any time be issued or delivered upon
the exercise of any Warrant or with respect to whether any such Warrant Shares
or other securities will when issued be validly issued and fully paid and
nonassessable, and makes no representation with respect thereto.
SECTION 18. Change of Warrant Agent. If the Warrant Agent shall become
incapable of acting as Warrant Agent or shall resign as provided below, the
Company shall appoint a successor to such Warrant Agent. If the Company shall
fail to make such appointment within a period of 30 days after it has been
notified in writing of such incapacity or resignation by the Warrant Agent or by
the registered holders of a majority of Warrant Certificates, then the
registered holder of any Warrant Certificate may apply to any court of competent
jurisdiction for the appointment of a successor to the Warrant Agent. Pending
appointment of a successor to such Warrant Agent, either by the Company or by
such a court, the duties of the Warrant Agent shall be carried out by the
Company. The holders of two-thirds of the unexercised Warrants shall be
entitled at any time to require the Company to remove the Warrant Agent and
appoint a successor to such Warrant Agent. Upon receipt of such request, the
Company shall promptly provide the Warrant Agent with 30 days prior written
notice of the effective date of such removal of Warrant Agent and shall appoint
a successor to such Warrant Agent. Such successor to the Warrant Agent need not
be approved by the Company or the former Warrant Agent. Any successor to the
Warrant Agent, whether appointed by the Company, the court or the holders of a
majority of the unexercised Warrants, shall be (a) a corporation or other entity
organized and doing business under the laws of the United States or any state of
the United States, in good standing, which is authorized under such laws to
exercise corporate trust or stock transfer powers and is subject to supervision
or examination by Federal or state authority and which has at the time of its
appointment as Warrant Agent a combined capital and surplus of at least
$25,000,000, or (b) an affiliate of a corporation or other entity described in
clause (a) of this sentence. After appointment the successor to the Warrant
Agent shall be vested with the same powers, rights, duties and responsibilities
as if it had been originally named as Warrant Agent without further act or deed;
but the former Warrant Agent shall deliver and transfer to the successor to the
Warrant Agent any property at the time held by it hereunder and execute and
deliver any further assurance, conveyance, act or deed necessary for the
purpose. Failure to give any notice provided for in this Section 18, however, or
any defect therein, shall not affect the legality or validity of the appointment
of a successor to the Warrant Agent.
The Warrant Agent may resign at any time and be discharged from the
obligations hereby created by so notifying the Company in writing at least 30
days in advance of the proposed
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effective date of its resignation. If no successor Warrant Agent accepts the
engagement hereunder by such time, the Company shall act as Warrant Agent.
SECTION 19. Notices to the Company and Warrant Agent. Any notice or
demand authorized by this Agreement to be given or made by the Warrant Agent or
by the registered holder of any Warrant Certificate to or on the Company shall
be sufficiently given or made when and if deposited in the mail, first class or
registered postage prepaid, addressed (until another address is filed in writing
by the Company with the Warrant Agent) as follows:
Homestead Village Incorporated
125 Lincoln Avenue, Suite 300
Santa Fe, New Mexico 87501
Attention: David C. Dressler, Jr.
with a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: Edward J. Schneidman
Any notice pursuant to this Agreement to be given by the Company or by the
registered holder of any Warrant Certificate to the Warrant Agent shall be
sufficiently given when and if deposited in the mail, first-class or registered,
postage prepaid, addressed (until another address is filed in writing by the
Warrant Agent with the Company) to the Warrant Agent as follows:
The First National Bank of Boston
150 Royall Street
Canton, Massachusetts 02021
Attention: Client Administration
Notice may also be given by facsimile transmission (effective when receipt
is acknowledged) (effective at the time of delivery) or by overnight delivery
service (effective the next business day).
SECTION 20. Supplements and Amendments. The Company and the Warrant Agent
may from time to time supplement or amend this Agreement and the terms of the
Warrants without the approval of any holders of Warrant Certificates in order to
cure any ambiguity or to correct or supplement any provision contained herein
which may be defective or inconsistent with any other provision herein, or to
make any other provisions in regard to matters or questions arising hereunder
which the Company and the Warrant Agent may deem necessary or desirable and
which shall not in any way adversely affect the interests of the holders of
Warrant Certificates. Any amendment or supplement to this Agreement that has an
adverse effect on the
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interests of holders shall require the written consent of registered holders of
a majority of the then outstanding Warrants; provided, however, that the consent
of each holder of a Warrant affected shall be required for any amendment
pursuant to which the Exercise Price would be increased, the number of Warrant
Shares purchasable upon exercise of Warrants would be decreased, the period of
time during which the Warrants are exercisable is reduced, the percentage
required for modification is reduced, or any change to this Section 20 is
effected (other than in accordance with Section 13 or 14 hereof).
SECTION 21. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
SECTION 22. Termination. This Agreement shall terminate at 5:00 p.m.,
New York, New York time on ____________ __, 1997. Notwithstanding the
foregoing, this Agreement will terminate on such earlier date on which all
Warrants have been exercised. The provisions of Section 17 hereof shall survive
such termination.
SECTION 23. Governing Law; Jurisdiction. This Agreement and each Warrant
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Maryland and for all purposes shall be governed by and
construed in accordance with the internal laws of said State.
SECTION 24. Benefits of This Agreement. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, the
Warrant Agent and the registered holders of the Warrant Certificates any legal
or equitable right, remedy or claim under this Agreement; but this Agreement
shall be for the sole and exclusive benefit of the Company, the Warrant Agent
and the registered holders of the Warrant Certificates.
SECTION 25. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
SECTION 26. Further Assurances. From time to time on and after the date
hereof, the Company shall deliver or cause to be delivered to the Warrant Agent
such further documents and instruments and shall do and cause to be done such
further acts as the Warrant Agent shall reasonably request (it being understood
that the Warrant Agent shall have no obligation to make such request) to carry
out more effectively the provisions and purposes of this Agreement, to evidence
compliance herewith or to assure itself that it is protected hereunder.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
HOMESTEAD VILLAGE INCORPORATED
By:/s/ David C. Dressler, Jr.
--------------------------
David C. Dressler, Jr.
Chairman
THE FIRST NATIONAL BANK OF BOSTON
By:/s/ David Dixon
---------------
David Dixon
Director
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EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
[FACE]
CUSIP #_______
No. ___ _____ Warrants
Warrant Certificate
Homestead Village Incorporated
This Warrant Certificate certifies that ____________, or registered
assigns, is the registered holder of ____________ Warrants expiring
____________, 1997 (the "Warrants") to purchase shares of the Common Stock, par
value $.01 per share (the "Common Stock"), of Homestead Village Incorporated, a
Maryland corporation (the "Company"). Each Warrant entitles the holder upon
exercise to receive from the Company at any time from 9:00 a.m. __________, 1996
to 5:00 p.m., New York, New York time on ____________, 1997, one fully paid,
registered and nonassessable share of Common Stock (a "Warrant Share", which may
also include any other securities or property purchasable upon exercise of a
Warrant, such adjustment and inclusion each as provided in the Warrant
Agreement) at the initial exercise price (the "Exercise Price") of ten dollars
($10.00) per share payable in United States dollars by certified or official
bank check to the order of the Company, upon surrender of this Warrant
Certificate and payment of the Exercise Price at the office or agency maintained
for that purpose by the Company (the "Warrant Agent Office"), subject to the
conditions set forth herein and in the Warrant Agreement referred to on the
reverse hereof. The Company has initially designated the corporate trust office
of the Warrant Agent in the Borough of Manhattan, the City of New York, as the
initial Warrant Agent Office. The number or amount of Warrant Shares for which a
Warrant may be exercised (the "Exercise Rate") is subject to adjustment upon the
occurrence of certain events set forth in the Warrant Agreement. All capitalized
terms not defined herein shall have the meanings assigned to such terms in the
Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., New York, New York time
on ___________, 1997 and to the extent not exercised by such time Warrants shall
become void.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.
This Warrant Certificate shall not be valid unless countersigned by
the Warrant Agent, as such term is used in the Warrant Agreement.
<PAGE>
This Warrant Certificate shall be governed and construed in accordance
with the internal laws of the State of Maryland.
IN WITNESS WHEREOF, Homestead Village Incorporated has caused this
Warrant Certificate to be signed by its Chairman and by its Secretary, each by a
facsimile of his signature, and has caused a facsimile of its corporate seal to
be affixed hereunto or imprinted hereon.
Dated: HOMESTEAD VILLAGE INCORPORATED
-------------
By:
--------------------------------
David C. Dressler, Jr.
Chairman
By:
--------------------------------
Jeffrey A. Klopf
Secretary
Countersigned:
THE FIRST NATIONAL BANK OF BOSTON
as Warrant Agent
By:
--------------------------------
Authorized Signatory
A-2
<PAGE>
Form of Warrant Certificate
[REVERSE]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring at 5:00 p.m., New York, New York time, on
_________, 1997 entitling the holder on exercise to receive shares of Common
Stock of the Company (the "Common Stock"), and are issued pursuant to a Warrant
Agreement dated as of _________, 1996 (the "Warrant Agreement"), duly executed
and delivered by the Company to The First National Bank of Boston, as warrant
agent (the "Warrant Agent"), which Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Warrant Agent, the Company and the holders (the
words "holders" or "holder" meaning the registered holders or registered holder)
of the Warrants. A copy of the Warrant Agreement may be obtained by the holder
hereof upon written request to the Company.
Subject to the provisions of the Warrant Agreement, the holder of each
Warrant shall have the right to purchase from the Company (and the Company shall
issue and sell to such holder of the Warrant), at any time on any Business Day
from 9:00 a.m. on __________, 1996 until 5:00 p.m., New York, New York time, on
_____________, 1997, one (or such other number as may result from adjustments as
provided in the Warrant Agreement) fully paid, registered and nonassessable
share of Common Stock at the Exercise Price (and any other securities or
property purchasable upon exercise of such Warrant at the time of such exercise
as provided in the Warrant Agreement). Warrants may be exercised by (i)
surrendering at any Warrant Agent Office this Warrant Certificate with the form
of Election to Exercise set forth hereon duly completed and executed and (ii)
paying in full the Warrant Exercise Price for each such Warrant exercised and
any other amounts required to be paid pursuant to the Warrant Agreement in
United States dollars by certified or official bank check to the order of the
Company.
If all of the items referred to in the last sentence of the preceding
paragraph are received by the Warrant Agent at or prior to 2:00 p.m., New York,
New York time, on a Business Day, the exercise of the Warrant to which such
items relate will be effective on such Business Day. If any items referred to
in the last sentence of the preceding paragraph are received after 2:00 p.m.,
New York, New York time, on a Business Day, the exercise of the Warrants to
which such item relates will be effective on the next succeeding Business Day.
Notwithstanding the foregoing, in the case of an exercise of Warrants on
_____________, 1997, if all of the items referred to in the last sentence of the
preceding paragraph are received by the Warrant Agent at or prior to 5:00 p.m.,
New York, New York time, on such Expiration Date, the exercise of the Warrants
to which such items relate will be effective on the Expiration Date.
A-3
<PAGE>
As soon as practicable after the exercise of any Warrant or Warrants,
the Company shall issue or cause to be issued to or upon the written order of
the registered holder of this Warrant Certificate, a certificate or certificates
evidencing the Warrant Shares to which such holder is entitled, in fully
registered form, registered in such name or names as may be directed by such
holder pursuant to the Election to Exercise, as set forth on the reverse of this
Warrant Certificate. Such certificate or certificates evidencing the Warrant
Shares shall be deemed to have been issued and any persons who are designated to
be named therein shall be deemed to have become the holder of record of such
Warrant Shares as of the close of business on the exercise date.
The Warrant Agreement provides that upon the occurrence of certain
events the number and kind of Warrant Shares for which a Warrant may be
exercised (the "Exercise Rate") may, subject to certain conditions, be adjusted.
No fractions of a share of Common Stock will be issued upon the exercise of any
Warrant, but the Company will pay the cash value thereof determined as provided
in the Warrant Agreement.
Warrant Certificates, when surrendered at the office of the Warrant
Agent by the registered holder thereof in person or by legal representative or
attorney duly authorized in writing, may be exchanged, in the manner and subject
to the limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Warrant Agent a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder(s) thereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
A-4
<PAGE>
Form of Election to Purchase
(To Be Executed Upon Exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive ____ shares of Common Stock
and herewith (check item) tenders payment for such shares to the order of the
Company, in the amount of $____ per share of Common Stock in accordance with the
terms hereof, as follows:
[_] $____________ in cash; or
[_] $____________ by wire transfer of immediately available funds;
or
[_] $ ___________ by certified or official bank check to the order of the
Company.
The undersigned requests that a certificate for such shares be registered
in the name of ________________, whose address is _____________________ and that
such shares be delivered to ________________________ whose address is
__________________.
If said number of shares is less than all of the shares of Common Stock
purchasable hereunder, the undersigned requests that a new Warrant Certificate
representing the remaining balance of such shares be registered in the name of
_________, whose address is ______________, and that such Warrant Certificate be
delivered to ___________________, whose address is _________________________.
Signature(s):
----------------------------------
Note: The above signature(s) must
correspond with the name written
upon the face of this Warrant
Certificate in every particular,
without alteration or enlargement or
any change whatsoever. If this
Warrant is held of record by two or
more joint owners, all such owners
must sign.
Date:
---------------
Signature Guaranteed*:
----------------------------------
*Note: The signature must be guaranteed by an institution which is a member of
one of the following recognized signature guarantee programs:
(1) The Securities Transfer Agent Medallion Program (STAMP);
(2) The New York Stock Exchange Medallion Program (MSP); or
(3) The Stock Exchange Medallion Program (SEMP).
A-5
<PAGE>
ASSIGNMENT FORM
To assign this Warrant, fill in the form below: (I) or (we) assign and
transfer this Warrant to
- -------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint __________________________ to transfer this Warrant on
the books of the Company. The agent may substitute another to act for him.
- --------------------------------------
Signature(s):
------------------------------------
Note: The above signature(s) must
correspond with the name written upon
the face of this Warrant Certificate
in every particular, without
alteration or enlargement or any
change whatsoever. If this Warrant is
held of record by two or more joint
owners, all such owners must sign.
Date:
------------------
Signature Guaranteed*:
------------------------------------
*Note: The signature must be guaranteed by an institution which is a member of
one of the following recognized signature guarantee programs:
(1) The Securities Transfer Agent Medallion Program (STAMP);
(2) The New York Stock Exchange Medallion Program (MSP); or
(3) The Stock Exchange Medallion Program (SEMP).
A-6
<PAGE>
AMENDED AND RESTATED PROMISSORY NOTE Exhibit 4.3
$142,042,725 May 28, 1996
This Amended and Restated Promissory Note (this "Note") is made and
delivered as of May 28, 1996, to Security Capital Pacific Trust a Maryland real
estate investment trust ("Lender"), by PTR Homestead Village Incorporated, a
Maryland corporation ("Borrower"), under the following circumstances:
RECITALS
A. Prior to the date hereof, Lender agreed to make a loan (the "Corporate
Loan") to Borrower, to fund, among other matters, acquisition and construction
costs and expenses incurred by Borrower in connection with acquiring and
developing various real properties as Homestead Village projects. In connection
therewith Borrower delivered to Lender that certain promissory note (the "Prior
Corporate Note") dated January 24, 1996, in the original principal amount of
$84,850,391, and various deeds of trust and mortgages (the "Prior Corporate
Security Documents"), to secure payment of the Prior Corporate Note and the
Prior Partnership Note (as defined below). (The Prior Corporate Note, the Prior
Corporate Security Documents and all other instruments delivered by Borrower in
connection therewith to secure the Prior Corporate Note and the Prior
Partnership Note are herein called the "Prior Corporate Loan Documents".)
B. Prior to the date hereof, Lender agreed to make a loan (the
"Partnership Loan") to Atlantic Homestead Village Limited Partnership (the
"Partnership"), to fund, among other matters, acquisition and construction costs
and expenses incurred by the Partnership in connection with acquiring and
developing various real properties as Homestead Village projects. In connection
therewith the Partnership delivered to Lender that certain promissory note (the
"Prior Partnership Note") dated January 24, 1996, in the original principal
amount of $63,314,441, and various deeds of trust and mortgages (the "Prior
Partnership Security Documents"), to secure payment of the Prior Corporate Note
and the Prior Partnership Note. (The Prior Partnership Note, the Prior
Partnership Security Documents and all other instruments delivered by the
Partnership in connection therewith to secure the Prior Partnership Note and the
Prior Corporate Note are herein called the "Prior Partnership Loan Documents";
the Prior Corporate Loan Documents and Prior Partnership Loan Documents are
collectively referred to herein as the "Prior Loan Documents"; the Corporate
Loan and the Partnership Loan are herein collectively called the "Loans".)
C. Borrower, the Partnership and Lender desire to continue the funding
provided for under the Prior Loan Documents, to provide funds to Borrower and
the Partnership for the costs incurred in connection with the acquisition and
development of Homestead Village projects. In
<PAGE>
furtherance of the foregoing, Borrower, the Partnership and Lender have agreed
that (i) the maximum amount of the Corporate Loan shall be $127,602,594 (the
"Maximum Corporate Loan Amount"); (ii) Borrower's repayment obligation for funds
advanced in respect of the Corporate Loan shall be adjusted by a premium factor
of 1.113164866782 (the "Premium Factor"), thus providing for the maximum face
amount of this Note of $142,042,725 (i.e., the Maximum Corporate Loan Amount as
adjusted by the Premium Factor); (iii) the maximum amount of the Partnership
Loan shall be $71,230,145 (the "Maximum Partnership Loan Amount"); (ii) the
Partnership's repayment obligation for funds advanced in respect of the
Partnership Loan, as evidenced by that certain Amended and Restated Promissory
Note, of even date herewith (the "Partnership Note"), shall be adjusted by the
Premium Factor, thus providing for the maximum face amount of the Partnership
Note of $79,290,895 (i.e., the Maximum Partnership Loan Amount as adjusted by
the Premium Factor); and (iv) in connection therewith, the Prior Loan Documents
shall be amended and restated in conformity with the foregoing and as otherwise
agreed by the parties. (The Partnership Note and this Note and the amended and
restated Prior Loan Documents being executed and delivered contemporaneously
herewith, and any and all other agreements or instruments now or hereafter
executed by Borrower, the Partnership or any other person or entity to evidence
the Loans, or any portion thereof, or in connection with, or as security for the
payment or performance of, this Note or the Partnership Note and/or any other
note(s) delivered from time to time to Lender to evidence the Loans or any
portion thereof, are, together with such notes, herein collectively referred to
as the "Loan Documents".)
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender agree to amend and restate the Prior Corporate
Note as follows:
1. Promise to Pay.
On or before October 31, 2006 (the "Due Date"), the undersigned Borrower,
hereby promises to pay to the order of Lender in lawful money of the United
States of America, the lesser of (A) ONE HUNDRED FORTY TWO MILLION FORTY TWO
THOUSAND SEVEN HUNDRED TWENTY FIVE DOLLARS ($142,042,725) and (B) the aggregate
unpaid principal amount of all advances made by Lender to Borrower in respect of
the Corporate Loan, multiplied by the Premium Factor (the amount so determined
being herein called the "Adjusted Principal Amount"), together with interest on
the Adjusted Principal Amount at a rate equal to 9.0% (the "Interest Rate").
Interest shall be calculated on the basis of a 360-day year and shall be
computed on the actual number of days elapsed.
2. Payments.
Accrued interest on the unpaid Adjusted Principal Amount shall be payable
in arrears every six months beginning with the date that is six months after the
date of this Note, in an amount equal to all of the interest accrued during the
immediately preceding six month period. Borrower shall make a payment of the
total Adjusted Principal Amount of advances then
2
<PAGE>
outstanding, together with accrued and unpaid interest to such date, on the Due
Date. Borrower shall have no obligation to pay the Adjusted Principal Amount, or
any portion thereof, until the Due Date or such earlier date upon which the loan
is accelerated. Borrower shall make each payment hereunder not later than 11:00
a.m. (Mountain Standard Time) on the day when due in U.S. dollars at Lender's
office at 7777 Market Center Avenue, El Paso, Texas 79912. Each payment shall
first be applied to late charges, costs of collection or enforcement and other
similar amounts due, if any, under this Note, then to interest due and payable
hereunder and the remainder to the Adjusted Principal Amount due and payable
hereunder. The aggregate unpaid Adjusted Principal Amount shown on the records
of Lender shall be rebuttable presumptive evidence of the Adjusted Principal
Amount owing and unpaid on this Note.
3. Conversion. Subject to the terms of this Note, the holder of this Note
shall have the right, beginning on any Business Day (as defined below) on or
after March 31, 1997, (the "Exercisability Date") and on or prior to the date on
which this Note is fully paid, to convert to shares of Common Stock all or any
portion of the principal amount outstanding on this Note, on the basis of one
fully paid, registered and nonassessable share of Common Stock for each $11.50
aggregate Adjusted Principal Amount outstanding on this Note. The number of
shares of Common Stock into which this Note may be converted, as adjusted
pursuant hereto, is referred to herein as the "Exercise Rate". For purposes of
this Note, certain capitalized terms used below are defined in Section 4 of this
Note.
(a) The conversion rights under this Section 3 of this Note may be
exercised from time to time on and after the Exercisability Date and on or
prior to the Due Date by surrendering this Note at the principal office of
Borrower with the form of conversion election set forth as Exhibit A hereto
(the "Conversion Exercise") duly completed and signed by the holder of this
Note.
(b) Except as otherwise provided in Section 3(h)(vi) no payment shall
be made on Common Stock issuable upon conversion of this Note on account of
any dividend or distribution declared on Borrower's Common Stock to holders
of such Common Stock of record as of a date prior to the Exercise Date.
(c) The "Exercise Date" shall be the date when all of the items
referred to in subsection (a) of this Section 3 are received by Borrower at
or prior to 2:00 p.m., New York, New York time, on a Business Day and the
conversion of this Note will be effective as of such Exercise Date. If any
items referred to in subsection (a) are received after 2:00 p.m., New York,
New York time, on a Business Day, the conversion of this Note will be
effective on the next succeeding Business Day. Notwithstanding the
foregoing, in the case of a conversion of this Note on the Expiration Date,
if all of the items referred to in the preceding subsection are received by
Borrower at or prior to 5:00 p.m. New York, New York time, on such
Expiration Date, the conversion of this Note will be effective on the
Expiration Date.
3
<PAGE>
(d) Upon the conversion of this Note in accordance with the terms
hereof Borrower shall issue and cause to be delivered with all reasonable
dispatch to or upon the written order of the holder of this Note, a
certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of this Note, in fully registered form,
registered in such name or names as may be directed by such holder pursuant
to the Conversion Exercise, together with cash as provided in Section 3(i)
hereof and shall deliver to holder a duly executed replacement note
representing the aggregate principal amount of this Note outstanding less
any amount previously converted (in each case, without the adjustment
provided for in Section 1 of this Note), but otherwise in the same form as
this Note; provided, however, that if any consolidation, merger or lease or
sale of assets is proposed to be effected by Borrower as described in
Section 3(h)(x) hereof, or a tender offer or an exchange offer for shares
of Common Stock of Borrower shall be made, upon such surrender of this Note
as aforesaid, Borrower shall, as soon as possible, but in any event not
later than two Business Days thereafter, issue and cause to be delivered
the full number of shares of Common Stock issuable upon the conversion of
this Note in the manner described in this sentence together with cash as
provided in Section 3(i) hereof. Such certificate or certificates shall be
deemed to have been issued and any person so designated to be named therein
shall be deemed to have become a holder of record or such shares of Common
Stock as of the date of the surrender of this Note. No fractional shares
shall be issued upon conversion of this Note in accordance with Section
3(i) hereof.
(e) Borrower will pay all documentary stamp taxes attributable to the
initial issuance of this Note and the issuance of shares of Common Stock
upon conversion of this Note; provided, however, that Borrower shall not be
required to pay any tax or taxes which may be payable in respect of any
transfer involved in the issuance of this Note or any certificates for
shares of Common Stock in a name other than that of the registered holder
of this Note surrendered upon the exercise hereof, and Borrower shall not
be required to issue or deliver such Note unless or until the person or
persons requesting the issuance thereof shall have paid to Borrower the
amount of such tax or shall have established to the satisfaction of
Borrower that such tax has been paid.
(f) Borrower will at all times reserve and keep available, free from
preemptive rights, out of the aggregate of its authorized but unissued
shares of Common Stock, for the purpose of enabling it to satisfy any
obligation to issue shares of Common Stock upon conversion of this Note,
the maximum number of shares of Common Stock which may then be deliverable
upon the conversion of this Note. Borrower or the transfer agent for the
Common Stock (the "Transfer Agent") and every subsequent transfer agent for
any shares of Borrower's capital stock issuable upon the exercise of any of
the conversion rights aforesaid will be irrevocably authorized and directed
at all times to reserve such number of authorized shares as shall be
required for such purpose. Before taking any action which would cause an
adjustment pursuant to this Section 3 to reduce the Exercise Price below
the then par value (if any) of the shares issuable upon
4
<PAGE>
conversion of this Note, Borrower will take any corporate action which may,
in the opinion of its counsel (which may be counsel employed by Borrower),
be necessary in order that Borrower may validly and legally issue fully
paid and nonassessable shares of Common Stock at the Exercise Price as so
adjusted.
(g) At any such time as Common Stock is listed or quoted on any
national securities exchange or inter-dealer quotation system, Borrower
will, at its expense, obtain promptly and maintain the approval for listing
or quotation on each such exchange or inter-dealer quotation system, upon
official notice of issuance after notice of conversion of this Note, the
shares of Common Stock issuable hereunder and maintain the listing or
quotation of such shares after their issuance; and Borrower will also, upon
official notice of issuance after notice of conversion of this Note, list
or quote on such national securities exchange, will register under the
Securities Exchange Act of 1934, as amended, and will maintain such listing
or quotation of, any Other Securities (as defined below) that at any time
are issuable upon conversion of this Note, if and at the time that any
securities of the same class shall be listed or quoted on such national
securities exchange or inter-dealer quotation system by Borrower.
(h) The Exercise Rate is subject to adjustment from time to time upon
the occurrence of the events enumerated in this Section 3(h). For purposes
of this Section 3(h), "Common Stock" means the Common Stock and any other
stock of Borrower, however designated, issuable upon conversion of this
Note.
(i) Adjustment for Change in Capital Stock. If Borrower:
a. pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock;
b. subdivides its outstanding shares of Common Stock into a
greater number of shares;
c. combines its outstanding shares of Common Stock into a
smaller number of shares;
d. makes a distribution on its Common Stock in shares of
its capital stock other than Common Stock; or
e. issues by reclassification of its Common Stock any
shares of its capital stock,
then the Exercise Rate in effect immediately prior to such action
shall be proportionately adjusted so that the holder of this Note may
receive the aggregate number and kind of shares of capital stock of
Borrower which such holder would
5
<PAGE>
have owned immediately following such action if this Note had been
exercised immediately prior to such action or immediately prior to the
record date applicable thereto, if any.
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or
reclassification.
If, after an adjustment, a holder of this Note, upon conversion, may
receive shares of two or more classes of capital stock of Borrower, the
Exercise Rate of each class of capital stock shall thereafter be subject to
adjustment on terms comparable to those applicable to Common Stock in this
Section 3(h).
Such adjustment shall be made successively whenever any event listed
above shall occur.
(ii) Adjustment for Rights Issue or Sale of Common Stock Below Current
Market Value. If Borrower (i) distributes any rights, warrants or options
to all holders of its Common Stock entitling them to subscribe for or
purchase shares of Common Stock at a price per share less than 94% (100% if
a stand-by underwriter is used and charges Borrower a commission) of the
Current Market Value at the Time of Determination (each as defined in
Section 4) or (ii) sells any Common Stock or any securities convertible
into or exchangeable or exercisable for the Common Stock (other than
pursuant to (1) the exercise of this Note (or any other note issued by
Borrower pursuant to or in connection with that certain Merger and
Distribution Agreement dated of even date herewith among Lender Security
Capital Atlantic Incorporated ("Atlantic"), Security Capital Group
Incorporated ("SCG") and Homestead Village Properties Incorporated
("Homestead") or (2) upon exercise of outstanding warrants to acquire
shares of Common Stock, which warrants were issued pursuant to a Warrant
Agreement executed in connection with that certain Warrant Purchase
Agreement of even date herewith among Lender, Atlantic, SCG and Homestead
or (3) any security convertible into, or exchangeable or exercisable for,
the Common Stock as to which the issuance thereof has previously been the
subject of any required adjustment (whether or not actually made) pursuant
to this Section 3(h)) at a price per share less than the Current Market
Value, the Exercise Rate shall be adjusted in accordance with the formula:
E ' = E x (O + N)
---------------
(O + (N x P/M))
where:
E ' = the adjusted Exercise Rate;
6
<PAGE>
E = the current Exercise Rate;
O = the number of shares of Common Stock outstanding on the record date
for the distribution to which this subsection (ii) is being applied or
on the date of sale of Common Stock at a price per share less than the
Current Market Value to which this subsection (ii) applies, as the
case may be;
N = the number of additional shares of Common Stock issuable upon exercise
of all rights, warrants and options so distributed or the number of
shares of Common Stock so sold or the maximum stated number of shares
of Common Stock issuable upon the conversion, exchange or exercise of
any such convertible, exchangeable or exercisable securities, as the
case may be;
P = the offering price per share of the additional shares of Common Stock
upon the exercise of any such rights, options or warrants so
distributed or pursuant to any such convertible, exchangeable or
exercisable securities so sold or the sale price of the shares so
sold, as the case may be; and
M = the Current Market Value as of the Time of Determination or at the
time of sale, as the case may be.
The adjustment shall be made successively whenever any such rights,
warrants or options are issued and shall become effective immediately after
the record date for the determination of stockholders entitled to receive
the rights, warrants or options. If at the end of the period during which
such rights, warrants or options are exercisable, not all rights, warrants
or options shall have been exercised, the Exercise Rate shall be
immediately readjusted to what it would have been if "N" in the above
formula had been the number of shares actually issued.
No adjustment shall be made under this subsection (ii) if the
application of the formula stated above in this subsection (ii) would
result in a value of E ' that is lower than the value of E.
(iii) Adjustment for Other Distributions. If Borrower distributes to
all holders of its Common Stock any of its assets or debt securities or any
rights, warrants or options to purchase any of its debt securities or
assets, the Exercise Rate shall be adjusted in accordance with the formula:
E ' = E x M
---
M-F
7
<PAGE>
where:
E ' = the adjusted Exercise Rate;
E = the current Exercise Rate;
M = the Current Market Value; and
F = the fair market value (on the record date for the distribution to
which this subsection (iii) applies) of the assets, securities,
rights, warrants or options to be distributed in respect of each
share of Common Stock in the distribution to which this subsection
(iii) is being applied (including, in the case of cash dividends or
other cash distributions giving rise to an adjustment, all such
cash distributed concurrently).
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the
record date for the determination of stockholders entitled to receive the
distribution. If at the end of the period during which such rights,
warrants or options are exercisable, not all rights, warrants or options
shall have been exercised, the Exercise Rate shall be immediately
readjusted to what it would have been if such rights, warrants or options
which are not exercised had not been issued.
This subsection (iii) does not apply to cash dividends or cash
distributions paid out of consolidated retained earnings as shown on the
books of Borrower prepared in accordance with generally accepted accounting
principles other than any Extraordinary Cash Dividend (as defined below).
An "Extraordinary Cash Dividend" shall be that portion, if any, of the
aggregate amount of all cash dividends paid in any fiscal year which
exceeds the sum of (A) Borrower cumulative undistributed earnings on the
date of this Agreement, plus (B) the cumulative amount of earnings, as
determined by the Board of Directors, after such date, minus (C) the
cumulative amount of dividends accrued or paid in respect of the Common
Stock. In all cases, Borrower shall give the holder of this Note advance
notice of a record date for any dividend payment on the Common Stock which
notice is delivered on a date at least as early as the date of notice to
the holders of Common Stock.
(iv) Consideration Received. For purposes of any computation
respecting consideration received pursuant to subsection (ii) of Section
3(h), the following shall apply:
8
<PAGE>
a. in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided
that in no case shall any deduction be made for any commissions,
discounts or other expenses incurred by Borrower for any underwriting
of the issue or otherwise in connection therewith;
b. in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined in good faith by the Board of Directors (irrespective of
the accounting treatment thereof), whose determination shall be
conclusive, and described in a Board resolution which shall be filed
with the records of Borrower; and
c. in the case of the issuance of securities convertible into or
exchangeable for shares, the aggregate consideration received therefor
shall be deemed to be the consideration received by Borrower for the
issuance of such securities plus the additional minimum consideration,
if any, to be received by Borrower upon the conversion or exchange
thereof (the consideration in each case to be determined in the same
manner as provided in clauses (1) and (2) of this subsection).
(v) When De Minimis Adjustment May Be Deferred. No adjustment in the
Exercise Rate need be made unless the adjustment would require an increase
or decrease of at least 1% in the Exercise Rate. Any adjustments that are
not made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 3(h) shall be made to the
nearest 1/100th of a share.
(vi) When No Adjustment Required. No adjustment need be made for a
transaction referred to in subsections (i), (ii) or (iii) of this Section
3(h) if the holder of this Note is offered the opportunity to participate
in the transaction on a basis and with notice that the Board of Directors
determines to be fair and appropriate in light of the basis and notice on
which holders of Common Stock participate in the transaction. To the extent
this Note becomes convertible into cash, no adjustment need be made
thereafter as to the cash. Interest will not accrue on the cash.
(vii) Notice of Adjustment. Whenever the Exercise Rate is adjusted,
Borrower shall provide the notices required by Section 3(j) hereof.
(viii) Voluntary Adjustment. Borrower from time to time may, as the
Board of Directors deems appropriate, increase the Exercise Rate by any
amount
9
<PAGE>
for any period of time if the period is at least 20 days and if the
increase is irrevocable during the period. Whenever the Exercise Rate is
increased, Borrower shall mail to the holder of this Note a notice of the
increase. Borrower shall mail the notice at least 15 days before the date
the increased Exercise Rate takes effect. The notice shall state the
increased Exercise Rate and the period it will be in effect. An increase of
the Exercise Rate pursuant to this Section 3(h)(viii), other than an
increase which Borrower has irrevocably committed will be in effect for so
long as this Note is outstanding, does not change or adjust the Exercise
Rate otherwise in effect for purposes of subsections (i), (ii) or (iii) of
this Section 3(h).
(ix) Notice of Certain Transactions. If:
a. Borrower takes any action that would require an adjustment in
the Exercise Rate pursuant to subsections (i), (ii) or (iii) of this
Section 3(h) and if Borrower does not arrange for the holder of this
Note to participate pursuant to Section 3(h)(vi); or
b. there is a liquidation or dissolution of Borrower,
Borrower shall mail to the holder of this Note a notice stating the
proposed record date for a dividend or distribution or the proposed
effective date of a subdivision, combination, reclassification,
consolidation, merger, transfer, lease, liquidation or dissolution.
Borrower shall mail the notice at least 15 days before such date. Failure
to mail the notice or any defect in it shall not affect the validity of the
transaction.
(x) Reorganization of Borrower. If Borrower consolidates or merges
with or into, or transfers or leases all or substantially all its assets
to, any Person, upon consummation of such transaction this Note shall
automatically become exercisable for the kind and amount of securities,
cash or other assets which the holder of this Note would have owned
immediately after the consolidation, merger, transfer or lease if the
holder had exercised this Note immediately before the effective date of the
transaction. Concurrently with the consummation of such transaction, the
corporation formed by or surviving any such consolidation or merger if
other than Borrower, or the Person to which such sale or conveyance shall
have been made (any such Person, the "Successor Guarantor"), shall enter
into a supplemental Note so providing and further providing for adjustments
which shall be as nearly equivalent as may be practical to the adjustments
provided for in this Section 3(h). The Successor Guarantor shall mail to
the holder of this Note a notice describing the supplemental Note. If the
issuer of securities deliverable upon conversion of this Note under the
supplemental Note is an Affiliate of the formed, surviving, transferee or
lessee corporation, that
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issuer shall join in the supplemental Note. If this subsection (x)
applies, subsections (i), (ii) or (iii) of this Section 3(h) do not
apply.
(xi) Borrower Determination Final. Any determination that Borrower or
the Board of Directors must make pursuant to subsection (i), (ii),
(iii), (iv) or (vii) of this Section 3(h) is conclusive.
(xii) When Issuance or Payment May Be Deferred. In any case in which
this Section 3(h) shall require that an adjustment in the Exercise
Rate be made effective as of a record date for a specified event,
Borrower may elect to defer until the occurrence of such event (i)
issuing to the holder of this Note exercised after such record date
the shares of Common Stock and other capital stock of Borrower, if
any, issuable upon such conversion over and above the shares of Common
Stock and other capital stock of Borrower, if any, issuable upon such
conversion on the basis of the Exercise Rate and (ii) paying to such
holder any amount in cash in lieu of a fractional share pursuant to
Section 3(i) hereof; provided, however, that Borrower shall deliver to
such holder a due bill or other appropriate instrument evidencing such
holder's right to receive such additional shares of Common Stock,
other capital stock and cash upon the occurrence of the event
requiring such adjustment.
(xiii) Adjustments to Par Value. Borrower shall from time to time
make such adjustments to the par value of the Common Stock as may be
necessary so that at all times, upon conversion of this Note, the
shares of Common Stock will be fully paid and nonassessable.
(xiv) Priority of Adjustments. If this Section 3(h) requires
adjustments to the Exercise Rate under more than one of subsections
(i), (ii) or (iii), and the record dates for the distributions giving
rise to such adjustments shall occur on the same date, then such
adjustments shall be made by applying, first, the provisions of
subsection (i), second, the provisions of subsection (iii) and, third,
the provisions of subsection (ii).
(xv) Multiple Adjustments. After an adjustment to the Exercise Rate
under this Section 3(h), any subsequent event requiring an adjustment
under this Section 3(h) shall cause an adjustment to the Exercise Rate
as so adjusted.
(i) Fractional Interests; Accrued Interest. Borrower shall not be
required to issue fractional shares on the conversion of this Note. If
any fraction of a share would, except for the provisions of this
Section 3(i), be issuable on the conversion of this Note, Borrower
shall pay to the holder an amount in cash equal to the product of (i)
such fraction of a share and (ii) the Current Market Value of a share
of Common Stock as of the date of conversion of this Note. Upon any
conversion of all or any portion of the
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<PAGE>
Adjusted Principal Amount in accordance with the terms hereof, Borrower
shall pay to the holder in cash all accrued but unpaid interest to the
effective date of conversion with respect to the portion of the Adjusted
Principal Amount of this Note being converted.
(j) Notices to Holder. Upon any adjustment of the Exercise Rate
pursuant to Section 3(h) hereof, Borrower shall promptly thereafter (i)
cause to be prepared a certificate of a firm of independent public
accountants of recognized standing selected by Borrower (who may be the
regular auditors of Borrower) setting forth the Exercise Rate after such
adjustment and setting forth in reasonable detail the method of calculation
and the facts upon which such calculations are based and setting forth the
number of shares (or portion thereof) issuable after such adjustment in the
Exercise Rate, upon conversion of this Note, which certificate shall be
conclusive evidence of the correctness of the matters set forth therein,
and (ii) cause to be given to the holder of this Note at such holder's
address appearing on the Note register written notice of such adjustments
by first-class mail, postage prepaid. Where appropriate, such notice may be
given in advance and included as a part of the notice required to be mailed
under the other provisions of this Section 3(j).
In the event:
(i) Borrower shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for
or purchase shares of Common Stock or of any other subscription rights
or warrants (other than rights, options or warrants issued to all
holders of its Common Stock entitling them to subscribe for or
purchase shares of Common Stock at a price per share not less than 94%
(100% if a stand-by underwriter is used and charges Borrower
commission) of the Current Market Value); or
(ii) Borrower shall authorize the distribution to all holders of
shares of Common Stock of evidences of its indebtedness or assets
(other than cash dividends or cash distributions payable out of
consolidated earnings or earned surplus or dividends payable in shares
of Common Stock or distributions referred to in subsection (i) of
Section 3(h) hereof); or
(iii) of any consolidation or merger to which Borrower is a
party or of the conveyance or transfer of the properties and assets of
Borrower substantially as an entirety, or of any reclassification or
change of Common Stock issuable upon conversion of this Note (other
than a change in par value, or from par value to no par value, or from
no par value to par value, or as a result of a subdivision or
combination), or a tender offer or exchange offer for shares of Common
Stock; or
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<PAGE>
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of Borrower; or
(v) Borrower proposes to take any action (other than actions of
the character described in Section 3(h)(i) which would require an
adjustment of the Exercise Rate pursuant to Section 3(h);
then Borrower shall cause to be given to the registered holder of this Note
at its address appearing on the Note register, at least 20 days (or 15 days
in any case specified in clauses (i) or (ii) above) prior to the applicable
record date hereinafter specified, or promptly in the case of events for
which there is no record date, by first-class mail, postage prepaid, a
written notice stating (i) the date as of which the holders of record of
shares of Common Stock to be entitled to receive any such rights, options,
warrants or distribution are to be determined, or (ii) the initial
expiration date set forth in any tender offer or exchange offer for shares
of Common Stock, or (iii) the date on which any such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding up is expected to become effective or consummated, and the date as
of which it is expected that holders of record of shares of Common Stock
shall be entitled to exchange such shares for securities or other property,
if any, deliverable upon such reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up. The failure
to give the notice required by this Section 3(j) or any defect therein
shall not affect the legality or validity of any distribution, right,
option, warrant, reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up, or the vote upon any
action.
Nothing contained in this Note shall be construed as conferring upon
the holder hereof the right to vote or to consent or to receive notice as
shareholders in respect of the meetings of shareholders or the election of
directors of Borrower or any other matter, or any rights whatsoever as
shareholders of Borrower.
4. Definitions. For purposes of Section 3 of this Note, the following
terms shall have the meanings indicated:
"Affiliate" means, with respect to another Person, any Person directly
or indirectly controlling or controlled by or under direct or indirect
common control with such other Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlled by"
and "under common control with"), when used with respect to any Person,
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities,
by contract or otherwise.
"Board of Directors" means the Board of Directors of Borrower.
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<PAGE>
"Business Day" shall mean any day other than a Saturday or a Sunday or
a day on which commercial banking institutions in The City of New York are
authorized by law to be closed.
"Current Market Value" per share of Common Stock or of any other
security at any date shall be the average of the daily market price, for
the twenty (20) consecutive trading days immediately preceding the day of
such determination. The market price for each such trading day shall be:
(i) the last reported sales price, regular way on such day, or, if no sale
takes place on such day, the average of the reported closing bid and asked
prices on such day, regular way, in either case as reported on the New York
Stock Exchange ("NYSE") or, (ii) if such security is not listed or admitted
for trading on the NYSE, on the principal national securities exchange on
which such security is listed or admitted for trading or, (iii) if not
listed or admitted for trading on any national securities exchange, on the
National Market System of the National Association of Securities Dealers,
Inc. Automated Quotations System ("NASDAQ") or, (iv) if such security is
not quoted on such National Market System, the average of the closing bid
and asked prices on such day in the over-the-counter market as reported by
NASDAQ or, (v) if bid and asked prices for such security on such day shall
not have been reported through NASDAQ, the average of the bid and asked
prices on such day as furnished by any NYSE member firm regularly making a
market in such security selected for such purpose by the Chairman of the
Board or the Board of Directors or, (vi) if such bid and asked prices are
not so furnished, then the fair market value of the security as established
by the Board of Directors acting in their good faith reasonable judgment.
"Other Securities" means any stock (other than Common Stock) and other
securities of Borrower or any other Person (corporate or otherwise) which
the holder of this Note at any time shall be entitled to receive, or shall
have received, upon the conversion of this Note, in lieu of or in addition
to Common Stock, or which at any time shall be issuable or shall have been
issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 3(h) hereof or otherwise.
"Person" means any individual, corporation, partnership, joint
venture, trust, estate, unincorporated organization or government or any
agency or political subdivision thereof.
"Time of Determination" means the time and date of the earlier of (i)
the determination of stockholders entitled to receive rights, warrants, or
options or a distribution, in each case, to which Sections 3(h)(ii) or
(iii) apply and (ii) the time ("Ex-Dividend Time") immediately prior to the
commencement of "ex-dividend" trading for such rights, warrants or
distribution on such national or regional exchange or market on which the
Common Stock is then listed or quoted.
5. Call Option.
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<PAGE>
Except as expressly set forth in this Section 5, Borrower is prohibited
from making any voluntary prepayment of this Note and shall not have any right
to cause the holder to convert any portion of the Adjusted Principal Amount
outstanding from time to time. From and after the fifth anniversary of the date
of this Note and on or prior to the Due Date, Borrower shall have the right (the
"Call Option") to repay the Adjusted Principal Amount then outstanding, in whole
but not in part, without premium or penalty (other than the imposition, if
applicable, of the Default Rate or "late charge" as provided herein). Borrower
may exercise the Call Option by giving the holder of this Note at any time upon
ninety (90) days' prior written notice of Borrower's intention to exercise the
Call Option, which notice shall state the date on which the Call Option is to be
consummated, the then current Adjusted Principal Amount and all accrued interest
and unpaid interest thereon, together with any other sums evidenced by this
Note, to be paid on such date. Upon the receipt of any such notice, the holder
shall have the right at any time prior to the date proposed for such repurchase
to convert any or all of the Adjusted Principal Amount of this Note in
accordance with the provisions of Section 3.
6. Default.
In the event that any one or more of the following events occur, this Note
shall become immediately due and payable at the option of Lender:
(a) Borrower or the Partnership, as applicable, shall fail to pay
when due any sums required to be paid under this Note or any other Loan
Documents, and such failure is not cured within 10 days after receipt of
written notice from Lender.
(b) To the extent any such failure, breach or inaccuracy has a
Material Adverse Effect (as hereinafter defined), the failure by Borrower
or the Partnership to perform or observe, as and when required, any
covenant, agreement, obligation or condition required to be performed or
observed under this Note or any other Loan Documents, or the existence of
any breach or inaccuracy in any of the representations, covenants or
warranties set forth in the Loan Documents, provided, however, that (i) no
default shall exist hereunder on account of a breach of any representation,
covenant or warranty set forth in the Loan Documents (other than this Note)
until either Borrower or Partnership, as applicable, shall have failed to
cure such breach within any applicable notice and cure period therein
provided; and (ii) no default shall exist hereunder on account of a breach
of any representation, covenant or warranty set forth herein unless and
until Lender shall provide written notice of such breach to Borrower, and
Borrower shall fail to cure the same within 30 days after receipt of such
notice, provided if such breach is of such a nature that it cannot be cured
within such 30 day period, it shall not constitute a default hereunder so
long as Borrower commences its cure of such breach within such 30 day
period and thereafter diligently and continuously proceeds with the curing
of same within a reasonable period of time not to exceed 180 days.
"Material Adverse Effect" means any material and adverse effect on the
business, operations,
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<PAGE>
properties, assets, condition (financial or other), results of operations
or prospects of Borrower and its affiliates, subsidiaries and any parent
entity, taken as a whole.
7. Default Rate; Late Charge.
Upon the maturity of any portion of this Note, whether by acceleration or
otherwise, Borrower further promises to pay interest at the rate per annum equal
to the sum of 2.0%, plus the Interest Rate, on the then outstanding past-due
amount of principal, until such amount is paid in full. In addition, a late
charge of four percent (4%) of the amount of any installment or the amount due
on the Due Date which is not paid when due shall be due and payable to the
holder of this Note to cover the extra expense involved in handling delinquent
payments. Said "late charge" shall be due and payable upon demand of the Lender.
8. Security; Governing Law.
(a) This Note evidences indebtedness incurred for the purpose of
financing the acquisition and development of real property, and payment of
this Note is secured by the Loan Documents. It is agreed that, at the
election of the holder hereof, the principal sum remaining unpaid hereon,
together with accrued interest thereon, shall become at once due and
payable at the place of payment aforesaid in the event that a default has
occurred under any of the Loan Documents.
(b) This Note shall be governed by, and construed in accordance with,
the laws of the State of New Mexico, United States.
9. Controlling General Provisions.
The provisions in this Section 9 shall govern and control over any
irreconcilably inconsistent provision, the Loan Documents or any other
instrument contemplated hereunder or thereunder. In no event shall the aggregate
of all interest paid or payable by Borrower to Lender ever exceed the maximum
rate of interest which may lawfully be charged to (or payable by) Borrower under
applicable law on the Adjusted Principal Amount of this Note from time to time
remaining unpaid. In this connection, it is expressly stipulated and agreed that
it is the intent of Lender and Borrower in the execution and delivery of this
Note to contract in strict compliance with any applicable usury laws. In
furtherance of the foregoing, none of the terms of the Loan Documents or any
such other instruments contemplated hereunder or thereunder shall ever be
construed to create a contract to charge or pay for interest in excess of the
maximum interest rate permitted to be contracted for, charged to, or payable by
Borrower under applicable law. Borrower and any guarantors, endorsers or other
parties now or hereafter becoming liable for payment of this Note shall never be
liable for interest in excess of the maximum interest that may be lawfully
charged under applicable law, and the provisions of this Section 9 shall govern
over all other provisions of the Loan Documents, and any other
16
<PAGE>
instruments evidencing or securing the Loan, should such provisions be in
apparent conflict herewith.
Specifically and without limiting the generality of the foregoing
paragraph, it is expressly agreed that:
(a) In the event of the payment of the principal of the Adjusted
Principal Amount of this Note, prior to the due date for payment
thereof, resulting from acceleration of maturity of this Note, if the
aggregate amounts of interest accruing hereunder prior to such payment
plus the amount of any interest accruing after such maturity up to the
date of payment and plus any other amounts paid or accrued in
connection with the Loan Documents, including, if applicable, all or
any portion of the value of any Common Stock issued to Lender under
Section 3 of this Note, and any adjustment to the principal amount
outstanding hereunder from time to time pursuant to Section 1, which
by law are deemed interest under such Loan Documents and which
aggregate amounts paid or accrued (if calculated in accordance with
the provisions of this Note other than pursuant to this Section 9)
would exceed the maximum lawful rate of interest which could be
charged on the principal balance of this Note from the date hereof to
the date of final payment thereof, then in such event the amount of
such excess shall be credited, as of the date paid, toward the payment
of principal of this Note so as to reduce the amount of the final
payments of Adjusted Principal Amount due on this Note;
(b) If under any circumstances the aggregate amounts paid under
the Loan Documents prior to and incident to the final payment hereof,
including, without limitation, if applicable, all or any portion of
the value of any Common Stock issued to Lender under Section 3 of this
Note, include amounts which by applicable law are deemed interest and
which would exceed the maximum amount of interest which could lawfully
have been charged or collected on this Note, Borrower stipulates that
such payment and collection will have been and will be deemed to have
been the result of a mathematical error on the part of both Borrower
and Lender, and Lender shall promptly refund the amount of such excess
(to the extent only of the excess of such payments above the maximum
amount which could lawfully have been collected and retained) upon the
discovery of such error by the party receiving such payment or notice
thereof from the party making such payment; and
(c) All calculations as to the rate of interest contracted for,
charged or received under this Note or the other Loan Document which
are made for the purposes of determining whether such rate exceeds the
maximum rate of interest which may lawfully be charged shall be made,
to the extent permitted by applicable usury laws, if any, by
amortizing, prorating, allocating and spreading,
17
<PAGE>
in equal parts, during the period of the full stated term of the Loan
evidenced hereby, all interest any time contracted for, charged or
received from Borrower or otherwise by Lender in connection with such
indebtedness.
Notwithstanding anything contained in this Note or the other Loan Documents
to the contrary, interest under this Note shall never exceed the lesser of (1)
the highest non-usurious rate allowed by applicable law or (2) seventeen percent
(17%) per annum on a compounded basis.
10. Invalidity.
The parties hereto intend and believe that each provision of this Note
comports with all applicable laws and judicial decisions. However, if any
provision or provisions, or if any portion of any provision or provision, in
this Note is found by a court of law to be in violation of any applicable
ordinance, statute, law, administrative or judicial decision, or public policy,
and if such court should declare such portion, provision or provisions of this
Note to be illegal, invalid, void or unenforceable as written, then it is the
intent of all parties hereto (i) that such portion, provision or provisions
shall be given force to the fullest possible extent that they are legal, valid
and enforceable, (ii) that the remainder of this Note shall be construed as if
such illegal, invalid, void or unenforceable portion, provision or provisions
were not contained therein, and (iii) that the rights, obligations and interest
of Borrower and the holder hereof under the remainder of this Note shall
continue in full force and effect.
11. Waiver; Expenses.
(a) Borrower hereby waives presentment, demand for payment, notice of
dishonor and all other notices or demands in connection with the delivery,
acceptance, performance, default or enforcement of this Note and hereby
consents to and extensions of time, renewals, waivers or modifications that
may be granted or consented to by the holder of this Note in respect of the
time of payment or any other provision of this Note. Borrower hereby waives
and renounces for itself, its successors and assigns, all rights to the
benefits of any statute of limitations and any moratorium, reinstatement,
marshalling, forbearance, valuation, stay, extension, redemption,
appraisement, or exemption now provided, or which may hereafter be
provided, by the Constitution and laws of the United States and of any
state thereof, both as to itself and in and to all of its property, real
and personal against the enforcement and collection of the obligations
evidenced by this Note.
(b) In the event that the holder hereof shall institute any action
for the enforcement of the collection of this Note, there shall be
immediately due from Borrower in addition to the unpaid interest and
principal, all costs and expenses of such action, including but not limited
to attorneys' fees and expenses.
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<PAGE>
12. Miscellaneous.
(a) This Note and all provision hereof shall be binding upon Borrower
and its successors and assigns and shall inure to the benefit of Lender,
together with its successors and assigns, including each owner and holder
from time to time of this Note.
(b) Time is of the essence as to all dates set forth herein subject
to any applicable grace or cure period expressly provided herein or the in
the Loan Documents; provided, however, that unless otherwise stated,
whenever any payment to be made under this Note shall be stated to be due
on a day other than a business day, such payment may be made on the
immediately preceding business day. For purposes of this Note, a business
day shall be any day that is not a Saturday, Sunday or national bank
holiday.
(c) All notices, demands or requests relating to any matters set
forth herein shall be in writing and delivered as set forth, and shall be
effective in the time set forth, in the Funding Agreement.
(d) Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
THE PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS
HEREIN PROVIDED FOR.
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<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Note as of the date set
forth above.
PTR HOMESTEAD VILLAGE INCORPORATED
By:/s/ David C. Dressler, Jr.
---------------------------------
Name: David C. Dressler, Jr.
Title: Managing Director
Address: 125 Lincoln Avenue
Santa Fe, New Mexico 87501
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<PAGE>
EXHIBIT A
Form of Exercise Notice
(To Be Executed Upon Conversion of Note)
The undersigned hereby irrevocably elects to convert the entire outstanding
principal amount of the Note (currently $__________) into __________ shares of
Common Stock in accordance with the terms thereof. The undersigned requests that
a certificate for such shares be registered in the name of ________________,
whose address is _____________________ and that such shares be delivered to
________________________ whose address is __________________.
Date:____________________
_________________________
Name:____________________
Title:___________________
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<PAGE>
AMENDED AND RESTATED PROMISSORY NOTE Exhibit 4.4
$79,290,895 May 28, 1996
This Amended and Restated Promissory Note (this "Note") is made and
delivered as of May 28, 1996, to Security Capital Pacific Trust, a Maryland real
estate investment trust ("Lender"), by PTR Homestead Village Limited
Partnership, a Delaware limited partnership ("Borrower"), under the following
circumstances:
RECITALS
A. Prior to the date hereof, Lender agreed to make a loan (the
"Partnership Loan") to Borrower, to fund, among other matters, acquisition and
construction costs and expenses incurred by the Partnership in connection with
acquiring and developing various real properties as Homestead Village projects.
In connection therewith Borrower delivered to Lender that certain promissory
note (the "Prior Partnership Note") dated January 24, 1996, in the original
principal amount of $63,314,441, and various deeds of trust and mortgages (the
"Prior Partnership Security Documents"), to secure payment of the Prior
Corporate Note (as defined below) and the Prior Partnership Note. (The Prior
Partnership Note, the Prior Partnership Security Documents and all other
instruments delivered by the Partnership in connection therewith to secure the
Prior Partnership Note and the Prior Corporate Note are herein called the "Prior
Partnership Loan Documents".)
B. Prior to the date hereof, Lender agreed to make a loan (the "Corporate
Loan") to PTR Homestead Village Partnership Incorporated (the "Corporate
Borrower"), to fund, among other matters, acquisition and construction costs and
expenses incurred by the Corporate Borrower in connection with acquiring and
developing various real properties as Homestead Village projects. In connection
therewith the Corporate Borrower delivered to Lender that certain promissory
note (the "Prior Corporate Note") dated January 24, 1996, in the original
principal amount of $84,850,391, and various deeds of trust and mortgages (the
"Prior Corporate Security Documents"), to secure payment of the Prior Corporate
Note and the Prior Partnership Note. (The Prior Corporate Note, the Prior
Corporate Security Documents and all other instruments delivered by the
Corporate Borrower in connection therewith to secure the Prior Corporate Note
and the Prior Partnership Note are herein called the "Prior Corporate Loan
Documents"; the Prior Corporate Loan Documents and Prior Partnership Loan
Documents are collectively referred to herein as the "Prior Loan Documents".)
C. Borrower, the Corporate Borrower and Lender desire to continue the
funding provided for under the Prior Loan Documents, to provide funds to
Borrower and the Corporate Borrower for the costs incurred in connection with
the acquisition and development of Homestead Village projects. In furtherance of
the foregoing, Borrower, the Corporate Borrower
<PAGE>
and Lender have agreed that (i) the maximum amount of the Corporate Loan shall
be $127,602,594 (the "Maximum Corporate Loan Amount"); (ii) the Corporate
Borrower's repayment obligation for funds advanced in respect of the Corporate
Loan, as evidenced by that certain Amended and Restated Promissory Note, of even
date herewith (the "Corporate Note"), shall be adjusted by a premium factor of
1.113164866782 (the "Premium Factor"), thus providing for the maximum face
amount of the Corporate Note of $142,042,725 (i.e., the Maximum Corporate Loan
Amount as adjusted by the Premium Factor); (iii) the maximum amount of the
Partnership Loan shall be $71,230,145 (the "Maximum Partnership Loan Amount");
(ii) the Partnership's repayment obligation for funds advanced in respect of the
Partnership Loan shall be adjusted by the Premium Factor, thus providing for the
maximum face amount this Note of $79,290,895 (i.e., the Maximum Partnership Loan
Amount as adjusted by the Premium Factor); and (iv) in connection therewith, the
Prior Loan Documents shall be amended and restated in conformity with the
foregoing and as otherwise agreed by the parties. (The Corporate Loan and the
Partnership Loan are herein collectively called the "Loans". The amended and
restated Prior Loan Documents being executed and delivered contemporaneously
herewith, and any and all other agreements or instruments now or hereafter
executed by Borrower, the Corporate Borrower or any other person or entity to
evidence, or in connection with, or as security for the payment of this Note
and/or the Corporate Note are herein collectively, with such notes, referred to
as the "Loan Documents".)
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender agree to amend and restate the Prior
Partnership Note as follows:
1. Promise to Pay.
On or before October 31, 2006 (the "Due Date"), the undersigned Borrower,
hereby promises to pay to the order of Lender in lawful money of the United
States of America, the lesser of (A) SEVENTY NINE MILLION TWO HUNDRED NINETY
THOUSAND EIGHT HUNDRED NINETY FIVE DOLLARS ($79,290,895) and (B) the aggregate
unpaid principal amount of all advances made by Lender to Borrower in respect of
the Partnership Loan, multiplied by the Premium Factor (the amount so determined
being herein called the "Adjusted Principal Amount"), together with interest on
the Adjusted Principal Amount at a rate equal to 9.0% (the "Interest Rate").
Interest shall be calculated on the basis of a 360-day year and shall be
computed on the actual number of days elapsed.
2. Payments.
Accrued interest on the unpaid Adjusted Principal Amount shall be payable
in arrears every six months beginning with the date that is six months after the
date of this Note, in an amount equal to all of the interest accrued during the
immediately preceding six month period. Borrower shall make a payment of the
total Adjusted Principal Amount then outstanding, together with accrued and
unpaid interest to such date, on the Due Date. Borrower shall have
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<PAGE>
no obligation to pay the Adjusted Principal Amount, or any portion thereof,
until the Due Date or such earlier date upon which the loan is accelerated.
Borrower shall make each payment hereunder not later than 11:00 a.m. (Mountain
Standard Time) on the day when due in U.S. dollars at Lender's office at 7777
Market Center Avenue, El Paso, Texas 79912. Each payment shall first be applied
to late charges, costs of collection or enforcement and other similar amounts
due, if any, under this Note, then to interest due and payable hereunder and the
remainder to the Adjusted Principal Amount due and payable hereunder. The
aggregate unpaid Adjusted Principal Amount shown on the records of Lender shall
be rebuttable presumptive evidence of the Adjusted Principal Amount owing and
unpaid on this Note.
3. Conversion. Subject to the terms of this Note, the holder of this Note
shall have the right, beginning on any Business Day (as defined below) on or
after March 31, 1997 (the "Exercisability Date") and on or prior to the date on
which this Note is fully paid, to convert to shares of Common Stock all or any
portion of the Adjusted Principal Amount outstanding on this Note, on the basis
of one fully paid, registered and nonassessable share of common stock $0.01 par
value per share (the "Common Stock"), of the Corporate Borrower, for each $11.50
aggregate Adjusted Principal Amount outstanding on this Note. The number of
shares of Common Stock into which this Note may be converted, as adjusted
pursuant hereto, is referred to herein as the "Exercise Rate". For purposes of
this Note, certain capitalized terms used below are defined in Section 4 of this
Note.
(a) The conversion rights under this Section 3 of this Note may be
exercised from time to time on and after the Exercisability Date and on or
prior to the Due Date by surrendering this Note at the principal office of
Borrower with the form of conversion election set forth as Exhibit A hereto
(the "Conversion Exercise") duly completed and signed by the holder of this
Note.
(b) Except as otherwise provided in Section 3(h)(vi) no payment shall
be made on Common Stock issuable upon conversion of this Note on account of
any dividend or distribution declared on the Corporate Borrower's Common
Stock to holders of such Common Stock of record as of a date prior to the
Exercise Date.
(c) The "Exercise Date" shall be the date when all of the items
referred to in subsection (a) of this Section 3 are received by Borrower at
or prior to 2:00 p.m., New York, New York time, on a Business Day and the
conversion of this Note will be effective as of such Exercise Date. If any
items referred to in subsection (a) are received after 2:00 p.m., New York,
New York time, on a Business Day, the conversion of this Note will be
effective on the next succeeding Business Day. Notwithstanding the
foregoing, in the case of a conversion of this Note on the Expiration Date,
if all of the items referred to in the preceding paragraph are received by
Borrower at or prior to 5:00 p.m. New York, New York time, on such
Expiration Date, the conversion of this Note will be effective on the
Expiration Date.
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<PAGE>
(d) Upon the conversion of this Note in accordance with the terms
hereof the Corporate Borrower shall issue and cause to be delivered with
all reasonable dispatch to or upon the written order of the holder of this
Note, a certificate or certificates for the number of full shares of Common
Stock issuable upon the conversion of this Note, in fully registered form,
registered in such name or names as may be directed by such holder pursuant
to the Conversion Exercise, together with cash as provided in Section 3(i)
hereof and shall deliver to holder a duly executed replacement note
representing the aggregate principal amount of this Note outstanding less
any amount previously converted (in each case, without the adjustment
provided for in Section 1 of this Note), but otherwise in the same form as
this Note; provided, however, that if any consolidation, merger or lease or
sale of assets is proposed to be effected by the Corporate Borrower as
described in Section 3(h)(x) hereof, or a tender offer or an exchange offer
for shares of Common Stock of the Corporate Borrower shall be made, upon
such surrender of this Note as aforesaid, the Corporate Borrower shall, as
soon as possible, but in any event not later than two Business Days
thereafter, issue and cause to be delivered the full number of shares of
Common Stock issuable upon the conversion of this Note in the manner
described in this sentence together with cash as provided in Section 3(i)
hereof. Such certificate or certificates shall be deemed to have been
issued and any person so designated to be named therein shall be deemed to
have become a holder of record or such shares of Common Stock as of the
date of the surrender of this Note. No fractional shares shall be issued
upon conversion of this Note in accordance with Section 3(i) hereof.
(e) Borrower will pay all documentary stamp taxes attributable to the
initial issuance of this Note and the issuance of shares of Common Stock
upon conversion of this Note; provided, however, that Borrower shall not be
required to pay any tax or taxes which may be payable in respect of any
transfer involved in the issuance of this Note or any certificates for
shares of Common Stock in a name other than that of the registered holder
of this Note surrendered upon the exercise hereof, and Borrower shall not
be required to issue or deliver such Note unless or until the person or
persons requesting the issuance thereof shall have paid to Borrower the
amount of such tax or shall have established to the satisfaction of
Borrower that such tax has been paid.
(f) The Corporate Borrower will at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its
authorized but unissued shares of Common Stock, for the purpose of enabling
it to satisfy any obligation to issue shares of Common Stock upon
conversion of this Note, the maximum number of shares of Common Stock which
may then be deliverable upon the conversion of this Note. The Corporate
Borrower or the transfer agent for the Common Stock (the "Transfer Agent")
and every subsequent transfer agent for any shares of the Corporate
Borrower's capital stock issuable upon the exercise of any of the
conversion rights aforesaid will be irrevocably authorized and directed at
all times to reserve such number of authorized shares as shall be required
for such purpose. Before taking any action which would
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<PAGE>
cause an adjustment pursuant to this Section 3 to reduce the Exercise Price
below the then par value (if any) of the shares issuable upon conversion of
this Note, the Corporate Borrower will take any corporate action which may,
in the opinion of its counsel (which may be counsel employed by the
Corporate Borrower), be necessary in order that the Corporate Borrower may
validly and legally issue fully paid and nonassessable shares of Common
Stock at the Exercise Price as so adjusted.
(g) At any such time as Common Stock is listed or quoted on any
national securities exchange or inter-dealer quotation system, the
Corporate Borrower will, at its expense, obtain promptly and maintain the
approval for listing or quotation on each such exchange or inter-dealer
quotation system, upon official notice of issuance after notice of
conversion of this Note, the shares of Common Stock issuable hereunder and
maintain the listing or quotation of such shares after their issuance; and
the Corporate Borrower will also, upon official notice of issuance after
notice of conversion of this Note, list or quote on such national
securities exchange, will register under the Securities Exchange Act of
1934, as amended, and will maintain such listing or quotation of, any Other
Securities (as defined below) that at any time are issuable upon conversion
of this Note, if and at the time that any securities of the same class
shall be listed or quoted on such national securities exchange or inter-
dealer quotation system by the Corporate Borrower.
(h) The Exercise Rate is subject to adjustment from time to time upon
the occurrence of the events enumerated in this Section 3(h). For purposes
of this Section 3(h), "Common Stock" means the Common Stock and any other
stock of the Corporate Borrower, however designated, issuable upon
conversion of this Note.
(i) Adjustment for Change in Capital Stock. If the Corporate
Borrower:
a. pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock;
b. subdivides its outstanding shares of Common Stock
into a greater number of shares;
c. combines its outstanding shares of Common Stock into
a smaller number of shares;
d. makes a distribution on its Common Stock in shares of
its capital stock other than Common Stock; or
e. issues by reclassification of its Common Stock any
shares of its capital stock,
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<PAGE>
then the Exercise Rate in effect immediately prior to such action
shall be proportionately adjusted so that the holder of this Note may
receive the aggregate number and kind of shares of capital stock of
the Corporate Borrower which such holder would have owned immediately
following such action if this Note had been exercised immediately
prior to such action or immediately prior to the record date
applicable thereto, if any.
The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution and immediately
after the effective date in the case of a subdivision, combination or
reclassification.
If, after an adjustment, a holder of this Note, upon conversion,
may receive shares of two or more classes of capital stock of the
Corporate Borrower, the Exercise Rate of each class of capital stock
shall thereafter be subject to adjustment on terms comparable to those
applicable to Common Stock in this Section 3(h).
Such adjustment shall be made successively whenever any event
listed above shall occur.
(ii) Adjustment for Rights Issue or Sale of Common Stock Below
Current Market Value. If the Corporate Borrower (i) distributes any
rights, warrants or options to all holders of its Common Stock
entitling them to subscribe for or purchase shares of Common Stock at
a price per share less than 94% (100% if a stand-by underwriter is
used and charges the Corporate Borrower a commission) of the Current
Market Value at the Time of Determination (each as defined in Section
4) or (ii) sells any Common Stock or any securities convertible into
or exchangeable or exercisable for the Common Stock (other than
pursuant to (1) the exercise of this Note (or any other note issued by
the Corporate Borrower or one of its subsidiaries pursuant to or in
connection with that certain Merger and Distribution Agreement dated
of even date herewith among Lender Security Capital Atlantic
Incorporated ("Atlantic"), Security Capital Group Incorporated ("SCG")
and Homestead Village Properties Incorporated ("Homestead") or (2)
upon exercise of outstanding warrants to acquire shares of Common
Stock, which warrants were issued pursuant to a Warrant Agreement
executed in connection with that certain Warrant Purchase Agreement of
even date herewith among Lender, Atlantic, SCG and Homestead or (3)
any security convertible into, or exchangeable or exercisable for, the
Common Stock as to which the issuance thereof has previously been the
subject of any required adjustment (whether or not actually made)
pursuant to this Section 3(h)) at a price per share less than the
Current Market Value, the Exercise Rate shall be adjusted in
accordance with the formula:
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<PAGE>
E' = E x (O + N)
------------------
(O + (N x P/M))
where:
E' = the adjusted Exercise Rate;
E = the current Exercise Rate;
O = the number of shares of Common Stock outstanding on the record
date for the distribution to which this subsection (ii) is being
applied or on the date of sale of Common Stock at a price per
share less than the Current Market Value to which this subsection
(ii) applies, as the case may be;
N = the number of additional shares of Common Stock issuable upon
exercise of all rights, warrants and options so distributed or
the number of shares of Common Stock so sold or the maximum
stated number of shares of Common Stock issuable upon the
conversion, exchange or exercise of any such convertible,
exchangeable or exercisable securities, as the case may be;
P = the offering price per share of the additional shares of Common
Stock upon the exercise of any such rights, options or warrants
so distributed or pursuant to any such convertible, exchangeable
or exercisable securities so sold or the sale price of the shares
so sold, as the case may be; and
M = the Current Market Value as of the Time of Determination or at
the time of sale, as the case may be.
The adjustment shall be made successively whenever any such
rights, warrants or options are issued and shall become effective
immediately after the record date for the determination of
stockholders entitled to receive the rights, warrants or options. If
at the end of the period during which such rights, warrants or options
are exercisable, not all rights, warrants or options shall have been
exercised, the Exercise Rate shall be immediately readjusted to what
it would have been if "N" in the above formula had been the number of
shares actually issued.
No adjustment shall be made under this subsection (ii) if the
application of the formula stated above in this subsection (ii) would
result in a value of E' that is lower than the value of E.
(iii) Adjustment for Other Distributions. If the Corporate
Borrower distributes to all holders of its Common Stock any of its
assets or debt securities
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<PAGE>
or any rights, warrants or options to purchase any of its debt
securities or assets, the Exercise Rate shall be adjusted in
accordance with the formula:
E' = E x M
---
M-F
where:
E' = the adjusted Exercise Rate;
E = the current Exercise Rate;
M = the Current Market Value; and
F = the fair market value (on the record date for the
distribution to which this subsection (iii) applies) of the
assets, securities, rights, warrants or options to be
distributed in respect of each share of Common Stock in the
distribution to which this subsection (iii) is being applied
(including, in the case of cash dividends or other cash
distributions giving rise to an adjustment, all such cash
distributed concurrently).
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the
record date for the determination of stockholders entitled to receive
the distribution. If at the end of the period during which such
rights, warrants or options are exercisable, not all rights, warrants
or options shall have been exercised, the Exercise Rate shall be
immediately readjusted to what it would have been if such rights,
warrants or options which are not exercised had not been issued.
This subsection (iii) does not apply to cash dividends or cash
distributions paid out of consolidated retained earnings as shown on
the books of the Corporate Borrower prepared in accordance with
generally accepted accounting principles other than any Extraordinary
Cash Dividend (as defined below). An "Extraordinary Cash Dividend"
shall be that portion, if any, of the aggregate amount of all cash
dividends paid in any fiscal year which exceeds the sum of (A) the
Corporate Borrower's cumulative undistributed earnings on the date of
this Agreement, plus (B) the cumulative amount of earnings, as
determined by the Board of Directors, after such date, minus (C) the
cumulative amount of dividends accrued or paid in respect of the
Common Stock. In all cases, Borrower shall give the holder of this
Note advance notice of a record date for any dividend payment on the
Common Stock which notice is delivered on a date at least as early as
the date of notice to the holders of Common Stock.
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<PAGE>
(iv) Consideration Received. For purposes of any computation
respecting consideration received pursuant to subsection (ii) of
Section 3(h), the following shall apply:
a. in the case of the issuance of shares of Common Stock
for cash, the consideration shall be the amount of such cash,
provided that in no case shall any deduction be made for any
commissions, discounts or other expenses incurred by the
Corporate Borrower for any underwriting of the issue or otherwise
in connection therewith;
b. in the case of the issuance of shares of Common Stock
for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
market value thereof as determined in good faith by the Board of
Directors (irrespective of the accounting treatment thereof),
whose determination shall be conclusive, and described in a Board
resolution which shall be filed with the records of the Corporate
Borrower; and
c. in the case of the issuance of securities convertible
into or exchangeable for shares, the aggregate consideration
received therefor shall be deemed to be the consideration
received by the Corporate Borrower for the issuance of such
securities plus the additional minimum consideration, if any, to
be received by the Corporate Borrower upon the conversion or
exchange thereof (the consideration in each case to be determined
in the same manner as provided in clauses (1) and (2) of this
subsection).
(v) When De Minimis Adjustment May Be Deferred. No adjustment
in the Exercise Rate need be made unless the adjustment would require
an increase or decrease of at least 1% in the Exercise Rate. Any
adjustments that are not made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this
Section 3(h) shall be made to the nearest 1/100th of a share.
(vi) When No Adjustment Required. No adjustment need be made
for a transaction referred to in subsections (i), (ii) or (iii) of
this Section 3(h) if the holder of this Note is offered the
opportunity to participate in the transaction on a basis and with
notice that the Board of Directors determines to be fair and
appropriate in light of the basis and notice on which holders of
Common Stock participate in the transaction. To the extent this Note
becomes convertible into cash, no adjustment need be made thereafter
as to the cash. Interest will not accrue on the cash.
9
<PAGE>
(vii) Notice of Adjustment. Whenever the Exercise Rate is
adjusted, the Corporate Borrower shall provide the notices required by
Section 3(j) hereof.
(viii) Voluntary Adjustment. The Corporate Borrower from time
to time may, as the Board of Directors deems appropriate, increase the
Exercise Rate by any amount for any period of time if the period is at
least 20 days and if the increase is irrevocable during the period.
Whenever the Exercise Rate is increased, the Corporate Borrower shall
mail to the holder of this Note a notice of the increase. The
Corporate Borrower shall mail the notice at least 15 days before the
date the increased Exercise Rate takes effect. The notice shall state
the increased Exercise Rate and the period it will be in effect. An
increase of the Exercise Rate pursuant to this Section 3(h)(viii),
other than an increase which the Corporate Borrower has irrevocably
committed will be in effect for so long as any this Note is
outstanding, does not change or adjust the Exercise Rate otherwise in
effect for purposes of subsections (i), (ii) or (iii) of this Section
3(h).
(ix) Notice of Certain Transactions. If:
------------------------------
a. The Corporate Borrower takes any action that would
require an adjustment in the Exercise Rate pursuant to
subsections (i), (i) or (iii) of this Section 3(h) and if the
Corporate Borrower does not arrange for the holder of this Note
to participate pursuant to Section 3(h)(vi); or
b. there is a liquidation or dissolution of the Corporate
Borrower,
The Corporate Borrower shall mail to the holder of this Note a notice
stating the proposed record date for a dividend or distribution or the
proposed effective date of a subdivision, combination,
reclassification, consolidation, merger, transfer, lease, liquidation
or dissolution. The Corporate Borrower shall mail the notice at least
15 days before such date. Failure to mail the notice or any defect in
it shall not affect the validity of the transaction.
(x) Reorganization of the Corporate Borrower. If the Corporate
Borrower consolidates or merges with or into, or transfers or leases
all or substantially all its assets to, any Person, upon consummation
of such transaction this Note shall automatically become exercisable
for the kind and amount of securities, cash or other assets which the
holder of this Note would have owned immediately after the
consolidation, merger, transfer or lease if the holder had exercised
this Note immediately before the effective date of the transaction.
Concurrently with the consummation of such transaction, the
corporation formed by or surviving any such consolidation or merger if
other than the Corporate Borrower, or the Person to which such sale or
conveyance shall have been made
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<PAGE>
(any such Person, the "Successor Guarantor"), shall enter into a
supplemental Note so providing and further providing for adjustments
which shall be as nearly equivalent as may be practical to the
adjustments provided for in this Section 3(h). The Successor Guarantor
shall mail to the holder of this Note a notice describing the
supplemental Note. If the issuer of securities deliverable upon
conversion of this Note under the supplemental Note is an Affiliate of
the formed, surviving, transferee or lessee corporation, that issuer
shall join in the supplemental Note. If this subsection (x) applies,
subsections (i), (ii) or (iii) of this Section 3(h) do not apply.
(xi) Corporate Borrower Determination Final. Any determination
that the Corporate Borrower or the Board of Directors must make
pursuant to subsection (i), (ii), (iii), (iv) or (vii) of this Section
3(h) is conclusive.
(xii) When Issuance or Payment May Be Deferred. In any case in
which this Section 3(h) shall require that an adjustment in the
Exercise Rate be made effective as of a record date for a specified
event, the Corporate Borrower may elect to defer until the occurrence
of such event (i) issuing to the holder of this Note exercised after
such record date the shares of Common Stock and other capital stock of
the Corporate Borrower, if any, issuable upon such conversion over and
above the shares of Common Stock and other capital stock of the
Corporate Borrower, if any, issuable upon such conversion on the basis
of the Exercise Rate and (ii) paying to such holder any amount in cash
in lieu of a fractional share pursuant to Section 3(i) hereof;
provided, however, that the Corporate Borrower shall deliver to such
holder a due bill or other appropriate instrument evidencing such
holder's right to receive such additional shares of Common Stock,
other capital stock and cash upon the occurrence of the event
requiring such adjustment.
(xiii) Adjustments to Par Value. The Corporate Borrower shall
from time to time make such adjustments to the par value of the Common
Stock as may be necessary so that at all times, upon conversion of
this Note, the shares of Common Stock will be fully paid and
nonassessable.
(xiv) Priority of Adjustments. If this Section 3(h) requires
adjustments to the Exercise Rate under more than one of subsections
(i)(4), (ii) or (iii), and the record dates for the distributions
giving rise to such adjustments shall occur on the same date, then
such adjustments shall be made by applying, first, the provisions of
subsection (i), second, the provisions of subsection (iii) and, third,
the provisions of subsection (ii).
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<PAGE>
(xv) Multiple Adjustments. After an adjustment to the Exercise
Rate under this Section 3(h), any subsequent event requiring an
adjustment under this Section 3(h) shall cause an adjustment to the
Exercise Rate as so adjusted.
(i) Fractional Interests; Accrued Interest. The Corporate Borrower
shall not be required to issue fractional shares on the conversion of this
Note. If any fraction of a share would, except for the provisions of this
Section 3(i), be issuable on the conversion of this Note, the Corporate
Borrower shall pay to the holder an amount in cash equal to the product of
(i) such fraction of a share and (ii) the Current Market Value of a share
of Common Stock as of the date of conversion of this Note. Upon any
conversion of all or any portion of the Adjusted Principal Amount in
accordance with the terms hereof, Borrower shall pay to the holder in cash
all accrued but unpaid interest to the effective date of conversion with
respect to the portion of the Adjusted Principal Amount of this Note being
converted.
(j) Notices to Holder. Upon any adjustment of the Exercise Rate
pursuant to Section 3(h) hereof, the Corporate Borrower shall promptly
thereafter (i) cause to be prepared a certificate of a firm of independent
public accountants of recognized standing selected by the Corporate
Borrower (who may be the regular auditors of the Corporate Borrower)
setting forth the Exercise Rate after such adjustment and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculations are based and setting forth the number of shares (or portion
thereof) issuable after such adjustment in the Exercise Rate, upon
conversion of this Note, which certificate shall be conclusive evidence of
the correctness of the matters set forth therein, and (ii) cause to be
given to the holder of this Note at such holder's address appearing on the
Note register written notice of such adjustments by first-class mail,
postage prepaid. Where appropriate, such notice may be given in advance and
included as a part of the notice required to be mailed under the other
provisions of this Section 3(j).
In the event:
(i) The Corporate Borrower shall authorize the issuance to
all holders of shares of Common Stock of rights, options or warrants
to subscribe for or purchase shares of Common Stock or of any other
subscription rights or warrants (other than rights, options or
warrants issued to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per share
not less than 94% (100% if a stand-by underwriter is used and charges
the Corporate Borrower commission) of the Current Market Value); or
(ii) The Corporate Borrower shall authorize the distribution
to all holders of shares of Common Stock of evidences of its
indebtedness or assets (other than cash dividends or cash
distributions payable out of consolidated
12
<PAGE>
earnings or earned surplus or dividends payable in shares of Common
Stock or distributions referred to in subsection (i) of Section 3(h)
hereof); or
(iii) of any consolidation or merger to which the Corporate
Borrower is a party or of the conveyance or transfer of the properties
and assets of the Corporate Borrower substantially as an entirety, or
of any reclassification or change of Common Stock issuable upon
conversion of this Note (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), or a tender offer or exchange
offer for shares of Common Stock; or
(iv) of the voluntary or involuntary dissolution, liquidation
or winding up of the Corporate Borrower; or
(v) The Corporate Borrower proposes to take any action (other
than actions of the character described in Section 3(h)(i) which would
require an adjustment of the Exercise Rate pursuant to Section 3(h);
then the Corporate Borrower shall cause to be given to the registered
holder of this Note at its address appearing on the Note register, at least
20 days (or 15 days in any case specified in clauses (i) or (ii) above)
prior to the applicable record date hereinafter specified, or promptly in
the case of events for which there is no record date, by first-class mail,
postage prepaid, a written notice stating (i) the date as of which the
holders of record of shares of Common Stock to be entitled to receive any
such rights, options, warrants or distribution are to be determined, or
(ii) the initial expiration date set forth in any tender offer or exchange
offer for shares of Common Stock, or (iii) the date on which any such
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up is expected to become effective or consummated,
and the date as of which it is expected that holders of record of shares of
Common Stock shall be entitled to exchange such shares for securities or
other property, if any, deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding up. The failure to give the notice required by this Section 3(j) or
any defect therein shall not affect the legality or validity of any
distribution, right, option, warrant, reclassification, consolidation,
merger, conveyance, transfer, dissolution, liquidation or winding up, or
the vote upon any action.
Nothing contained in this Note shall be construed as conferring upon
the holder hereof the right to vote or to consent or to receive notice as
shareholders in respect of the meetings of shareholders or the election of
directors of the Corporate Borrower or any other matter, or any rights
whatsoever as shareholders of the Corporate Borrower.
4. Definitions. For purposes of this Note, the following terms shall
have the meanings indicated:
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"Affiliate" means, with respect to another Person, any Person directly
or indirectly controlling or controlled by or under direct or indirect
common control with such other Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlled by"
and "under common control with"), when used with respect to any Person,
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities,
by contract or otherwise.
"Board of Directors" means the Board of Directors of the Corporate
Borrower.
"Business Day" shall mean any day other than a Saturday or a Sunday or
a day on which commercial banking institutions in The City of New York are
authorized by law to be closed.
"Current Market Value" per share of Common Stock or of any other
security at any date shall be the average of the daily market price, for
the twenty (20) consecutive trading days immediately preceding the day of
such determination. The market price for each such trading day shall be:
(i) the last reported sales price, regular way on such day, or, if no sale
takes place on such day, the average of the reported closing bid and asked
prices on such day, regular way, in either case as reported on the New York
Stock Exchange ("NYSE") or, (ii) if such security is not listed or admitted
for trading on the NYSE, on the principal national securities exchange on
which such security is listed or admitted for trading or, (iii) if not
listed or admitted for trading on any national securities exchange, on the
National Market System of the National Association of Securities Dealers,
Inc. Automated Quotations System ("NASDAQ") or, (iv) if such security is
not quoted on such National Market System, the average of the closing bid
and asked prices on such day in the over-the-counter market as reported by
NASDAQ or, (v) if bid and asked prices for such security on such day shall
not have been reported through NASDAQ, the average of the bid and asked
prices on such day as furnished by any NYSE member firm regularly making a
market in such security selected for such purpose by the Chairman of the
Board or the Board of Directors or, (vi) if such bid and asked prices are
not so furnished, then the fair market value of the security as established
by the Board of Directors acting in their good faith reasonable judgment.
"Other Securities" means any stock (other than Common Stock) and other
securities of the Corporate Borrower or any other Person (corporate or
otherwise) which the holder of this Note at any time shall be entitled to
receive, or shall have received, upon the conversion of this Note, in lieu
of or in addition to Common Stock, or which at any time shall be issuable
or shall have been issued in exchange for or in replacement of Common Stock
or Other Securities pursuant to Section 3(h) hereof or otherwise.
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"Person" means any individual, corporation, partnership, joint
venture, trust, estate, unincorporated organization or government or any
agency or political subdivision thereof.
"Time of Determination" means the time and date of the earlier of (i)
the determination of stockholders entitled to receive rights, warrants, or
options or a distribution, in each case, to which Sections 3(h)(ii) or
(iii) apply and (ii) the time ("Ex-Dividend Time") immediately prior to the
commencement of "ex-dividend" trading for such rights, warrants or
distribution on such national or regional exchange or market on which the
Common Stock is then listed or quoted.
5. Call Option. Except as expressly set forth in this Section 5, Borrower
is prohibited from making any voluntary prepayment of this Note and shall not
have any right to cause the holder to convert any portion of the Adjusted
Principal Amount outstanding from time to time. From and after the fifth
anniversary of the date of this Note and on or prior to the Due Date, Borrower
shall have the right (the "Call Option") to repay the Adjusted Principal Amount
then outstanding, in whole but not in part, without premium or penalty (other
than the imposition, if applicable, of the Default Rate or "late charge" as
provided herein). Borrower may exercise the Call Option by giving the holder of
this Note at any time upon ninety (90) days' prior written notice of Borrower's
intention to exercise the Call Option, which notice shall state the date on
which the Call Option is to be consummated, the then current Adjusted Principal
Amount and all accrued interest and unpaid interest thereon, together with any
other sums evidenced by this Note, to be paid on such date. Upon the receipt of
any such notice, the holder shall have the right at any time prior to the date
proposed for such repurchase to convert any or all of the Adjusted Principal
Amount of this Note in accordance with the provisions of Section 3.
6. Default.
In the event that any one or more of the following events occur, this Note
shall become immediately due and payable at the option of Lender:
(a) Borrower or the Corporate Borrower, as applicable, shall fail to
pay when due any sums required to be paid under this Note or any other Loan
Documents, and such failure is not cured within 10 days after receipt of
written notice from Lender.
(b) To the extent any such failure, breach or inaccuracy has a
Material Adverse Effect (as hereinafter defined), the failure by Borrower
or the Corporate Borrower to perform or observe, as and when required, any
covenant, agreement, obligation or condition required to be performed or
observed under this Note or any other Loan Documents, or the existence of
any breach or inaccuracy in any of the representations, covenants or
warranties set forth in the Loan Documents, provided, however, that (i) no
default shall exist hereunder on account of a breach of any
15
<PAGE>
representation, covenant or warranty set forth in the Loan Documents (other
than this Note) until either Borrower or the Corporate Borrower, as
applicable, shall have failed to cure such breach within any applicable
notice and cure period therein provided; and (ii) no default shall exist
hereunder on account of a breach of any representation, covenant or
warranty set forth herein unless and until Lender shall provide written
notice of such breach to Borrower, and Borrower shall fail to cure the same
within 30 days after receipt of such notice, provided if such breach is of
such a nature that it cannot be cured within such 30 day period, it shall
not constitute a default hereunder so long as Borrower commences its cure
of such breach within such 30 day period and thereafter diligently and
continuously proceeds with the curing of same within a reasonable period of
time not to exceed 180 days. "Material Adverse Effect" means any material
and adverse effect on the business, operations, properties, assets,
condition (financial or other), results of operations or prospects of
Borrower and its affiliates, subsidiaries and any parent entity, taken as a
whole.
7. Default Rate; Late Charge.
Upon the maturity of any portion of this Note, whether by acceleration or
otherwise, Borrower further promises to pay interest at the rate per annum equal
to the sum of (x) 2.0%, plus the Interest Rate, on the then outstanding past-due
Adjusted Principal Amount, until such amount is paid in full. In addition, a
late charge of four percent (4%) of the amount of any installment or the amount
due on the Due Date which is not paid when due shall be due and payable to the
holder of this Note to cover the extra expense involved in handling delinquent
payments. Said "late charge" shall be due and payable upon demand of the
Lender.
8. Security; Governing Law.
(a) This Note evidences indebtedness incurred for the purpose of
financing the acquisition and development of real property, and payment of
this Note is secured by the Loan Documents. It is agreed that, at the
election of the holder hereof, the principal sum remaining unpaid hereon,
together with accrued interest thereon, shall become at once due and
payable at the place of payment aforesaid in the event that a default has
occurred under any of the Loan Documents.
(b) This Note shall be governed by, and construed in accordance with,
the laws of the State of New Mexico, United States.
9. Controlling General Provisions. The provisions in this Section 9
shall govern and control over any irreconcilably inconsistent provision
contained in this Note or any of the other Loan Documents or any other
instrument contemplated hereunder or thereunder. In no event shall the
aggregate of all interest paid or payable by Borrower to Lender ever exceed the
maximum rate of interest which may lawfully be charged to (or payable by)
Borrower under applicable law on the Adjusted Principal Amount of this Note from
time to time remaining
16
<PAGE>
unpaid. In this connection, it is expressly stipulated and agreed that it is the
intent of Lender and Borrower in the execution and delivery of this Note to
contract in strict compliance with any applicable usury laws. In furtherance of
the foregoing, none of the terms of this Note, the Loan Documents (other than
this Note) or any such other instruments contemplated hereunder or thereunder
shall ever be construed to create a contract to charge or pay for interest in
excess of the maximum interest rate permitted to be contracted for, charged to,
or payable by Borrower under applicable law. Borrower and any guarantors,
endorsers or other parties now or hereafter becoming liable for payment of this
Note shall never be liable for interest in excess of the maximum interest that
may be lawfully charged under applicable law, and the provisions of this Section
9 shall govern over all other provisions of the Loan Documents, and any other
instruments evidencing or securing the Loan, should such provisions be in
apparent conflict herewith.
Specifically and without limiting the generality of the foregoing
paragraph, it is expressly agreed that:
(a) In the event of the payment of the Adjusted Principal Amount
of this Note, prior to the due date for payment thereof, resulting
from acceleration of maturity of this Note, if the aggregate amounts
of interest accruing hereunder prior to such payment plus the amount
of any interest accruing after such maturity up to the date of payment
and plus any other amounts paid or accrued in connection with the
other Loan Documents, including, if applicable, all or any portion of
the value of any Common Stock issued to Lender under Section 3 of this
Note and any adjustment to the principal amount outstanding hereunder
from time to time pursuant to Section 1, which by law are deemed
interest under such Loan Documents and which aggregate amounts paid or
accrued (if calculated in accordance with the provisions of this Note
other than pursuant to this Section 9) would exceed the maximum lawful
rate of interest which could be charged on the principal balance of
this Note from the date hereof to the date of final payment thereof,
then in such event the amount of such excess shall be credited, as of
the date paid, toward the payment of principal of this Note so as to
reduce the amount of the final payments of Adjusted Principal Amount
due on this Note;
(b) If under any circumstances the aggregate amounts paid under
the Loan Documents prior to and incident to the final payment hereof,
including, without limitation, if applicable, all or any portion of
the value of any Common Stock issued to Lender under Section 3 of this
Note, include amounts which by applicable law are deemed interest and
which would exceed the maximum amount of interest which could lawfully
have been charged or collected on this Note, Borrower stipulates that
such payment and collection will have been and will be deemed to have
been the result of a mathematical error on the part of both Borrower
and Lender, and Lender shall promptly refund the amount of such excess
(to the extent only of the excess of such payments above the maximum
17
<PAGE>
amount which could lawfully have been collected and retained) upon the
discovery of such error by the party receiving such payment or notice
thereof from the party making such payment; and
(c) All calculations as to the rate of interest contracted for,
charged or received under this Note or the other Loan Document which
are made for the purposes of determining whether such rate exceeds the
maximum rate of interest which may lawfully be charged shall be made,
to the extent permitted by applicable usury laws, if any, by
amortizing, prorating, allocating and spreading, in equal parts,
during the period of the full stated term of the Loan evidenced
hereby, all interest any time contracted for, charged or received from
Borrower or otherwise by Lender in connection with such indebtedness.
Notwithstanding anything contained in this Note or the other Loan Documents
to the contrary, interest under this Note shall never exceed the lesser of (1)
the highest non-usurious rate allowed by applicable law or (2) seventeen percent
(17%) per annum on a compounded basis.
10. Invalidity.
The parties hereto intend and believe that each provision of this Note
comports with all applicable laws and judicial decisions. However, if any
provision or provisions, or if any portion of any provision or provision, in
this Note is found by a court of law to be in violation of any applicable
ordinance, statute, law, administrative or judicial decision, or public policy,
and if such court should declare such portion, provision or provisions of this
Note to be illegal, invalid, void or unenforceable as written, then it is the
intent of all parties hereto (i) that such portion, provision or provisions
shall be given force to the fullest possible extent that they are legal, valid
and enforceable, (ii) that the remainder of this Note shall be construed as if
such illegal, invalid, void or unenforceable portion, provision or provisions
were not contained therein, and (iii) that the rights, obligations and interest
of Borrower and the holder hereof under the remainder of this Note shall
continue in full force and effect.
11. Waiver; Expenses.
(a) Borrower hereby waives presentment, demand for payment, notice of
dishonor and all other notices or demands in connection with the delivery,
acceptance, performance, default or enforcement of this Note and hereby
consents to and extensions of time, renewals, waivers or modifications that
may be granted or consented to by the holder of this Note in respect of the
time of payment or any other provision of this Note. Borrower hereby
waives and renounces for itself, its successors and assigns, all rights to
the benefits of any statute of limitations and any moratorium,
reinstatement, marshalling, forbearance, valuation, stay, extension,
redemption, appraisement, or exemption now provided, or which may hereafter
be provided, by the Constitution and
18
<PAGE>
laws of the United States and of any state thereof, both as to itself and
in and to all of its property, real and personal against the enforcement
and collection of the obligations evidenced by this Note.
(b) In the event that the holder hereof shall institute any action for
the enforcement of the collection of this Note, there shall be immediately
due from Borrower in addition to the unpaid interest and the Adjusted
Principal Amount, all costs and expenses of such action, including but not
limited to attorneys' fees and expenses.
12. Miscellaneous.
(a) This Note and all provision hereof shall be binding upon Borrower
and its successors and assigns and shall inure to the benefit of Lender,
together with its successors and assigns, including each owner and holder
from time to time of this Note.
(b) Time is of the essence as to all dates set forth herein subject to
any applicable grace or cure period expressly provided herein or the in the
Loan Documents; provided, however, that unless otherwise stated, whenever
any payment to be made under this Note shall be stated to be due on a day
other than a Business Day, such payment may be made on the immediately
preceding Business Day.
(c) All notices, demands or requests relating to any matters set forth
herein shall be in writing and delivered as set forth, and shall be
effective in the time set forth, in the Funding Agreement.
(d) Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
THE PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS
HEREIN PROVIDED FOR.
19
<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Note as of the date set
forth above.
PTR HOMESTEAD VILLAGE LIMITED PARTNERSHIP
By: PTR Homestead Village (1) Incorporated, its
sole general partner
By:/s/ David C. Dressler, Jr.
--------------------------
Name: David C. Dressler, Jr.
Title: Managing Director
Address: 125 Lincoln Avenue
Santa Fe, New Mexico 87501
For purposes of Sections 3 and 4 only:
PTR HOMESTEAD VILLAGE INCORPORATED
By:/s/ David C. Dressler, Jr.
--------------------------
Name: David C. Dressler, Jr.
Title: Managing Director
Address: 125 Lincoln Avenue
Santa Fe, New Mexico 87501
20
<PAGE>
EXHIBIT A
Form of Exercise Notice
(To Be Executed Upon Conversion of Note)
The undersigned hereby irrevocably elects to convert the entire outstanding
principal amount of the Note (currently $__________) into __________ shares of
Common Stock in accordance with the terms thereof. The undersigned requests
that a certificate for such shares be registered in the name of
________________, whose address is _____________________ and that such shares be
delivered to ________________________ whose address is __________________.
Date:_________________
_____________________________
Name:________________________
Title:_______________________
21
<PAGE>
ADDITIONAL CORPORATE PROMISSORY NOTE Exhibit 4.5
$18,041,687 May 28, 1996
This Additional Corporate Promissory Note (this "Note") is made and
delivered as of May 28, 1996, to Security Capital Atlantic Incorporated, a
Maryland corporation ("Lender"), by Atlantic Homestead Village Incorporated, a
Maryland corporation ("Borrower"), under the following circumstances:
RECITALS
A. Prior to the date hereof, Lender agreed to make a loan (the "Corporate
Loan") to Borrower, to fund, among other matters, acquisition and construction
costs and expenses incurred by Borrower in connection with acquiring and
developing various real properties as Homestead Village projects. In connection
therewith Borrower delivered to Lender that certain promissory note (the "Prior
Corporate Note") dated January 24, 1996, in the original principal amount of
$62,031,430, and various deeds to secure debt, deeds of trust and mortgages (the
"Prior Corporate Security Documents"), to secure payment of the Prior Corporate
Note and the Prior Partnership Note (as defined below). (The Prior Corporate
Note, the Prior Corporate Security Documents and all other instruments delivered
by Borrower in connection therewith to secure the Prior Corporate Note and the
Prior Partnership Note are herein called the "Prior Corporate Loan Documents".)
B. Prior to the date hereof, Lender agreed to make a loan (the
"Partnership Loan") to Atlantic Homestead Village Limited Partnership (the
"Partnership"), to fund, among other matters, acquisition and construction costs
and expenses incurred by the Partnership in connection with acquiring and
developing various real properties as Homestead Village projects. In connection
therewith the Partnership delivered to Lender that certain promissory note (the
"Prior Partnership Note") dated January 24, 1996, in the original principal
amount of $19,213,476, and various deeds to secure debt, deeds of trust and
mortgages (the "Prior Partnership Security Documents"), to secure payment of the
Prior Corporate Note and the Prior Partnership Note. (The Prior Partnership
Note, the Prior Partnership Security Documents and all other instruments
delivered by the Partnership in connection therewith to secure the Prior
Partnership Note and the Prior Corporate Note are herein called the "Prior
Partnership Loan Documents"; the Prior Corporate Loan Documents and Prior
Partnership Loan Documents are collectively referred to herein as the "Prior
Loan Documents"; the Corporate Loan and the Partnership Loan are herein
collectively called the "Loans".)
C. Borrower, the Partnership and Lender desire to continue the funding
provided for under the Prior Loan Documents, to provide funds to Borrower and
the Partnership for the costs
<PAGE>
incurred in connection with the acquisition and development of Homestead Village
projects. In furtherance of the foregoing, Borrower, the Partnership and Lender
have agreed that (i) the maximum amount of the Corporate Loan shall be
$90,765,665 (the "Maximum Corporate Loan Amount"); (ii) Borrower's repayment
obligation for funds advanced in respect of the Corporate Loan shall be adjusted
by a discount factor of .882196112 (the "Discount Factor"), thus providing for
the maximum face amount of this Note of $80,073,117 (i.e., the Maximum Corporate
Loan Amount as adjusted by the Discount Factor); (iii) the maximum amount of the
Partnership Loan shall be $20,353,019 (the "Maximum Partnership Loan Amount");
(ii) the Partnership's repayment obligation for funds advanced in respect of the
Partnership Loan, as evidenced by that certain Amended and Restated Promissory
Note, of even date herewith (the "Partnership Note"), shall be adjusted by the
Discount Factor, thus providing for the maximum face amount of the Partnership
Note of $17,955,354 (i.e., the Maximum Partnership Loan Amount as adjusted by
the Discount Factor); and (iv) in connection therewith, the Prior Loan Documents
shall be amended and restated in conformity with the foregoing and as otherwise
agreed by the parties. This Note is being delivered by Borrower to Lender to
evidence the increase in the amount of the Corporate Loan, as adjusted by the
Discount Factor. The amended and restated Prior Loan Documents being executed
and delivered contemporaneously herewith, and any and all other agreements or
instruments now or hereafter executed by Borrower, the Partnership or any other
person or entity to evidence, or in connection with, or as security for the
payment of this Note and/or the Partnership Note are herein collectively, with
such notes, referred to as the "Loan Documents".
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender agree as follows:
1. Promise to Pay.
--------------
On or before October 31, 2006 (the "Due Date"), the undersigned Borrower,
hereby promises to pay to the order of Lender in lawful money of the United
States of America, the lesser of (A) EIGHTEEN MILLION FORTY ONE THOUSAND SIX
HUNDRED EIGHTY SEVEN DOLLARS ($18,041,687) and (B) the aggregate unpaid
principal amount of all advances made by Lender to Borrower in respect of the
Corporate Loan, multiplied by the Discount Factor (the amount so determined
being herein called the "Adjusted Principal Amount"), together with interest on
the Adjusted Principal Amount at a rate equal to 9.0% peer annum (the "Interest
Rate"). Interest shall be calculated on the basis of a 360-day year and shall be
computed on the actual number of days elapsed.
2. Payments.
--------
Accrued interest on the unpaid Adjusted Principal Amount shall be payable
in arrears every six months beginning with the date that is six months after the
date of this Note, in an amount equal to all of the interest accrued during the
immediately preceding six month period.
2
<PAGE>
Borrower shall make a payment of the total Adjusted Principal Amount of advances
then outstanding, together with accrued and unpaid interest to such date, on the
Due Date. Borrower shall have no obligation to pay the Adjusted Principal
Amount, or any portion thereof, until the Due Date or such earlier date upon
which the loan is accelerated. Borrower shall make each payment hereunder not
later than 11:00 a.m. (Mountain Standard Time) on the day when due in U.S.
dollars at Lender's office at 7777 Market Center Avenue, El Paso, Texas 79912.
Each payment shall first be applied to late charges, costs of collection or
enforcement and other similar amounts due, if any, under this Note, then to
interest due and payable hereunder and the remainder to the Adjusted Principal
Amount due and payable hereunder. The aggregate unpaid Adjusted Principal Amount
shown on the records of Lender shall be rebuttable presumptive evidence of the
Adjusted Principal Amount owing and unpaid on this Note.
3. Conversion. Subject to the terms of this Note, the holder of this Note
shall have the right, beginning on any Business Day (as defined below) on or
after March 31, 1997, (the "Exercisability Date") and on or prior to the date on
which this Note is fully paid, to convert to shares of Common Stock all or any
portion of the principal amount outstanding on this Note, on the basis of one
fully paid, registered and nonassessable share of Common Stock for each $11.50
aggregate Adjusted Principal Amount outstanding on this Note. The number of
shares of Common Stock into which this Note may be converted, as adjusted
pursuant hereto, is referred to herein as the "Exercise Rate". For purposes of
this Note, certain capitalized terms used below are defined in Section 4 of this
Note.
(a) The conversion rights under this Section 3 of this Note may be
exercised from time to time on and after the Exercisability Date and on or
prior to the Due Date by surrendering this Note at the principal office of
Borrower with the form of conversion election set forth as Exhibit A hereto
(the "Conversion Exercise") duly completed and signed by the holder of this
Note.
(b) Except as otherwise provided in Section 3(h)(vi) no payment shall
be made on Common Stock issuable upon conversion of this Note on account of
any dividend or distribution declared on Borrower's Common Stock to holders
of such Common Stock of record as of a date prior to the Exercise Date.
(c) The "Exercise Date" shall be the date when all of the items
referred to in subsection (a) of this Section 3 are received by Borrower at
or prior to 2:00 p.m., New York, New York time, on a Business Day and the
conversion of this Note will be effective as of such Exercise Date. If any
items referred to in subsection (a) are received after 2:00 p.m., New York,
New York time, on a Business Day, the conversion of this Note will be
effective on the next succeeding Business Day. Notwithstanding the
foregoing, in the case of a conversion of this Note on the Expiration Date,
if all of the items referred to in the preceding subsection are received by
Borrower at or prior to 5:00 p.m. New York, New York time, on such
Expiration Date, the conversion of this Note will be effective on the
Expiration Date.
3
<PAGE>
(d) Upon the conversion of this Note in accordance with the terms
hereof Borrower shall issue and cause to be delivered with all reasonable
dispatch to or upon the written order of the holder of this Note, a
certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of this Note, in fully registered form,
registered in such name or names as may be directed by such holder pursuant
to the Conversion Exercise, together with cash as provided in Section 3(i)
hereof and shall deliver to holder a duly executed replacement note
representing the aggregate principal amount of this Note outstanding less
any amount previously converted (in each case, without the adjustment
provided for in Section 1 of this Note), but otherwise in the same form as
this Note; provided, however, that if any consolidation, merger or lease or
sale of assets is proposed to be effected by Borrower as described in
Section 3(h)(x) hereof, or a tender offer or an exchange offer for shares
of Common Stock of Borrower shall be made, upon such surrender of this Note
as aforesaid, Borrower shall, as soon as possible, but in any event not
later than two Business Days thereafter, issue and cause to be delivered
the full number of shares of Common Stock issuable upon the conversion of
this Note in the manner described in this sentence together with cash as
provided in Section 3(i) hereof. Such certificate or certificates shall be
deemed to have been issued and any person so designated to be named therein
shall be deemed to have become a holder of record or such shares of Common
Stock as of the date of the surrender of this Note. No fractional shares
shall be issued upon conversion of this Note in accordance with Section
3(i) hereof.
(e) Borrower will pay all documentary stamp taxes attributable to the
initial issuance of this Note and the issuance of shares of Common Stock
upon conversion of this Note; provided, however, that Borrower shall not be
required to pay any tax or taxes which may be payable in respect of any
transfer involved in the issuance of this Note or any certificates for
shares of Common Stock in a name other than that of the registered holder
of this Note surrendered upon the exercise hereof, and Borrower shall not
be required to issue or deliver such Note unless or until the person or
persons requesting the issuance thereof shall have paid to Borrower the
amount of such tax or shall have established to the satisfaction of
Borrower that such tax has been paid.
(f) Borrower will at all times reserve and keep available, free from
preemptive rights, out of the aggregate of its authorized but unissued
shares of Common Stock, for the purpose of enabling it to satisfy any
obligation to issue shares of Common Stock upon conversion of this Note,
the maximum number of shares of Common Stock which may then be deliverable
upon the conversion of this Note. Borrower or the transfer agent for the
Common Stock (the "Transfer Agent") and every subsequent transfer agent for
any shares of Borrower's capital stock issuable upon the exercise of any of
the conversion rights aforesaid will be irrevocably authorized and directed
at all times to reserve such number of authorized shares as shall be
required for such purpose. Before taking any action which would cause an
adjustment pursuant to this Section 3 to reduce the Exercise Price below
the then par value (if any) of the shares issuable upon
4
<PAGE>
conversion of this Note, Borrower will take any corporate action which may,
in the opinion of its counsel (which may be counsel employed by Borrower),
be necessary in order that Borrower may validly and legally issue fully
paid and nonassessable shares of Common Stock at the Exercise Price as so
adjusted.
(g) At any such time as Common Stock is listed or quoted on any
national securities exchange or inter-dealer quotation system, Borrower
will, at its expense, obtain promptly and maintain the approval for listing
or quotation on each such exchange or inter-dealer quotation system, upon
official notice of issuance after notice of conversion of this Note, the
shares of Common Stock issuable hereunder and maintain the listing or
quotation of such shares after their issuance; and Borrower will also, upon
official notice of issuance after notice of conversion of this Note, list
or quote on such national securities exchange, will register under the
Securities Exchange Act of 1934, as amended, and will maintain such listing
or quotation of, any Other Securities (as defined below) that at any time
are issuable upon conversion of this Note, if and at the time that any
securities of the same class shall be listed or quoted on such national
securities exchange or inter-dealer quotation system by Borrower.
(h) The Exercise Rate is subject to adjustment from time to time upon
the occurrence of the events enumerated in this Section 3(h). For purposes
of this Section 3(h), "Common Stock" means the Common Stock and any other
stock of Borrower, however designated, issuable upon conversion of this
Note.
(i) Adjustment for Change in Capital Stock. If Borrower:
a. pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock;
b. subdivides its outstanding shares of Common Stock into a
greater number of shares;
c. combines its outstanding shares of Common Stock into a
smaller number of shares;
d. makes a distribution on its Common Stock in shares of
its capital stock other than Common Stock; or
e. issues by reclassification of its Common Stock any
shares of its capital stock,
then the Exercise Rate in effect immediately prior to such action
shall be proportionately adjusted so that the holder of this Note may
receive the aggregate number and kind of shares of capital stock of
Borrower which such holder would
5
<PAGE>
have owned immediately following such action if this Note had been
exercised immediately prior to such action or immediately prior to the
record date applicable thereto, if any.
The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution and immediately
after the effective date in the case of a subdivision, combination or
reclassification.
If, after an adjustment, a holder of this Note, upon conversion,
may receive shares of two or more classes of capital stock of
Borrower, the Exercise Rate of each class of capital stock shall
thereafter be subject to adjustment on terms comparable to those
applicable to Common Stock in this Section 3(h).
Such adjustment shall be made successively whenever any event
listed above shall occur.
(ii) Adjustment for Rights Issue or Sale of Common Stock Below
Current Market Value. If Borrower (i) distributes any rights,
warrants or options to all holders of its Common Stock entitling them
to subscribe for or purchase shares of Common Stock at a price per
share less than 94% (100% if a stand-by underwriter is used and
charges Borrower a commission) of the Current Market Value at the Time
of Determination (each as defined in Section 4) or (ii) sells any
Common Stock or any securities convertible into or exchangeable or
exercisable for the Common Stock (other than pursuant to (1) the
exercise of this Note (or any other note issued by Borrower pursuant
to or in connection with that certain Merger and Distribution
Agreement dated of even date herewith among Lender Security Capital
Pacific Trust ("PTR"), Security Capital Group Incorporated ("SCG") and
Homestead Village Properties Incorporated ("Homestead") or (2) upon
exercise of outstanding warrants to acquire shares of Common Stock,
which warrants were issued pursuant to a Warrant Agreement executed in
connection with that certain Warrant Purchase Agreement of even date
herewith among Lender, PTR, SCG and Homestead or (3) any security
convertible into, or exchangeable or exercisable for, the Common Stock
as to which the issuance thereof has previously been the subject of
any required adjustment (whether or not actually made) pursuant to
this Section 3(h)) at a price per share less than the Current Market
Value, the Exercise Rate shall be adjusted in accordance with the
formula:
E ' = E x (O + N)
------------------
(O + (N x P/M))
where:
E ' = the adjusted Exercise Rate;
6
<PAGE>
E = the current Exercise Rate;
O = the number of shares of Common Stock outstanding on the record
date for the distribution to which this subsection (ii) is being
applied or on the date of sale of Common Stock at a price per
share less than the Current Market Value to which this subsection
(ii) applies, as the case may be;
N = the number of additional shares of Common Stock issuable upon
exercise of all rights, warrants and options so distributed or
the number of shares of Common Stock so sold or the maximum
stated number of shares of Common Stock issuable upon the
conversion, exchange or exercise of any such convertible,
exchangeable or exercisable securities, as the case may be;
P = the offering price per share of the additional shares of Common
Stock upon the exercise of any such rights, options or warrants
so distributed or pursuant to any such convertible, exchangeable
or exercisable securities so sold or the sale price of the shares
so sold, as the case may be; and
M = the Current Market Value as of the Time of Determination or at
the time of sale, as the case may be.
The adjustment shall be made successively whenever any such
rights, warrants or options are issued and shall become effective
immediately after the record date for the determination of
stockholders entitled to receive the rights, warrants or options. If
at the end of the period during which such rights, warrants or options
are exercisable, not all rights, warrants or options shall have been
exercised, the Exercise Rate shall be immediately readjusted to what
it would have been if "N" in the above formula had been the number of
shares actually issued.
No adjustment shall be made under this subsection (ii) if the
application of the formula stated above in this subsection (ii) would
result in a value of E ' that is lower than the value of E.
(iii) Adjustment for Other Distributions. If Borrower
distributes to all holders of its Common Stock any of its assets or
debt securities or any rights, warrants or options to purchase any of
its debt securities or assets, the Exercise Rate shall be adjusted in
accordance with the formula:
E ' = E x M
---
M-F
7
<PAGE>
where:
E' = the adjusted Exercise Rate;
E = the current Exercise Rate;
M = the Current Market Value; and
F = the fair market value (on the record date for the distribution
to which this subsection (iii) applies) of the assets,
securities, rights, warrants or options to be distributed in
respect of each share of Common Stock in the distribution to
which this subsection (iii) is being applied (including, in
the case of cash dividends or other cash distributions giving
rise to an adjustment, all such cash distributed
concurrently).
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the
record date for the determination of stockholders entitled to receive
the distribution. If at the end of the period during which such
rights, warrants or options are exercisable, not all rights, warrants
or options shall have been exercised, the Exercise Rate shall be
immediately readjusted to what it would have been if such rights,
warrants or options which are not exercised had not been issued.
This subsection (iii) does not apply to cash dividends or cash
distributions paid out of consolidated retained earnings as shown on
the books of Borrower prepared in accordance with generally accepted
accounting principles other than any Extraordinary Cash Dividend (as
defined below). An "Extraordinary Cash Dividend" shall be that
portion, if any, of the aggregate amount of all cash dividends paid in
any fiscal year which exceeds the sum of (A) Borrower cumulative
undistributed earnings on the date of this Agreement, plus (B) the
cumulative amount of earnings, as determined by the Board of
Directors, after such date, minus (C) the cumulative amount of
dividends accrued or paid in respect of the Common Stock. In all
cases, Borrower shall give the holder of this Note advance notice of a
record date for any dividend payment on the Common Stock which notice
is delivered on a date at least as early as the date of notice to the
holders of Common Stock.
(iv) Consideration Received. For purposes of any computation
respecting consideration received pursuant to subsection (ii) of
Section 3(h), the following shall apply:
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a. in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash,
provided that in no case shall any deduction be made for any
commissions, discounts or other expenses incurred by Borrower for
any underwriting of the issue or otherwise in connection
therewith;
b. in the case of the issuance of shares of Common Stock for
a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
market value thereof as determined in good faith by the Board of
Directors (irrespective of the accounting treatment thereof),
whose determination shall be conclusive, and described in a Board
resolution which shall be filed with the records of Borrower; and
c. in the case of the issuance of securities convertible
into or exchangeable for shares, the aggregate consideration
received therefor shall be deemed to be the consideration
received by Borrower for the issuance of such securities plus the
additional minimum consideration, if any, to be received by
Borrower upon the conversion or exchange thereof (the
consideration in each case to be determined in the same manner as
provided in clauses (1) and (2) of this subsection).
(v) When De Minimis Adjustment May Be Deferred. No adjustment in
the Exercise Rate need be made unless the adjustment would require an
increase or decrease of at least 1% in the Exercise Rate. Any
adjustments that are not made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this
Section 3(h) shall be made to the nearest 1/100th of a share.
(vi) When No Adjustment Required. No adjustment need be made for
a transaction referred to in subsections (i), (ii) or (iii) of this
Section 3(h) if the holder of this Note is offered the opportunity to
participate in the transaction on a basis and with notice that the
Board of Directors determines to be fair and appropriate in light of
the basis and notice on which holders of Common Stock participate in
the transaction. To the extent this Note becomes convertible into
cash, no adjustment need be made thereafter as to the cash. Interest
will not accrue on the cash.
(vii) Notice of Adjustment. Whenever the Exercise Rate is
adjusted, Borrower shall provide the notices required by Section 3(j)
hereof.
(viii) Voluntary Adjustment. Borrower from time to time may, as
the Board of Directors deems appropriate, increase the Exercise Rate
by any amount
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<PAGE>
for any period of time if the period is at least 20 days and if the
increase is irrevocable during the period. Whenever the Exercise Rate
is increased, Borrower shall mail to the holder of this Note a notice
of the increase. Borrower shall mail the notice at least 15 days
before the date the increased Exercise Rate takes effect. The notice
shall state the increased Exercise Rate and the period it will be in
effect. An increase of the Exercise Rate pursuant to this Section
3(h)(viii), other than an increase which Borrower has irrevocably
committed will be in effect for so long as this Note is outstanding,
does not change or adjust the Exercise Rate otherwise in effect for
purposes of subsections (i), (ii) or (iii) of this Section 3(h).
(ix) Notice of Certain Transactions. If:
a. Borrower takes any action that would require an
adjustment in the Exercise Rate pursuant to subsections (i), (ii)
or (iii) of this Section 3(h) and if Borrower does not arrange
for the holder of this Note to participate pursuant to Section
3(h)(vi); or
b. there is a liquidation or dissolution of Borrower,
Borrower shall mail to the holder of this Note a notice stating
the proposed record date for a dividend or distribution or the
proposed effective date of a subdivision, combination,
reclassification, consolidation, merger, transfer, lease,
liquidation or dissolution. Borrower shall mail the notice at
least 15 days before such date. Failure to mail the notice or any
defect in it shall not affect the validity of the transaction.
(x) Reorganization of Borrower. If Borrower consolidates or
merges with or into, or transfers or leases all or substantially all
its assets to, any Person, upon consummation of such transaction this
Note shall automatically become exercisable for the kind and amount of
securities, cash or other assets which the holder of this Note would
have owned immediately after the consolidation, merger, transfer or
lease if the holder had exercised this Note immediately before the
effective date of the transaction. Concurrently with the consummation
of such transaction, the corporation formed by or surviving any such
consolidation or merger if other than Borrower, or the Person to which
such sale or conveyance shall have been made (any such Person, the
"Successor Guarantor"), shall enter into a supplemental Note so
providing and further providing for adjustments which shall be as
nearly equivalent as may be practical to the adjustments provided for
in this Section 3(h). The Successor Guarantor shall mail to the holder
of this Note a notice describing the supplemental Note. If the issuer
of securities deliverable upon conversion of this Note under the
supplemental Note is an Affiliate of the formed, surviving, transferee
or lessee corporation, that
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<PAGE>
issuer shall join in the supplemental Note. If this subsection (x)
applies, subsections (i), (ii) or (iii) of this Section 3(h) do not
apply.
(xi) Borrower Determination Final. Any determination that
Borrower or the Board of Directors must make pursuant to subsection
(i), (ii), (iii), (iv) or (vii) of this Section 3(h) is conclusive.
(xii) When Issuance or Payment May Be Deferred. In any case in
which this Section 3(h) shall require that an adjustment in the
Exercise Rate be made effective as of a record date for a specified
event, Borrower may elect to defer until the occurrence of such event
(i) issuing to the holder of this Note exercised after such record
date the shares of Common Stock and other capital stock of Borrower,
if any, issuable upon such conversion over and above the shares of
Common Stock and other capital stock of Borrower, if any, issuable
upon such conversion on the basis of the Exercise Rate and (ii) paying
to such holder any amount in cash in lieu of a fractional share
pursuant to Section 3(i) hereof; provided, however, that Borrower
shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional
shares of Common Stock, other capital stock and cash upon the
occurrence of the event requiring such adjustment.
(xiii) Adjustments to Par Value. Borrower shall from time to
time make such adjustments to the par value of the Common Stock as may
be necessary so that at all times, upon conversion of this Note, the
shares of Common Stock will be fully paid and nonassessable.
(xiv) Priority of Adjustments. If this Section 3(h) requires
adjustments to the Exercise Rate under more than one of subsections
(i), (ii) or (iii), and the record dates for the distributions giving
rise to such adjustments shall occur on the same date, then such
adjustments shall be made by applying, first, the provisions of
subsection (i), second, the provisions of subsection (iii) and, third,
the provisions of subsection (ii).
(xv) Multiple Adjustments. After an adjustment to the Exercise
Rate under this Section 3(h), any subsequent event requiring an
adjustment under this Section 3(h) shall cause an adjustment to the
Exercise Rate as so adjusted.
(i) Fractional Interests; Accrued Interest. Borrower shall not be
required to issue fractional shares on the conversion of this Note. If any
fraction of a share would, except for the provisions of this Section 3(i),
be issuable on the conversion of this Note, Borrower shall pay to the
holder an amount in cash equal to the product of (i) such fraction of a
share and (ii) the Current Market Value of a share of Common Stock as of
the date of conversion of this Note. Upon any conversion of all or any
portion of the
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<PAGE>
Adjusted Principal Amount in accordance with the terms hereof, Borrower
shall pay to the holder in cash all accrued but unpaid interest to the
effective date of conversion with respect to the portion of the Adjusted
Principal Amount of this Note being converted.
(j) Notices to Holder. Upon any adjustment of the Exercise Rate
pursuant to Section 3(h) hereof, Borrower shall promptly thereafter (i)
cause to be prepared a certificate of a firm of independent public
accountants of recognized standing selected by Borrower (who may be the
regular auditors of Borrower) setting forth the Exercise Rate after such
adjustment and setting forth in reasonable detail the method of calculation
and the facts upon which such calculations are based and setting forth the
number of shares (or portion thereof) issuable after such adjustment in the
Exercise Rate, upon conversion of this Note, which certificate shall be
conclusive evidence of the correctness of the matters set forth therein,
and (ii) cause to be given to the holder of this Note at such holder's
address appearing on the Note register written notice of such adjustments
by first-class mail, postage prepaid. Where appropriate, such notice may be
given in advance and included as a part of the notice required to be mailed
under the other provisions of this Section 3(j).
In the event:
(i) Borrower shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for
or purchase shares of Common Stock or of any other subscription rights
or warrants (other than rights, options or warrants issued to all
holders of its Common Stock entitling them to subscribe for or
purchase shares of Common Stock at a price per share not less than 94%
(100% if a stand-by underwriter is used and charges Borrower
commission) of the Current Market Value); or
(ii) Borrower shall authorize the distribution to all holders of
shares of Common Stock of evidences of its indebtedness or assets
(other than cash dividends or cash distributions payable out of
consolidated earnings or earned surplus or dividends payable in shares
of Common Stock or distributions referred to in subsection (i) of
Section 3(h) hereof); or
(iii) of any consolidation or merger to which Borrower is a
party or of the conveyance or transfer of the properties and assets of
Borrower substantially as an entirety, or of any reclassification or
change of Common Stock issuable upon conversion of this Note (other
than a change in par value, or from par value to no par value, or from
no par value to par value, or as a result of a subdivision or
combination), or a tender offer or exchange offer for shares of Common
Stock; or
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<PAGE>
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of Borrower; or
(v) Borrower proposes to take any action (other than actions of
the character described in Section 3(h)(i) which would require an
adjustment of the Exercise Rate pursuant to Section 3(h);
then Borrower shall cause to be given to the registered holder of this Note
at its address appearing on the Note register, at least 20 days (or 15 days
in any case specified in clauses (i) or (ii) above) prior to the applicable
record date hereinafter specified, or promptly in the case of events for
which there is no record date, by first-class mail, postage prepaid, a
written notice stating (i) the date as of which the holders of record of
shares of Common Stock to be entitled to receive any such rights, options,
warrants or distribution are to be determined, or (ii) the initial
expiration date set forth in any tender offer or exchange offer for shares
of Common Stock, or (iii) the date on which any such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding up is expected to become effective or consummated, and the date as
of which it is expected that holders of record of shares of Common Stock
shall be entitled to exchange such shares for securities or other property,
if any, deliverable upon such reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up. The failure
to give the notice required by this Section 3(j) or any defect therein
shall not affect the legality or validity of any distribution, right,
option, warrant, reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up, or the vote upon any
action.
Nothing contained in this Note shall be construed as conferring upon
the holder hereof the right to vote or to consent or to receive notice as
shareholders in respect of the meetings of shareholders or the election of
directors of Borrower or any other matter, or any rights whatsoever as
shareholders of Borrower.
4. Definitions. For purposes of Section 3 of this Note, the following
terms shall have the meanings indicated:
"Affiliate" means, with respect to another Person, any Person directly
or indirectly controlling or controlled by or under direct or indirect
common control with such other Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlled by"
and "under common control with"), when used with respect to any Person,
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities,
by contract or otherwise.
"Board of Directors" means the Board of Directors of Borrower.
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<PAGE>
"Business Day" shall mean any day other than a Saturday or a Sunday or
a day on which commercial banking institutions in The City of New York are
authorized by law to be closed.
"Current Market Value" per share of Common Stock or of any other
security at any date shall be the average of the daily market price, for
the twenty (20) consecutive trading days immediately preceding the day of
such determination. The market price for each such trading day shall be:
(i) the last reported sales price, regular way on such day, or, if no sale
takes place on such day, the average of the reported closing bid and asked
prices on such day, regular way, in either case as reported on the New York
Stock Exchange ("NYSE") or, (ii) if such security is not listed or admitted
for trading on the NYSE, on the principal national securities exchange on
which such security is listed or admitted for trading or, (iii) if not
listed or admitted for trading on any national securities exchange, on the
National Market System of the National Association of Securities Dealers,
Inc. Automated Quotations System ("NASDAQ") or, (iv) if such security is
not quoted on such National Market System, the average of the closing bid
and asked prices on such day in the over-the-counter market as reported by
NASDAQ or, (v) if bid and asked prices for such security on such day shall
not have been reported through NASDAQ, the average of the bid and asked
prices on such day as furnished by any NYSE member firm regularly making a
market in such security selected for such purpose by the Chairman of the
Board or the Board of Directors or, (vi) if such bid and asked prices are
not so furnished, then the fair market value of the security as established
by the Board of Directors acting in their good faith reasonable judgment.
"Other Securities" means any stock (other than Common Stock) and other
securities of Borrower or any other Person (corporate or otherwise) which
the holder of this Note at any time shall be entitled to receive, or shall
have received, upon the conversion of this Note, in lieu of or in addition
to Common Stock, or which at any time shall be issuable or shall have been
issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 3(h) hereof or otherwise.
"Person" means any individual, corporation, partnership, joint
venture, trust, estate, unincorporated organization or government or any
agency or political subdivision thereof.
"Time of Determination" means the time and date of the earlier of (i)
the determination of stockholders entitled to receive rights, warrants, or
options or a distribution, in each case, to which Sections 3(h)(ii) or
(iii) apply and (ii) the time ("Ex-Dividend Time") immediately prior to the
commencement of "ex-dividend" trading for such rights, warrants or
distribution on such national or regional exchange or market on which the
Common Stock is then listed or quoted.
5. Call Option.
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<PAGE>
Except as expressly set forth in this Section 5, Borrower is prohibited
from making any voluntary prepayment of this Note and shall not have any right
to cause the holder to convert any portion of the Adjusted Principal Amount
outstanding from time to time. From and after the fifth anniversary of the date
of this Note and on or prior to the Due Date, Borrower shall have the right (the
"Call Option") to repay the Adjusted Principal Amount then outstanding, in whole
but not in part, without premium or penalty (other than the imposition, if
applicable, of the Default Rate or "late charge" as provided herein). Borrower
may exercise the Call Option by giving the holder of this Note at any time upon
ninety (90) days' prior written notice of Borrower's intention to exercise the
Call Option, which notice shall state the date on which the Call Option is to be
consummated, the then current Adjusted Principal Amount and all accrued interest
and unpaid interest thereon, together with any other sums evidenced by this
Note, to be paid on such date. Upon the receipt of any such notice, the holder
shall have the right at any time prior to the date proposed for such repurchase
to convert any or all of the Adjusted Principal Amount of this Note in
accordance with the provisions of Section 3.
6. Default.
In the event that any one or more of the following events occur, this Note
shall become immediately due and payable at the option of Lender:
(a) Borrower or the Partnership, as applicable, shall fail to pay
when due any sums required to be paid under this Note or any other Loan
Documents, and such failure is not cured within 10 days after receipt of
written notice from Lender.
(b) To the extent any such failure, breach or inaccuracy has a
Material Adverse Effect (as hereinafter defined), the failure by Borrower
or the Partnership to perform or observe, as and when required, any
covenant, agreement, obligation or condition required to be performed or
observed under this Note or any other Loan Documents, or the existence of
any breach or inaccuracy in any of the representations, covenants or
warranties set forth in the Loan Documents, provided, however, that (i) no
default shall exist hereunder on account of a breach of any representation,
covenant or warranty set forth in the Loan Documents (other than this Note)
until either Borrower or Partnership, as applicable, shall have failed to
cure such breach within any applicable notice and cure period therein
provided; and (ii) no default shall exist hereunder on account of a breach
of any representation, covenant or warranty set forth herein unless and
until Lender shall provide written notice of such breach to Borrower, and
Borrower shall fail to cure the same within 30 days after receipt of such
notice, provided if such breach is of such a nature that it cannot be cured
within such 30 day period, it shall not constitute a default hereunder so
long as Borrower commences its cure of such breach within such 30 day
period and thereafter diligently and continuously proceeds with the curing
of same within a reasonable period of time not to exceed 180 days.
"Material Adverse Effect" means any material and adverse effect on the
business, operations,
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<PAGE>
properties, assets, condition (financial or other), results of operations
or prospects of Borrower and its affiliates, subsidiaries and any parent
entity, taken as a whole.
7. Default Rate; Late Charge.
Upon the maturity of any portion of this Note, whether by acceleration or
otherwise, Borrower further promises to pay interest at the rate per annum equal
to the sum of 2.0%, plus the Interest Rate, on the then outstanding past-due
amount of principal, until such amount is paid in full. In addition, a late
charge of four percent (4%) of the amount of any installment or the amount due
on the Due Date which is not paid when due shall be due and payable to the
holder of this Note to cover the extra expense involved in handling delinquent
payments. Said "late charge" shall be due and payable upon demand of the Lender.
8. Security; Governing Law.
(a) This Note evidences indebtedness incurred for the purpose of
financing the acquisition and development of real property, and payment of
this Note is secured by the Loan Documents. It is agreed that, at the
election of the holder hereof, the principal sum remaining unpaid hereon,
together with accrued interest thereon, shall become at once due and
payable at the place of payment aforesaid in the event that a default has
occurred under any of the Loan Documents.
(b) This Note shall be governed by, and construed in accordance with,
the laws of the State of New Mexico, United States.
9. Controlling General Provisions.
The provisions in this Section 9 shall govern and control over any
irreconcilably inconsistent provision, the Loan Documents or any other
instrument contemplated hereunder or thereunder. In no event shall the aggregate
of all interest paid or payable by Borrower to Lender ever exceed the maximum
rate of interest which may lawfully be charged to (or payable by) Borrower under
applicable law on the Adjusted Principal Amount of this Note from time to time
remaining unpaid. In this connection, it is expressly stipulated and agreed that
it is the intent of Lender and Borrower in the execution and delivery of this
Note to contract in strict compliance with any applicable usury laws. In
furtherance of the foregoing, none of the terms of the Loan Documents or any
such other instruments contemplated hereunder or thereunder shall ever be
construed to create a contract to charge or pay for interest in excess of the
maximum interest rate permitted to be contracted for, charged to, or payable by
Borrower under applicable law. Borrower and any guarantors, endorsers or other
parties now or hereafter becoming liable for payment of this Note shall never be
liable for interest in excess of the maximum interest that may be lawfully
charged under applicable law, and the provisions of this Section 9 shall govern
over all other provisions of the Loan Documents, and any other
16
<PAGE>
instruments evidencing or securing the Loans, should such provisions be in
apparent conflict herewith.
Specifically and without limiting the generality of the foregoing
paragraph, it is expressly agreed that:
(a) In the event of the payment of the principal of the Adjusted
Principal Amount of this Note, prior to the due date for payment
thereof, resulting from acceleration of maturity of this Note, if the
aggregate amounts of interest accruing hereunder prior to such payment
plus the amount of any interest accruing after such maturity up to the
date of payment and plus any other amounts paid or accrued in
connection with the Loan Documents, including, if applicable, all or
any portion of the value of any Common Stock issued to Lender under
Section 3 of this Note, which by law are deemed interest under such
Loan Documents and which aggregate amounts paid or accrued (if
calculated in accordance with the provisions of this Note other than
pursuant to this Section 9) would exceed the maximum lawful rate of
interest which could be charged on the principal balance of this Note
from the date hereof to the date of final payment thereof, then in
such event the amount of such excess shall be credited, as of the date
paid, toward the payment of principal of this Note so as to reduce the
amount of the final payments of Adjusted Principal Amount due on this
Note;
(b) If under any circumstances the aggregate amounts paid under
the Loan Documents prior to and incident to the final payment hereof,
including, without limitation, if applicable, all or any portion of
the value of any Common Stock issued to Lender under Section 3 of this
Note, include amounts which by applicable law are deemed interest and
which would exceed the maximum amount of interest which could lawfully
have been charged or collected on this Note, Borrower stipulates that
such payment and collection will have been and will be deemed to have
been the result of a mathematical error on the part of both Borrower
and Lender, and Lender shall promptly refund the amount of such excess
(to the extent only of the excess of such payments above the maximum
amount which could lawfully have been collected and retained) upon the
discovery of such error by the party receiving such payment or notice
thereof from the party making such payment; and
(c) All calculations as to the rate of interest contracted for,
charged or received under this Note or the other Loan Document which
are made for the purposes of determining whether such rate exceeds the
maximum rate of interest which may lawfully be charged shall be made,
to the extent permitted by applicable usury laws, if any, by
amortizing, prorating, allocating and spreading, in equal parts,
during the period of the full stated term of the Loan evidenced
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<PAGE>
hereby, all interest any time contracted for, charged or received from
Borrower or otherwise by Lender in connection with such indebtedness.
Notwithstanding anything contained in this Note or the other Loan Documents
to the contrary, interest under this Note shall never exceed the lesser of (1)
the highest non-usurious rate allowed by applicable law or (2) seventeen percent
(17%) per annum on a compounded basis.
10. Invalidity.
The parties hereto intend and believe that each provision of this Note
comports with all applicable laws and judicial decisions. However, if any
provision or provisions, or if any portion of any provision or provision, in
this Note is found by a court of law to be in violation of any applicable
ordinance, statute, law, administrative or judicial decision, or public policy,
and if such court should declare such portion, provision or provisions of this
Note to be illegal, invalid, void or unenforceable as written, then it is the
intent of all parties hereto (i) that such portion, provision or provisions
shall be given force to the fullest possible extent that they are legal, valid
and enforceable, (ii) that the remainder of this Note shall be construed as if
such illegal, invalid, void or unenforceable portion, provision or provisions
were not contained therein, and (iii) that the rights, obligations and interest
of Borrower and the holder hereof under the remainder of this Note shall
continue in full force and effect.
11. Waiver; Expenses.
(a) Borrower hereby waives presentment, demand for payment, notice of
dishonor and all other notices or demands in connection with the delivery,
acceptance, performance, default or enforcement of this Note and hereby
consents to and extensions of time, renewals, waivers or modifications that
may be granted or consented to by the holder of this Note in respect of the
time of payment or any other provision of this Note. Borrower hereby waives
and renounces for itself, its successors and assigns, all rights to the
benefits of any statute of limitations and any moratorium, reinstatement,
marshalling, forbearance, valuation, stay, extension, redemption,
appraisement, or exemption now provided, or which may hereafter be
provided, by the Constitution and laws of the United States and of any
state thereof, both as to itself and in and to all of its property, real
and personal against the enforcement and collection of the obligations
evidenced by this Note.
(b) In the event that the holder hereof shall institute any action for
the enforcement of the collection of this Note, there shall be immediately
due from Borrower in addition to the unpaid interest and principal, all
costs and expenses of such action, including but not limited to attorneys'
fees and expenses.
12. Miscellaneous.
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<PAGE>
(a) This Note and all provision hereof shall be binding upon Borrower
and its successors and assigns and shall inure to the benefit of Lender,
together with its successors and assigns, including each owner and holder
from time to time of this Note.
(b) Time is of the essence as to all dates set forth herein subject to
any applicable grace or cure period expressly provided herein or the in the
Loan Documents; provided, however, that unless otherwise stated, whenever
any payment to be made under this Note shall be stated to be due on a day
other than a business day, such payment may be made on the immediately
preceding business day. For purposes of this Note, a business day shall be
any day that is not a Saturday, Sunday or national bank holiday.
(c) All notices, demands or requests relating to any matters set forth
herein shall be in writing and delivered as set forth, and shall be
effective in the time set forth, in the Funding Agreement.
(d) Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
THE PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS
HEREIN PROVIDED FOR.
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IN WITNESS WHEREOF, Borrower has executed this Note as of the date set
forth above.
ATLANTIC HOMESTEAD VILLAGE INCORPORATED
By:/s/ David C. Dressler, Jr.
--------------------------
Name: David C. Dressler, Jr.
Title: Managing Director
Address: 125 Lincoln Avenue
Santa Fe, New Mexico 87501
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EXHIBIT A
Form of Exercise Notice
(To Be Executed Upon Conversion of Note)
The undersigned hereby irrevocably elects to convert the entire outstanding
principal amount of the Note (currently $__________) into __________ shares of
Common Stock in accordance with the terms thereof. The undersigned requests that
a certificate for such shares be registered in the name of ________________,
whose address is _____________________ and that such shares be delivered to
________________________ whose address is __________________.
Date:
----------------
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
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Exhibit 4.6
CONSOLIDATED AMENDED AND RESTATED PROMISSORY NOTE
$80,073,117 May 28, 1996
This Consolidated Amended and Restated Promissory Note (this "Note") is
made and delivered as of May 28, 1996, to Security Capital Atlantic
Incorporated, a Maryland corporation ("Lender"), by Atlantic Homestead Village
Incorporated, a Maryland corporation ("Borrower"), under the following
circumstances:
RECITALS
A. Prior to the date hereof, Lender agreed to make a loan (the "Corporate
Loan") to Borrower, to fund, among other matters, acquisition and construction
costs and expenses incurred by Borrower in connection with acquiring and
developing various real properties as Homestead Village projects. In connection
therewith Borrower delivered to Lender that certain promissory note (the "Prior
Corporate Note") dated January 24, 1996, in the original principal amount of
$62,031,430, and various deeds to secure debt, deeds of trust and mortgages (the
"Prior Corporate Security Documents"), to secure payment of the Prior Corporate
Note and the Prior Partnership Note (as defined below). (The Prior Corporate
Note, the Prior Corporate Security Documents and all other instruments delivered
by Borrower in connection therewith to secure the Prior Corporate Note and the
Prior Partnership Note are herein called the "Prior Corporate Loan Documents".)
B. Prior to the date hereof, Lender agreed to make a loan (the
"Partnership Loan") to Atlantic Homestead Village Limited Partnership (the
"Partnership"), to fund, among other matters, acquisition and construction costs
and expenses incurred by the Partnership in connection with acquiring and
developing various real properties as Homestead Village projects. In connection
therewith the Partnership delivered to Lender that certain promissory note (the
"Prior Partnership Note") dated January 24, 1996, in the original principal
amount of $19,213,476, and various deeds to secure debt, deeds of trust and
mortgages (the "Prior Partnership Security Documents"), to secure payment of the
Prior Corporate Note and the Prior Partnership Note. (The Prior Partnership
Note, the Prior Partnership Security Documents and all other instruments
delivered by the Partnership in connection therewith to secure the Prior
Partnership Note and the Prior Corporate Note are herein called the "Prior
Partnership Loan Documents"; the Prior Corporate Loan Documents and Prior
Partnership Loan Documents are collectively referred to herein as the "Prior
Loan Documents"; the Corporate Loan and the Partnership Loan are herein
collectively called the "Loans".)
C. Borrower, the Partnership and Lender desire to continue the funding
provided for under the Prior Loan Documents, to provide funds to Borrower and
the Partnership for the costs
<PAGE>
incurred in connection with the acquisition and development of Homestead Village
projects. In furtherance of the foregoing, Borrower, the Partnership and Lender
have agreed that (i) the maximum amount of the Corporate Loan shall be
$90,765,665 (the "Maximum Corporate Loan Amount"); (ii) Borrower's repayment
obligation for funds advanced in respect of the Corporate Loan shall be adjusted
by a discount factor of .882196112 (the "Discount Factor"), thus providing for
the maximum face amount of this Note of $80,073,117 (i.e., the Maximum Corporate
Loan Amount as adjusted by the Discount Factor); (iii) the maximum amount of the
Partnership Loan shall be $20,353,019 (the "Maximum Partnership Loan Amount");
(ii) the Partnership's repayment obligation for funds advanced in respect of the
Partnership Loan, as evidenced by that certain Amended and Restated Promissory
Note, of even date herewith (the "Partnership Note"), shall be adjusted by the
Discount Factor, thus providing for the maximum face amount of the Partnership
Note of $17,955,354 (i.e., the Maximum Partnership Loan Amount as adjusted by
the Discount Factor); and (iv) in connection therewith, the Prior Loan Documents
shall be amended and restated in conformity with the foregoing and as otherwise
agreed by the parties. In connection with such amendment and restatement of the
Prior Loan Documents, prior to the execution and delivery of this Note to
Lender, Borrower executed and delivered to Lender that certain promissory note
in the amount of $18,041,687 (the "Additional Corporate Note"). This Note only
renews and consolidates the outstanding principal balance plus the amounts not
yet disbursed under (a) the Additional Corporate Note; and (b) the Prior
Corporate Note. Florida documentary stamp and intangible tax on the Prior
Corporate Note is affixed to the instrument recorded in ORB 8027, Page 484,
Hillsborough County Public Records, the instrument recorded in ORB 24449, Page
598, Broward County Public Records, and the instrument recorded in ORB 17194
Page 179, Dade County Public Records. Any Florida documentary stamp and
intangible tax due on account of the Additional Corporate Note is affixed to the
Amended and Restated Mortgages dated this date, from Borrower to Lender, being
recorded in the Public Records of Hillsborough County, Broward County and Dade
County.
D. The Partnership Note and this Note and the amended and restated Prior
Loan Documents being executed and delivered contemporaneously herewith, and any
and all other agreements or instruments now or hereafter executed by Borrower,
the Partnership or any other person or entity to evidence the Loans, or any
portion thereof, or in connection with, or as security for the payment or
performance of, this Note or the Partnership Note and/or any other note(s)
delivered from time to time to Lender to evidence the Loans or any portion
thereof, are, together with such notes, herein collectively referred to as the
"Loan Documents".
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender agree to consolidate, amend and restate the
Additional Corporate Note and the Prior Corporate Note as follows:
2
<PAGE>
1. Promise to Pay.
On or before October 31, 2006 (the "Due Date"), the undersigned Borrower,
hereby promises to pay to the order of Lender in lawful money of the United
States of America, the lesser of (A) EIGHTY MILLION SEVENTY THREE THOUSAND ONE
HUNDRED SEVENTEEN DOLLARS ($80,073,117) and (B) the aggregate unpaid principal
amount of all advances made by Lender to Borrower in respect of the Corporate
Loan, multiplied by the Discount Factor (the amount so determined being herein
called the "Adjusted Principal Amount"), together with interest on the Adjusted
Principal Amount at a rate equal to 9.0% per annum (the "Interest Rate").
Interest shall be calculated on the basis of a 360-day year and shall be
computed on the actual number of days elapsed.
2. Payments.
Accrued interest on the unpaid Adjusted Principal Amount shall be payable
in arrears every six months beginning with the date that is six months after the
date of this Note, in an amount equal to all of the interest accrued during the
immediately preceding six month period. Borrower shall make a payment of the
total Adjusted Principal Amount of advances then outstanding, together with
accrued and unpaid interest to such date, on the Due Date. Borrower shall have
no obligation to pay the Adjusted Principal Amount, or any portion thereof,
until the Due Date or such earlier date upon which the loan is accelerated.
Borrower shall make each payment hereunder not later than 11:00 a.m. (Mountain
Standard Time) on the day when due in U.S. dollars at Lender's office at 7777
Market Center Avenue, El Paso, Texas 79912. Each payment shall first be applied
to late charges, costs of collection or enforcement and other similar amounts
due, if any, under this Note, then to interest due and payable hereunder and the
remainder to the Adjusted Principal Amount due and payable hereunder. The
aggregate unpaid Adjusted Principal Amount shown on the records of Lender shall
be rebuttable presumptive evidence of the Adjusted Principal Amount owing and
unpaid on this Note.
3. Conversion. Subject to the terms of this Note, the holder of this Note
shall have the right, beginning on any Business Day (as defined below) on or
after March 31, 1997, (the "Exercisability Date") and on or prior to the date on
which this Note is fully paid, to convert to shares of Common Stock all or any
portion of the principal amount outstanding on this Note, on the basis of one
fully paid, registered and nonassessable share of Common Stock for each $11.50
aggregate Adjusted Principal Amount outstanding on this Note. The number of
shares of Common Stock into which this Note may be converted, as adjusted
pursuant hereto, is referred to herein as the "Exercise Rate". For purposes of
this Note, certain capitalized terms used below are defined in Section 4 of this
Note.
(a) The conversion rights under this Section 3 of this Note may be
exercised from time to time on and after the Exercisability Date and on or
prior to the Due Date by surrendering this Note at the principal office of
Borrower with the form of conversion
3
<PAGE>
election set forth as Exhibit A hereto (the "Conversion Exercise") duly
completed and signed by the holder of this Note.
(b) Except as otherwise provided in Section 3(h)(vi) no payment shall
be made on Common Stock issuable upon conversion of this Note on account of
any dividend or distribution declared on Borrower's Common Stock to holders
of such Common Stock of record as of a date prior to the Exercise Date.
(c) The "Exercise Date" shall be the date when all of the items
referred to in subsection (a) of this Section 3 are received by Borrower at
or prior to 2:00 p.m., New York, New York time, on a Business Day and the
conversion of this Note will be effective as of such Exercise Date. If any
items referred to in subsection (a) are received after 2:00 p.m., New York,
New York time, on a Business Day, the conversion of this Note will be
effective on the next succeeding Business Day. Notwithstanding the
foregoing, in the case of a conversion of this Note on the Expiration Date,
if all of the items referred to in the preceding subsection are received by
Borrower at or prior to 5:00 p.m. New York, New York time, on such
Expiration Date, the conversion of this Note will be effective on the
Expiration Date.
(d) Upon the conversion of this Note in accordance with the terms
hereof Borrower shall issue and cause to be delivered with all reasonable
dispatch to or upon the written order of the holder of this Note, a
certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of this Note, in fully registered form,
registered in such name or names as may be directed by such holder pursuant
to the Conversion Exercise, together with cash as provided in Section 3(i)
hereof and shall deliver to holder a duly executed replacement note
representing the aggregate principal amount of this Note outstanding less
any amount previously converted (in each case, without the adjustment
provided for in Section 1 of this Note), but otherwise in the same form as
this Note; provided, however, that if any consolidation, merger or lease or
sale of assets is proposed to be effected by Borrower as described in
Section 3(h)(x) hereof, or a tender offer or an exchange offer for shares
of Common Stock of Borrower shall be made, upon such surrender of this Note
as aforesaid, Borrower shall, as soon as possible, but in any event not
later than two Business Days thereafter, issue and cause to be delivered
the full number of shares of Common Stock issuable upon the conversion of
this Note in the manner described in this sentence together with cash as
provided in Section 3(i) hereof. Such certificate or certificates shall be
deemed to have been issued and any person so designated to be named therein
shall be deemed to have become a holder of record or such shares of Common
Stock as of the date of the surrender of this Note. No fractional shares
shall be issued upon conversion of this Note in accordance with Section
3(i) hereof.
(e) Borrower will pay all documentary stamp taxes attributable to the
initial issuance of this Note and the issuance of shares of Common Stock
upon conversion of
4
<PAGE>
this Note; provided, however, that Borrower shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved
in the issuance of this Note or any certificates for shares of Common Stock
in a name other than that of the registered holder of this Note surrendered
upon the exercise hereof, and Borrower shall not be required to issue or
deliver such Note unless or until the person or persons requesting the
issuance thereof shall have paid to Borrower the amount of such tax or
shall have established to the satisfaction of Borrower that such tax has
been paid.
(f) Borrower will at all times reserve and keep available, free from
preemptive rights, out of the aggregate of its authorized but unissued
shares of Common Stock, for the purpose of enabling it to satisfy any
obligation to issue shares of Common Stock upon conversion of this Note,
the maximum number of shares of Common Stock which may then be deliverable
upon the conversion of this Note. Borrower or the transfer agent for the
Common Stock (the "Transfer Agent") and every subsequent transfer agent for
any shares of Borrower's capital stock issuable upon the exercise of any of
the conversion rights aforesaid will be irrevocably authorized and directed
at all times to reserve such number of authorized shares as shall be
required for such purpose. Before taking any action which would cause an
adjustment pursuant to this Section 3 to reduce the Exercise Price below
the then par value (if any) of the shares issuable upon conversion of this
Note, Borrower will take any corporate action which may, in the opinion of
its counsel (which may be counsel employed by Borrower), be necessary in
order that Borrower may validly and legally issue fully paid and
nonassessable shares of Common Stock at the Exercise Price as so adjusted.
(g) At any such time as Common Stock is listed or quoted on any
national securities exchange or inter-dealer quotation system, Borrower
will, at its expense, obtain promptly and maintain the approval for listing
or quotation on each such exchange or inter-dealer quotation system, upon
official notice of issuance after notice of conversion of this Note, the
shares of Common Stock issuable hereunder and maintain the listing or
quotation of such shares after their issuance; and Borrower will also, upon
official notice of issuance after notice of conversion of this Note, list
or quote on such national securities exchange, will register under the
Securities Exchange Act of 1934, as amended, and will maintain such listing
or quotation of, any Other Securities (as defined below) that at any time
are issuable upon conversion of this Note, if and at the time that any
securities of the same class shall be listed or quoted on such national
securities exchange or inter-dealer quotation system by Borrower.
(h) The Exercise Rate is subject to adjustment from time to time upon
the occurrence of the events enumerated in this Section 3(h). For purposes
of this Section 3(h), "Common Stock" means the Common Stock and any other
stock of Borrower, however designated, issuable upon conversion of this
Note.
5
<PAGE>
(i) Adjustment for Change in Capital Stock. If Borrower:
a. pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock;
b. subdivides its outstanding shares of Common Stock into a
greater number of shares;
c. combines its outstanding shares of Common Stock into a
smaller number of shares;
d. makes a distribution on its Common Stock in shares of
its capital stock other than Common Stock; or
e. issues by reclassification of its Common Stock any
shares of its capital stock,
then the Exercise Rate in effect immediately prior to such action shall be
proportionately adjusted so that the holder of this Note may receive the
aggregate number and kind of shares of capital stock of Borrower which such
holder would have owned immediately following such action if this Note had
been exercised immediately prior to such action or immediately prior to the
record date applicable thereto, if any.
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or
reclassification.
If, after an adjustment, a holder of this Note, upon conversion, may
receive shares of two or more classes of capital stock of Borrower, the
Exercise Rate of each class of capital stock shall thereafter be subject to
adjustment on terms comparable to those applicable to Common Stock in this
Section 3(h).
Such adjustment shall be made successively whenever any event listed
above shall occur.
(ii) Adjustment for Rights Issue or Sale of Common Stock Below
Current Market Value. If Borrower (i) distributes any rights, warrants or
options to all holders of its Common Stock entitling them to subscribe for
or purchase shares of Common Stock at a price per share less than 94% (100%
if a stand-by underwriter is used and charges Borrower a commission) of the
Current Market Value at the Time of Determination (each as defined in
Section 4) or (ii) sells any Common Stock or any securities convertible
into or exchangeable or exercisable
6
<PAGE>
for the Common Stock (other than pursuant to (1) the exercise of this Note
(or any other note issued by Borrower pursuant to or in connection with
that certain Merger and Distribution Agreement dated of even date herewith
among Lender Security Capital Pacific Trust ("PTR"), Security Capital Group
Incorporated ("SCG") and Homestead Village Properties Incorporated
("Homestead") or (2) upon exercise of outstanding warrants to acquire
shares of Common Stock, which warrants were issued pursuant to a Warrant
Agreement executed in connection with that certain Warrant Purchase
Agreement of even date herewith among Lender, PTR, SCG and Homestead or (3)
any security convertible into, or exchangeable or exercisable for, the
Common Stock as to which the issuance thereof has previously been the
subject of any required adjustment (whether or not actually made) pursuant
to this Section 3(h)) at a price per share less than the Current Market
Value, the Exercise Rate shall be adjusted in accordance with the formula:
E ' = E x (O + N)
---------------
(O + (N x P/M))
where:
E ' = the adjusted Exercise Rate;
E = the current Exercise Rate;
O = the number of shares of Common Stock outstanding on the record date
for the distribution to which this subsection (ii) is being applied
or on the date of sale of Common Stock at a price per share less than
the Current Market Value to which this subsection (ii) applies, as
the case may be;
N = the number of additional shares of Common Stock issuable upon
exercise of all rights, warrants and options so distributed or the
number of shares of Common Stock so sold or the maximum stated number
of shares of Common Stock issuable upon the conversion, exchange or
exercise of any such convertible, exchangeable or exercisable
securities, as the case may be;
P = the offering price per share of the additional shares of Common Stock
upon the exercise of any such rights, options or warrants so
distributed or pursuant to any such convertible, exchangeable or
exercisable securities so sold or the sale price of the shares so
sold, as the case may be; and
M = the Current Market Value as of the Time of Determination or at the
time of sale, as the case may be.
7
<PAGE>
The adjustment shall be made successively whenever any such rights,
warrants or options are issued and shall become effective immediately after
the record date for the determination of stockholders entitled to receive
the rights, warrants or options. If at the end of the period during which
such rights, warrants or options are exercisable, not all rights, warrants
or options shall have been exercised, the Exercise Rate shall be
immediately readjusted to what it would have been if "N" in the above
formula had been the number of shares actually issued.
No adjustment shall be made under this subsection (ii) if the
application of the formula stated above in this subsection (ii) would
result in a value of E ' that is lower than the value of E.
(iii) Adjustment for Other Distributions. If Borrower distributes to
all holders of its Common Stock any of its assets or debt securities or any
rights, warrants or options to purchase any of its debt securities or
assets, the Exercise Rate shall be adjusted in accordance with the formula:
E ' = E x M
---
M-F
where:
E ' = the adjusted Exercise Rate;
E = the current Exercise Rate;
M = the Current Market Value; and
F = the fair market value (on the record date for the distribution to
which this subsection (iii) applies) of the assets, securities,
rights, warrants or options to be distributed in respect of each
share of Common Stock in the distribution to which this
subsection (iii) is being applied (including, in the case of cash
dividends or other cash distributions giving rise to an
adjustment, all such cash distributed concurrently).
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the
record date for the determination of stockholders entitled to receive the
distribution. If at the end of the period during which such rights,
warrants or options are exercisable, not all rights, warrants or options
shall have been exercised, the Exercise Rate shall be immediately
readjusted to what it would have been if such rights, warrants or options
which are not exercised had not been issued.
8
<PAGE>
This subsection (iii) does not apply to cash dividends or cash
distributions paid out of consolidated retained earnings as shown on the
books of Borrower prepared in accordance with generally accepted accounting
principles other than any Extraordinary Cash Dividend (as defined below).
An "Extraordinary Cash Dividend" shall be that portion, if any, of the
aggregate amount of all cash dividends paid in any fiscal year which
exceeds the sum of (A) Borrower cumulative undistributed earnings on the
date of this Agreement, plus (B) the cumulative amount of earnings, as
determined by the Board of Directors, after such date, minus (C) the
cumulative amount of dividends accrued or paid in respect of the Common
Stock. In all cases, Borrower shall give the holder of this Note advance
notice of a record date for any dividend payment on the Common Stock which
notice is delivered on a date at least as early as the date of notice to
the holders of Common Stock.
(iv) Consideration Received. For purposes of any computation
respecting consideration received pursuant to subsection (ii) of Section
3(h), the following shall apply:
a. in the case of the issuance of shares of Common Stock
for cash, the consideration shall be the amount of such cash,
provided that in no case shall any deduction be made for any
commissions, discounts or other expenses incurred by Borrower for
any underwriting of the issue or otherwise in connection
therewith;
b. in the case of the issuance of shares of Common Stock
for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
market value thereof as determined in good faith by the Board of
Directors (irrespective of the accounting treatment thereof),
whose determination shall be conclusive, and described in a Board
resolution which shall be filed with the records of Borrower; and
c. in the case of the issuance of securities convertible
into or exchangeable for shares, the aggregate consideration
received therefor shall be deemed to be the consideration
received by Borrower for the issuance of such securities plus the
additional minimum consideration, if any, to be received by
Borrower upon the conversion or exchange thereof (the
consideration in each case to be determined in the same manner as
provided in clauses (1) and (2) of this subsection).
(v) When De Minimis Adjustment May Be Deferred. No adjustment in the
Exercise Rate need be made unless the adjustment would require an increase
or decrease of at least 1% in the Exercise Rate. Any adjustments that
9
<PAGE>
are not made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 3(h) shall be
made to the nearest 1/100th of a share.
(vi) When No Adjustment Required. No adjustment need be made for a
transaction referred to in subsections (i), (ii) or (iii) of this Section
3(h) if the holder of this Note is offered the opportunity to participate
in the transaction on a basis and with notice that the Board of Directors
determines to be fair and appropriate in light of the basis and notice on
which holders of Common Stock participate in the transaction. To the extent
this Note becomes convertible into cash, no adjustment need be made
thereafter as to the cash. Interest will not accrue on the cash.
(vii) Notice of Adjustment. Whenever the Exercise Rate is adjusted,
Borrower shall provide the notices required by Section 3(j) hereof.
(viii) Voluntary Adjustment. Borrower from time to time may, as the
Board of Directors deems appropriate, increase the Exercise Rate by any
amount for any period of time if the period is at least 20 days and if the
increase is irrevocable during the period. Whenever the Exercise Rate is
increased, Borrower shall mail to the holder of this Note a notice of the
increase. Borrower shall mail the notice at least 15 days before the date
the increased Exercise Rate takes effect. The notice shall state the
increased Exercise Rate and the period it will be in effect. An increase of
the Exercise Rate pursuant to this Section 3(h)(viii), other than an
increase which Borrower has irrevocably committed will be in effect for so
long as this Note is outstanding, does not change or adjust the Exercise
Rate otherwise in effect for purposes of subsections (i), (ii) or (iii) of
this Section 3(h).
(ix) Notice of Certain Transactions. If:
------------------------------
a. Borrower takes any action that would require an adjustment in
the Exercise Rate pursuant to subsections (i), (ii) or (iii) of this
Section 3(h) and if Borrower does not arrange for the holder of this
Note to participate pursuant to Section 3(h)(vi); or
b. there is a liquidation or dissolution of Borrower,
Borrower shall mail to the holder of this Note a notice stating the
proposed record date for a dividend or distribution or the proposed
effective date of a subdivision, combination, reclassification,
consolidation, merger, transfer, lease, liquidation or dissolution.
Borrower shall mail the notice at least 15 days before such date.
10
<PAGE>
Failure to mail the notice or any defect in it shall not affect the
validity of the transaction.
(x) Reorganization of Borrower. If Borrower consolidates or
merges with or into, or transfers or leases all or substantially all
its assets to, any Person, upon consummation of such transaction this
Note shall automatically become exercisable for the kind and amount of
securities, cash or other assets which the holder of this Note would
have owned immediately after the consolidation, merger, transfer or
lease if the holder had exercised this Note immediately before the
effective date of the transaction. Concurrently with the consummation
of such transaction, the corporation formed by or surviving any such
consolidation or merger if other than Borrower, or the Person to which
such sale or conveyance shall have been made (any such Person, the
"Successor Guarantor"), shall enter into a supplemental Note so
providing and further providing for adjustments which shall be as
nearly equivalent as may be practical to the adjustments provided for
in this Section 3(h). The Successor Guarantor shall mail to the holder
of this Note a notice describing the supplemental Note. If the issuer
of securities deliverable upon conversion of this Note under the
supplemental Note is an Affiliate of the formed, surviving, transferee
or lessee corporation, that issuer shall join in the supplemental
Note. If this subsection (x) applies, subsections (i), (ii) or (iii)
of this Section 3(h) do not apply.
(xi) Borrower Determination Final. Any determination that
Borrower or the Board of Directors must make pursuant to subsection
(i), (ii), (iii), (iv) or (vii) of this Section 3(h) is conclusive.
(xii) When Issuance or Payment May Be Deferred. In any case in
which this Section 3(h) shall require that an adjustment in the
Exercise Rate be made effective as of a record date for a specified
event, Borrower may elect to defer until the occurrence of such event
(i) issuing to the holder of this Note exercised after such record
date the shares of Common Stock and other capital stock of Borrower,
if any, issuable upon such conversion over and above the shares of
Common Stock and other capital stock of Borrower, if any, issuable
upon such conversion on the basis of the Exercise Rate and (ii) paying
to such holder any amount in cash in lieu of a fractional share
pursuant to Section 3(i) hereof; provided, however, that Borrower
shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional
shares of Common Stock, other capital stock and cash upon the
occurrence of the event requiring such adjustment.
(xiii) Adjustments to Par Value. Borrower shall from time to
time make such adjustments to the par value of the Common Stock as may
be necessary so
11
<PAGE>
that at all times, upon conversion of this Note, the shares of Common
Stock will be fully paid and nonassessable.
(xiv) Priority of Adjustments. If this Section 3(h) requires
adjustments to the Exercise Rate under more than one of subsections
(i), (ii) or (iii), and the record dates for the distributions giving
rise to such adjustments shall occur on the same date, then such
adjustments shall be made by applying, first, the provisions of
subsection (i), second, the provisions of subsection (iii) and, third,
the provisions of subsection (ii).
(xv) Multiple Adjustments. After an adjustment to the Exercise
Rate under this Section 3(h), any subsequent event requiring an
adjustment under this Section 3(h) shall cause an adjustment to the
Exercise Rate as so adjusted.
(i) Fractional Interests; Accrued Interest. Borrower shall not be
required to issue fractional shares on the conversion of this Note. If any
fraction of a share would, except for the provisions of this Section 3(i),
be issuable on the conversion of this Note, Borrower shall pay to the
holder an amount in cash equal to the product of (i) such fraction of a
share and (ii) the Current Market Value of a share of Common Stock as of
the date of conversion of this Note. Upon any conversion of all or any
portion of the Adjusted Principal Amount in accordance with the terms
hereof, Borrower shall pay to the holder in cash all accrued but unpaid
interest to the effective date of conversion with respect to the portion of
the Adjusted Principal Amount of this Note being converted.
(j) Notices to Holder. Upon any adjustment of the Exercise Rate
pursuant to Section 3(h) hereof, Borrower shall promptly thereafter (i)
cause to be prepared a certificate of a firm of independent public
accountants of recognized standing selected by Borrower (who may be the
regular auditors of Borrower) setting forth the Exercise Rate after such
adjustment and setting forth in reasonable detail the method of calculation
and the facts upon which such calculations are based and setting forth the
number of shares (or portion thereof) issuable after such adjustment in the
Exercise Rate, upon conversion of this Note, which certificate shall be
conclusive evidence of the correctness of the matters set forth therein,
and (ii) cause to be given to the holder of this Note at such holder's
address appearing on the Note register written notice of such adjustments
by first-class mail, postage prepaid. Where appropriate, such notice may be
given in advance and included as a part of the notice required to be mailed
under the other provisions of this Section 3(j).
In the event:
(i) Borrower shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for
or purchase shares of Common Stock or of any other subscription rights
or warrants (other than
12
<PAGE>
rights, options or warrants issued to all holders of its Common Stock
entitling them to subscribe for or purchase shares of Common Stock at
a price per share not less than 94% (100% if a stand-by underwriter is
used and charges Borrower commission) of the Current Market Value); or
(ii) Borrower shall authorize the distribution to all holders of
shares of Common Stock of evidences of its indebtedness or assets
(other than cash dividends or cash distributions payable out of
consolidated earnings or earned surplus or dividends payable in shares
of Common Stock or distributions referred to in subsection (i) of
Section 3(h) hereof); or
(iii) of any consolidation or merger to which Borrower is a
party or of the conveyance or transfer of the properties and assets of
Borrower substantially as an entirety, or of any reclassification or
change of Common Stock issuable upon conversion of this Note (other
than a change in par value, or from par value to no par value, or from
no par value to par value, or as a result of a subdivision or
combination), or a tender offer or exchange offer for shares of Common
Stock; or
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of Borrower; or
(v) Borrower proposes to take any action (other than actions of
the character described in Section 3(h)(i) which would require an
adjustment of the Exercise Rate pursuant to Section 3(h);
then Borrower shall cause to be given to the registered holder of this Note
at its address appearing on the Note register, at least 20 days (or 15 days
in any case specified in clauses (i) or (ii) above) prior to the applicable
record date hereinafter specified, or promptly in the case of events for
which there is no record date, by first-class mail, postage prepaid, a
written notice stating (i) the date as of which the holders of record of
shares of Common Stock to be entitled to receive any such rights, options,
warrants or distribution are to be determined, or (ii) the initial
expiration date set forth in any tender offer or exchange offer for shares
of Common Stock, or (iii) the date on which any such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding up is expected to become effective or consummated, and the date as
of which it is expected that holders of record of shares of Common Stock
shall be entitled to exchange such shares for securities or other property,
if any, deliverable upon such reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up. The failure
to give the notice required by this Section 3(j) or any defect therein
shall not affect the legality or validity of any distribution, right,
option, warrant, reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up, or the vote upon any
action.
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<PAGE>
Nothing contained in this Note shall be construed as conferring upon
the holder hereof the right to vote or to consent or to receive notice as
shareholders in respect of the meetings of shareholders or the election of
directors of Borrower or any other matter, or any rights whatsoever as
shareholders of Borrower.
4. Definitions. For purposes of Section 3 of this Note, the following
terms shall have the meanings indicated:
"Affiliate" means, with respect to another Person, any Person directly
or indirectly controlling or controlled by or under direct or indirect
common control with such other Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlled by"
and "under common control with"), when used with respect to any Person,
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities,
by contract or otherwise.
"Board of Directors" means the Board of Directors of Borrower.
"Business Day" shall mean any day other than a Saturday or a Sunday or
a day on which commercial banking institutions in The City of New York are
authorized by law to be closed.
"Current Market Value" per share of Common Stock or of any other
security at any date shall be the average of the daily market price, for
the twenty (20) consecutive trading days immediately preceding the day of
such determination. The market price for each such trading day shall be:
(i) the last reported sales price, regular way on such day, or, if no sale
takes place on such day, the average of the reported closing bid and asked
prices on such day, regular way, in either case as reported on the New York
Stock Exchange ("NYSE") or, (ii) if such security is not listed or admitted
for trading on the NYSE, on the principal national securities exchange on
which such security is listed or admitted for trading or, (iii) if not
listed or admitted for trading on any national securities exchange, on the
National Market System of the National Association of Securities Dealers,
Inc. Automated Quotations System ("NASDAQ") or, (iv) if such security is
not quoted on such National Market System, the average of the closing bid
and asked prices on such day in the over-the-counter market as reported by
NASDAQ or, (v) if bid and asked prices for such security on such day shall
not have been reported through NASDAQ, the average of the bid and asked
prices on such day as furnished by any NYSE member firm regularly making a
market in such security selected for such purpose by the Chairman of the
Board or the Board of Directors or, (vi) if such bid and asked prices are
not so furnished, then the fair market value of the security as established
by the Board of Directors acting in their good faith reasonable judgment.
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<PAGE>
"Other Securities" means any stock (other than Common Stock) and other
securities of Borrower or any other Person (corporate or otherwise) which
the holder of this Note at any time shall be entitled to receive, or shall
have received, upon the conversion of this Note, in lieu of or in addition
to Common Stock, or which at any time shall be issuable or shall have been
issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 3(h) hereof or otherwise.
"Person" means any individual, corporation, partnership, joint
venture, trust, estate, unincorporated organization or government or any
agency or political subdivision thereof.
"Time of Determination" means the time and date of the earlier of (i)
the determination of stockholders entitled to receive rights, warrants, or
options or a distribution, in each case, to which Sections 3(h)(ii) or
(iii) apply and (ii) the time ("Ex-Dividend Time") immediately prior to the
commencement of "ex-dividend" trading for such rights, warrants or
distribution on such national or regional exchange or market on which the
Common Stock is then listed or quoted.
5. Call Option.
Except as expressly set forth in this Section 5, Borrower is prohibited
from making any voluntary prepayment of this Note and shall not have any right
to cause the holder to convert any portion of the Adjusted Principal Amount
outstanding from time to time. From and after the fifth anniversary of the date
of this Note and on or prior to the Due Date, Borrower shall have the right (the
"Call Option") to repay the Adjusted Principal Amount then outstanding, in whole
but not in part, without premium or penalty (other than the imposition, if
applicable, of the Default Rate or "late charge" as provided herein). Borrower
may exercise the Call Option by giving the holder of this Note at any time upon
ninety (90) days' prior written notice of Borrower's intention to exercise the
Call Option, which notice shall state the date on which the Call Option is to be
consummated, the then current Adjusted Principal Amount and all accrued interest
and unpaid interest thereon, together with any other sums evidenced by this
Note, to be paid on such date. Upon the receipt of any such notice, the holder
shall have the right at any time prior to the date proposed for such repurchase
to convert any or all of the Adjusted Principal Amount of this Note in
accordance with the provisions of Section 3.
6. Default.
In the event that any one or more of the following events occur, this Note
shall become immediately due and payable at the option of Lender:
(a) Borrower or the Partnership, as applicable, shall fail to pay
when due any sums required to be paid under this Note or any other Loan
Documents, and such failure is not cured within 10 days after receipt of
written notice from Lender.
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<PAGE>
(b) To the extent any such failure, breach or inaccuracy has a
Material Adverse Effect (as hereinafter defined), the failure by Borrower
or the Partnership to perform or observe, as and when required, any
covenant, agreement, obligation or condition required to be performed or
observed under this Note or any other Loan Documents, or the existence of
any breach or inaccuracy in any of the representations, covenants or
warranties set forth in the Loan Documents, provided, however, that (i) no
default shall exist hereunder on account of a breach of any representation,
covenant or warranty set forth in the Loan Documents (other than this Note)
until either Borrower or Partnership, as applicable, shall have failed to
cure such breach within any applicable notice and cure period therein
provided; and (ii) no default shall exist hereunder on account of a breach
of any representation, covenant or warranty set forth herein unless and
until Lender shall provide written notice of such breach to Borrower, and
Borrower shall fail to cure the same within 30 days after receipt of such
notice, provided if such breach is of such a nature that it cannot be cured
within such 30 day period, it shall not constitute a default hereunder so
long as Borrower commences its cure of such breach within such 30 day
period and thereafter diligently and continuously proceeds with the curing
of same within a reasonable period of time not to exceed 180 days.
"Material Adverse Effect" means any material and adverse effect on the
business, operations, properties, assets, condition (financial or other),
results of operations or prospects of Borrower and its affiliates,
subsidiaries and any parent entity, taken as a whole.
7. Default Rate; Late Charge.
Upon the maturity of any portion of this Note, whether by acceleration or
otherwise, Borrower further promises to pay interest at the rate per annum equal
to the sum of 2.0%, plus the Interest Rate, on the then outstanding past-due
amount of principal, until such amount is paid in full. In addition, a late
charge of four percent (4%) of the amount of any installment or the amount due
on the Due Date which is not paid when due shall be due and payable to the
holder of this Note to cover the extra expense involved in handling delinquent
payments. Said "late charge" shall be due and payable upon demand of the Lender.
8. Security; Governing Law.
(a) This Note evidences indebtedness incurred for the purpose of
financing the acquisition and development of real property, and payment of
this Note is secured by the Loan Documents. It is agreed that, at the
election of the holder hereof, the principal sum remaining unpaid hereon,
together with accrued interest thereon, shall become at once due and
payable at the place of payment aforesaid in the event that a default has
occurred under any of the Loan Documents.
(b) This Note shall be governed by, and construed in accordance with,
the laws of the State of New Mexico, United States.
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<PAGE>
9. Controlling General Provisions.
The provisions in this Section 9 shall govern and control over any
irreconcilably inconsistent provision, the Loan Documents or any other
instrument contemplated hereunder or thereunder. In no event shall the aggregate
of all interest paid or payable by Borrower to Lender ever exceed the maximum
rate of interest which may lawfully be charged to (or payable by) Borrower under
applicable law on the Adjusted Principal Amount of this Note from time to time
remaining unpaid. In this connection, it is expressly stipulated and agreed that
it is the intent of Lender and Borrower in the execution and delivery of this
Note to contract in strict compliance with any applicable usury laws. In
furtherance of the foregoing, none of the terms of the Loan Documents or any
such other instruments contemplated hereunder or thereunder shall ever be
construed to create a contract to charge or pay for interest in excess of the
maximum interest rate permitted to be contracted for, charged to, or payable by
Borrower under applicable law. Borrower and any guarantors, endorsers or other
parties now or hereafter becoming liable for payment of this Note shall never be
liable for interest in excess of the maximum interest that may be lawfully
charged under applicable law, and the provisions of this Section 9 shall govern
over all other provisions of the Loan Documents, and any other instruments
evidencing or securing the Loan, should such provisions be in apparent conflict
herewith.
Specifically and without limiting the generality of the foregoing
paragraph, it is expressly agreed that:
(a) In the event of the payment of the principal of the Adjusted
Principal Amount of this Note, prior to the due date for payment
thereof, resulting from acceleration of maturity of this Note, if the
aggregate amounts of interest accruing hereunder prior to such payment
plus the amount of any interest accruing after such maturity up to the
date of payment and plus any other amounts paid or accrued in
connection with the Loan Documents, including, if applicable, all or
any portion of the value of any Common Stock issued to Lender under
Section 3 of this Note, which by law are deemed interest under such
Loan Documents and which aggregate amounts paid or accrued (if
calculated in accordance with the provisions of this Note other than
pursuant to this Section 9) would exceed the maximum lawful rate of
interest which could be charged on the principal balance of this Note
from the date hereof to the date of final payment thereof, then in
such event the amount of such excess shall be credited, as of the date
paid, toward the payment of principal of this Note so as to reduce the
amount of the final payments of Adjusted Principal Amount due on this
Note;
(b) If under any circumstances the aggregate amounts paid under
the Loan Documents prior to and incident to the final payment hereof,
including, without limitation, if applicable, all or any portion of
the value of any Common Stock issued to Lender under Section 3 of this
Note, include amounts which by
17
<PAGE>
applicable law are deemed interest and which would exceed the maximum
amount of interest which could lawfully have been charged or collected
on this Note, Borrower stipulates that such payment and collection
will have been and will be deemed to have been the result of a
mathematical error on the part of both Borrower and Lender, and Lender
shall promptly refund the amount of such excess (to the extent only of
the excess of such payments above the maximum amount which could
lawfully have been collected and retained) upon the discovery of such
error by the party receiving such payment or notice thereof from the
party making such payment; and
(c) All calculations as to the rate of interest contracted for,
charged or received under this Note or the other Loan Document which
are made for the purposes of determining whether such rate exceeds the
maximum rate of interest which may lawfully be charged shall be made,
to the extent permitted by applicable usury laws, if any, by
amortizing, prorating, allocating and spreading, in equal parts,
during the period of the full stated term of the Loan evidenced
hereby, all interest any time contracted for, charged or received from
Borrower or otherwise by Lender in connection with such indebtedness.
Notwithstanding anything contained in this Note or the other Loan Documents
to the contrary, interest under this Note shall never exceed the lesser of (1)
the highest non-usurious rate allowed by applicable law or (2) seventeen percent
(17%) per annum on a compounded basis.
10. Invalidity.
The parties hereto intend and believe that each provision of this Note
comports with all applicable laws and judicial decisions. However, if any
provision or provisions, or if any portion of any provision or provision, in
this Note is found by a court of law to be in violation of any applicable
ordinance, statute, law, administrative or judicial decision, or public policy,
and if such court should declare such portion, provision or provisions of this
Note to be illegal, invalid, void or unenforceable as written, then it is the
intent of all parties hereto (i) that such portion, provision or provisions
shall be given force to the fullest possible extent that they are legal, valid
and enforceable, (ii) that the remainder of this Note shall be construed as if
such illegal, invalid, void or unenforceable portion, provision or provisions
were not contained therein, and (iii) that the rights, obligations and interest
of Borrower and the holder hereof under the remainder of this Note shall
continue in full force and effect.
11. Waiver; Expenses.
(a) Borrower hereby waives presentment, demand for payment, notice of
dishonor and all other notices or demands in connection with the delivery,
acceptance, performance, default or enforcement of this Note and hereby
consents to and extensions
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<PAGE>
of time, renewals, waivers or modifications that may be granted or
consented to by the holder of this Note in respect of the time of payment
or any other provision of this Note. Borrower hereby waives and renounces
for itself, its successors and assigns, all rights to the benefits of any
statute of limitations and any moratorium, reinstatement, marshalling,
forbearance, valuation, stay, extension, redemption, appraisement, or
exemption now provided, or which may hereafter be provided, by the
Constitution and laws of the United States and of any state thereof, both
as to itself and in and to all of its property, real and personal against
the enforcement and collection of the obligations evidenced by this Note.
(b) In the event that the holder hereof shall institute any action
for the enforcement of the collection of this Note, there shall be
immediately due from Borrower in addition to the unpaid interest and
principal, all costs and expenses of such action, including but not limited
to attorneys' fees and expenses.
12. Miscellaneous.
(a) This Note and all provision hereof shall be binding upon Borrower
and its successors and assigns and shall inure to the benefit of Lender,
together with its successors and assigns, including each owner and holder
from time to time of this Note.
(b) Time is of the essence as to all dates set forth herein subject
to any applicable grace or cure period expressly provided herein or the in
the Loan Documents; provided, however, that unless otherwise stated,
whenever any payment to be made under this Note shall be stated to be due
on a day other than a business day, such payment may be made on the
immediately preceding business day. For purposes of this Note, a business
day shall be any day that is not a Saturday, Sunday or national bank
holiday.
(c) All notices, demands or requests relating to any matters set
forth herein shall be in writing and delivered as set forth, and shall be
effective in the time set forth, in the Funding Agreement.
(d) Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
THE PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS
HEREIN PROVIDED FOR.
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<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Note as of the date set
forth above.
ATLANTIC HOMESTEAD VILLAGE INCORPORATED
By:/s/ David C. Dressler, Jr.
--------------------------
Name: David C. Dressler, Jr.
Title: Managing Director
Address: 125 Lincoln Avenue
Santa Fe, New Mexico 87501
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EXHIBIT A
Form of Exercise Notice
(To Be Executed Upon Conversion of Note)
The undersigned hereby irrevocably elects to convert the entire outstanding
principal amount of the Note (currently $__________) into __________ shares of
Common Stock in accordance with the terms thereof. The undersigned requests
that a certificate for such shares be registered in the name of
________________, whose address is _____________________ and that such shares be
delivered to ________________________ whose address is __________________.
Date:
----------
-----------------------
Name:
------------------
Title:
-----------------
21
<PAGE>
AMENDED AND RESTATED PROMISSORY NOTE Exhibit 4.7
$17,955,354 May 28, 1996
This Amended and Restated Promissory Note (this "Note") is made and
delivered as of May 28, 1996, to Security Capital Atlantic Incorporated, a
Maryland corporation ("Lender"), by Atlantic Homestead Village Limited
Partnership, a Delaware limited partnership ("Borrower"), under the following
circumstances:
RECITALS
A. Prior to the date hereof, Lender agreed to make a loan (the
"Partnership Loan") to Borrower, to fund, among other matters, acquisition and
construction costs and expenses incurred by the Partnership in connection with
acquiring and developing various real properties as Homestead Village projects.
In connection therewith Borrower delivered to Lender that certain promissory
note (the "Prior Partnership Note") dated January 24, 1996, in the original
principal amount of $19,213,476, and various deeds to secure debt, deeds of
trust and mortgages (the "Prior Partnership Security Documents"), to secure
payment of the Prior Corporate Note (as defined below) and the Prior Partnership
Note. (The Prior Partnership Note, the Prior Partnership Security Documents and
all other instruments delivered by the Partnership in connection therewith to
secure the Prior Partnership Note and the Prior Corporate Note are herein called
the "Prior Partnership Loan Documents".)
B. Prior to the date hereof, Lender agreed to make a loan (the "Corporate
Loan") to Atlantic Homestead Village Partnership Incorporated (the "Corporate
Borrower"), to fund, among other matters, acquisition and construction costs and
expenses incurred by the Corporate Borrower in connection with acquiring and
developing various real properties as Homestead Village projects. In connection
therewith the Corporate Borrower delivered to Lender that certain promissory
note (the "Prior Corporate Note") dated January 24, 1996, in the original
principal amount of $62,031,430, and various deeds to secure debt, deeds of
trust and mortgages (the "Prior Corporate Security Documents"), to secure
payment of the Prior Corporate Note and the Prior Partnership Note. (The Prior
Corporate Note, the Prior Corporate Security Documents and all other instruments
delivered by the Corporate Borrower in connection therewith to secure the Prior
Corporate Note and the Prior Partnership Note are herein called the "Prior
Corporate Loan Documents"; the Prior Corporate Loan Documents and Prior
Partnership Loan Documents are collectively referred to herein as the "Prior
Loan Documents".)
C. Borrower, the Corporate Borrower and Lender desire to continue the
funding provided for under the Prior Loan Documents, to provide funds to
Borrower and the Corporate
<PAGE>
Borrower for the costs incurred in connection with the acquisition and
development of Homestead Village projects. In furtherance of the foregoing,
Borrower, the Corporate Borrower and Lender have agreed that (i) the maximum
amount of the Corporate Loan shall be $90,765,665 (the "Maximum Corporate Loan
Amount"); (ii) the Corporate Borrower's repayment obligation for funds advanced
in respect of the Corporate Loan, as evidenced by that certain Consolidated
Amended and Restated Promissory Note, of even date herewith (the "Corporate
Note"), shall be adjusted by a discount factor of .882196112 (the "Discount
Factor"), thus providing for the maximum face amount of the Corporate Note of
$80,073,117 (i.e., the Maximum Corporate Loan Amount as adjusted by the Discount
Factor); (iii) the maximum amount of the Partnership Loan shall be $20,353,019
(the "Maximum Partnership Loan Amount"); (ii) the Partnership's repayment
obligation for funds advanced in respect of the Partnership Loan shall be
adjusted by the Discount Factor, thus providing for the maximum face amount this
Note of $17,955,354 (i.e., the Maximum Partnership Loan Amount as adjusted by
the Discount Factor); and (iv) in connection therewith, the Prior Loan Documents
shall be amended and restated in conformity with the foregoing and as otherwise
agreed by the parties. (The Corporate Loan and the Partnership Loan are herein
collectively called the "Loans". The amended and restated Prior Loan Documents
being executed and delivered contemporaneously herewith, and any and all other
agreements or instruments now or hereafter executed by Borrower, the Corporate
Borrower or any other person or entity to evidence, or in connection with, or as
security for the payment of this Note and/or the Corporate Note are herein
collectively, with such notes, referred to as the "Loan Documents".)
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender agree to amend and restate the Prior
Partnership Note as follows:
1. Promise to Pay.
On or before October 31, 2006 (the "Due Date"), the undersigned Borrower,
hereby promises to pay to the order of Lender in lawful money of the United
States of America, the lesser of (A) SEVENTEEN MILLION NINE HUNDRED FIFTY FIVE
THOUSAND THREE HUNDRED FIFTY FOUR DOLLARS ($17,955,354) and (B) the aggregate
unpaid principal amount of all advances made by Lender to Borrower in respect of
the Partnership Loan, multiplied by the Discount Factor (the amount so
determined being herein called the "Adjusted Principal Amount"), together with
interest on the Adjusted Principal Amount at a rate equal to 9.0% per annum (the
"Interest Rate"). Interest shall be calculated on the basis of a 360-day year
and shall be computed on the actual number of days elapsed.
2. Payments.
Accrued interest on the unpaid Adjusted Principal Amount shall be payable
in arrears every six months beginning with the date that is six months after the
date of this Note, in an
2
<PAGE>
amount equal to all of the interest accrued during the immediately preceding six
month period. Borrower shall make a payment of the total Adjusted Principal
Amount then outstanding, together with accrued and unpaid interest to such date,
on the Due Date. Borrower shall have no obligation to pay the Adjusted
Principal Amount, or any portion thereof, until the Due Date or such earlier
date upon which the loan is accelerated. Borrower shall make each payment
hereunder not later than 11:00 a.m. (Mountain Standard Time) on the day when due
in U.S. dollars at Lender's office at 7777 Market Center Avenue, El Paso, Texas
79912. Each payment shall first be applied to late charges, costs of collection
or enforcement and other similar amounts due, if any, under this Note, then to
interest due and payable hereunder and the remainder to the Adjusted Principal
Amount due and payable hereunder. The aggregate unpaid Adjusted Principal
Amount shown on the records of Lender shall be rebuttable presumptive evidence
of the Adjusted Principal Amount owing and unpaid on this Note.
3. Conversion. Subject to the terms of this Note, the holder of this Note
shall have the right, beginning on any Business Day (as defined below) on or
after March 31, 1997 (the "Exercisability Date") and on or prior to the date on
which this Note is fully paid, to convert to shares of Common Stock all or any
portion of the Adjusted Principal Amount outstanding on this Note, on the basis
of one fully paid, registered and nonassessable share of common stock $0.01 par
value per share (the "Common Stock"), of the Corporate Borrower, for each $11.50
aggregate Adjusted Principal Amount outstanding on this Note. The number of
shares of Common Stock into which this Note may be converted, as adjusted
pursuant hereto, is referred to herein as the "Exercise Rate". For purposes of
this Note, certain capitalized terms used below are defined in Section 4 of this
Note.
(a) The conversion rights under this Section 3 of this Note may be
exercised from time to time on and after the Exercisability Date and on or
prior to the Due Date by surrendering this Note at the principal office of
Borrower with the form of conversion election set forth as Exhibit A hereto
(the "Conversion Exercise") duly completed and signed by the holder of this
Note.
(b) Except as otherwise provided in Section 3(h)(vi) no payment shall
be made on Common Stock issuable upon conversion of this Note on account of
any dividend or distribution declared on the Corporate Borrower's Common
Stock to holders of such Common Stock of record as of a date prior to the
Exercise Date.
(c) The "Exercise Date" shall be the date when all of the items
referred to in subsection (a) of this Section 3 are received by Borrower at
or prior to 2:00 p.m., New York, New York time, on a Business Day and the
conversion of this Note will be effective as of such Exercise Date. If any
items referred to in subsection (a) are received after 2:00 p.m., New York,
New York time, on a Business Day, the conversion of this Note will be
effective on the next succeeding Business Day. Notwithstanding the
foregoing, in the case of a conversion of this Note on the Expiration Date,
if all of the items referred to in the preceding paragraph are received by
Borrower at or prior to 5:00
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<PAGE>
p.m. New York, New York time, on such Expiration Date, the conversion of
this Note will be effective on the Expiration Date.
(d) Upon the conversion of this Note in accordance with the terms
hereof the Corporate Borrower shall issue and cause to be delivered with
all reasonable dispatch to or upon the written order of the holder of this
Note, a certificate or certificates for the number of full shares of Common
Stock issuable upon the conversion of this Note, in fully registered form,
registered in such name or names as may be directed by such holder pursuant
to the Conversion Exercise, together with cash as provided in Section 3(i)
hereof and shall deliver to holder a duly executed replacement note
representing the aggregate principal amount of this Note outstanding less
any amount previously converted (in each case, without the adjustment
provided for in Section 1 of this Note), but otherwise in the same form as
this Note; provided, however, that if any consolidation, merger or lease or
sale of assets is proposed to be effected by the Corporate Borrower as
described in Section 3(h)(x) hereof, or a tender offer or an exchange offer
for shares of Common Stock of the Corporate Borrower shall be made, upon
such surrender of this Note as aforesaid, the Corporate Borrower shall, as
soon as possible, but in any event not later than two Business Days
thereafter, issue and cause to be delivered the full number of shares of
Common Stock issuable upon the conversion of this Note in the manner
described in this sentence together with cash as provided in Section 3(i)
hereof. Such certificate or certificates shall be deemed to have been
issued and any person so designated to be named therein shall be deemed to
have become a holder of record or such shares of Common Stock as of the
date of the surrender of this Note. No fractional shares shall be issued
upon conversion of this Note in accordance with Section 3(i) hereof.
(e) Borrower will pay all documentary stamp taxes attributable to the
initial issuance of this Note and the issuance of shares of Common Stock
upon conversion of this Note; provided, however, that Borrower shall not be
required to pay any tax or taxes which may be payable in respect of any
transfer involved in the issuance of this Note or any certificates for
shares of Common Stock in a name other than that of the registered holder
of this Note surrendered upon the exercise hereof, and Borrower shall not
be required to issue or deliver such Note unless or until the person or
persons requesting the issuance thereof shall have paid to Borrower the
amount of such tax or shall have established to the satisfaction of
Borrower that such tax has been paid.
(f) The Corporate Borrower will at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its
authorized but unissued shares of Common Stock, for the purpose of enabling
it to satisfy any obligation to issue shares of Common Stock upon
conversion of this Note, the maximum number of shares of Common Stock which
may then be deliverable upon the conversion of this Note. The Corporate
Borrower or the transfer agent for the Common Stock (the "Transfer Agent")
and every subsequent transfer agent for any shares of the Corporate
Borrower's capital
4
<PAGE>
stock issuable upon the exercise of any of the conversion rights aforesaid
will be irrevocably authorized and directed at all times to reserve such
number of authorized shares as shall be required for such purpose. Before
taking any action which would cause an adjustment pursuant to this Section
3 to reduce the Exercise Price below the then par value (if any) of the
shares issuable upon conversion of this Note, the Corporate Borrower will
take any corporate action which may, in the opinion of its counsel (which
may be counsel employed by the Corporate Borrower), be necessary in order
that the Corporate Borrower may validly and legally issue fully paid and
nonassessable shares of Common Stock at the Exercise Price as so adjusted.
(g) At any such time as Common Stock is listed or quoted on any
national securities exchange or inter-dealer quotation system, the
Corporate Borrower will, at its expense, obtain promptly and maintain the
approval for listing or quotation on each such exchange or inter-dealer
quotation system, upon official notice of issuance after notice of
conversion of this Note, the shares of Common Stock issuable hereunder and
maintain the listing or quotation of such shares after their issuance; and
the Corporate Borrower will also, upon official notice of issuance after
notice of conversion of this Note, list or quote on such national
securities exchange, will register under the Securities Exchange Act of
1934, as amended, and will maintain such listing or quotation of, any Other
Securities (as defined below) that at any time are issuable upon conversion
of this Note, if and at the time that any securities of the same class
shall be listed or quoted on such national securities exchange or inter-
dealer quotation system by the Corporate Borrower.
(h) The Exercise Rate is subject to adjustment from time to time upon
the occurrence of the events enumerated in this Section 3(h). For purposes
of this Section 3(h), "Common Stock" means the Common Stock and any other
stock of the Corporate Borrower, however designated, issuable upon
conversion of this Note.
(i) Adjustment for Change in Capital Stock. If the Corporate
Borrower:
a. pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock;
b. subdivides its outstanding shares of Common Stock into a
greater number of shares;
c. combines its outstanding shares of Common Stock into a
smaller number of shares;
d. makes a distribution on its Common Stock in shares of
its capital stock other than Common Stock; or
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<PAGE>
e. issues by reclassification of its Common Stock any
shares of its capital stock,
then the Exercise Rate in effect immediately prior to such action
shall be proportionately adjusted so that the holder of this Note may
receive the aggregate number and kind of shares of capital stock of
the Corporate Borrower which such holder would have owned immediately
following such action if this Note had been exercised immediately
prior to such action or immediately prior to the record date
applicable thereto, if any.
The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution and immediately
after the effective date in the case of a subdivision, combination or
reclassification.
If, after an adjustment, a holder of this Note, upon conversion,
may receive shares of two or more classes of capital stock of the
Corporate Borrower, the Exercise Rate of each class of capital stock
shall thereafter be subject to adjustment on terms comparable to those
applicable to Common Stock in this Section 3(h).
Such adjustment shall be made successively whenever any event
listed above shall occur.
(ii) Adjustment for Rights Issue or Sale of Common Stock Below
Current Market Value. If the Corporate Borrower (i) distributes any
rights, warrants or options to all holders of its Common Stock
entitling them to subscribe for or purchase shares of Common Stock at
a price per share less than 94% (100% if a stand-by underwriter is
used and charges the Corporate Borrower a commission) of the Current
Market Value at the Time of Determination (each as defined in Section
4) or (ii) sells any Common Stock or any securities convertible into
or exchangeable or exercisable for the Common Stock (other than
pursuant to (1) the exercise of this Note (or any other note issued by
the Corporate Borrower or one of its subsidiaries pursuant to or in
connection with that certain Merger and Distribution Agreement dated
of even date herewith among Lender, Security Capital Pacific Trust
("PTR"), Security Capital Group Incorporated ("SCG") and Homestead
Village Properties Incorporated ("Homestead") or (2) upon exercise of
outstanding warrants to acquire shares of Common Stock, which warrants
were issued pursuant to a Warrant Agreement executed in connection
with that certain Warrant Purchase Agreement of even date herewith
among Lender, PTR, SCG and Homestead or (3) any security convertible
into, or exchangeable or exercisable for, the Common Stock as to which
the issuance thereof has previously been the subject of any required
adjustment (whether or not actually made) pursuant to this Section
3(h)) at a price per share less than the
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Current Market Value, the Exercise Rate shall be adjusted in
accordance with the formula:
E ' = E x (O + N)
------------------
(O + (N x P/M))
where:
E '= the adjusted Exercise Rate;
E = the current Exercise Rate;
O = the number of shares of Common Stock outstanding on the record
date for the distribution to which this subsection (ii) is being
applied or on the date of sale of Common Stock at a price per
share less than the Current Market Value to which this subsection
(ii) applies, as the case may be;
N = the number of additional shares of Common Stock issuable upon
exercise of all rights, warrants and options so distributed or
the number of shares of Common Stock so sold or the maximum
stated number of shares of Common Stock issuable upon the
conversion, exchange or exercise of any such convertible,
exchangeable or exercisable securities, as the case may be;
P = the offering price per share of the additional shares of Common
Stock upon the exercise of any such rights, options or warrants
so distributed or pursuant to any such convertible, exchangeable
or exercisable securities so sold or the sale price of the shares
so sold, as the case may be; and
M = the Current Market Value as of the Time of Determination or at
the time of sale, as the case may be.
The adjustment shall be made successively whenever any such
rights, warrants or options are issued and shall become effective
immediately after the record date for the determination of
stockholders entitled to receive the rights, warrants or options. If
at the end of the period during which such rights, warrants or options
are exercisable, not all rights, warrants or options shall have been
exercised, the Exercise Rate shall be immediately readjusted to what
it would have been if "N" in the above formula had been the number of
shares actually issued.
No adjustment shall be made under this subsection (ii) if the
application of the formula stated above in this subsection (ii) would
result in a value of E ' that is lower than the value of E.
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<PAGE>
(iii) Adjustment for Other Distributions. If the Corporate
Borrower distributes to all holders of its Common Stock any of its
assets or debt securities or any rights, warrants or options to
purchase any of its debt securities or assets, the Exercise Rate shall
be adjusted in accordance with the formula:
E ' = E x M
----------
M-F
where:
E '= the adjusted Exercise Rate;
E = the current Exercise Rate;
M = the Current Market Value; and
F = the fair market value (on the record date for the distribution
to which this subsection (iii) applies) of the assets,
securities, rights, warrants or options to be distributed in
respect of each share of Common Stock in the distribution to
which this subsection (iii) is being applied (including, in the
case of cash dividends or other cash distributions giving rise
to an adjustment, all such cash distributed concurrently).
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the
record date for the determination of stockholders entitled to receive
the distribution. If at the end of the period during which such
rights, warrants or options are exercisable, not all rights, warrants
or options shall have been exercised, the Exercise Rate shall be
immediately readjusted to what it would have been if such rights,
warrants or options which are not exercised had not been issued.
This subsection (iii) does not apply to cash dividends or cash
distributions paid out of consolidated retained earnings as shown on
the books of the Corporate Borrower prepared in accordance with
generally accepted accounting principles other than any Extraordinary
Cash Dividend (as defined below). An "Extraordinary Cash Dividend"
shall be that portion, if any, of the aggregate amount of all cash
dividends paid in any fiscal year which exceeds the sum of (A) the
Corporate Borrower's cumulative undistributed earnings on the date of
this Agreement, plus (B) the cumulative amount of earnings, as
determined by the Board of Directors, after such date, minus (C) the
cumulative amount of dividends accrued or paid in respect of the
Common Stock. In all cases, Borrower shall give the holder of this
Note advance notice of a record date for
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<PAGE>
any dividend payment on the Common Stock which notice is delivered on
a date at least as early as the date of notice to the holders of
Common Stock.
(iv) Consideration Received. For purposes of any computation
respecting consideration received pursuant to subsection (ii) of
Section 3(h), the following shall apply:
a. in the case of the issuance of shares of Common Stock
for cash, the consideration shall be the amount of such cash,
provided that in no case shall any deduction be made for any
commissions, discounts or other expenses incurred by the
Corporate Borrower for any underwriting of the issue or otherwise
in connection therewith;
b. in the case of the issuance of shares of Common Stock
for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
market value thereof as determined in good faith by the Board of
Directors (irrespective of the accounting treatment thereof),
whose determination shall be conclusive, and described in a Board
resolution which shall be filed with the records of the Corporate
Borrower; and
c. in the case of the issuance of securities convertible
into or exchangeable for shares, the aggregate consideration
received therefor shall be deemed to be the consideration
received by the Corporate Borrower for the issuance of such
securities plus the additional minimum consideration, if any, to
be received by the Corporate Borrower upon the conversion or
exchange thereof (the consideration in each case to be determined
in the same manner as provided in clauses (1) and (2) of this
subsection).
(v) When De Minimis Adjustment May Be Deferred. No adjustment in
the Exercise Rate need be made unless the adjustment would require an
increase or decrease of at least 1% in the Exercise Rate. Any
adjustments that are not made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this
Section 3(h) shall be made to the nearest 1/100th of a share.
(vi) When No Adjustment Required. No adjustment need be made for
a transaction referred to in subsections (i), (ii) or (iii) of this
Section 3(h) if the holder of this Note is offered the opportunity to
participate in the transaction on a basis and with notice that the
Board of Directors determines to be fair and appropriate in light of
the basis and notice on which holders of Common Stock participate in
the transaction. To the extent this Note becomes convertible into
9
<PAGE>
cash, no adjustment need be made thereafter as to the cash. Interest
will not accrue on the cash.
(vii) Notice of Adjustment. Whenever the Exercise Rate is
adjusted, the Corporate Borrower shall provide the notices required by
Section 3(j) hereof.
(viii) Voluntary Adjustment. The Corporate Borrower from time
to time may, as the Board of Directors deems appropriate, increase the
Exercise Rate by any amount for any period of time if the period is at
least 20 days and if the increase is irrevocable during the period.
Whenever the Exercise Rate is increased, the Corporate Borrower shall
mail to the holder of this Note a notice of the increase. The
Corporate Borrower shall mail the notice at least 15 days before the
date the increased Exercise Rate takes effect. The notice shall state
the increased Exercise Rate and the period it will be in effect. An
increase of the Exercise Rate pursuant to this Section 3(h)(viii),
other than an increase which the Corporate Borrower has irrevocably
committed will be in effect for so long as any this Note is
outstanding, does not change or adjust the Exercise Rate otherwise in
effect for purposes of subsections (i), (ii) or (iii) of this Section
3(h).
(ix) Notice of Certain Transactions. If:
a. The Corporate Borrower takes any action that would
require an adjustment in the Exercise Rate pursuant to
subsections (i), (i) or (iii) of this Section 3(h) and if the
Corporate Borrower does not arrange for the holder of this Note
to participate pursuant to Section 3(h)(vi); or
b. there is a liquidation or dissolution of the Corporate
Borrower,
The Corporate Borrower shall mail to the holder of this Note a notice
stating the proposed record date for a dividend or distribution or the
proposed effective date of a subdivision, combination,
reclassification, consolidation, merger, transfer, lease, liquidation
or dissolution. The Corporate Borrower shall mail the notice at least
15 days before such date. Failure to mail the notice or any defect in
it shall not affect the validity of the transaction.
(x) Reorganization of the Corporate Borrower. If the Corporate
Borrower consolidates or merges with or into, or transfers or leases
all or substantially all its assets to, any Person, upon consummation
of such transaction this Note shall automatically become exercisable
for the kind and amount of securities, cash or other assets which the
holder of this Note would have owned immediately after the
consolidation, merger, transfer or lease if the holder had exercised
this Note immediately before the effective date of the transaction.
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<PAGE>
Concurrently with the consummation of such transaction, the
corporation formed by or surviving any such consolidation or merger if
other than the Corporate Borrower, or the Person to which such sale or
conveyance shall have been made (any such Person, the "Successor
Guarantor"), shall enter into a supplemental Note so providing and
further providing for adjustments which shall be as nearly equivalent
as may be practical to the adjustments provided for in this Section
3(h). The Successor Guarantor shall mail to the holder of this Note a
notice describing the supplemental Note. If the issuer of securities
deliverable upon conversion of this Note under the supplemental Note
is an Affiliate of the formed, surviving, transferee or lessee
corporation, that issuer shall join in the supplemental Note. If this
subsection (x) applies, subsections (i), (ii) or (iii) of this Section
3(h) do not apply.
(xi) Corporate Borrower Determination Final. Any determination
that the Corporate Borrower or the Board of Directors must make
pursuant to subsection (i), (ii), (iii), (iv) or (vii) of this Section
3(h) is conclusive.
(xii) When Issuance or Payment May Be Deferred. In any case in
which this Section 3(h) shall require that an adjustment in the
Exercise Rate be made effective as of a record date for a specified
event, the Corporate Borrower may elect to defer until the occurrence
of such event (i) issuing to the holder of this Note exercised after
such record date the shares of Common Stock and other capital stock of
the Corporate Borrower, if any, issuable upon such conversion over and
above the shares of Common Stock and other capital stock of the
Corporate Borrower, if any, issuable upon such conversion on the basis
of the Exercise Rate and (ii) paying to such holder any amount in cash
in lieu of a fractional share pursuant to Section 3(i) hereof;
provided, however, that the Corporate Borrower shall deliver to such
holder a due bill or other appropriate instrument evidencing such
holder's right to receive such additional shares of Common Stock,
other capital stock and cash upon the occurrence of the event
requiring such adjustment.
(xiii) Adjustments to Par Value. The Corporate Borrower shall
from time to time make such adjustments to the par value of the Common
Stock as may be necessary so that at all times, upon conversion of
this Note, the shares of Common Stock will be fully paid and
nonassessable.
(xiv) Priority of Adjustments. If this Section 3(h) requires
adjustments to the Exercise Rate under more than one of subsections
(i)(4), (ii) or (iii), and the record dates for the distributions
giving rise to such adjustments shall occur on the same date, then
such adjustments shall be made by applying, first, the provisions of
subsection (i), second, the provisions of subsection (iii) and, third,
the provisions of subsection (ii).
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<PAGE>
(xv) Multiple Adjustments. After an adjustment to the Exercise
Rate under this Section 3(h), any subsequent event requiring an
adjustment under this Section 3(h) shall cause an adjustment to the
Exercise Rate as so adjusted.
(i) Fractional Interests; Accrued Interest. The Corporate Borrower
shall not be required to issue fractional shares on the conversion of this
Note. If any fraction of a share would, except for the provisions of this
Section 3(i), be issuable on the conversion of this Note, the Corporate
Borrower shall pay to the holder an amount in cash equal to the product of
(i) such fraction of a share and (ii) the Current Market Value of a share
of Common Stock as of the date of conversion of this Note. Upon any
conversion of all or any portion of the Adjusted Principal Amount in
accordance with the terms hereof, Borrower shall pay to the holder in cash
all accrued but unpaid interest to the effective date of conversion with
respect to the portion of the Adjusted Principal Amount of this Note being
converted.
(j) Notices to Holder. Upon any adjustment of the Exercise Rate
pursuant to Section 3(h) hereof, the Corporate Borrower shall promptly
thereafter (i) cause to be prepared a certificate of a firm of independent
public accountants of recognized standing selected by the Corporate
Borrower (who may be the regular auditors of the Corporate Borrower)
setting forth the Exercise Rate after such adjustment and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculations are based and setting forth the number of shares (or portion
thereof) issuable after such adjustment in the Exercise Rate, upon
conversion of this Note, which certificate shall be conclusive evidence of
the correctness of the matters set forth therein, and (ii) cause to be
given to the holder of this Note at such holder's address appearing on the
Note register written notice of such adjustments by first-class mail,
postage prepaid. Where appropriate, such notice may be given in advance
and included as a part of the notice required to be mailed under the other
provisions of this Section 3(j).
In the event:
(i) The Corporate Borrower shall authorize the issuance to all
holders of shares of Common Stock of rights, options or warrants to
subscribe for or purchase shares of Common Stock or of any other
subscription rights or warrants (other than rights, options or
warrants issued to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per share
not less than 94% (100% if a stand-by underwriter is used and charges
the Corporate Borrower commission) of the Current Market Value); or
(ii) The Corporate Borrower shall authorize the distribution to
all holders of shares of Common Stock of evidences of its indebtedness
or assets (other than cash dividends or cash distributions payable out
of consolidated
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<PAGE>
earnings or earned surplus or dividends payable in shares of Common
Stock or distributions referred to in subsection (i) of Section 3(h)
hereof); or
(iii) of any consolidation or merger to which the Corporate
Borrower is a party or of the conveyance or transfer of the properties
and assets of the Corporate Borrower substantially as an entirety, or
of any reclassification or change of Common Stock issuable upon
conversion of this Note (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), or a tender offer or exchange
offer for shares of Common Stock; or
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporate Borrower; or
(v) The Corporate Borrower proposes to take any action (other
than actions of the character described in Section 3(h)(i) which would
require an adjustment of the Exercise Rate pursuant to Section 3(h);
then the Corporate Borrower shall cause to be given to the registered
holder of this Note at its address appearing on the Note register, at least
20 days (or 15 days in any case specified in clauses (i) or (ii) above)
prior to the applicable record date hereinafter specified, or promptly in
the case of events for which there is no record date, by first-class mail,
postage prepaid, a written notice stating (i) the date as of which the
holders of record of shares of Common Stock to be entitled to receive any
such rights, options, warrants or distribution are to be determined, or
(ii) the initial expiration date set forth in any tender offer or exchange
offer for shares of Common Stock, or (iii) the date on which any such
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up is expected to become effective or consummated,
and the date as of which it is expected that holders of record of shares of
Common Stock shall be entitled to exchange such shares for securities or
other property, if any, deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding up. The failure to give the notice required by this Section 3(j)
or any defect therein shall not affect the legality or validity of any
distribution, right, option, warrant, reclassification, consolidation,
merger, conveyance, transfer, dissolution, liquidation or winding up, or
the vote upon any action.
Nothing contained in this Note shall be construed as conferring upon
the holder hereof the right to vote or to consent or to receive notice as
shareholders in respect of the meetings of shareholders or the election of
directors of the Corporate Borrower or any other matter, or any rights
whatsoever as shareholders of the Corporate Borrower.
4. Definitions. For purposes of this Note, the following terms shall
have the meanings indicated:
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<PAGE>
"Affiliate" means, with respect to another Person, any Person directly
or indirectly controlling or controlled by or under direct or indirect
common control with such other Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlled by"
and "under common control with"), when used with respect to any Person,
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities,
by contract or otherwise.
"Board of Directors" means the Board of Directors of the Corporate
Borrower.
"Business Day" shall mean any day other than a Saturday or a Sunday or
a day on which commercial banking institutions in The City of New York are
authorized by law to be closed.
"Current Market Value" per share of Common Stock or of any other
security at any date shall be the average of the daily market price, for
the twenty (20) consecutive trading days immediately preceding the day of
such determination. The market price for each such trading day shall be:
(i) the last reported sales price, regular way on such day, or, if no sale
takes place on such day, the average of the reported closing bid and asked
prices on such day, regular way, in either case as reported on the New York
Stock Exchange ("NYSE") or, (ii) if such security is not listed or admitted
for trading on the NYSE, on the principal national securities exchange on
which such security is listed or admitted for trading or, (iii) if not
listed or admitted for trading on any national securities exchange, on the
National Market System of the National Association of Securities Dealers,
Inc. Automated Quotations System ("NASDAQ") or, (iv) if such security is
not quoted on such National Market System, the average of the closing bid
and asked prices on such day in the over-the-counter market as reported by
NASDAQ or, (v) if bid and asked prices for such security on such day shall
not have been reported through NASDAQ, the average of the bid and asked
prices on such day as furnished by any NYSE member firm regularly making a
market in such security selected for such purpose by the Chairman of the
Board or the Board of Directors or, (vi) if such bid and asked prices are
not so furnished, then the fair market value of the security as established
by the Board of Directors acting in their good faith reasonable judgment.
"Other Securities" means any stock (other than Common Stock) and other
securities of the Corporate Borrower or any other Person (corporate or
otherwise) which the holder of this Note at any time shall be entitled to
receive, or shall have received, upon the conversion of this Note, in lieu
of or in addition to Common Stock, or which at any time shall be issuable
or shall have been issued in exchange for or in replacement of Common Stock
or Other Securities pursuant to Section 3(h) hereof or otherwise.
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"Person" means any individual, corporation, partnership, joint
venture, trust, estate, unincorporated organization or government or any
agency or political subdivision thereof.
"Time of Determination" means the time and date of the earlier of (i)
the determination of stockholders entitled to receive rights, warrants, or
options or a distribution, in each case, to which Sections 3(h)(ii) or
(iii) apply and (ii) the time ("Ex-Dividend Time") immediately prior to the
commencement of "ex-dividend" trading for such rights, warrants or
distribution on such national or regional exchange or market on which the
Common Stock is then listed or quoted.
5. Call Option. Except as expressly set forth in this Section 5,
Borrower is prohibited from making any voluntary prepayment of this Note and
shall not have any right to cause the holder to convert any portion of the
Adjusted Principal Amount outstanding from time to time. From and after the
fifth anniversary of the date of this Note and on or prior to the Due Date,
Borrower shall have the right (the "Call Option") to repay the Adjusted
Principal Amount then outstanding, in whole but not in part, without premium or
penalty (other than the imposition, if applicable, of the Default Rate or "late
charge" as provided herein). Borrower may exercise the Call Option by giving
the holder of this Note at any time upon ninety (90) days' prior written notice
of Borrower's intention to exercise the Call Option, which notice shall state
the date on which the Call Option is to be consummated, the then current
Adjusted Principal Amount and all accrued interest and unpaid interest thereon,
together with any other sums evidenced by this Note, to be paid on such date.
Upon the receipt of any such notice, the holder shall have the right at any time
prior to the date proposed for such repurchase to convert any or all of the
Adjusted Principal Amount of this Note in accordance with the provisions of
Section 3.
6. Default.
In the event that any one or more of the following events occur, this Note
shall become immediately due and payable at the option of Lender:
(a) Borrower or the Corporate Borrower, as applicable, shall fail to
pay when due any sums required to be paid under this Note or any other Loan
Documents, and such failure is not cured within 10 days after receipt of
written notice from Lender.
(b) To the extent any such failure, breach or inaccuracy has a
Material Adverse Effect (as hereinafter defined), the failure by Borrower
or the Corporate Borrower to perform or observe, as and when required, any
covenant, agreement, obligation or condition required to be performed or
observed under this Note or any other Loan Documents, or the existence of
any breach or inaccuracy in any of the representations, covenants or
warranties set forth in the Loan Documents, provided, however, that (i) no
default shall exist hereunder on account of a breach of any
15
<PAGE>
representation, covenant or warranty set forth in the Loan Documents (other
than this Note) until either Borrower or the Corporate Borrower, as
applicable, shall have failed to cure such breach within any applicable
notice and cure period therein provided; and (ii) no default shall exist
hereunder on account of a breach of any representation, covenant or
warranty set forth herein unless and until Lender shall provide written
notice of such breach to Borrower, and Borrower shall fail to cure the same
within 30 days after receipt of such notice, provided if such breach is of
such a nature that it cannot be cured within such 30 day period, it shall
not constitute a default hereunder so long as Borrower commences its cure
of such breach within such 30 day period and thereafter diligently and
continuously proceeds with the curing of same within a reasonable period of
time not to exceed 180 days. "Material Adverse Effect" means any material
and adverse effect on the business, operations, properties, assets,
condition (financial or other), results of operations or prospects of
Borrower and its affiliates, subsidiaries and any parent entity, taken as a
whole.
7. Default Rate; Late Charge.
Upon the maturity of any portion of this Note, whether by acceleration or
otherwise, Borrower further promises to pay interest at the rate per annum equal
to the sum of (x) 2.0%, plus the Interest Rate, on the then outstanding past-due
Adjusted Principal Amount, until such amount is paid in full. In addition, a
late charge of four percent (4%) of the amount of any installment or the amount
due on the Due Date which is not paid when due shall be due and payable to the
holder of this Note to cover the extra expense involved in handling delinquent
payments. Said "late charge" shall be due and payable upon demand of the
Lender.
8. Security; Governing Law.
(a) This Note evidences indebtedness incurred for the purpose of
financing the acquisition and development of real property, and payment of
this Note is secured by the Loan Documents. It is agreed that, at the
election of the holder hereof, the principal sum remaining unpaid hereon,
together with accrued interest thereon, shall become at once due and
payable at the place of payment aforesaid in the event that a default has
occurred under any of the Loan Documents.
(b) This Note shall be governed by, and construed in accordance with,
the laws of the State of New Mexico, United States.
9. Controlling General Provisions. The provisions in this Section 9
shall govern and control over any irreconcilably inconsistent provision
contained in this Note or any of the other Loan Documents or any other
instrument contemplated hereunder or thereunder. In no event shall the
aggregate of all interest paid or payable by Borrower to Lender ever exceed the
maximum rate of interest which may lawfully be charged to (or payable by)
Borrower under applicable law on the Adjusted Principal Amount of this Note from
time to time remaining
16
<PAGE>
unpaid. In this connection, it is expressly stipulated and agreed that it is
the intent of Lender and Borrower in the execution and delivery of this Note to
contract in strict compliance with any applicable usury laws. In furtherance of
the foregoing, none of the terms of this Note, the Loan Documents (other than
this Note) or any such other instruments contemplated hereunder or thereunder
shall ever be construed to create a contract to charge or pay for interest in
excess of the maximum interest rate permitted to be contracted for, charged to,
or payable by Borrower under applicable law. Borrower and any guarantors,
endorsers or other parties now or hereafter becoming liable for payment of this
Note shall never be liable for interest in excess of the maximum interest that
may be lawfully charged under applicable law, and the provisions of this Section
9 shall govern over all other provisions of the Loan Documents, and any other
instruments evidencing or securing the Loan, should such provisions be in
apparent conflict herewith.
Specifically and without limiting the generality of the foregoing
paragraph, it is expressly agreed that:
(a) In the event of the payment of the Adjusted Principal Amount
of this Note, prior to the due date for payment thereof, resulting
from acceleration of maturity of this Note, if the aggregate amounts
of interest accruing hereunder prior to such payment plus the amount
of any interest accruing after such maturity up to the date of payment
and plus any other amounts paid or accrued in connection with the
other Loan Documents, including, if applicable, all or any portion of
the value of any Common Stock issued to Lender under Section 3 of this
Note, which by law are deemed interest under such Loan Documents and
which aggregate amounts paid or accrued (if calculated in accordance
with the provisions of this Note other than pursuant to this Section
9) would exceed the maximum lawful rate of interest which could be
charged on the principal balance of this Note from the date hereof to
the date of final payment thereof, then in such event the amount of
such excess shall be credited, as of the date paid, toward the payment
of principal of this Note so as to reduce the amount of the final
payments of Adjusted Principal Amount due on this Note;
(b) If under any circumstances the aggregate amounts paid under
the Loan Documents prior to and incident to the final payment hereof,
including, without limitation, if applicable, all or any portion of
the value of any Common Stock issued to Lender under Section 3 of this
Note, include amounts which by applicable law are deemed interest and
which would exceed the maximum amount of interest which could lawfully
have been charged or collected on this Note, Borrower stipulates that
such payment and collection will have been and will be deemed to have
been the result of a mathematical error on the part of both Borrower
and Lender, and Lender shall promptly refund the amount of such excess
(to the extent only of the excess of such payments above the maximum
amount which could lawfully have been collected and retained) upon the
17
<PAGE>
discovery of such error by the party receiving such payment or notice
thereof from the party making such payment; and
(c) All calculations as to the rate of interest contracted for,
charged or received under this Note or the other Loan Document which
are made for the purposes of determining whether such rate exceeds the
maximum rate of interest which may lawfully be charged shall be made,
to the extent permitted by applicable usury laws, if any, by
amortizing, prorating, allocating and spreading, in equal parts,
during the period of the full stated term of the Loan evidenced
hereby, all interest any time contracted for, charged or received from
Borrower or otherwise by Lender in connection with such indebtedness.
Notwithstanding anything contained in this Note or the other Loan Documents
to the contrary, interest under this Note shall never exceed the lesser of (1)
the highest non-usurious rate allowed by applicable law or (2) seventeen percent
(17%) per annum on a compounded basis.
10. Invalidity.
The parties hereto intend and believe that each provision of this Note
comports with all applicable laws and judicial decisions. However, if any
provision or provisions, or if any portion of any provision or provision, in
this Note is found by a court of law to be in violation of any applicable
ordinance, statute, law, administrative or judicial decision, or public policy,
and if such court should declare such portion, provision or provisions of this
Note to be illegal, invalid, void or unenforceable as written, then it is the
intent of all parties hereto (i) that such portion, provision or provisions
shall be given force to the fullest possible extent that they are legal, valid
and enforceable, (ii) that the remainder of this Note shall be construed as if
such illegal, invalid, void or unenforceable portion, provision or provisions
were not contained therein, and (iii) that the rights, obligations and interest
of Borrower and the holder hereof under the remainder of this Note shall
continue in full force and effect.
11. Waiver; Expenses.
(a) Borrower hereby waives presentment, demand for payment, notice of
dishonor and all other notices or demands in connection with the delivery,
acceptance, performance, default or enforcement of this Note and hereby
consents to and extensions of time, renewals, waivers or modifications that
may be granted or consented to by the holder of this Note in respect of the
time of payment or any other provision of this Note. Borrower hereby
waives and renounces for itself, its successors and assigns, all rights to
the benefits of any statute of limitations and any moratorium,
reinstatement, marshalling, forbearance, valuation, stay, extension,
redemption, appraisement, or exemption now provided, or which may hereafter
be provided, by the Constitution and laws of the United States and of any
state thereof, both as to itself and in and to all of
18
<PAGE>
its property, real and personal against the enforcement and collection of
the obligations evidenced by this Note.
(b) In the event that the holder hereof shall institute any action for
the enforcement of the collection of this Note, there shall be immediately
due from Borrower in addition to the unpaid interest and the Adjusted
Principal Amount, all costs and expenses of such action, including but not
limited to attorneys' fees and expenses.
12. Miscellaneous.
(a) This Note and all provision hereof shall be binding upon Borrower
and its successors and assigns and shall inure to the benefit of Lender,
together with its successors and assigns, including each owner and holder
from time to time of this Note.
(b) Time is of the essence as to all dates set forth herein subject to
any applicable grace or cure period expressly provided herein or the in the
Loan Documents; provided, however, that unless otherwise stated, whenever
any payment to be made under this Note shall be stated to be due on a day
other than a Business Day, such payment may be made on the immediately
preceding Business Day.
(c) All notices, demands or requests relating to any matters set forth
herein shall be in writing and delivered as set forth, and shall be
effective in the time set forth, in the Funding Agreement.
(d) Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
THE PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS
HEREIN PROVIDED FOR.
19
<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Note as of the date set
forth above.
ATLANTIC HOMESTEAD VILLAGE LIMITED PARTNERSHIP
By: Atlantic Homestead Village (1)
Incorporated, its sole general partner
By:/s/ David C. Dressler, Jr.
--------------------------
Name: David C. Dressler, Jr.
Title: Managing Director
Address: 125 Lincoln Avenue
Santa Fe, New Mexico 87501
For purposes of Sections 3 and 4 only:
ATLANTIC HOMESTEAD VILLAGE INCORPORATED
By:/s/ David C. Dressler, Jr.
--------------------------
Name: David C. Dressler, Jr.
Title: Managing Director
Address: 125 Lincoln Avenue
Santa Fe, New Mexico 87501
20
<PAGE>
EXHIBIT A
Form of Exercise Notice
(To Be Executed Upon Conversion of Note)
The undersigned hereby irrevocably elects to convert the entire outstanding
principal amount of the Note (currently $__________) into __________ shares of
Common Stock in accordance with the terms thereof. The undersigned requests
that a certificate for such shares be registered in the name of
________________, whose address is _____________________ and that such shares be
delivered to ________________________ whose address is __________________.
Date:
---------------
------------------------------------
Name:
-------------------------------
Title:
------------------------------
21
<PAGE>
PROTECTION OF BUSINESS AGREEMENT Exhibit 10.1
--------------------------------
THIS PROTECTION OF BUSINESS AGREEMENT (this "Agreement") is entered into as
of October 17, 1996, by and among Security Capital Atlantic Incorporated, a
Maryland corporation ("Atlantic"), Security Capital Pacific Trust, a Maryland
real estate investment trust ("PTR"), and Security Capital Group Incorporated, a
Maryland corporation ("SCG"), and Homestead Village Incorporated, a Maryland
corporation ("Homestead").
WHEREAS, on the date hereof the parties are entering into a series of
related transactions as described in that certain Merger and Distribution
Agreement, dated as of May 21, 1996, among Atlantic, PTR, SCG and Homestead (the
"Merger Agreement"), pursuant to which, among other things, PTR, Atlantic and
SCG will cause their respective subsidiaries engaged in the conduct of the
extended-stay lodging business to be merged with and into Homestead;
WHEREAS, Atlantic, PTR and SCG and their respective affiliates will
continue to engage in certain businesses after the date hereof;
WHEREAS, as a condition to the consummation of the transactions
contemplated by the Merger Agreement, the parties hereto desire to enter into
certain agreements restricting the activities of Atlantic, PTR and SCG and their
respective affiliates; and
WHEREAS, pursuant to the Merger Agreement, it is contemplated that
securities of Homestead will be distributed by PTR and Atlantic in a public
distribution to their respective shareholders.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
Section 1. Definitions. Capitalized terms used herein shall have the
meanings set forth below:
"Affiliate" with regard to any Person, means (a) any Person directly or
indirectly controlling, controlled by or under common control with such Person,
(b) any Person owning or controlling 10% or more of the outstanding voting
interests of such Person or (c) any Person of which such Person owns or controls
10% or more of the voting interests. The term "Affiliates" and "Affiliated"
shall have correlative meanings. For purposes of this Agreement, the term
"Affiliate" shall not include Security Capital U.S. Realty, a Luxembourg
corporation, or any Person controlled by Security Capital U.S. Realty and no
party hereto shall be deemed to be an Affiliate of any other party hereto.
<PAGE>
"Extended-Stay Property" means real property that is or is planned to be
used primarily for lodging facilities generally offering studio apartments,
including cooking facilities, which are generally rented for incremental periods
of one week but shall not include any real property that is or is planned to be
used primarily as corporate apartments.
"Interest" means any kind of right, title or interest (whether legal or
beneficial), whether such right, title or interest is held directly or
indirectly through an interest in a Person that either directly or indirectly
owns such interest, but excluding any interests in Homestead.
"Multifamily Property" means real property that is or is planned to be used
primarily for garden style multifamily dwellings which are generally leased for
six-month to twelve-month periods and require security deposits and also
includes real property that is or is planned to be used primarily for master-
planned apartment neighborhoods.
"Person" means an individual or any corporation, partnership, trust,
unincorporated association or any other legal entity; provided, however that,
for purposes of Sections 2, 3 and 4 hereof, the term "Person" shall not include
an individual.
"Restricted Area" means the continental United States.
Section 2. Agreement not to Engage in Certain Activities.
---------------------------------------------
(a) During the term provided in Section 6 hereof, none of Atlantic,
PTR or SCG nor any of their respective Affiliates shall, anywhere within
the Restricted Area, directly or indirectly, engage in the ownership,
operation, development, management or leasing of any Extended-Stay
Property.
(b) During the term provided in Section 6 hereof, neither Homestead
nor any of its Affiliates shall, anywhere within the Restricted Area,
directly or indirectly, engage in the ownership, operation, development,
management or leasing of any Multifamily Property.
Section 3. Atlantic, PTR and SCG Limitations on Protection of Business.
Notwithstanding anything to the contrary contained in this Agreement, each of
Atlantic, PTR and SCG and their respective Affiliates may:
(a) be an owner of securities of any class of Homestead;
(b) be an owner of up to 5% of the outstanding shares of stock of any
class of securities of a Person (public or private) primarily engaged in
owning, operating, developing, managing or leasing Extended-Stay
Properties, so long as Atlantic, PTR and SCG and their Affiliates have no
active participation (except to the extent permitted by clauses (c) and (d)
below) in the business of such Person;
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<PAGE>
(c) be an owner of any amount of the outstanding shares of stock of
any class of securities of a Person (public or private), a majority owned
subsidiary, division, group, franchise or segment of which is engaged in
owning, operating, developing, managing or leasing Extended-Stay
Properties, so long as not more than 5% of such Person's consolidated
revenues are derived from the ownership, operation, development, management
or leasing of Extended-Stay Properties; and
(d) be an owner of the outstanding shares of stock of any class of
securities of a Person (public or private) primarily engaged in a business
other than owning, operating, developing, managing or leasing Extended-Stay
Properties, including a Person primarily engaged in business as an owner,
operator or developer of hotel properties, whether or not such Person owns,
operates, develops, manages or leases any Extended-Stay Properties.
Section 4. Homestead Limitations on Protection of Business. Notwithstanding
anything to the contrary contained in this Agreement, Homestead and its
Affiliates may:
(a) be an owner of securities of any class of any of Atlantic, PTR or
SCG;
(b) be an owner of up to 5% of the outstanding shares of stock of any
class of securities of a Person (public or private) primarily engaged in
owning, operating, developing, managing or leasing Multifamily Properties,
so long as Homestead and its Affiliates have no active participation
(except to the extent permitted by clause (c) below) in the business of
such Person; and
(c) be an owner of any amount of the outstanding shares of stock of
any class of securities of a Person (public or private), a majority owned
subsidiary, division, group, franchise or segment of which is engaged in
owning, operating, developing, managing or leasing Multifamily Properties,
so long as not more than 5% of such Person's consolidated revenues are
derived from the ownership, operation, development, management or leasing
of Multifamily Properties.
Section 5. Reasonable and Necessary Restrictions. Each of the parties
hereto acknowledges that the restrictions, prohibitions and other provisions
hereof are reasonable, fair and equitable in scope, terms and duration, are
necessary to protect the legitimate business interests of each of the other
parties hereto, and are a material inducement to such party to enter into the
transactions contemplated by the Merger Agreement.
Section 6. Term.
----
6.1 General. Subject to earlier termination pursuant to Section 6.2, this
Agreement shall be effective from and after the date hereof and shall continue
in effect until the tenth anniversary of the date hereof.
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<PAGE>
6.2 Change in Control. Notwithstanding anything to the contrary contained
herein, the provisions of Section 2 of this Agreement shall terminate and be of
no further force or effect upon the occurrence of a Change in Control. As used
herein, "Change in Control" means the acquisition, directly or indirectly (other
than by purchase from PTR, Atlantic or SCG, or any of their respective
Affiliates), by any Person (or group of associated Persons acting in concert),
other than PTR, Atlantic, SCG, or their respective Affiliates, of 25% or more of
the outstanding shares of voting stock of Homestead, without the prior written
consent of the Board of Directors of Homestead.
Section 7. Specific Performance. Each of the parties hereto acknowledges
that the obligations undertaken by it pursuant to this Agreement are unique and
that the other parties hereto will not have an adequate remedy at law if it
shall fail to perform any of its obligations hereunder, and each of the parties
hereto therefore confirms that the right of each other party hereto to specific
performance of the terms of this Agreement is essential to protect the rights
and interests of such party. Accordingly, in addition to any other remedies that
any party hereto may have at law or in equity, each such party shall have the
right to have all obligations, covenants, agreements and other provisions of
this Agreement specifically performed by each other party, and each party shall
have the right to obtain preliminary and permanent injunctive relief to secure
specific performance and to prevent a breach or contemplated breach of this
Agreement by each other party hereto.
Section 8. Operations of Affiliated Parties. Each of the parties hereto
agrees that it will refrain from authorizing or permitting any Affiliated party
to perform any activities that would be prohibited by the terms of this
Agreement if such activities were performed by it.
Section 9. Ancillary Agreements. Nothing contained in this Agreement shall
in any way restrict or impair the obligations and rights of any party under the
terms of any agreement entered into in connection with the transactions
contemplated by the Merger Agreement, including, without limitation, the
foreclosure by PTR or Atlantic under any mortgages secured by the properties of
Homestead and the operation of such properties subsequent to such foreclosure.
Section 10. Miscellaneous Provisions.
------------------------
10.1 Interpretation. The parties hereto acknowledge that the fundamental
policies of this Agreement are to protect each other party's interest in its
respective business and to eliminate potential conflicts of interest that may
exist as a result of actions taken or proposed to be taken by the other parties
hereto, and this Agreement shall be construed and enforced in a manner
consistent with and in furtherance of these policies.
10.2 Binding Effect. Subject to any provisions hereof restricting
assignment, all covenants and agreements in this Agreement by or on behalf of
any of the parties hereto shall
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<PAGE>
bind and inure to the benefit of their respective successors, assigns, heirs,
and personal representatives.
10.3 Assignment. None of the parties hereto may assign any of its rights
under this Agreement, or attempt to have any other entity or individual assume
any of its obligations hereunder.
10.4 Severability. If performance of any provision of this Agreement, at
the time such performance shall be due, shall transcend the limit of validity
prescribed by law, then the obligation to be performed shall be reduced to the
limit of such validity; and if any clause or provision contained in this
Agreement operates or would operate to invalidate this Agreement, in whole or in
part, then such clause or provision only shall be held ineffective, as though
not herein contained, and the remainder of this Agreement shall remain operative
and in full force and effect. The parties shall negotiate in good faith a
replacement clause or provision as consistent with the ineffective clause or
provision as is practicable under law.
10.5 Governing Law. This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto shall be governed by
and construed in accordance with the laws of the State of Maryland, not
including the choice-of-law rules thereof.
10.6 Amendment. Except as otherwise expressly provided in this Agreement,
no amendment, modification or discharge of this Agreement shall be valid or
binding unless set forth in writing and duly executed by each of the parties
hereto.
10.7 Waiver. Any waiver by any party or consent by any party to any
variation from any provision of this Agreement shall be valid only if in writing
and only in the specific instance in which it is given, and such waiver or
consent shall not be construed as a waiver of any other provision or as a
consent with respect to any similar instance or circumstance.
10.8 Headings. Section and subsection headings contained in this Agreement
are inserted for convenience of reference only, shall not be deemed to be a part
of this Agreement for any purpose, and shall not in any way define or affect the
meaning, construction or scope of any of the provisions hereof.
10.9 No Presumption Against Drafter. Each of the parties hereto have
jointly participated in the negotiation and drafting of this Agreement. In the
event of an ambiguity or a question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by each of the parties hereto
and no presumptions or burdens of proof shall arise favoring any party by virtue
of the authorship of any of the provisions of this Agreement.
10.10 Execution in Counterparts. This Agreement may be executed in one or
more counterparts, none of which need contain the signatures of each of the
parties hereto and each of which shall be deemed an original.
-5-
<PAGE>
10.11 Limitation of Liability. Any obligation or liability whatsoever of
PTR which may arise at any time under this Agreement or any obligation or
liability which may be incurred by it pursuant to any other instrument,
transaction or undertaking contemplated hereby shall be satisfied, if at all,
out of assets only. No such obligation or liability shall be personally binding
upon, nor shall resort for the enforcement thereof be had to, the property of
any of its shareholders, trustees, officers, employees or agents, regardless of
whether such obligation or liability is in the nature of contract, tort or
otherwise.
-6-
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed this Agreement, or
caused this Agreement to be duly executed on its behalf, as of the date first
set forth above.
SECURITY CAPITAL ATLANTIC INCORPORATED
By: /s/ James C. Potts
------------------
James C. Potts
Co-Chairman
SECURITY CAPITAL PACIFIC TRUST
By: /s/ C. Ronald Blankenship
-------------------------
C. Ronald Blankenship
Chairman
SECURITY CAPITAL GROUP INCORPORATED
By: /s/ Jeffrey A. Klopf
--------------------
Jeffrey A. Klopf
Senior Vice President
HOMESTEAD VILLAGE INCORPORATED
By: /s/ David C. Dressler, Jr.
--------------------------
David C. Dressler, Jr.
Chairman
S-1
<PAGE>
INVESTOR AGREEMENT Exhibit 10.2
THIS INVESTOR AGREEMENT (this "Agreement"), dated as of October 17, 1996,
is by and between Homestead Village Incorporated, a Maryland corporation (the
"Company") and Security Capital Group Incorporated, a Maryland corporation
("SCG").
W I T N E S S E T H
-------------------
WHEREAS, the Company and SCG have entered into that certain Merger and
Distribution Agreement, dated as of May 21, 1996, among Security Capital
Atlantic Incorporated ("Atlantic"), Security Capital Pacific Trust ("PTR"), SCG
and the Company (the "Merger Agreement");
WHEREAS, pursuant to a Warrant Purchase Agreement dated as of May 21, 1996
(the "Warrant Purchase Agreement"), each of SCG, PTR and Atlantic will be issued
warrants (the "Warrants") to acquire Common Stock (as hereinafter defined);
WHEREAS, pursuant to the Merger Agreement, SCG will be issued, through a
distribution from Atlantic and PTR, Warrants and shares of common stock, $0.01
par value per share ("Common Stock"), of the Company; and
WHEREAS, concurrently herewith, each of PTR and Atlantic are entering into
an Investor Agreement (as applicable, the "PTR Investor Agreement" and the
"Atlantic Investor Agreement"), with Homestead, pursuant to which, among other
things, each of PTR and Atlantic will be entitled to nominate one person to the
Board (as hereafter defined).
NOW, THEREFORE, in consideration of the premises, the mutual covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. In addition to the terms defined elsewhere herein, the
following terms shall have the following meanings:
"Articles of Incorporation" shall mean the Company's Articles of
Incorporation, as now in effect or as amended from time to time.
"Beneficial Owner" shall mean any Person deemed to be a "Beneficial Owner"
of or to "Beneficially Own" any Common Stock in accordance with the term
"beneficial ownership" as defined in Rule 13d-3 under the Exchange Act.
"Board" shall mean the Board of Directors of the Company.
<PAGE>
"Commission" shall mean the Securities and Exchange Commission or any
successor agency or entity thereto.
"Common Stock" shall have the meaning set forth in the preamble of this
Agreement.
"Company" shall have the meaning set forth in the first paragraph of this
Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
A "group" shall have the meaning assigned thereto in Section 13(d)(3) of
the Exchange Act.
"Nominee" shall have the meaning set forth in Section 6(a) of this
Agreement.
A "Person" shall mean any individual, firm, corporation, partnership or
other entity.
"SCG" shall have the meaning set forth in the first paragraph of this
Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended.
2. Exercise of Warrants. Subject to the terms and conditions hereafter
set forth, from and after the date hereof, at any time and from time to time,
upon not less than 10 business days' prior written notice, SCG shall exercise
such number of Warrants then owned by SCG as requested by the Company.
3. Representations and Warranties of the Company. The Company hereby
represents and warrants to SCG as follows:
(a) Organization and Standing. The Company has been duly organized
and is validly existing as a corporation in good standing under the laws of
the State of Maryland, with full power and authority to own its properties
and conduct its business as now conducted and as proposed by it to be
conducted. The Company is duly qualified to do business and is in good
standing in each jurisdiction in which the character of the business
conducted by it or the location of the properties owned or leased by it
makes such qualification necessary, except where the failure to be so
qualified and in good standing would not reasonably be expected to have a
material adverse effect on the business, operations, properties, assets,
condition (financial or other), results of operations or properties of the
Company.
(b) No Defaults. The Company is not in violation of its Articles of
Incorporation, Bylaws or other governing documents, nor is it in default in
the performance of any obligation, agreement or condition contained in any
license, contract, indenture, mortgage, deed of trust, lease or loan
agreement or in any bond, debenture,
-2-
<PAGE>
note or any other evidence of indebtedness to which it is a party or by
which it is bound, except where such default does not materially adversely
affect the condition (financial or other), properties or business of the
Company. The performance of this Agreement and the consummation of the
transactions herein contemplated will not conflict with the Articles of
Incorporation, Bylaws or other governing documents of the Company, or
result in a breach of, or default under, any agreement, indenture,
mortgage, deed of trust, lease or other instrument to which the Company is
a party or by which it is bound, or any law, rule, administrative
regulation or decree of any court, or governmental agency or body having
jurisdiction over the Company or its properties or result in the creation
or imposition of any lien, charge, claim or encumbrance upon any property
or asset of the Company, except as any of the foregoing would not
reasonably be expected to have a material adverse effect on the business,
operations, properties, assets, condition (financial or other), results of
operations or prospects of the Company.
(c) Issuance. The Common Stock, when issued and delivered by the
Company to SCG upon exercise of Warrants, will be duly authorized, validly
issued and, when paid for, will be fully paid and non-assessable, free and
clear of any security interest, lien, charge or encumbrance whatsoever and
will have the voting powers, preferences and other rights, and will be
subject to qualifications and restrictions, as set forth in the Articles of
Incorporation.
(d) Authority. The Company has full right, power and authority to
enter into this Agreement and to carry out its obligations hereunder. This
Agreement has been duly authorized, executed and delivered by the Company
and constitutes a valid and binding agreement of the Company enforceable
against it in accordance with its terms, except to the extent that its
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally and judicial limitations on the right of specific performance or
by general equitable principles, and except as enforceability of
indemnification provisions hereof may be limited by federal securities
laws.
(e) No Violation. The Company is not in violation of any law,
ordinance, governmental rule or regulation or court decree to which it may
be subject nor has it failed to obtain any license, permit, franchise or
other governmental authorization necessary to the ownership of its property
or to the conduct of its business, which violation or failure to obtain is
reasonably expected to have a material adverse effect on the business,
operations, properties, assets, condition (financial or other), results of
operations or prospects of the Company.
(f) Investment Company Act. The Company is not required to be
registered under the Investment Company Act of 1940, as amended.
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<PAGE>
4. Representations and Warranties of SCG. SCG hereby represents and
warrants to the Company as follows:
(a) Organization and Standing. SCG has been duly organized and is
validly existing as a corporation in good standing under the laws of the
State of Maryland, with corporate power and authority to own its properties
and conduct its business as now conducted.
(b) Authorization. SCG has full right, power and authority to enter
into this Agreement and to carry out its obligations hereunder. This
Agreement has been duly authorized, executed and delivered by SCG and
constitutes a valid and binding agreement of SCG enforceable against it in
accordance with its terms, except to the extent that its enforceability may
be limited by applicable bankruptcy, insolvency, reorganization or other
laws affecting the enforcement of creditors' rights generally and judicial
limitations on the right of specific performance or by general equitable
principles. The performance by SCG of all of its obligations under this
Agreement and the consummation of the transactions herein contemplated will
not conflict with or result in a breach of any of the terms or provisions
of, or constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other material agreement or instrument to which SCG is a
party or by which SCG is bound or to which any of the property or assets of
SCG is subject, nor will any such action result in any violation of the
provisions of the Articles of Incorporation or the By-Laws of SCG or any
applicable law or statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over SCG or any of its
properties.
(c) Investment Company Act. SCG is not required to be registered
under the Investment Company Act of 1940, as amended.
5. Conditions to the Obligations of SCG. The obligations of SCG to
exercise any Warrants under this Agreement are subject to the fulfillment at
each time of exercise of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties in this Agreement made by the Company shall have been true in
all material respects when made, and shall be true in all material respects
on the date of exercise of the Warrants as though such representations and
warranties were made at such date.
(b) Performance. The Company shall have performed and complied in
all material respects with all agreements, covenants, obligations and
conditions required by this Agreement to be performed or complied with by
it.
(c) Casualty and Other Calamity. The Company shall not have
sustained any loss on account of fire, explosion, flood, accident, calamity
or any other cause, of such
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<PAGE>
character as materially adversely affects its business or property
considered as an entire entity, whether or not such loss is covered by
insurance.
(d) Litigation and Other Proceedings. There shall be no litigation
instituted or threatened against the Company and there shall be no
proceeding instituted or threatened against the Company before or by any
federal or state commission, regulatory body or administrative agency or
other governmental body, domestic or foreign, wherein an unfavorable
ruling, decision or finding would materially adversely affect the business,
franchise, licenses, patents, operations or financial condition or income
of the Company.
(e) Lack of Material Change. The Company shall not have experienced
any event (other than changes in general economic or market conditions)
which would reasonably be expected to result in a material adverse change,
individually or in the aggregate, in the business, operations, properties,
assets, liabilities, condition (financial or other), results of operations
or prospects of the Company.
6. Covenants of the Company. The Company covenants and agrees with SCG
as follows:
(a) Board Representation. From and after the date hereof and for so
long thereafter as SCG Beneficially Owns 10% or more of the outstanding
shares of Common Stock, the Company shall not increase the number of
members of its Board to more than seven (7), and SCG shall be entitled to
designate one or more Persons for nomination to the Board (such Person, a
"Nominee") as follows and the Company will use its best efforts to cause
the election of such Nominee or Nominees:
(i) So long as SCG Beneficially Owns at least 10% but less than
30% of the outstanding shares of Common Stock, one (1) Nominee;
(ii) So long as SCG Beneficially Owns 30% or more of the
outstanding shares of Common Stock, that number of Nominees as shall
bear approximately the same ratio (rounded down to the nearest whole
number) to the total number of members of the Board as the number of
shares of Common Stock Beneficially Owned by SCG bears to the total
number of outstanding shares of Common Stock, provided, that (A) SCG
shall be entitled to designate not more than two (2) Nominees so long
as the Board consists of not more than seven (7) members; and (B) any
Person who is employed by SCG or who is an employee, a 25% shareholder
or a director of any corporation of which SCG is a 25% shareholder
(except for the Company) shall be deemed to be a designee of SCG.
The Nominee or Nominees of SCG may, but need not, include the same person
or persons nominated by either PTR or Atlantic pursuant to the PTR Investor
Agreement or the Atlantic Investor Agreement.
-5-
<PAGE>
(b) File Reports. For as long as SCG shall continue to Beneficially Own
any shares of Common Stock, the Company shall file on a timely basis all annual,
quarterly and other reports required to be filed by it under Sections 13 and
15(d) of the Exchange Act, and the Rules and Regulations of the Commission
thereunder, as amended from time to time.
(c) Advice of Actions. Without first having consulted with the Nominee or
Nominees of SCG designated by SCG in writing, the Company will not seek approval
by the Board of any proposal relating to:
(i) Budget. The Company's annual budget.
(ii) Expenses. Incurring expenses in any year exceeding (A) any line
item in the annual budget by 20% and (B) the total expenses set forth in
the annual budget by 5%.
(iii) Assets. The acquisition or sale of any assets in any single
transaction or any series of related transactions where the aggregate
purchase price paid or received by the Company exceeds $5,000,000.
(iv) Contracts. Entering into any new contract with a service
provider (A) for investment management, property management, or leasing
services or (B) that reasonably contemplates annual contract payments by
the Company in excess of $200,000.
(v) Dividends. The declaration or payment of any dividend or other
distribution.
(vi) Benefit Plans. The adoption of any employee benefit plan
pursuant to which shares of stock of the Company or any securities
convertible into shares of stock of the Company may be issued.
(vii) Equity Securities. The offer or sale of any shares of stock of
the Company or any securities convertible into shares of stock of the
Company (other than the sale or grant of any stock of the Company or
options to purchase stock of the Company pursuant to the provisions of any
benefit plan approved by the stockholders of the Company and the exercise
of any options so granted); provided, however, that nothing contained in
this clause (vii) shall in any way restrict or impair the obligations and
rights of any party under the terms of any agreement entered into in
connection with the transactions contemplated by the Merger Agreement.
-6-
<PAGE>
(viii) The incurrence, restructuring, renegotiation or repayment of
indebtedness for borrowed money (including guarantees thereof) in which the
aggregate amount involved exceeds $5,000,000; provided, however, that
nothing contained in this clause (viii) shall in any way restrict or impair
the obligations and rights of any party under the terms of any agreement
entered into in connection with the transactions contemplated by the Merger
Agreement.
Notwithstanding the foregoing, the Company shall have no obligation to
accept or comply with any advice offered by SCG or its designated Nominees in
any consultation pursuant to this Section 6(c).
(d) Inspection. At any time during regular business hours and as often as
reasonably requested of the Company's officers, permit SCG or any authorized
employee, agent or representative of SCG to examine and make copies and
abstracts from the records and books of account of, and to visit the properties
of, the Company and to discuss the affairs, finances, and accounts of the
Company with any of its officers or directors; provided, that all costs and
expenses of such inspection shall be borne by SCG.
7. Registration Rights.
-------------------
(a) Demand. At any time after the first anniversary of the date on which
the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act,
SCG may request, on not more than three (3) separate occasions, registration of
all or any part of its Registrable Securities (as defined in subsection (g)
below) pursuant to Rule 415 under the Securities Act by delivering written
notice to the Company specifying the number of Registrable Securities that SCG
desires to sell and the Company shall use its reasonable efforts to effect the
registration of such Registrable Securities under the Securities Act.
(b) Registration Procedures. If and whenever the Company is required by
any of the provisions of this Section 7 to use its reasonable efforts to effect
the registration of any of the Registrable Securities under the Securities Act,
the Company shall:
(i) prepare and file with the Commission a registration statement
with respect to such securities and use its reasonable efforts to cause
such registration statement to become effective and remain effective for as
long as shall be necessary to complete the distribution of at least 90% of
the Registrable Securities so registered;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for so
-7-
<PAGE>
long as shall be necessary to complete the distribution of at least 90% of
the Registrable Securities so registered and to comply with the provisions
of the Securities Act with respect to the sale or other disposition of all
securities covered by such registration statement whenever SCG shall desire
to sell or otherwise dispose of the same within such period;
(iii) furnish to SCG such numbers of copies of such registration
statement, each amendment and supplement thereto, the prospectus included
in such registration statement, including any preliminary prospectus, and
any amendment or supplement thereto, and such other documents, as may be
reasonably requested in order to facilitate the sale or other disposition
of the Registrable Securities owned by SCG;
(iv) use its reasonable efforts to register and qualify the
securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as SCG shall reasonably
request, and do any and all other acts and things reasonably requested by
SCG to assist the public sale or other disposition by SCG in such
jurisdictions of the securities owned by SCG except that the Company shall
not for any such purpose be required to qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified or to file
therein any general consent to service of process;
(v) otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the Commission, and make available to
its security holders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months, beginning with the
first fiscal quarter beginning after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act;
(vi) use its reasonable efforts to list such securities on any
securities exchange or quotation system on which any securities of the
Company are then listed, if the listing of such securities is then
permitted under the rules of such exchange or quotation system; and
(vii) notify SCG, at any time when a prospectus relating to the
Registrable Securities is required to be delivered under the Securities
Act, of the happening of any event of which it has knowledge as a result of
which the prospectus included in such registration statement, as then in
effect, contains an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
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<PAGE>
(c) Company's Ability to Postpone. The Company shall have the right to
postpone the filing of a registration statement under this Section 7 for a
reasonable period of time (not exceeding 60 days) if the Company furnishes SCG
with a certificate signed by the Chairman of the Board or the President of the
Company stating that, in its good faith judgment, the Board has determined that
effecting the registration at such time would adversely affect a material
financing, acquisition, disposition of assets or stock, merger or other
comparable transaction or would require the Company to make public disclosure of
information the public disclosure of which would have a material adverse effect
upon the Company.
(d) Expenses. All expenses incurred in the registration of Registrable
Securities under this Agreement shall be paid by the Company. The expenses
shall include, without limitation, the expenses of preparing the registration
statement and the prospectus used in connection therewith and any amendment or
supplement thereto, printing and photocopying expenses, all registration and
filing fees under Federal and state securities laws, and expenses of complying
with the securities or blue sky laws of any jurisdictions; provided, however,
that SCG shall be responsible for paying the fees and disbursements of its own
counsel.
(e) Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 7:
(i) Indemnity by Company. Without limitation of any other indemnity
provided to SCG, to the extent permitted by law, the Company will indemnify
and hold harmless SCG and its officers, directors and each Person, if any,
who controls SCG (within the meaning of the Securities Act or the Exchange
Act), against any losses, claims, damages, liabilities and expenses (joint
or several) to which they may become subject under the Securities Act, the
Exchange Act or other federal or state law, insofar as such losses, claims,
damages, liabilities and expenses (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or
alleged untrue statement of a material fact contained in any registration
statement (including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto), (ii) the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or (iii) any
violation or alleged violation by the Company of the Securities Act, the
Exchange Act, any state securities law or any rule or regulation
promulgated under the Securities Act, the Exchange Act or any state
securities law, and the Company will reimburse SCG and its officers,
directors and any controlling person thereof for any reasonable legal or
other expenses incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, expense or action;
provided, however, that the
-9-
<PAGE>
Company shall not be liable in any such case for any such loss, claim,
damage, liability, expense or action to the extent that it arises out of or
is based upon a Violation that occurs in reliance upon and in conformity
with written information furnished expressly for use in connection with
such registration by SCG or any officer, director or controlling person
thereof.
(ii) Indemnity by SCG. In connection with any registration statement
in which SCG is participating, SCG will furnish to the Company in writing
such information and affidavits as the Company reasonably requests for use
in connection with any such registration statement or prospectus and, to
the extent permitted by law, will indemnify the Company, its directors and
officers and each Person who controls the Company (within the meaning of
the Securities Act or Exchange Act) against any losses, claims, damages,
liabilities and expenses resulting from any Violation, but only to the
extent that such Violation is contained in any information or affidavit so
furnished in writing by SCG; provided, that the obligation to indemnify
will be several and not joint and several with any other Person and will be
limited to the net amount received by SCG from the sale of Registrable
Securities pursuant to such registration statement.
(iii) Notice; Right to Defend. Promptly after receipt by an
indemnified party under this Section 7(e) of notice of the commencement of
any action (including any governmental action), such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying
party under this Section 7(e), deliver to the indemnifying party a written
notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, if the indemnifying party agrees in
writing that it will be responsible for any costs, expenses, judgments,
damages and losses incurred by the indemnified party with respect to such
claim, jointly with any other indemnifying party similarly noticed, to
assume the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an indemnified party shall have the right
to retain its own counsel, with the fees and expenses to be paid by the
indemnifying party, if the indemnified party reasonably believes that
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall relieve such indemnifying party of
any liability to the indemnified party under this Section 7(e) only if and
to the extent that such failure is prejudicial to its ability to defend
such action, and the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to
any indemnified party other than under this Section 7(e).
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<PAGE>
(iv) Contribution. If the indemnification provided for in this
Section 7(e) is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss,
liability, claim, damage or expense referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage
or expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the
indemnified party on the other hand in connection with the statements
or omissions which resulted in such loss, liability, claim, damage or
expense as well as any other relevant equitable considerations. The
relevant fault of the indemnifying party and the indemnified party
shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission
to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. Notwithstanding the
foregoing, the amount SCG shall be obligated to contribute pursuant to
this Section 7(e)(iv) shall be limited to an amount equal to the
proceeds to SCG of the Registrable Securities sold pursuant to the
registration statement which gives rise to such obligation to
contribute (less the aggregate amount of any damages which SCG has
otherwise been required to pay in respect of such loss, claim, damage,
liability or action or any substantially similar loss, claim, damage,
liability or action arising from the sale of such Registrable
Securities).
(v) Survival of Indemnity. The indemnification provided by this
Section 7(e) shall be a continuing right to indemnification and shall
survive the registration and sale of any securities by any Person
entitled to indemnification hereunder and the expiration or
termination of this Agreement.
(f) Limitations on Registration Rights.
(i) The Company shall not, without the prior written consent of
SCG, include in any registration in which SCG has a right to
participate pursuant to this Agreement any securities of any Person
other than SCG.
(ii) SCG shall not, without the prior written consent of the
Company, effect any public sale or distribution (including sales
pursuant to Rule 144 under the Securities Act) of securities of the
Company during any period commencing 30 days prior to and ending 60
days after the effective date any registration statement filed by the
Company on behalf of any Person (including the Company), other than a
registration statement on Form S-8 or any successor form.
-11-
<PAGE>
(g) Registrable Security. The term Registrable Security means (i)
any shares of Common Stock issuable to SCG upon exercise of Warrants, (ii)
any other shares of Common Stock owned by SCG and (iii) any shares of
Common Stock or other securities that may subsequently be issued with
respect to such shares of Common Stock as a result of a stock split or
dividend or any sale, transfer, assignment or other transaction by the
Company involving the shares of Common Stock and any securities into which
the shares of Common Stock may thereafter be changed as a result of merger,
consolidation, recapitalization or otherwise. As to any particular
Registrable Securities, such securities will cease to be Registrable
Securities when they have been distributed to the public pursuant to an
offering registered under the Securities Act. All Registrable Securities
shall cease to be Registrable Securities when all such securities may be
sold in any three-month period pursuant to Rule 144, or any successor to
such rule, under the Securities Act.
(h) Assignment. SCG may assign without the consent of the Company
its rights under this Section 7 with respect to any Registrable Securities
to any party (a "Lender") to whom it provides a bona fide pledge,
assignment or hypothecation of such Registrable Securities. If (i) SCG
assigns its rights under this Section 7 with respect to Registrable
Securities having an aggregate offering value of at least $10,000,000 to a
Lender, (ii) any Event of Default occurs and is continuing under the
related loan agreement between SCG and the Lender and (iii) the Common
Stock is not registered under Section 12(b) or 12(g) of the Exchange Act,
the Lender may request one registration of all or part of its Registrable
Securities having an aggregate offering value of at least $10,000,000 on
Form S-1 (or any successor form) under the Securities Act by delivering
written notice to the Company specifying the number of Registrable
Securities that the Lender desires to sell and the Company shall use its
reasonable efforts to effect the registration of such Registrable
Securities under the Securities Act in accordance with and subject to the
provisions of this Section 7.
8. Reports. For so long as SCG owns any Registrable Securities, the
Company shall file on a timely basis all annual, quarterly and other reports
required to be filed by it under Section 13 and 15(d) of the Exchange Act, and
the rules and regulations of the Commission thereunder, as amended from time to
time.
9. Rule 144. From and after the time the Company has securities
registered under Section 12(b) or 12(g) of the Exchange Act, in order to permit
SCG to sell the Registrable Securities it holds, if it so desires, from time to
time pursuant to Rule 144 under the Securities Act, or any successor to such
rule, the Company shall make available adequate current public information and
file with the Commission in a timely manner all reports and other documents
required of the Company under the Exchange Act.
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<PAGE>
10. Miscellaneous.
(a) Survival of Representations, Warranties and Covenants. All
representations, warranties and covenants contained herein shall survive the
execution of this Agreement and shall remain in full force and effect following
the exercise by SCG of all Warrants required by it to be exercised hereunder;
provided, that Sections 2 and 6 of this Agreement shall terminate and be of no
further force or effect if SCG Beneficially Owns less than 10% of the shares of
Common Stock then outstanding.
(b) Successors and Assigns. This Agreement shall be binding upon, and
inure to the benefit of, the parties hereto and their respective heirs, personal
representatives, successors, assigns and affiliates, but shall not be assignable
by any party hereto without the prior written consent of the other party hereto.
(c) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, sent via a recognized
overnight courier with delivery confirmed in writing or sent via facsimile to
the parties at the following addresses (or such other address for a party as
shall be specified by like notice):
If to the Company:
Homestead Village Incorporated
125 Lincoln Avenue, Suite 300
Santa Fe, New Mexico 87501
Attention: David C. Dressler, Jr.
Facsimile: (505) 982-2925
If to SCG:
Security Capital Group Incorporated
125 Lincoln Avenue
Santa Fe, New Mexico 87501
Attention: Jeffrey A. Klopf
Facsimile: (505) 988-8920
(d) Waiver. No party may waive any of the terms or conditions of this
Agreement, except by a duly executed writing referring to the specific provision
to be waived.
(e) Amendment. This Agreement may be amended only by a writing duly
executed by both the Company and SCG.
(f) Severability. Insofar as is possible, each provision of this Agreement
shall be interpreted so as to render it valid and enforceable under applicable
law and severable from the
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remainder of this Agreement. A finding that any such provision is invalid or
unenforceable in any jurisdiction shall not affect the validity or
enforceability of any other provision or the validity or enforceability of such
provision under the laws of any other jurisdiction.
(g) Entire Agreement. This Agreement constitutes the entire agreement, and
supersedes all other prior agreements and understandings, both written and oral,
among the parties hereto and their affiliates, with respect to the subject
matter hereof.
(h) Expenses. Except as otherwise expressly contemplated herein to the
contrary, regardless of whether the transactions contemplated hereby are
consummated, each party hereto shall pay its own expenses incident to preparing
for, entering into and carrying out this Agreement and the consummation of the
transactions contemplated hereby.
(i) Captions. The Section and Paragraph captions herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
(j) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
(k) Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Maryland.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the day and year first above written.
HOMESTEAD VILLAGE INCORPORATED
By: /s/ David C. Dressler, Jr.
--------------------------
David C. Dressler, Jr.
Chairman
SECURITY CAPITAL GROUP INCORPORATED
By: /s/ Jeffrey A. Klopf
--------------------
Jeffrey A. Klopf
Senior Vice President
S-1
<PAGE>
Exhibit 10.3
- --------------------------------------------------------------------------------
FUNDING COMMITMENT AGREEMENT
By and Between
SECURITY CAPITAL PACIFIC TRUST
"PTR"
AND
HOMESTEAD VILLAGE INCORPORATED
"Homestead"
PTR HOMESTEAD VILLAGE LIMITED PARTNERSHIP
"Partnership Borrower"
Dated: October 17, 1996
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<PAGE>
TABLE OF CONTENTS
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<TABLE>
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<S> <C>
ARTICLE 1. DEFINITIONS............................................................ 3
Section 1.1. Certain Defined Terms........................................... 3
Section 1.2. Other Definitional Provisions................................... 10
ARTICLE 2. THE LOANS.............................................................. 11
Section 2.1. The Homestead Loan.............................................. 11
Section 2.2. The Partnership Loan............................................ 11
Section 2.3. Future Projects................................................. 11
Section 2.4. Subsidiary Loans................................................ 12
Section 2.5. Duration of Funding Commitment.................................. 13
Section 2.6. Project Specific Funding Commitment............................. 13
Section 2.7. Replacement Projects............................................ 14
Section 2.8. Release of Security Documents................................... 15
ARTICLE 3. REPRESENTATIONS AND WARRANTIES......................................... 15
Section 3.1. Existence and Power............................................. 15
Section 3.2. Authorization and Binding Obligations........................... 15
Section 3.3. No Legal Bar or Resultant Lien.................................. 16
Section 3.4. No Consent...................................................... 16
Section 3.5. Compliance with Laws............................................ 16
Section 3.6. Litigation...................................................... 16
Section 3.7. Defaults........................................................ 17
Section 3.8. Status of Property.............................................. 17
Section 3.9. Use of Proceeds................................................. 17
Section 3.10. Real Property Environmental Matters............................. 17
Section 3.11. Financial Condition............................................. 17
Section 3.12. No Condemnation................................................. 18
Section 3.13. No Actions...................................................... 18
Section 3.14. No Adverse Conditions........................................... 18
ARTICLE 4. COVENANTS.............................................................. 18
Section 4.1. Construction of Improvements.................................... 18
Section 4.2. Plans; Project Budgets; Project Schedules and Material Changes.. 19
Section 4.3. Inspection and Examination...................................... 19
Section 4.4. Permits and Approvals........................................... 19
Section 4.5. Governmental Requirements....................................... 19
Section 4.6. Books and Records............................................... 19
Section 4.7. Title to Property and Improvements.............................. 20
Section 4.8. Costs and Expenses.............................................. 20
</TABLE>
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TABLE OF CONTENTS
(continued)
<TABLE>
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<S> <C>
Section 4.9. Use of Advances............................................... 20
Section 4.10. Insurance..................................................... 20
Section 4.11. Environmental Matters......................................... 20
Section 4.12. Selection of Architects; Contractors; Inspecting A/E's........ 21
Section 4.13. Further Assurances............................................ 21
Section 4.14. Quarterly Statements.......................................... 21
Section 4.15. Continued Existence........................................... 21
Section 4.16. Defaults Under Other Loans.................................... 22
ARTICLE 5. ADVANCE CONDITIONS................................................... 22
Section 5.1. Conditions Precedent to First Advance under this Agreement.... 22
Section 5.2. Conditions Precedent to First Advance for New Project......... 24
Section 5.3. Initial Improvement Advance Conditions.......................... 25
Section 5.4. Additional Improvement Advance Conditions....................... 26
Section 5.5. Final-Advance Conditions........................................ 26
ARTICLE 6. PROCEDURE FOR ADVANCES; RESERVES....................................... 27
Section 6.1. General......................................................... 27
Section 6.2. Payments to PTR................................................. 28
Section 6.3. Retainage and Contractor's Fee Holdback......................... 28
Section 6.4. Interest Reserve................................................ 29
Section 6.5. Owner's Contingency............................................. 29
Section 6.6. Cost Overruns and Savings; Change Order Reserve................. 29
ARTICLE 7. EVENTS OF DEFAULT...................................................... 30
Section 7.1. Failure to Pay.................................................. 30
Section 7.2. Other Loan Document Defaults.................................... 30
Section 7.3. Judgment or Attachment.......................................... 31
Section 7.4. Violation of Governmental Requirements.......................... 31
Section 7.5. Insolvency, etc................................................. 31
Section 7.6. Unapproved Transfer............................................. 32
ARTICLE 8. REMEDIES............................................................... 32
Section 8.1. General......................................................... 32
Section 8.2. Remedies Cumulative............................................. 34
</TABLE>
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TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE 9. MISCELLANEOUS 34
Section 9.1. Survival of Representations, Warranties and Covenants........... 34
Section 9.2. Successors and Assigns.......................................... 34
Section 9.3. Notices......................................................... 35
Section 9.4. Waiver.......................................................... 35
Section 9.5. Amendment....................................................... 35
Section 9.6. Severability.................................................... 35
Section 9.7. Entire Agreement................................................ 36
Section 9.8. Expenses........................................................ 36
Section 9.9. Captions........................................................ 36
Section 9.10. Governing Law................................................... 36
Section 9.11. No Joint Venture or Partnership................................. 36
Section 9.12. No Third Party Beneficiary Rights Created....................... 36
Section 9.13. Incorporation by Reference...................................... 36
Section 9.14. Counterparts.................................................... 37
Section 9.15. Scope of Review of Plans........................................ 37
Section 9.16. Governmental Regulation......................................... 37
Section 9.17. Subordination................................................... 37
Section 9.18. Indemnity....................................................... 37
Section 9.19. Limitation of Liability......................................... 37
</TABLE>
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<PAGE>
FUNDING COMMITMENT AGREEMENT
THIS FUNDING COMMITMENT AGREEMENT (this "Agreement"), is entered into as of
October 17, 1996, among HOMESTEAD VILLAGE INCORPORATED, a Maryland corporation
("Homestead"), PTR HOMESTEAD VILLAGE LIMITED PARTNERSHIP, a Delaware limited
partnership (the "Partnership Borrower") and SECURITY CAPITAL PACIFIC TRUST, a
Maryland real estate investment trust ("PTR").
RECITALS
A. Prior to the date hereof, PTR agreed to make to PTR Homestead Village
Incorporated (the "Prior Corporate Borrower") a loan (the "Corporate Loan"), of
up to a maximum amount of $127,602,594 (the "Maximum Corporate Loan Amount") to
fund, among other things, acquisition and construction costs and expenses
incurred in connection with the acquisition and development of Homestead Village
extended stay lodging facilities. In connection with agreeing to make the
Corporate Loan, PTR and the Prior Corporate Borrower agreed that the Prior
Corporate Borrower's repayment obligation for funds advanced in respect of the
Corporate Loan would be adjusted by a premium factor of 1.113164866782 (the
"Premium Factor"). To evidence the Prior Corporate Borrower's obligation to
repay the Corporate Loan, at the adjusted rate, the Prior Corporate Borrower has
delivered to PTR an Amended and Restated Promissory Note (the "Corporate Note"),
dated May 28, 1996, in the face amount of $142,042,725 (i.e., the Maximum
Corporate Loan Amount as adjusted by the Premium Factor) (which note amended and
restated a prior promissory note dated January 24, 1996, and delivered by the
Prior Corporate Borrower to PTR to evidence the Corporate Loan), and to secure
the payment obligations under the Corporate Note and the Partnership Note (as
defined below), the Prior Corporate Borrower has, prior to the date hereof,
delivered to PTR deeds of trust and mortgages (the "Existing Corporate Security
Documents"), creating liens on the existing Homestead Village Projects listed in
Exhibit A hereto which are owned by the Prior Corporate Borrower (the "Existing
Corporate Projects"). (The Corporate Note, the Existing Corporate Security
Documents and all other instruments heretofore delivered by the Prior Corporate
Borrower in connection therewith to secure the payment of the Corporate Note and
the Partnership Note are herein called the "Existing Corporate Loan Documents".)
B. Prior to the date hereof, PTR agreed to make to the Partnership
Borrower a loan (the "Partnership Loan") of up to a maximum amount of
$71,230,145 (the "Maximum Partnership Loan Amount") to fund, among other things,
acquisition and construction costs and expenses incurred in connection with the
acquisition and development of Homestead Village
1
<PAGE>
extended stay lodging facilities. In connection with agreeing to make the
Partnership Loan, PTR and the Partnership agreed that the Partnership Borrower's
repayment obligation for funds advanced in respect of the Partnership Loan would
be adjusted by the Premium Factor. To evidence the Partnership Borrower's
obligation to repay the Partnership Loan, at the adjusted rate, the Partnership
Borrower has delivered to PTR an Amended and Restated Promissory Note (the
"Partnership Note"), dated May 28, 1996, in the face amount of $79,290,895
(i.e., the Maximum Partnership Loan Amount as adjusted by the Premium Factor)
(which note amended and restated a prior promissory note dated January 24, 1996,
and delivered by the Partnership Borrower to PTR to evidence the Partnership
Loan), and to secure the payment obligations under the Corporate Note and the
Partnership Note, the Partnership Borrower has, prior to the date hereof,
delivered to PTR those certain deeds of trust and mortgages listed in Part II of
Exhibit A hereto (the "Existing Partnership Security Documents"), creating liens
on the existing Homestead Village Projects listed in Exhibit A hereto which are
owned by the Partnership Borrower (the "Existing Partnership Projects"). (The
Partnership Note, the Existing Partnership Security Documents and all other
instruments heretofore delivered by the Partnership Borrower in connection
therewith to secure the payment of the Corporate Note and the Partnership Note
are herein called the "Existing Partnership Loan Documents"; and the Existing
Corporate Loan Documents and Existing Partnership Loan Documents are
collectively referred to herein as the "Existing Loan Documents".)
C. On the date hereof, the parties are entering into a series of
transactions as described in that certain Merger and Distribution Agreement,
dated as of May 21, 1996, among Security Capital Atlantic Incorporated
("Atlantic"), PTR, Security Capital Group Incorporated ("SCG") and Homestead
(the "Merger Agreement"), pursuant to which, among other things, Homestead is,
contemporaneously herewith, acquiring all of the stock of PTR's subsidiaries
which own, operate or develop PTR's Homestead Village extended-stay lodging
facilities. As a consequence of the mergers contemplated under the Merger
Agreement, the Prior Corporate Borrower has been merged into Homestead and in
connection therewith Homestead has succeeded to and assumed all of the Prior
Corporate Borrower's obligations and liabilities, including those under the
Corporate Note and the Existing Corporate Loan Documents.
D. Upon and subject to the provisions of this Agreement, Homestead, the
Partnership Borrower and PTR desire to continue the funding provided for under
the Existing Loan Documents, and in consideration of the issuance, pursuant to
that certain Warrant Purchase Agreement, dated as of May 21, 1996 among
Atlantic, PTR, SCG and Homestead, to PTR by Homestead of warrants to purchase
shares of common stock, $0.01 par value per share, of Homestead ("Homestead
Common Stock"), PTR is willing to provide funds to Homestead and the Partnership
Borrower for the costs incurred in connection with performing due diligence
investigations, securing required development approvals and otherwise completing
the acquisition
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and development of the proposed future Homestead Village projects listed in
Exhibit A (which projects, and any replacement projects approved by PTR pursuant
to the provisions of this Agreement, are herein called the "Future Projects").
E. The execution of this Agreement is a condition to the consummation of
the transactions contemplated by the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS
Section 1.1. CERTAIN DEFINED TERMS. As used herein, the following terms
shall have the following meanings:
"Agreement" shall mean this Funding Commitment Agreement.
"Acquisition Notice" has the meaning set forth in Section 2.3 of this
Agreement.
"Architect" means the architect retained by a Borrower to provide
architectural services for a Project.
"Architect's Agreement" means the agreement for architectural services
executed by a Borrower and an Architect in connection with the design of a
Project, and all exhibits, attachments, riders and addenda thereto.
"Architect's Certificate" means a Certificate from the Architect for a
Project, in form and substance reasonably acceptable to PTR, wherein the
Architect acknowledges the collateral assignment of the Architect's Agreement
and the Plans prepared by such Architect from Borrower to PTR pursuant to this
Agreement and agrees to perform all of its obligations under the Architect's
Agreement in the event PTR takes possession of the subject Project in connection
with the exercise of its remedies hereunder or under the Security Documents
after an Event of Default.
"Atlantic" has the meaning set forth in the Preamble to this Agreement.
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"Borrower" means Homestead, in its capacity as maker under the Corporate
Note, the Partnership Borrower or any Subsidiary, whichever entity is the owner
of the subject Project.
"Business Day" means any day other than Saturday, Sunday, or any other day
on which commercial banks in New Mexico are not required to be open for
business.
"Change Order" means a written order executed by a Borrower authorizing a
Contractor to proceed with a change in the work as provided for in the original
Plans for a Project, which change has been made in accordance with the
applicable provisions of this Agreement.
"Completion and Payment Guaranty" means that certain Guaranty of Completion
and Payment of even date herewith from Homestead to PTR in the form attached as
Exhibit B.
"Construction Contract" means the contract for construction executed by a
Borrower and the Contractor in connection with the construction of a Project,
and all exhibits, attachments, riders and addenda thereto.
"Consultant" means any civil engineer or other material consultant, other
than the Architect, retained directly by a Borrower to provide design or
engineering services for a Project.
"Consultant's Agreement" means the agreement for engineering or other
consultant services executed by a Borrower and a Consultant in connection with a
Project, and all exhibits, attachments, riders and addenda thereto.
"Consultant's Certificate" means a Certificate from a Consultant for a
Project, in form and substance reasonably acceptable to PTR, wherein the
Consultant acknowledges the collateral assignment of the Consultant's Agreement
and the Plans prepared by such Consultant from Borrower to PTR pursuant to this
Agreement and agrees to perform all of its obligations under the Consultant's
Agreement in the event PTR takes possession of the subject Project in connection
with the exercise of its remedies hereunder or under the Security Documents
after an Event of Default.
"Contractor" means the general contractor retained by a Borrower to provide
construction services for a Project.
"Contractor's Certificate" means a Certificate from the Contractor for a
Project, in form and substance reasonably acceptable to PTR, wherein the
Contractor acknowledges the collateral assignment of the Construction Contract
from Borrower to PTR pursuant to this Agreement and
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agrees to perform all of its obligations under the Construction Contract in the
event PTR takes possession of the subject Project in connection with the
exercise of its remedies hereunder or under the Security Documents after an
Event of Default.
"Corporate Loan" has the meaning set forth in Recital A to this Agreement.
"Corporate Note" has the meaning set forth in Recital A to this Agreement.
"Default" means any condition or event that constitutes an Event of Default
or that with the giving of notice or lapse of time or both would, unless cured
or waived, become an Event of Default.
"Development Budget" has the meaning set forth in Section 2.3 of this
Agreement.
"Development Schedule" has the meaning set forth in Section 2.3 of this
Agreement.
"Environmental Laws" means any and all laws, statutes, ordinances, rules,
regulations, orders, or determinations of any governmental authority pertaining
to health or the environment applicable to a Borrower, or a Property owned by
such Borrower, in effect in the jurisdiction in which such Property is located,
or where any hazardous substances generated by or disposed of by a Borrower in
connection with such Property are located, including but not limited to the
Clean Air Act, as amended, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 as amended by the Superfund Amendments
and Reauthorization Act of 1986, as amended ("CERCLA"), the Federal Water
Pollution Control Act, as amended, the Resource Conservation and Recovery Act of
1976, as amended by the Used Oil Recycling Act of 1980, the Solid Waste Disposal
Act Amendments of 1980, and the Hazardous and Solid Waste Amendments of 1984, as
amended ("RCRA"), the Safe Drinking Water Act, as amended, the Toxic Substances
Control Act, as amended, the Hazardous Materials Transportation Act, as amended
any analogous state law of the state in which the Property is located and other
environmental conservation or protection laws. The terms "hazardous substance,"
"release," and "threatened release" shall have the meanings specified in CERCLA,
and the terms "solid waste" and "disposal" (or "disposed") shall have the
meanings specified in RCRA; provided, however, that (i) in the event either
CERCLA or RCRA is amended so as to broaden the meaning of any term defined
thereby, such broader meaning shall apply subsequent to the effective date of
such amendment and (ii) to the extent the laws of the state in which the
Property is located establish a meaning for "hazardous substance," "release,"
"threatened release," "solid waste," or "disposal" which is broader than that
specified in either CERCLA or RCRA, such broader meaning shall apply.
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"Event of Default" means the occurrence of any of the events specified in
Article 7 hereof.
"Existing Corporate Projects" has the meaning set forth in Recital A to
this Agreement.
"Existing Corporate Security Documents" has the meaning set forth in
Recital A to this Agreement.
"Existing Loan Documents" has the meaning set forth in Recital B to this
Agreement.
"Existing Partnership Loan Documents" has the meaning set forth in Recital
B to this Agreement.
"Existing Partnership Projects" has the meaning set forth in Recital B to
this Agreement.
"Existing Partnership Security Documents" has the meaning set forth in
Recital B to this Agreement.
"Existing Projects" means the Existing Corporate Projects and the Existing
Partnership Projects.
"Expiration Date" has the meaning set forth in Section 2.5 of this
Agreement.
"Final Advance" means the final advance of Loan proceeds to a Borrower for
construction of a Project in accordance with the applicable provisions of this
Agreement.
"Final Completion" means that the requirements of Section 5.5 have been
fully satisfied for a Project.
"Final CO" means a final unconditional certificate of occupancy for a
Project issued by the applicable Governmental Authority.
"Force Majeure" means, with respect to any Project, an event entitling a
Contractor to an extension of time in constructing the Improvements as
established in the Construction Contract and any act of God, war, riots,
unusually severe weather, shortages of labor or materials (but not a shortage of
funds), strikes, lock-outs, explosions, the order of any court or governmental
authority or unavailability of or delay in issuance of any Permits despite a
Borrower's reasonable diligence in securing same, which results in any delay in
whole or in part
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in the design, engineering or construction of a Project, or the duration of any
inspection, testing, or remediation related to any environmental condition or
aspect of a Project.
"Funding Notice" has the meaning set forth in Section 2.3 of this
Agreement.
"Future Project" has the meaning set forth in Recital D to this Agreement.
"Geographic Area" means the States of Arizona, California, Colorado, Idaho,
Kansas, Missouri, Nevada, New Mexico, Oklahoma, Oregon, Texas, Utah and
Washington.
"Governmental Authority" means any Federal, state, county, municipal or
other governmental or quasi-governmental department, commission, board, court,
agency or other instrumentality having jurisdiction over a Borrower and any
Project.
"Governmental Requirement" means any law, statute, code, ordinance, order,
rule, regulation, judgment, decree, injunction, franchise, permit, certificate,
license, authorization or other direction or requirement (including, without
limitation, any of the foregoing that relate to environmental standards or
controls, energy regulations and occupational safety and health standards or
controls) of any Governmental Authority.
"Homestead" has the meaning set forth in the Preamble to this Agreement.
"Homestead Common Stock" has the meaning set forth in Recital D to this
Agreement.
"Homestead Affiliate" means (a) an entity that directly or indirectly
controls, is controlled by or is under common control with Homestead or (b) an
entity at least a majority of whose economic interest is owned by Homestead; and
the term "control" means the power to direct the management of such entity
through voting rights, ownership or contractual obligations; provided, however,
in no event shall PTR, Atlantic, SCG or any wholly-owned subsidiary of any of
the foregoing be deemed a Homestead affiliate.
"Homestead Security Documents" means the deeds of trust, deeds to secure
debt and/or mortgage instruments, substantially in the forms attached as Exhibit
C hereto, to be delivered to PTR by Homestead in connection with the funding of
any Project acquired by Homestead after the date of this Agreement, as security
for the Corporate Note, the Partnership Note and any Subsidiary Note executed
and delivered after the date hereof, and any other security instruments
delivered by Homestead from time to time as security for the Corporate Note, the
Partnership Note and any such Subsidiary Note.
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"Improvements" means the buildings, structures, and other improvements to
be constructed on the Land as described on the Plans for the subject Project.
"Inspecting A/E" means the inspecting architect or engineer retained by a
Borrower to inspect, monitor and administer the progress of construction of a
Project.
"Land" means the parcel or parcels of land on which a Project is or is to
be located, together with all easements, rights of way and other appurtenances
thereto.
"Lien Waivers" means a waiver of all liens relating to a Project executed
by any and all contractors, subcontractors and/or suppliers of a Borrower who
have provided any goods or services relating to Improvements.
"Loan" means the Corporate Loan, the Partnership Loan, or any Subsidiary
Loan made after the date hereof, as the context may require; and "Loans" means
the Corporate Loan, the Partnership Loan, and any Subsidiary Loans made after
the date hereof, collectively.
"Loan Documents" means this Agreement, the Notes, the Security Documents,
the Completion and Payment Guaranty and any and all other agreements or
instruments now or hereafter executed and delivered by a Borrower, Homestead or
any other person in connection with, or as security for, the payment or
performance of the Notes.
"Material Adverse Effect" means any material and adverse effect on the
business, operations, properties, assets, condition (financial or other),
results of operations or prospects of Homestead and its Subsidiaries, taken as a
whole.
"Material Change" means any change to the Plans or to a Project which would
result in a material increase or decrease in the number of lodging units in such
Project from the number contained in a Prototypical Project, a material increase
or decrease in the overall cost of completing a Project above the costs
contemplated in the Prototypical Project Budget, or would otherwise result in
such Project materially deviating from the product and/or investment concept of
a Prototypical Project as set forth in the Prototypical Plans.
"Maximum Corporate Loan Amount" has the meaning set forth in Recital A to
this Agreement.
"Maximum Loan Amount" means the aggregate of the Maximum Corporate Loan
Amount and the Maximum Partnership Loan Amount.
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"Maximum Partnership Loan Amount" has the meaning set forth in Recital B to
this Agreement.
"Note" means the Corporate Note, the Partnership Note, or any Subsidiary
Note executed and delivered after the date hereof, as the context may require,
and "Notes" means the Corporate Note, the Partnership Note, and any Subsidiary
Notes executed and delivered after the date hereof, collectively.
"Partnership Borrower" has the meaning set forth in the Preamble to this
Agreement.
"Partnership Loan" has the meaning set forth in Recital B to this
Agreement.
"Partnership Note" has the meaning set forth in Recital B to this
Agreement.
"Partnership Security Documents" means the deeds of trust, deeds to secure
debt and/or mortgage instruments, substantially in the forms attached as Exhibit
D hereto, to be delivered to PTR by the Partnership Borrower in connection with
the funding of any Project acquired by the Partnership after the date of this
Agreement, as security for the Partnership Note, the Corporate Note and any
Subsidiary Note executed and delivered after the date hereof, and any other
security instruments delivered by the Partnership Borrower from time to time as
security for the Corporate Note, the Partnership Note and any such Subsidiary
Note.
"Permits" shall mean all permits, licenses, registrations, certificates,
authorizations and approvals now or hereafter issued or required to be issued by
any governmental or quasi-Governmental Authority for the lawful ownership,
construction, use and operation of a Project.
"Personalty" means all items of tangible or intangible personal property
owned by a Borrower, or in which a Borrower has any interest, to the extent of
such interest, that now are or hereafter may be purchased, prepared, constructed
or placed for, upon or in a Project owned by such Borrower.
"Plans" means the final plans and specifications for the construction of
the Improvements comprising a Project, together with any modifications or
additions to the same subsequently permitted under the terms of this Agreement
or, to the extent required hereunder, approved by PTR in accordance with the
provisions of this Agreement.
"Project" means each Existing Project and each Future Project for which an
Acquisition Notice has been delivered to PTR prior to the Expiration Date.
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"Project Budget" means the budget for a Project delivered by a Borrower to
PTR.
"Project Schedule" means the schedule for the design and construction of
the Improvements encompassed within a Project delivered by a Borrower to PTR.
"Property" means any property from time to time subject to any of the
Security Documents, including the Land and all Improvements now or hereafter
located thereon and all Personalty associated therewith.
"Proposed Substitute Future Project" has the meaning set forth in Section
2.7 of this Agreement.
"Prototypical Project Budget" means the due diligence, development
approval, land acquisition, design and construction budget for a Prototypical
Project heretofore delivered to, and approved by, PTR.
"Prototypical Project Schedule" means the due diligence, development
approval, design and construction schedule for a Prototypical Project heretofore
delivered to, and approved by, PTR.
"Prototypical Plans" means the standard plans and specifications for a
Homestead Village extended-stay lodging facility heretofore delivered to, and
approved by, PTR.
"Prototypical Project" means a Homestead Village extended-stay lodging
facility designed and constructed in substantial accordance with the
Prototypical Plans.
"PTR" has the meaning set forth in the Preamble to this Agreement.
"Pursuit Costs" has the meaning set forth in Section 2.3 of this Agreement.
"Quarterly Statement" has the meaning set forth in Section 4.14 of this
Agreement.
"Rejected Project" has the meaning set forth in Section 2.7 of this
Agreement.
"Security Documents" means the Homestead Security Documents, the Existing
Corporate Security Documents, the Existing Partnership Security Documents, the
Partnership Security Documents, and any Subsidiary Security Documents,
collectively.
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"Subcontractor" means all persons performing labor or services, or
providing materials, equipment or furnishings in connection with the
construction of Improvements, other than Contractor.
"Subsidiary" means any entity now or hereafter in existence including the
Partnership Borrower, all of the outstanding equity securities of which are
owned by Homestead.
"Subsidiary Loan" means any portion of the Corporate Loan or Partnership
Loan which Homestead may direct PTR to advance to a Subsidiary instead of to
Homestead or the Partnership Borrower in accordance with the provisions of this
Agreement.
"Subsidiary Note" means any promissory note, substantially in the form of
the Partnership Note, which a Subsidiary executes and delivers to PTR after the
date hereof to evidence a Subsidiary Loan made by PTR to such Subsidiary.
"Subsidiary Security Documents" means the deed of trust or mortgage
instrument to be delivered to PTR by a Subsidiary, substantially in the form of
the Homestead Security Documents, in connection with the funding of any Future
Project owned by Subsidiary as security for the Corporate Note, the Partnership
Note and any Subsidiary Note executed and delivered after the date hereof, and
any other security instruments delivered by such Subsidiary from time to time as
security for the Corporate Note, the Partnership Note and any such Subsidiary
Note.
"Title Insurer" means Chicago Title Insurance Company or any other
nationally recognized title insurance company issuing a Title Policy.
"Title Policy" means the lender's policy of title insurance for a Property
issued by the Title Insurer for the benefit of PTR and all endorsements thereto,
which insures the lien priority of the Security Documents applicable to such
Property.
"UCC" means the Uniform Commercial Code as in force in the state in which a
Project is located.
Section 1.2. OTHER DEFINITIONAL PROVISIONS.
(a) Except as otherwise specified herein, all references herein (i) to any
person or entity shall be deemed to include such person's or entity's heirs,
legal representatives, successors and assigns, as appropriate, (ii) to any
Governmental Requirement defined or referred to herein shall be deemed
references to such Governmental Requirement as the same may have been or
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may be amended or supplemented from time to time and (iii) to any Loan Document
or other agreement defined or referred to herein shall be deemed references to
such Loan Document or agreement (and, in the case of the Notes or other
instruments, any instrument issued in substitution therefor) as the terms
thereof may have been or may be amended, supplemented, waived or otherwise
modified from time to time in writing.
(b) Whenever the context so requires, the neuter gender includes the
masculine or feminine, the masculine gender includes the feminine, and the
singular number includes the plural, and vice versa.
ARTICLE 2.
THE LOANS
Section 2.1. THE HOMESTEAD LOAN. Subject to the limitations set forth in
Sections 2.5, 2.6 and 2.7 below, PTR hereby agrees, upon the terms and
conditions set forth herein and in the other applicable Loan Documents, to
advance to Homestead (or, as Homestead may direct, to any Subsidiary) up to the
amount of the Maximum Corporate Loan Amount for the purpose of paying the costs
and expenses incurred by Homestead (or by any such Subsidiary, as the case may
be) in completing the design and construction of the Existing Projects and in
performing its due diligence review, obtaining all Permits required for
development of and otherwise acquiring the Land for, and completing the design
and construction of, such of the Future Projects hereafter pursued by Homestead
or any such Subsidiary as may be funded under the provisions of this Agreement.
Principal and accrued interest on the Corporate Note shall be due and payable in
accordance with the terms and conditions set forth therein and herein.
Section 2.2. THE PARTNERSHIP LOAN. Subject to the limitations set forth
in Sections 2.5, 2.6 and 2.7 below, PTR hereby agrees, upon the terms and
conditions set forth herein and in the other applicable Loan Documents, to
advance to the Partnership Borrower (or, as Homestead may direct, to Homestead
or any Subsidiary) up to the amount of the Maximum Partnership Loan Amount for
the purpose of paying the costs and expenses incurred by the Partnership
Borrower (or by Homestead or any such Subsidiary, as the case may be) in
completing the design and construction of the Existing Projects and in
performing its due diligence review, obtaining all Permits required for
development of and otherwise acquiring the Land for, and completing the design
and construction of the Future Projects hereafter pursued by Homestead, the
Partnership Borrower or any other Subsidiary as may be funded under the
provisions of this Agreement. Principal and accrued interest on the Partnership
Note shall be due and payable in accordance with the terms and conditions set
forth therein and herein.
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Section 2.3. FUTURE PROJECTS. The parties acknowledge and agree that the
Future Projects identified in Exhibit A hereto are in differing stages of
consideration by Homestead and that, at any point in the process of its due
diligence review, the negotiation of definitive acquisition and related
documents and its efforts to obtain all Permits required for development of any
such Future Project, Homestead may determine, in its sole and absolute
discretion, either to proceed with the acquisition of the land for, and
development of, any such Future Project or to discontinue its efforts in respect
of any such Future Project. Requests for advances of Loan proceeds hereunder
may include amounts required to reimburse Homestead for the costs and expenses
incurred by Homestead in its due diligence review of any such Future Project, as
well as all costs incurred in connection with its efforts to secure the Permits
required for development of any such Future Project. Whenever such pursuit
costs ("Pursuit Costs") are to be funded with Loan proceeds, prior to the first
advance in respect of a Future Project, Homestead will provided PTR with a
notice (a "Funding Notice") identifying the Future Project, together with a
development budget (a "Development Budget") indicating the anticipated costs
that are likely to be incurred prior to the acquisition of such Future Project
by Homestead or a Subsidiary, the amount of such costs to be funded by Loan
proceeds, which amount shall in no event exceed $100,000 per Future Project, and
a schedule setting forth the anticipated time-frames for completing the due
diligence review and obtaining required Permits (a "Development Schedule").
If Homestead elects to proceed with a Future Project, then Homestead shall
provide PTR at least 10 Business Days' prior written notice (an "Acquisition
Notice") of the anticipated closing date for the acquisition of the subject
Land, the identity of the Borrower for such transaction, and the estimated
amount of Loan proceeds that will need to be advanced at such closing. From and
after delivery of an Acquisition Notice to PTR, the subject project shall, for
all purposes under this Agreement, be deemed a "Project". Notwithstanding
anything to the contrary in the foregoing, funding of the first advance of Loan
proceeds in respect of any such Project shall require the recordation of
Security Documents adding such Project as security for the Loan and the
satisfaction of the other conditions set forth in Section 5.2 as to such
Project.
In the event, however, that Homestead determines from time to time that any
Future Project is unacceptable to it and that Homestead will not expend further
efforts with respect to such Future Project, Homestead shall provide written
notice to PTR identifying any such Future Project. In such event, any Pursuit
Costs theretofore funded with Loan proceeds, together with accrued and unpaid
interest thereon due under the terms of the Corporate Note, shall be repaid by
Homestead to PTR within 30 days after delivery of such notice to PTR.
Section 2.4. SUBSIDIARY LOANS. With respect to any Future Project for
which an Acquisition Notice is delivered to PTR in accordance with Section 2.3
above, Homestead shall have the right to determine, in its sole and absolute
discretion, that a Subsidiary acquire the
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subject Project, in which event, the subject Subsidiary shall, at such time as
it acquires the subject Future Project, execute and deliver to PTR Subsidiary
Security Documents in connection therewith together with an agreement in form
and substance satisfactory to PTR pursuant to which such Subsidiary agrees to be
bound by the terms of this Agreement as to such Project. In addition, at the
election of Homestead, the subject Subsidiary shall execute a Subsidiary Note in
the amount of the Loan determined by Homestead to be allocable to such Project
and the Maximum Corporate Loan Amount and/or the Maximum Partnership Loan Amount
(as Homestead may elect) shall be decreased by the amount of any such Subsidiary
Note. Alternatively, Homestead may elect to have funds advanced with respect to
such Project under the Corporate Loan or Partnership Loan and either loan or
contribute, or cause the Partnership Borrower to loan or contribute, the funds
so advanced to the subject Subsidiary. In the event any Subsidiary executes a
Subsidiary Note and/or any Subsidiary Security Documents as contemplated under
this Section 2.4, the parties shall, contemporaneously therewith, execute,
deliver, and, if appropriate, record, such amendments to the Loan Documents as
may reasonably be necessary or appropriate to properly document any resulting
changes in the Maximum Corporate Loan Amount and/or the Maximum Partnership Loan
Amount.
Section 2.5. DURATION OF FUNDING COMMITMENT. The obligation of PTR to
advance Loan proceeds in respect of Future Projects for which an Acquisition
Notice has not yet been delivered to PTR shall expire on March 31, 1998 (the
"Expiration Date"). Notwithstanding anything to the contrary in the foregoing,
PTR shall continue to be obligated, subject to and upon the terms and conditions
set forth herein and in the other Loan Documents, to continue to make advances
of Loan proceeds after such date for each Project for which an Acquisition
Notice has theretofore been delivered to PTR under the terms of this Agreement,
but shall not have any obligation to make further advances in respect of Pursuit
Costs for any Future Project for which only a Funding Notice has been delivered
to PTR. On or before April 30, 1998, Homestead shall repay, or cause to be
repaid, to PTR any advances of Loan proceeds in respect of Pursuit Costs
(together with accrued and unpaid interest thereon) that have not been repaid
pursuant to Section 2.3 hereof as of the Expiration Date.
SECTION 2.6. PROJECT SPECIFIC FUNDING COMMITMENT. PTR's obligation under
this Agreement to make advances of Loan proceeds in respect of a designated
Project shall not exceed the lesser of (i) the actual aggregate hard and soft
costs incurred by the applicable Borrower in connection with the acquisition,
development, design and construction of such Project, or (ii), except as
provided in Section 6.6, the amount allocated to such Project in Exhibit A
hereto, and all costs in respect of a Project in excess of the Loan amount
allocated to such Project shall, except as provided in such Section 6.6, be
funded by Homestead as and when needed. In addition, PTR's obligation to make
advances in respect of a designated Project shall expire on the second
anniversary of the date on which the subject Land was acquired by
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Homestead or the applicable Subsidiary. In the event Final Completion of such
Project has not been achieved by such date, PTR shall have no obligation to make
any further advances of Loan proceeds in connection with such Project and all
costs required to complete such Project shall be funded by Homestead as and when
required in order to assure that such Project is completed and placed in
operation as soon as is reasonably practicable. If, however, Final Completion
of such Project has not been achieved by the date which is 30 months after the
date of acquisition of the subject Land, then, at the election of PTR, exercised
by delivering written notice to Homestead, Homestead shall repay, or cause the
applicable Subsidiary to repay, within 30 days after receipt of such notice the
amount of Loan proceeds advanced in respect of such Project (together with
accrued and unpaid interest on such amount), and upon receipt of such payment,
this Agreement, solely as it relates to such Project, shall terminate and PTR
shall cause to be released the Security Documents recorded or filed against such
Project.
Section 2.7. REPLACEMENT PROJECTS. Homestead agrees that for each Future
Project rejected by Homestead pursuant to Section 2.3 (a "Rejected Project"),
Homestead will propose to PTR in writing a proposed substitute future project (a
"Proposed Substitute Future Project") to take the place of such Rejected
Project. Any such Proposed Substitute Future Project shall be located within
the Geographic Area and, except as specifically noted in writing by Homestead,
shall conform, to Homestead's then current knowledge, to the Prototypical
Project requirements. Homestead may select a Proposed Substitute Future Project
from its then contemplated Homestead Village projects which Homestead is
considering pursuing or, if all such contemplated projects are then already
included within the list of Future Projects under this Agreement, then Homestead
may delay in identifying a Proposed Substitute Future Project until, in the
ordinary course of its business, a new site for a contemplated Homestead Village
project is identified within the Geographic Area. Homestead shall not, however,
be obligated to identify a new potential Homestead Village site solely for the
purposes of presenting to PTR a Proposed Substitute Future Project.
PTR shall have a period of 20 Business Days after receipt of any such
Proposed Substitute Project to approve or reject, in its sole and absolute
discretion, any such proposal, and failure of PTR to provide Homestead with
written notice within such 20-Business Day period shall be deemed a rejection by
PTR of the subject Proposed Substitute Future Project. If PTR timely approves a
Proposed Substitute Future Project, then such project shall be substituted in
the place and stead of the Rejected Project in Exhibit A hereto, and shall for
all purposes under this Agreement thereafter be deemed a Future Project. The
maximum amount of Loan proceeds that will be available to fund such Future
Project (if Homestead thereafter delivers an Acquisition Notice for such
Project) shall be equal to the Loan amount originally allocated to the
applicable Rejected Project in Exhibit A.
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In the event that any Proposed Substitute Future Project is rejected or
deemed rejected by PTR, Homestead shall be free to pursue the Proposed
Substitute Future Project on its own. For each Rejected Project, Homestead
shall be required (subject to the limitations set forth above) to propose to PTR
up to a maximum of three (3) Proposed Substitute Future Projects. If PTR
rejects all three (3) Proposed Substitute Future Projects submitted by Homestead
in respect of a particular Rejected Project, then the Maximum Loan Amount, and
PTR's funding commitment hereunder, shall be reduced by the amount allocated to
the Rejected Project in Exhibit A hereto. The obligation of Homestead to
propose to PTR Proposed Substitute Future Projects shall in any event terminate
on the Expiration Date.
Section 2.8. RELEASE OF SECURITY DOCUMENTS. The parties acknowledge and
agree that the Notes are convertible, in whole or in part, into shares of
Homestead Common Stock up to the maximum amount of the unpaid principal amount
of such Notes outstanding from time to time and otherwise pursuant and subject
to the terms and conditions of such Notes. Any such conversion shall reduce the
amount of the debt evidenced by the Notes and secured by the Security Documents
by the amount determined in accordance with the conversion provisions of the
Notes. In connection with any partial conversion of the Notes, Homestead may
request that, in lieu of or in addition to reducing the amount secured by the
Security Documents, PTR release any one or more of the Projects then subject to
the Security Documents and having a value equivalent to or less than the amount
of the debt reduction resulting from such conversion. The release of any
Projects from the lien of the Security Documents shall, however, be subject to
the approval of PTR, which approval shall not to be unreasonably withheld or
delayed.
At such time as all amounts owing to PTR under or in respect of any of the
Loan Documents have been paid in accordance with the provisions of the Loan
Documents or if not paid then, to the extent permitted under the Notes,
converted into Homestead Common Stock, and when PTR has no further obligation to
make any advance, disbursement or payment of any kind or to extend credit under
or with respect to any of the Loan Documents, then this Agreement shall
terminate and upon receipt of demand therefor from Homestead, PTR shall execute
and deliver to Homestead appropriate instruments of release or reconveyance of
any Security Documents then in effect.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
To induce PTR to enter into this Agreement, Homestead and each Borrower
represents and warrants to PTR (each representation and warranty herein being
given as of the date of this
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Agreement and deemed repeated and reaffirmed on the date of each advance of
funds by PTR) as follows:
Section 3.1. EXISTENCE AND POWER. Homestead and each Borrower is duly
organized, validly existing and in good standing under the laws of the State of
its organization and to the extent required is qualified to do business in and
is in good standing in each jurisdiction in which it owns property; has full
power and authority to own its assets, to conduct the activities in which it is
engaged, and to own and develop each Project which it owns.
Section 3.2. AUTHORIZATION AND BINDING OBLIGATIONS. The borrowing
evidenced by the Notes and the execution, delivery and performance of this
Agreement and all other Loan Documents by Homestead and each Borrower (i) are
within the power of the subject entity and (ii) have been duly authorized. Each
of the Loan Documents executed by Homestead and/or any Borrower, when executed
and delivered, will constitute the legal, valid and binding obligations of such
entity and are enforceable against such entity in accordance with its respective
terms, subject to bankruptcy and insolvency laws, equitable principles, and laws
affecting creditors rights generally.
Section 3.3. NO LEGAL BAR OR RESULTANT LIEN. None of the (i) execution
and delivery of, (ii) fulfillment of the terms and conditions of, or (iii) the
consummation of the transactions contemplated by the Loan Documents to which
Homestead and/or any Borrower is a party (a) violate any provisions of the
articles or certificate of incorporation, bylaws or partnership agreement of
such entity, (b) violate or constitute a default under any contract, agreement
or instrument, or any law, ordinance, rule or regulation of any Governmental
Authority, to which such entity is subject, (c) to such entity's knowledge,
violate or constitute a default under any Governmental Requirement so as to
create a Material Adverse Effect or (d) to such entity's knowledge, result in
the creation or imposition of any lien upon any property of such entity, other
than those permitted by this Agreement.
Section 3.4. NO CONSENT. The execution, delivery and performance of the
Loan Documents to which Homestead and/or each Borrower is a party does not
require the consent or approval of any other person, including, without
limitation, any financial institution or other creditor of such entity, any
trustee, conservator, receiver or administrator, or any regulatory authority or
governmental body of the United States of America or any state thereof or any
Governmental Authority.
Section 3.5. COMPLIANCE WITH LAWS. All Plans, Projects, Properties,
Improvements and their intended use presently comply, and throughout the term of
this Agreement will continue to comply, in all material respects with all
Governmental Requirements and all public
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and private restrictions or other agreements affecting each such Property,
including, without limitation, building codes, special use permits, zoning
codes, Environmental Laws, applicable requirements of fire underwriters,
restrictive covenants, easements and other agreements affecting the Property.
All Permits currently required by Governmental Requirements to be obtained for
the Projects now subject to this Agreement have been obtained, and neither
Homestead nor any Borrower has any reason to believe that any Permits that
subsequently may be required to enable it to construct, occupy, operate, use or
sell any of the Property will not be obtained in due course.
Section 3.6. LITIGATION. Except as disclosed to PTR in writing, at the
date of this Agreement there is no litigation, legal, administrative, or
arbitral proceeding, investigation or other action of any nature pending or, to
the knowledge of Homestead or any Borrower, threatened against or affecting any
Borrower or Homestead that involves the possibility of any judgment or liability
(not fully covered by insurance) that would have a Material Adverse Effect.
Section 3.7. DEFAULTS. To the knowledge of Homestead and each Borrower,
neither Homestead nor any Borrower is in default, and no event or circumstance
has occurred that, but for the passage of time or the giving of notice, or both,
would constitute a default, in any respect under any agreement of instrument
that may have a Material Adverse Effect. No Event Default has occurred
hereunder.
Section 3.8. STATUS OF PROPERTY. The Borrower delivering any Security
Documents to PTR is the fee simple owner of the subject Property free and clear
of all restrictions, covenants, easements, liens and encumbrances, including,
without limitation, mechanics', materialmen's and suppliers' liens (except liens
securing PTR and matters reflected in the Title Policy). To Homestead and each
Borrower's knowledge: each Property is a legal lot under applicable laws,
statutes, ordinances and regulations of the governing jurisdiction; each
Property is carried, or is in the process of being changed so as to be carried,
on the tax rolls of the governing jurisdiction as a separate, subdivided parcel;
each Property has, or will have upon completion of construction, full access to
the public highways and to the services of all utilities, including water, storm
sewer, sanitary sewer, electricity and telephone, required to serve the intended
use of the Property; each Property under construction or completed is zoned
under applicable zoning laws and ordinances so as to permit the construction and
development of the Project planned for such Property and the use and occupancy
of the Property as contemplated under this Agreement; and each Property under
construction or completed currently complies in all material respects with such
laws and ordinances and with all private restrictions applicable thereto and any
special use permit, variance, exception, or other special zoning authorization
applicable thereto; each Property currently complies in all material respects
with all Governmental Requirements
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applicable thereto. To Borrower's knowledge, the liens of the Security Documents
executed by it are valid liens covering the subject Properties.
Section 3.9. USE OF PROCEEDS. None of the proceeds of the Loans has been
or shall be used to purchase or carry, or to reduce or retire or refinance any
credit incurred to purchase or carry, any margin stock (within the meaning of
Regulations G and U of the Board of Governors of the Federal Reserve System) or
to extend credit to others for the purpose of purchasing or carrying any margin
stock.
Section 3.10. REAL PROPERTY ENVIRONMENTAL MATTERS. To the actual
knowledge of Homestead and each Borrower, except as disclosed in the
environmental audits prepared for Homestead and/or any such Borrower and
delivered to PTR, no hazardous substances or solid waste are located at or on or
have been disposed of or otherwise released on or to any of the Properties in
violation of any Environmental Laws.
Section 3.11. FINANCIAL CONDITION. All financial statements delivered to
PTR concerning Homestead and each Borrower fairly and accurately present the
financial condition of such entities as of the date of such statements and have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis, and there are no contingent liabilities not
disclosed thereby which would have a Material Adverse Effect. Since the close
of the period covered by the latest financial statements delivered to PTR with
respect to Homestead's and each Borrower's assets, liabilities, or financial
condition, no event has occurred (including, without limitation, any litigation
or administrative proceedings) and no change in such entities' financial
condition exists or, to the knowledge of Homestead or any Borrower, is
threatened, which (i) materially adversely affects a Borrower's ability to
perform its obligations under the Loan Documents, (ii) constitutes or which
after notice or lapse of time, or both, would constitute a Default hereunder, or
(iii) materially adversely affects the validity or priority of the lien of the
Security Documents on any Borrower's Property or the financial condition of
Homestead or any Borrower.
Section 3.12. NO CONDEMNATION. No taking of any Property or any material
part thereof, through eminent domain, conveyance in lieu thereof, condemnation
or similar proceeding is pending or, to the best of Homestead's and each
Borrower's knowledge, threatened by any governmental agency.
Section 3.13. NO ACTIONS. There is no action, proceeding or investigation
pending or, to the best of Homestead's and each Borrower's knowledge, threatened
(or any basis therefor) which questions, directly or indirectly, the validity of
this Agreement, the Notes, the Security
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Documents, or any other Loan Document or any action taken or to be taken
pursuant hereto or thereto.
Section 3.14. NO ADVERSE CONDITIONS. To the best of Homestead's and each
Borrower's knowledge, there are no existing, pending or threatened events which
could materially adversely affect any of the Properties or the operation
thereof.
ARTICLE 4.
COVENANTS
Each Borrower will, at all times, comply with the covenants contained in
this Article 4 from the date hereof and for so long as any part of the Loans is
outstanding.
Section 4.1. CONSTRUCTION OF IMPROVEMENTS. Each Borrower will proceed
with the design, engineering and construction of its Improvements with
reasonable diligence and continuity and will endeavor in good faith to complete
the design, engineering and construction of its Improvements substantially in
accordance with the applicable Project Schedule, subject to Force Majeure, and
substantially in accordance with the Plans for such Improvement and applicable
Governmental Requirements.
Section 4.2. PLANS; PROJECT BUDGETS; PROJECT SCHEDULES AND MATERIAL
CHANGES. Prior to the date hereof, Homestead has delivered to PTR and PTR has
approved Homestead's Prototypical Plans, Prototypical Project Budget and
Prototypical Project Schedule. So long as the Plans and Project Budget
(including the Development Budget which is a part of the overall Project Budget)
for a given Project do not contain any Material Change and the Project Schedule
does not deviate in any material respect from the Prototypical Schedule, no
further approval by PTR of the Plans, Project Schedule or Project Budget for a
Project shall be required. Borrower shall not, however, make any Material
Change in the Plans for any of its Projects or construct any Improvements which
are not substantially in accordance with the Prototypical Plans or make any
change to any Plans or install any material or equipment which would constitute
a Material Change, without Homestead's obtaining in each instance PTR's prior
written consent, which consent shall not be unreasonably withheld or delayed.
Homestead shall promptly notify PTR in writing of any Material Change desired by
a Borrower, which notice shall be accompanied by such plans or other information
as may reasonably be necessary for PTR to evaluate the proposed Material Change.
PTR shall deliver written notice to Homestead within 10 Business Days after
receipt of the requested Material Change stating whether such Material Change
has been approved or disapproved by PTR.
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Section 4.3. INSPECTION AND EXAMINATION. Borrower will permit
representatives and agents of PTR to enter each Property owned by such Borrower
at all reasonable times to inspect the progress of the construction of the
subject Improvements and all materials to be used therein and to examine all
detailed plans and shop drawings which are or may be kept at the construction
site, and such Borrower will use reasonable efforts to cause the Contractor and
all Subcontractors to cooperate with PTR or its representatives in such
inspections or examinations. Homestead and each other Borrower shall also
permit representatives and agents of PTR to examine their respective books,
records and accounting data applicable to the Loans and the subject Projects
(and to make extracts therefrom or copies thereof) and, to the extent Homestead
or such Borrower has such right, all Contractor's and Subcontractors' books,
records and accounting data applicable to the subject Project.
Section 4.4. PERMITS AND APPROVALS. Borrower will comply in all material
respects with, and keep in full force and effect, all Permits necessary for
ownership, development and operation of the Projects owned or operated by it.
Section 4.5. GOVERNMENTAL REQUIREMENTS. Borrower will cause all
Governmental Requirements and all restrictive covenants affecting its Projects
to be complied with in all material respects (except matters contested in good
faith by appropriate proceedings).
Section 4.6. BOOKS AND RECORDS. Borrower will implement and maintain
payment and accounting systems which will assure accurate and complete records
of all amounts owed and paid in connection with the completion of each Project.
Borrower shall require each Contractor and each Subcontractor having a
subcontract in excess of $100,000 to deliver lien waivers or releases as a
condition to receiving payments. Contractor lien waivers shall cover the amount
paid to the Contractor under its application for payment for the month or other
payment period just ending; Subcontractor lien waivers shall cover the amount
paid to such Subcontractor pursuant to the Contractor's application for payment
for the immediately preceding month or other payment period.
Section 4.7. TITLE TO PROPERTY AND IMPROVEMENTS. Neither the legal or
beneficial title and ownership of a Borrower in the Property(ies) and
Improvements or any portion thereof owned by it will be conveyed, pledged or
encumbered in any way other than to Homestead or a Homestead Affiliate without
the consent of PTR, which may be granted or denied in PTR's sole and absolute
discretion. Borrower will promptly pay and discharge prior to the date when any
interest or penalties shall accrue thereon, all taxes, levies, charges,
impositions, water and sewer rents, and assessments of every kind or nature,
whether foreseen or unforeseen and whether general or special, which are now or
shall hereafter be charged or assessed against the Property(ies) or the
Improvements owned by it, or any part thereof, or which may become a lien
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thereon (except matters contested in good faith by appropriate proceedings and
for which adequate reserves have been provided).
Section 4.8. COSTS AND EXPENSES. Borrower shall pay any out-of-pocket
expenses reasonably incurred by PTR in the enforcement or collection of the
Loans, including without limitation, attorneys' fees and expenses, records
searches, documentary stamps, transfer taxes and recording taxes and court
costs.
Section 4.9. USE OF ADVANCES. Borrower shall not apply any advances of
Loan proceeds to costs other than those incurred in connection with the subject
Future Project or Project for which the advance has been made. Borrower shall
not apply such advances to the cost of acquiring any additional real property
other than a Project. Borrower shall not receive or apply advances of Loan
proceeds except to the purposes for which such proceeds have been advanced by
PTR, and in accordance with the provisions of the Loan Documents generally.
Section 4.10. INSURANCE. Borrower shall keep in full force and effect at
all times the policies of insurance applicable to the Property owned by it and
required by the Security Documents, and Borrower shall provide PTR with evidence
of such insurance upon receipt or request therefor.
Section 4.11. ENVIRONMENTAL MATTERS. Borrower shall not, by any act or
omission, cause or permit any hazardous substances, solid wastes or other
pollutants to exist on or about any Project in violation of Environmental Laws.
In the event of a breach of the foregoing provision, Homestead and the subject
Borrower shall remove the same (or if removal is prohibited by law, take
whatever action is required by law) promptly upon discovery at Homestead's and
such Borrower's sole expense. Homestead will promptly notify PTR in writing of
any existing, pending or threatened action, investigation or inquiry by any
Governmental Authority of which it has knowledge relating to any Property in
connection with any Environmental Laws.
Section 4.12. SELECTION OF ARCHITECTS; CONTRACTORS; INSPECTING A/E'S.
Prior to the date hereof, Homestead has delivered to PTR and PTR has approved, a
list of potential Contractors, Architects, Consultants and Inspecting A/E's that
Homestead, or any of its Subsidiaries, has or may retain in connection with any
Project funded, or to be funded, under this Agreement. Homestead may, from time
to time, subject to the prior written approval of PTR, add Contractor,
Architect, Consultant and Inspecting A/E names to such list. So long as any
Contractor, Architect, Consultant and Inspecting A/E retained by Homestead or a
Subsidiary in connection with a Project is on such pre-approved list, no further
approval of such hiring by PTR shall be required. If Homestead or any
Subsidiary desires to retain a Contractor, Architect,
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Consultant or Inspecting A/E not on the current pre-approved list, then prior to
retaining such individual or entity, Homestead shall be required to obtain the
prior written approval of PTR, such approval not to be unreasonably withheld or
delayed, and such approval shall be deemed given if PTR does not deliver written
notice of objection to Homestead within 10 Business Days after receipt by PTR of
a request for approval from Homestead.
Section 4.13. FURTHER ASSURANCES. Homestead and each Borrower shall
execute such further documents, agreements and instruments, and take all other
actions, as may reasonably be necessary to carry out the purposes of the Loan
Documents or to protect and enforce the validity and priority of the Security
Documents.
Section 4.14. QUARTERLY STATEMENTS. Within 20 Business Days after the
expiration of each calendar quarter, Homestead shall deliver to PTR a written
summary (each, a "Quarterly Statement") containing a status report for each
Future Project or Project then being funded pursuant to this Agreement,
indicating whether and to what extent each such Future Project or Project is
proceeding substantially on schedule and on budget or, if not, the amount of any
overrun and/or schedule slippage and setting forth in reasonable detail any
efforts being undertaken to remedy any noted material problems. Each Quarterly
Statement shall also include any pertinent information in respect of Future
Projects and the anticipated timing of when any such Future Projects may be
acquired and construction commenced and such other information as Homestead may
deem appropriate, or PTR may reasonably request, to keep PTR reasonably apprised
of the status of the Future Projects.
Section 4.15. CONTINUED EXISTENCE. Homestead and each Borrower shall at
all times preserve and keep in full force and effect its existence and rights
and franchises material to its business and rights and franchises material to
its business and properties.
Section 4.16. DEFAULTS UNDER OTHER LOANS. Borrower shall notify PTR in
writing within fifteen (15) days following Borrower's receipt of notice of a
default under any document or instrument governing, evidencing, securing, or
otherwise relating to any loan (other than the Loan) made to Borrower.
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ARTICLE 5.
ADVANCE CONDITIONS
Section 5.1. CONDITIONS PRECEDENT TO FIRST ADVANCE UNDER THIS AGREEMENT.
PTR shall not be obligated to advance funds pursuant to this Agreement until
each of the following conditions is fulfilled:
(a) Receipt by PTR of each of the following:
(i) a fully executed copy of this Agreement;
(ii) duly executed copies of each of the Notes from any
Subsidiaries owning Projects for which a Funding Notice or
Acquisition Notice has been delivered to PTR and Security
Documents for any Land then owned or to be acquired with such
initial funding by Homestead or any Subsidiary for which the
subject Project is to be financed with Loan proceeds, the
Completion and Payment Guaranty and all other Loan Documents
PTR may reasonably require to be executed and delivered in
connection with the first advance hereunder;
(iii) Title Policies for all Properties then subject to Security
Documents or to be made subject to Security Documents
contemporaneously with the first advance of Loan proceeds (or
an irrevocable commitment to issue each such Title Policy),
effective as of the date of the Notes, in form and substance
satisfactory to PTR in its reasonable judgment, confirming the
first priority status and validity of the lien of the Security
Documents on the Property to secure the obligations under the
Notes, the Security Documents and the other Loan Documents;
(iv) for each Project then subject to this Agreement, a survey of
the subject Land, and a geotechnical report and environmental
audit, satisfactory to PTR, in its reasonable judgment;
(v) opinions of counsel reasonably satisfactory to PTR addressing
the following matters:
(A) each Borrower then executing and delivering any Loan
Documents is duly organized and validly existing, and in
good standing and
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authorized to do business in each state in which it owns a
Project, with power and authority to own its Projects and to
perform its obligations under the Loan Documents to which it
is a party and to carry on its business as it is now being
conducted;
(B) the execution, delivery and performance of the Loan
Documents delivered by each such Borrower have been duly and
validly authorized by all necessary action of such Borrower;
and
(C) the Loan Documents executed by each such Borrower constitute
valid and binding obligations of such Borrower, enforceable
against such Borrower in accordance with their respective
terms, except as such enforcement may be limited by
applicable bankruptcy laws and other customary exceptions;
(vi) for each Project then under construction or completed,
certificates of insurance confirming the existence of all
insurance required by Section 4.9 hereof;
(vii) Copies of the Plans, Project Budget and Project Schedule for
each Project then under construction or then being added to
this Agreement; and
(viii) Certification from Homestead that any Property(ies) then being
added to this Agreement either contain no Material Changes or
any Material Changes have previously been approved by PTR.
(b) The Title Insurer shall have been paid all title insurance premiums,
filing fees, recording fees and taxes required for proper recording of the
Security Documents to be recorded at such time and any other Loan Document to be
filed or recorded at such time.
(c) There shall not have occurred and be continuing any Default.
(d) There shall be no actual or threatened condemnation of all or any
portion of the Land comprising any Property then subject to any of the Security
Documents.
(e) Neither Homestead nor any Borrower shall be the subject of any
bankruptcy or similar proceeding.
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(f) There shall not have occurred and be continuing beyond any applicable
cure or grace period any default under any of the Prior Loan Documents.
(g) The representations and warranties set forth in Article 3 hereof shall
be true and correct in all material respects with respect to each Project then
subject to the Security Documents.
Section 5.2. CONDITIONS PRECEDENT TO FIRST ADVANCE FOR NEW PROJECT. PTR
shall not be obligated to advance funds in respect of a new Future Project for
which Pursuit Costs are to be funded or for any Project to be acquired by
Homestead or any Subsidiary until each of the following conditions is fulfilled:
(a) The conditions precedent set forth in Section 5.1 shall remain
satisfied.
(b) Receipt by PTR of each of the following for each Future Project for
which Pursuit Costs are to be funded:
(i) a Funding Notice for the subject Future Project;
(ii) if applicable, a fully executed copy of any agreement to be
delivered by a Subsidiary in connection with such Future
Project whereby such Subsidiary agrees to be bound by the terms
of this Agreement with respect to the subject Future Project;
and
(iii) a Development Budget and Development Schedule for the subject
Future Project.
(c) Receipt by PTR of each of the following for each Project:
(i) an Acquisition Notice for the subject Project;
(ii) if applicable, a fully executed copy of any agreement to be
delivered by a Subsidiary in connection with such Project
whereby such Subsidiary agrees to be bound by the terms of this
Agreement with respect to the subject Project;
(iii) duly executed copies of any Homestead Security Documents,
Partnership Security Documents or Subsidiary Security
Documents, any Subsidiary
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Note, and any other Loan Documents which PTR may reasonably
require to be executed and delivered in connection with such
Project;
(iv) an opinion of counsel addressing, as to the subject Borrower
and the Loan Documents then being executed by such Borrower,
the matters set forth in Section 5.1(a)(viii) above;
(v) the Title Policy for the subject Property (or irrevocable
commitment to issue such Title Policy), effective as of the
date of the first advance in respect of such Project, in form
and substance satisfactory to PTR in its reasonable judgment,
confirming the first priority status and validity of the lien
of the Security Documents on the Property to secure the
obligations under the Notes, the Security Documents and the
other Loan Documents;
(vi) a survey of the subject Land, and a soils report, geotechnical
report and environmental audit of the Land, satisfactory to
PTR, in its reasonable judgment; and
(vii) Copies of the Plans, Project Budget and Project Schedule for
the subject Project.
(d) With respect to each Project, the Title Insurer shall have been paid
all title insurance premiums, filing fees, recording fees and taxes required for
proper recording of the Security Documents to be recorded at such time and any
other Loan Document to be filed or recorded at such time.
(e) There shall not have occurred and be continuing any Default.
(f) There shall be no actual or threatened condemnation of all or any
portion of the Land comprising the Property.
(g) The Completion and Payment Guaranty shall be in full force and effect.
Section 5.3. INITIAL IMPROVEMENT ADVANCE CONDITIONS. PTR's initial
obligation to advance any of the Loan proceeds to a Borrower for construction of
Improvements is conditioned upon the conditions precedent set forth in Sections
5.1 and 5.2 remaining satisfied and, if requested by PTR, receipt of the
following:
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(a) Evidence of the issuance of all Permits required by any Governmental
Authority as a condition to the commencement of construction of the subject
Improvements.
(b) A copy of the Construction Contract, Architect's Agreement and any
Consultants' Agreements for the subject Project.
(c) Certificates of insurance and other certificates or information in form
and substance reasonably satisfactory to PTR confirming the existence of all
insurance required by Section 4.9 hereof.
(d) An executed Contractor's Certificate, Architect's Certificate and
Consultants' Certificates from the Contractor, Architect and Consultants
performing services to the subject Project.
(e) Such further financing statements and security agreements, executed and
acknowledged by the subject Borrower, relating to construction materials for the
subject Project as PTR may reasonably require.
(f) Evidence of the availability of utilities and access to and from the
subject Project sufficient for its intended use.
Section 5.4. ADDITIONAL IMPROVEMENT ADVANCE CONDITIONS. After the initial
advance, additional advances made for the purpose of constructing any subject
Improvements shall be subject to the following conditions:
(a) The conditions precedent set forth in Sections 5.1, 5.2 and 5.3 shall
remain satisfied.
(b) All Permits required under Governmental Requirements for construction
of the subject Improvements shall be legally valid and in force and effect.
(c) The subject Property and Improvements shall not have suffered any
damage or deterioration without provision for arrangements satisfactory to PTR
for the restoration and replacement of the damage or deterioration to such
Property or Improvements.
Section 5.5. FINAL-ADVANCE CONDITIONS. PTR's obligation to advance any of
the Loan proceeds to a Borrower for the Final Advance for the Improvements
comprising a Project is conditioned upon the following and, if requested by PTR,
receipt by PTR of evidence reasonably satisfactory to PTR that such conditions
have been satisfied:
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(a) The completion of all Improvements in substantial accordance with the
Plans.
(b) Receipt by the Borrower of all Final CO's issued by the appropriate
Governmental Authorities for the Improvements and all other Permits necessary
for use of the subject Improvements and Property.
(c) The Inspecting A/E for the Project shall have executed a certificate of
final completion with respect to all of the Improvements required under the
applicable Construction Contract.
(d) The Contractor, all Subcontractors and other parties (including
Architects and Consultants, if applicable) who performed work for the subject
Project have been paid (or with the application of the final advance of Loan
proceeds for such Project, will have been paid) in full, except for amounts
which the Borrower in good faith disputes and/or amounts which Homestead and/or
the subject Borrower intends to pay with its own funds provided any liens filed
against the Project have been released or bonded over.
(e) Receipt by Borrower of an as-built survey showing the location of all
Improvements, including parking areas, streets and the location of all utilities
and other easements, encroachments and building set back lines, if any, together
with delivery to PTR of an endorsement to the Title Policy removing any
exception for matters of survey.
(f) All remaining punchlist items have been completed by the Contractor and
approved by the Borrower.
(g) All conditions precedent to the "Final Payment" required under the
Construction Contract shall have been satisfied.
(h) The Project is otherwise ready for immediate occupancy by guests.
ARTICLE 6.
PROCEDURE FOR ADVANCES; RESERVES
Section 6.1. GENERAL. PTR will disburse the proceeds of the Loans on a
monthly basis for the cost categories set forth in the applicable Development
Budgets and Project Budgets. Homestead shall submit a written request for
advance in a form approved by PTR by the 25th day of each month and, provided
PTR determines that all conditions precedent to the advance
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have been satisfied, disbursements will be made by the 1st day of the
immediately following month. Each request for advance shall set forth, on a
Project-by-Project basis, Homestead's reasonable estimate of the hard and soft
costs and expenses incurred during the month just ending and for which
reimbursement is being sought. With each request for advance after the first,
Homestead shall also provide a reconciliation indicating the amount by which the
immediately preceding advance made by PTR exceeded the actual hard and soft
costs for the period covered by such advance and the amount by which the request
for advance for the month just ending has been adjusted on account of any over-
or underpayment by PTR for the preceding month. With respect to the final
advance of Loan proceeds in respect of a Project, if the final reconciliation
submitted in the month following such advance reflects that Loan proceeds in
excess of actual costs were advanced, such overpayment (together with accrued
and unpaid interest thereon) shall be repaid by Borrower to PTR within 15 days
after such reconciliation is delivered to PTR. Any additional Loan proceeds
owing to Borrower on the basis of such final reconciliation shall be advanced by
PTR with the balance of the monthly advance made by PTR under this Section 6.1.
All disbursements with respect to any request for an advance submitted
other than on the 25th day of a month will be made within ten (10) business days
after the later of (i) receipt by PTR of a written request for an advance from
Homestead in a form approved by PTR and (ii) PTR's determination that all
conditions precedent to the advance have been satisfied.
All disbursements shall be made in accordance with any instructions
contained in the Homestead request for advance.
Section 6.2. PAYMENTS TO PTR. Notwithstanding any other provisions of this
Agreement, PTR may, at it's option and without notice or authorization by
Homestead or any Borrower, use any Loan proceeds to pay, as and when due, any
interest on the Loans. The parties acknowledge that the Loans provide for
interest reserves in amounts sufficient to pay all interest due and payable in
respect of each Project through completion of same, and Homestead and each
Borrower specifically authorizes PTR to advance portions of such interest
reserves to pay interest on the Loans as and when the same comes due.
Section 6.3. RETAINAGE AND CONTRACTOR'S FEE HOLDBACK. The parties
acknowledge that PTR shall retain, and Homestead shall not request disbursement,
of any retainages provided for under any Construction Contract, which amounts
shall be retained by PTR to secure full and complete performance of all
construction obligations hereunder (hereinafter, the "Retainage Holdback").
Provided no Default exists hereunder, PTR shall disburse the Retainage Holdback
in accordance with the provisions of the applicable Construction Contract as
requested by Homestead in its requests for advances. Upon the occurrence of a
Default hereunder, PTR shall
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have no obligation to make further disbursements from the Retainage Holdback,
and no Borrower shall be entitled to any such disbursements, until such Default
is cured. Upon the occurrence of an Event of Default hereunder, PTR may apply
the Retainage Holdback against any of the obligations secured by the Security
Documents as PTR sees fit or, in PTR's discretion, to the completion of any
incomplete Improvements. Subject to the foregoing terms and provisions, to the
extent not theretofore disbursed, PTR will disburse the amounts in the Retainage
Holdback in respect of a Project concurrently with the Final Advance for such
Project.
Section 6.4. INTEREST RESERVE. PTR shall, on the date hereof, withhold
from the proceeds of the Loans available for distribution the amount of Seven
Million, Nine Hundred Five Thousand, Four Hundred Sixty-Six Dollars ($7,905,466)
(the "Interest Reserve"). Provided no Default exists hereunder, the Interest
Reserve shall be disbursed for the payment of interest on the Loans as such
interest becomes due and payable. Upon the occurrence of a Default hereunder,
PTR shall have no obligation to make further disbursements from the Interest
Reserve, and no Borrower shall be entitled to any such disbursements, until such
Default is cured. Should interest payable on the Loans exceed the amount of the
Interest Reserve, the Borrowers shall promptly pay such amounts. Upon the
occurrence of an Event of Default, PTR may apply any undisbursed portion of the
foregoing reserve against any of the obligations secured by the Security
Documents as it sees fit or, at PTR's discretion, to the completion of and
incomplete Improvements.
Section 6.5. OWNER'S CONTINGENCY. The parties acknowledge that each
Project Budget shall contain an owner's contingency (an "Owner's Contingency")
equal to no less than 2% of Project hard and soft costs contained within the
Project Budget. Provided no Default exists hereunder, the Owner's Contingency
for a Project shall be disbursed by PTR to the subject Borrower to cover
unanticipated Project costs, costs associated with change orders and hard and
soft cost overruns (before such Borrower or Homestead, as guarantor under the
Completion and Payment Guaranty, shall be required to cover such additional
costs pursuant to the provisions of Section 6.6 hereinbelow or the Completion
and Payment Guaranty) as and when such payments are due and payable. Requests
for disbursement of portions of the Owner's Contingency shall be made with
Homestead's monthly requests for advance of Loan proceeds. Upon the occurrence
of a Default hereunder, PTR shall have no obligation to advance any portion of
the Owner's Contingency until such Default is cured. Upon the occurrence of an
Event of Default, PTR may apply the Owner's Contingency against any of the
obligations secured by the Security Documents as PTR sees fit, or at PTR's
option, to the completion of any incomplete Improvements.
Section 6.6. COST OVERRUNS AND SAVINGS; CHANGE ORDER RESERVE. In the
event that the costs to acquire and complete any Project in its entirety,
including, without limitation, the
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furnishing thereof, exceed the amount of Loan proceeds available for the subject
Project (including the applicable Owner's Contingency), then the subject
Borrower shall with its own funds pay all costs and expenses which may be
required to complete the subject Project as and when such costs and expenses
become due and payable. In the event the costs to acquire and complete any
Project are less than the amount of Loan proceeds allocated to the subject
Project, then the unapplied portion of the Loan proceeds (including any
unexpended portion of the applicable Owner's Contingency and amounts required to
be refunded by Borrower under Section 6.1 for any overpayments of Loan proceeds
made in the final advance for a Project) shall be retained by PTR as a reserve
for Change Orders on other Projects which are made in accordance with the
requirements of this Agreement (the "Change Order Reserve"). Provided no
Default exists hereunder, the Change Order Reserve shall be disbursed by PTR to
any Borrower from time to time to cover the costs of Change Orders to the extent
any such Change Order results in Project costs exceeding the Project Budget,
including the Owner's Contingency, for such Project (before such Borrower or
Homestead, as guarantor under the Completion and Payment Guaranty, shall be
required to cover such additional costs pursuant to the provisions of this
Section 6.6 or the Completion and Payment Guaranty). Requests for disbursement
of portions of the Change Order Reserve shall be made with Homestead's monthly
requests for advance of Loan proceeds. Upon the occurrence of a Default
hereunder, PTR shall have no obligation to advance any portion of the Change
Order Reserve until such Default is cured. Upon the occurrence of an Event of
Default, PTR may apply the Change Order Reserve against any of the obligations
secured by the Security Documents as PTR sees fit or, at PTR's option, to the
completion of any incomplete Improvements.
ARTICLE 7.
EVENTS OF DEFAULT
The occurrence of any one or more of the following shall constitute an
Event of Default under this Agreement:
Section 7.1. FAILURE TO PAY. The failure by a Borrower to pay when due
any sums required to be paid under the Notes, the Security Documents, this
Agreement or any other Loan Documents, and such failure is not cured within 10
days after receipt of written notice from PTR.
Section 7.2. OTHER LOAN DOCUMENT DEFAULTS. To the extent any such
failure, breach or inaccuracy has, or would have, a Material Adverse Effect, the
failure by a Borrower or Homestead to perform or observe, as and when required,
any covenant, agreement, obligation
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or condition required to be performed or observed under this Agreement or under
any of the other Loan Documents other than as set forth elsewhere in this
Article 7 (for which no additional grace or cure period is given by this Section
7.2, or the existence of any breach or inaccuracy in any of the representations,
covenants or warranties set forth in this Agreement or in any of the other Loan
Documents, provided, however, that (i) no Event of Default shall exist hereunder
on account of a breach of any representation, warranty or covenant set forth in
any of the other Loan Documents (other than this Agreement) until Homestead or
such Borrower, as applicable, shall have failed to cure such breach within any
applicable notice and cure period therein provided; and (ii) no Event of Default
shall exist hereunder on account of a breach of any representation, warranty or
covenant contained herein unless and until PTR shall provide written notice of
such breach to Homestead or such Borrower and such entity shall fail to cure the
same within 30 days after receipt of such notice, provided if such breach is of
such a nature that it cannot be cured within such 30 day period, it shall not
constitute an Event of Default hereunder so long as Homestead or such Borrower,
as applicable, commences its cure of such breach within such 30 day period and
thereafter diligently and continuously proceeds with the curing of same within a
reasonable period of time not to exceed 180 days.
Section 7.3. JUDGMENT OR ATTACHMENT. The entry by any court of a final
judgment in excess of $500,000 against Homestead or a Borrower that is not
satisfactorily stayed or discharged within 30 days from the date thereof, or any
attachment of any of the Properties or any of the proceeds of the Loans that
shall not be released, stayed or otherwise provided for to PTR's satisfaction
within 30 days after the occurrence thereof; provided that in the case of a
stay, Homestead or the subject Borrower, as applicable, shall have reserved for
the full amount thereof.
Section 7.4. VIOLATION OF GOVERNMENTAL REQUIREMENTS. The institution of
any judicial or administrative proceeding alleging that any of the Improvements
violate any Governmental Requirements if such violation gives rise to a Material
Adverse Effect and the failure to have such proceeding dismissed or such
violation corrected within 30 days after the institution thereof, except that
Homestead or the applicable Borrower shall have the right to contest any such
proceeding beyond such 30 day period, provided that PTR is satisfied that the
prosecution of such proceeding will neither have any Material Adverse Effect nor
materially impair PTR's security.
Section 7.5. INSOLVENCY, ETC. The occurrence of any of the following:
(a) Homestead or any Borrower shall generally not pay its debts as they
become due or shall admit in writing its inability to pay its debts, or shall
make a general assignment for the benefit of creditors;
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(b) Homestead or any Borrower shall commence any case, proceeding or other
action seeking reorganization, arrangement, adjustment, liquidation, dissolution
or composition of it or its debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, or seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or any
substantial part of its property;
(c) Homestead or any Borrower shall take any corporate action to authorize
any of the actions set forth above in paragraphs (a) or (b); or
(d) Any case, proceeding or other action against Homestead or any Borrower
shall be commenced seeking to have an order for relief entered against it as
debtor, or seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, or seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its property, and such case, proceeding or
other action (i) results in the entry of an order for relief against it which is
not fully stayed within 15 Business Days after the entry thereof or (ii) remains
undismissed for a period of 60 days.
Section 7.6. UNAPPROVED TRANSFER. Any sale, conveyance, transfer,
disposition, alienation, hypothecation, leasing (except in the ordinary course
of business) or further encumbrancing of a Project, or any portion thereof or
any interest therein, by any Borrower, other than any conveyance of a portion of
the unimproved land associated with such Project which is in excess of what is
needed for such Project (which conveyance is permitted), or a sale, conveyance,
transfer, disposition, alienation, hypothecation or encumbrancing of any legal
or equitable interest in a Borrower or Homestead in violation of the Loan
Documents shall be an Event of Default as of the date of such transfer, without
any right to cure. In the case of a permitted conveyance of excess land, as
hereinbefore provided, Lender shall, upon request of Homestead, execute a
partial release, releasing the lien of any Security Documents applicable to such
excess land.
ARTICLE 8.
REMEDIES
Section 8.1. GENERAL. Upon the occurrence of any Event of Default an
defined in Article 7 of this Agreement, PTR, at its option, shall have the
following rights and remedies:
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(a) PTR may declare any one or more of the Notes to be immediately due and
payable, whereupon the Notes shall become forthwith due and payable without
presentment, demand, protest or further notice of any kind.
(b) PTR may bring a foreclosure action with respect to the Security
Documents, take possession of any one or more of the Properties or exercise any
other remedy provided for in the Security Documents.
(c) PTR shall be entitled to proceed simultaneously, or selectively and
successively, to enforce its rights and remedies under the Notes, the Security
Documents, the Completion and Payment Guaranty or this Agreement, and to
exercise any or all other rights and remedies available to PTR at law or in
equity.
(d) In the event PTR shall elect to enforce its rights selectively under
any one or more of the Loan Documents, such action shall not be deemed a waiver
or discharge of any lien or encumbrance securing payment of the Notes until such
time as PTR shall have been paid in full all sums due under the Notes or secured
by the Security Documents, including any sums advanced or disbursed pursuant to
this Agreement. The foreclosure of any lien provided pursuant to this Agreement
or the Security Documents, without the simultaneous foreclosure of all such
liens, shall not merge the liens granted which are not foreclosed with any
interest which PTR might obtain as a result of such selective and successive
foreclosure.
(e) PTR shall have the right, but not the obligation, to take possession of
any one or more of the Properties and proceed to complete the Improvements
thereto according to the applicable Plans. For this purpose, each Borrower
hereby conditionally assigns to PTR as additional security for the repayment of
the Loans all of each such Borrower's rights to the Plans for the Projects owned
by it, any contracts pertaining to the Project owned by such Borrower, whether
for construction, sale or otherwise, and any Permits pertaining to the subject
Property(ies); provided, PTR shall, upon occurrence of an Event of Default, have
the option to exercise this assignment, but shall not be obligated to accept
this assignment or to assume any liability of any Borrower under any such Plans,
contracts or Permits. Furthermore, each Borrower hereby constitutes and
appoints PTR as its true and lawful attorney-in-fact with full power of
substitution to complete, or cause to be completed, the Improvements owned by
such Borrower in the name of such Borrower and hereby empowers said attorney or
attorneys as follows: (i) to use any funds of Borrower, including any balance
that may be held in escrow and any funds which may remain unadvanced hereunder,
for the purpose of completing the Improvements being built by such Borrower;
(ii) to make such additional changes and corrections in the Plans for such
Improvements as may reasonably be necessary or desirable to complete such
Improvements in substantially the manner contemplated by the Plans for such
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Improvements and in a good and workmanlike manner; (iii) to employ such
contractors, subcontractors, agents, architects and inspectors as shall be
required for said purposes; (iv) to pay, settle or compromise all existing bills
and claims that are or may become liens against the subject Property(ies) or any
part thereof or may be necessary or desirable for the completion of the subject
Improvements or the clearance of title; (v) to execute all applications and
certificates in the name of Borrower which may be required by law or by any
contract relating to the subject Improvements; and (vi) to do any and every act
with respect to the applicable Property(ies) which such Borrower may do in its
own behalf. It is understood and agreed that this power of attorney shall be
deemed to be a power coupled with an interest which cannot be revoked. PTR, as
attorney-in-fact, shall also have the power to defend, to the extent PTR
reasonably deems necessary, at such Borrower's cost, all actions or proceedings
in connection with the subject Improvements and Property(ies). At the time PTR
takes possession of a Property(ies), or any part thereof, all materials on such
Property owned by Borrower shall become the property of PTR for the purpose of
completing the subject Improvements. In addition, any materials or equipment
paid for with the proceeds of the Notes but stored at a location other than the
subject Property(ies) shall become the property of PTR when it takes possession
of the subject Property(ies). Such Borrower shall pay PTR the cost of
completion. Each Borrower hereby authorizes PTR to add such costs to the
indebtedness of the Borrowers to PTR, which costs shall be secured by the
Security Documents. Any of the foregoing actions by PTR shall not relieve the
Borrowers of their responsibility to repay the Notes. The foregoing provision
shall not be construed as creating any third party beneficiary contract and
nothing in the foregoing shall be construed as giving or conferring any rights
or benefits whatsoever to or upon any other person or entities other than the
parties to this Agreement. Homestead shall indemnify, defend and hold harmless
PTR from and against any and all claims, liabilities, loss, damages, suits,
actions, expenses (including reasonable attorneys' fees) and costs arising from
any actions taken by PTR in accordance with the power of attorney herein granted
except to the extent attributable to the gross negligence or willful misconduct
of PTR.
(f) PTR shall not have any obligation to make any advances under the Notes
pursuant to this Agreement after the occurrence and during the continuance of an
Event of Default and at any time during such period, may unilaterally elect to
terminate any obligation of PTR to make any future advances under the Notes
pursuant to this Agreement.
Section 8.2. REMEDIES CUMULATIVE. No failure or delay by PTR in the
exercise of any rights or remedies available to it under the Loan Documents or
at law or in equity shall operate as a waiver thereof, nor shall any single or
partial exercise by PTR of any such right or remedy preclude any further
exercise thereof or of any other right or remedy. The remedies provided in the
Loan Documents or available at law or in equity are cumulative and not
alternative.
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ARTICLE 9.
MISCELLANEOUS
Section 9.1. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations, warranties and covenants contained herein shall survive the
execution of this Agreement, the making of the Loans and the delivery of the
Notes and other Loan Documents and the release of any portion of the liens of
the Security Documents, and shall remain in full force and effect until the
termination of this Agreement in accordance with Section 2.8 hereof.
Section 9.2. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
heirs, personal representatives, successors, assigns and affiliates, but shall
not be assignable by any party hereto without the prior written consent of the
other party hereto; provided that Homestead and/or the Partnership Borrower may
assign its rights hereunder in whole or in part to a Homestead Affiliate or
Subsidiary. Other than to a Homestead Affiliate or Subsidiary, no Borrower
shall, without the prior written consent of PTR, which consent PTR may withhold
in its sole discretion, directly or indirectly assign, transfer or convey (i)
this Agreement or any of the other Loan Documents, (ii) any of Borrower's rights
or obligations under any of the Loan Documents, (iii) any portion of the
proceeds of the Notes, (iv) any legal or equitable interest in the Property or
(v) any legal or equitable interest in such Borrower.
Section 9.3. NOTICES. Any notice or other communication provided for
herein or given hereunder to a party hereto shall be in writing and shall be
given by delivery, by telex, telecopier or by mail (registered or certified
mail, postage prepaid, return receipt requested) to the respective parties as
follows:
If to Homestead:
Homestead Village Incorporated
125 Lincoln Avenue, Suite 300
Santa Fe, New Mexico 87501
Attention: David C. Dressler, Jr.
Facsimile: (505) 982-2925
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If to PTR:
Security Capital Pacific Trust
7777 Market Center Avenue
El Paso, Texas 79912
Attention: C. Ronald Blankenship
Facsimile: (915) 877-3301
or to such other address with respect to a party as such party shall notify the
other in writing.
Section 9.4. WAIVER. No party may waive any of the terms or conditions of
this Agreement, except by a duly executed writing referring to the specific
provision to be waived.
Section 9.5. AMENDMENT. This Agreement may be amended only by a writing
duly executed by both Homestead and PTR.
Section 9.6. SEVERABILITY. Insofar as is possible, each provision of this
Agreement shall be interpreted so as to render it valid and enforceable under
applicable law and severable from the remainder of this Agreement. A finding
that any such provision is invalid or unenforceable in any jurisdiction shall
not affect the validity or enforceability of any other provision or the validity
or enforceability of such provision under the laws of any other jurisdiction.
Section 9.7. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement, and supersedes all other prior agreements and understandings, both
written and oral, among the parties hereto and their affiliates, with respect to
the subject matter hereof. The provisions of this Agreement supersede any
provisions set forth in the Existing Loan Documents relating to the disbursement
of Loan proceeds for the Projects.
Section 9.8. EXPENSES. Except as otherwise expressly contemplated herein
to the contrary, regardless of whether the transactions contemplated hereby are
consummated, each party hereto shall pay its own expenses incident to preparing
for, entering into and carrying out this Agreement and the consummation of the
transactions contemplated hereby.
Section 9.9. CAPTIONS. The Article, Section and Paragraph captions herein
are for convenience of reference only, do not constitute part of this Agreement
and shall not be deemed to limit or otherwise affect any of the provisions
hereof.
Section 9.10. GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of New Mexico.
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Section 9.11. NO JOINT VENTURE OR PARTNERSHIP. Nothing contained in this
Agreement or in any of the other Loan Documents and no other aspect of the
relationship between Homestead or any Borrower and PTR shall be construed as
creating a partnership, joint venture, or other relationship of or between
Homestead or any Borrower and PTR other than the lending relationship of lender
and borrower. All rights and obligations granted to or undertaken by either of
the parties hereto shall be construed as incidents of such lending relationship.
Section 9.12. NO THIRD PARTY BENEFICIARY RIGHTS CREATED. The parties
hereto expressly declare that it is their joint and mutual intention that this
Agreement and the transactions contemplated hereby shall not be construed as
creating a third party beneficiary contract, and neither this Agreement nor any
of the other Loan Documents shall be construed as giving or conferring any
rights or benefits whatsoever to or upon any other persons or entities other
than Homestead, any Borrower and PTR.
Section 9.13. INCORPORATION BY REFERENCE. This Agreement, the Notes and
the Security Documents are intended to be construed as part of the same
transaction, and all of the covenants, agreements, conditions, terms and
provisions contained in any one of the Loan Documents shall be deemed to be
included in each of the other Loan Documents with the same force and effect as
though set forth in full therein. In the event any of the provisions of this
Agreement are in conflict with or inconsistent with the provisions of the
Security Documents, this Agreement shall govern and control.
Section 9.14. COUNTERPARTS. This Agreement may be executed in counterpart
copies, each of which shall constitute an original, and all of which together
shall constitute one and the same document.
Section 9.15. SCOPE OF REVIEW OF PLANS. Neither the approval of the Plans
nor any subsequent inspections or approvals of the Improvements during
construction shall constitute a warranty or representation by PTR or any of its
agents, representatives or designees as to the technical or legal sufficiency,
adequacy or safety of the structures or any of their component parts, including
without limitation fixtures, equipment or furnishings, nor shall such approvals
or inspections constitute such a warranty or representation as to the subsoil
conditions involved in the Property or any other physical condition or feature
pertaining to the Property. All acts, including any failure to act, relating to
the Property by any agents, representatives or designees of PTR are performed
solely for the benefit of PTR to assure repayment of the Loans and are not for
the benefit of Borrower or any other person, including without limitation
purchasers, guests or other occupants.
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Section 9.16. GOVERNMENTAL REGULATION. Anything contained in this
Agreement to the contrary notwithstanding, PTR shall not be obligated to extend
credit to Borrower in an amount in violation of any limitation or prohibition
provided by any applicable governmental statute or regulation.
Section 9.17. SUBORDINATION. Each Borrower hereby subordinates all
rights, liens and claims for any of the proceeds and advances under the Notes to
the liens, operation and effect of the Security Documents.
Section 9.18. INDEMNITY. Homestead and each Borrower agree to indemnify,
defend and hold PTR harmless from and against any and all claims, injuries,
damages and liabilities that may be asserted or claimed against PTR by any
person as a result or by reason of, or that may be incurred or suffered by PTR
as a result or by reason of, the construction contemplated herein or the
operation of the ownership or Encumbered Property or any part thereof.
Section 9.19. Limitation of Liability. Any obligation or liability
whatsoever of PTR which may arise at any time under this Funding Commitment
Agreement or any obligation or liability which may be incurred by it pursuant to
any other instrument, transaction or undertaking contemplated hereby shall be
satisfied, if at all, out of PTR's assets only. No such obligation or liability
shall be personally binding upon, nor shall resort for the enforcement thereof
be had to, the property of any of its shareholders, trustees, officers,
employees or agents, regardless of whether such obligation or liability is in
the nature of contract, tort or otherwise.
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IN WITNESS WHEREOF, each of the undersigned has executed this Agreement, or
caused this Agreement to be duly executed on its behalf, as of the date first
set forth above.
HOMESTEAD VILLAGE INCORPORATED
By: /s/ David C. Dressler, Jr.
--------------------------
David C. Dressler, Jr.
Chairman
SECURITY CAPITAL PACIFIC TRUST
By: /s/ C. Ronald Blankenship
-------------------------
C. Ronald Blankenship
Chairman
S-1
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Exhibit 10.4
- --------------------------------------------------------------------------------
FUNDING COMMITMENT AGREEMENT
By and Between
SECURITY CAPITAL ATLANTIC INCORPORATED
"ATLANTIC"
AND
HOMESTEAD VILLAGE INCORPORATED
"Homestead"
ATLANTIC HOMESTEAD VILLAGE LIMITED PARTNERSHIP
"Partnership Borrower"
Dated: October 17, 1996
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TABLE OF CONTENTS
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ARTICLE 1. DEFINITIONS................................................................. 3
Section 1.1. Certain Defined Terms................................................ 3
Section 1.2. Other Definitional Provisions........................................ 10
ARTICLE 2. THE LOANS................................................................... 11
Section 2.1. The Homestead Loan................................................... 11
Section 2.2. The Partnership Loan................................................. 11
Section 2.3. Future Projects...................................................... 11
Section 2.4. Subsidiary Loans..................................................... 12
Section 2.5. Duration of Funding Commitment....................................... 13
Section 2.6. Project Specific Funding Commitment.................................. 13
Section 2.7. Replacement Projects................................................. 14
Section 2.8. Release of Security Documents........................................ 15
ARTICLE 3. REPRESENTATIONS AND WARRANTIES.............................................. 15
Section 3.1. Existence and Power.................................................. 15
Section 3.2. Authorization and Binding Obligations................................ 15
Section 3.3. No Legal Bar or Resultant Lien....................................... 16
Section 3.4. No Consent........................................................... 16
Section 3.5. Compliance with Laws................................................. 16
Section 3.6. Litigation........................................................... 16
Section 3.7. Defaults............................................................. 17
Section 3.8. Status of Property................................................... 17
Section 3.9. Use of Proceeds...................................................... 17
Section 3.10. Real Property Environmental Matters.................................. 17
Section 3.11. Financial Condition.................................................. 18
Section 3.12. No Condemnation...................................................... 18
Section 3.13. No Actions........................................................... 18
Section 3.14. No Adverse Conditions................................................ 18
ARTICLE 4. COVENANTS................................................................... 18
Section 4.1. Construction of Improvements......................................... 18
Section 4.2. Plans; Project Budgets; Project Schedules and Material Changes....... 19
Section 4.3. Inspection and Examination........................................... 19
Section 4.4. Permits and Approvals................................................ 19
Section 4.5. Governmental Requirements............................................ 19
Section 4.6. Books and Records.................................................... 20
Section 4.7. Title to Property and Improvements................................... 20
Section 4.8. Costs and Expenses................................................... 20
</TABLE>
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TABLE OF CONTENTS
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(continued)
<TABLE>
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Section 4.9. Use of Advances.................................................. 20
Section 4.10. Insurance........................................................ 20
Section 4.11. Environmental Matters............................................ 20
Section 4.12. Selection of Architects; Contractors; Inspecting A/E's........... 21
Section 4.13. Further Assurances............................................... 21
Section 4.14. Quarterly Statements............................................. 21
Section 4.15. Continued Existence.............................................. 22
Section 4.16. Defaults Under Other Loans....................................... 22
ARTICLE 5. ADVANCE CONDITIONS...................................................... 22
Section 5.1. Conditions Precedent to First Advance under this Agreement....... 22
Section 5.2. Conditions Precedent to First Advance for New Project............ 24
Section 5.3. Initial Improvement Advance Conditions........................... 26
Section 5.4. Additional Improvement Advance Conditions........................ 26
Section 5.5. Final-Advance Conditions......................................... 27
ARTICLE 6. PROCEDURE FOR ADVANCES; RESERVES........................................ 28
Section 6.1. General.......................................................... 28
Section 6.2. Payments to Atlantic............................................. 28
Section 6.3. Retainage and Contractor's Fee Holdback.......................... 29
Section 6.4. Interest Reserve................................................. 29
Section 6.5. Owner's Contingency.............................................. 29
Section 6.6. Cost Overruns and Savings; Change Order Reserve.................. 30
ARTICLE 7. EVENTS OF DEFAULT....................................................... 30
Section 7.1. Failure to Pay................................................... 30
Section 7.2. Other Loan Document Defaults..................................... 31
Section 7.3. Judgment or Attachment........................................... 31
Section 7.4. Violation of Governmental Requirements........................... 31
Section 7.5. Insolvency, etc.................................................. 31
Section 7.6. Unapproved Transfer.............................................. 32
ARTICLE 8. REMEDIES................................................................ 33
Section 8.1. General.......................................................... 33
Section 8.2. Remedies Cumulative.............................................. 34
</TABLE>
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TABLE OF CONTENTS
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<TABLE>
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Page
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<S> <C>
ARTICLE 9. MISCELLANEOUS................................................................ 35
Section 9.1. Survival of Representations, Warranties and Covenants................. 35
Section 9.2. Successors and Assigns................................................ 35
Section 9.3. Notices............................................................... 35
Section 9.4. Waiver................................................................ 36
Section 9.5. Amendment............................................................. 36
Section 9.6. Severability.......................................................... 36
Section 9.7. Entire Agreement...................................................... 36
Section 9.8. Expenses.............................................................. 36
Section 9.9. Captions.............................................................. 36
Section 9.10. Governing Law......................................................... 36
Section 9.11. No Joint Venture or Partnership....................................... 37
Section 9.12. No Third Party Beneficiary Rights Created............................. 37
Section 9.13. Incorporation by Reference............................................ 37
Section 9.14. Counterparts.......................................................... 37
Section 9.15. Scope of Review of Plans.............................................. 37
Section 9.16. Governmental Regulation............................................... 37
Section 9.17. Subordination......................................................... 38
Section 9.18. Indemnity............................................................. 38
</TABLE>
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FUNDING COMMITMENT AGREEMENT
THIS FUNDING COMMITMENT AGREEMENT (this "Agreement"), is entered into as of
October 17, 1996, among HOMESTEAD VILLAGE INCORPORATED, a Maryland corporation
("Homestead"), ATLANTIC HOMESTEAD VILLAGE LIMITED PARTNERSHIP, a Delaware
limited partnership (the "Partnership Borrower") and SECURITY CAPITAL ATLANTIC
INCORPORATED, a Maryland corporation ("Atlantic").
RECITALS
A. Prior to the date hereof, Atlantic agreed to make to Atlantic Homestead
Village Incorporated (the "Prior Corporate Borrower") a loan (the "Corporate
Loan") of up to a maximum amount of $90,765,665 (the "Maximum Corporate Loan
Amount") to fund, among other things, acquisition and construction costs and
expenses incurred in connection with the acquisition and development of
Homestead Village extended stay lodging facilities. In connection with agreeing
to make the Corporate Loan, Atlantic agreed that the Prior Corporate Borrower's
repayment obligation for funds advanced in respect of the Corporate Loan would
be adjusted by a discount factor of .8821961120 (the "Discount Factor"). To
evidence the Prior Corporate Borrower's obligation to repay the Corporate Loan,
at the discounted rate, the Prior Corporate Borrower has delivered to Atlantic
an Amended and Restated Promissory Note (the "Corporate Note"), dated May 28,
1996, in the face amount of $80,073,117 (i.e., the Maximum Corporate Loan Amount
as adjusted by the Discount Factor) (which note amended and restated a prior
promissory note dated January 24, 1996, and delivered by the Prior Corporate
Borrower to Atlantic to evidence the Corporate Loan), and to secure the payment
obligations under the Corporate Note and the Partnership Note (as defined
below), the Prior Corporate Borrower has, prior to the date hereof, delivered to
Atlantic deeds to secure debt, deeds of trust and mortgages (the "Existing
Corporate Security Documents"), creating liens on the existing Homestead Village
Projects listed in Exhibit A hereto which are owned by the Prior Corporate
Borrower (the "Existing Corporate Projects"). (The Corporate Note, the Existing
Corporate Security Documents and all other instruments heretofore delivered by
the Prior Corporate Borrower in connection therewith to secure the payment of
the Corporate Note and the Partnership Note are herein called the "Existing
Corporate Loan Documents".)
B. Prior to the date hereof, Atlantic agreed to make to the Partnership
Borrower a loan (the "Partnership Loan") of up to a maximum amount of
$20,353,019 (the "Maximum Partnership Loan Amount") to fund, among other things,
acquisition and construction costs and expenses incurred in connection with the
acquisition and development of Homestead Village
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extended stay lodging facilities. In connection with agreeing to make the
Corporate Loan, Atlantic agreed that the Partnership Borrower's repayment
obligation for funds advanced in respect of the Partnership Loan would be
adjusted by the Discount Factor. To evidence the Partnership Borrower's
obligation to repay the Partnership Loan, at the discounted rate, the
Partnership Borrower has delivered to Atlantic an Amended and Restated
Promissory Note (the "Partnership Note"), dated May 28, 1996, in the face amount
of $17,955,354 (the Maximum Partnership Loan Amount as adjusted by the Discount
Factor) (which note amended and restated a prior promissory note dated January
24, 1996, and delivered by the Partnership Borrower to Atlantic to evidence the
Partnership Loan), and to secure the payment obligations under the Corporate
Note and the Partnership Note, the Partnership Borrower has, prior to the date
hereof, delivered to Atlantic deeds to secure debt, deeds of trust and mortgages
(the "Existing Partnership Security Documents"), creating liens on the existing
Homestead Village Projects listed in Exhibit A hereto which are owned by the
Partnership Borrower (the "Existing Partnership Projects"). (The Partnership
Note, the Existing Partnership Security Documents and all other instruments
heretofore delivered by the Partnership Borrower in connection therewith to
secure the payment of the Corporate Note and the Partnership Note are herein
called the "Existing Partnership Loan Documents"; and the Existing Corporate
Loan Documents and Existing Partnership Loan Documents are collectively referred
to herein as the "Existing Loan Documents".)
C. On the date hereof, the parties are entering into a series of
transactions as described in that certain Merger and Distribution Agreement,
dated as of May 21, 1996, among Atlantic, Security Capital Pacific Trust
("PTR"), Security Capital Group Incorporated ("SCG") and Homestead (the "Merger
Agreement"), pursuant to which, among other things, Homestead is,
contemporaneously herewith, acquiring all of the stock of Atlantic's
subsidiaries which own, operate or develop Atlantic's Homestead Village
extended-stay lodging facilities. As a consequence of the mergers contemplated
under the Merger Agreement, the Prior Corporate Borrower has been merged into
Homestead and in connection therewith Homestead has succeeded to and assumed all
of the Prior Corporate Borrower's obligations and liabilities, including those
under the Corporate Note and the Existing Corporate Loan Documents.
D. Upon and subject to the provisions of this Agreement, Homestead, the
Partnership Borrower and Atlantic desire to continue the funding provided for
under the Existing Loan Documents, and in consideration of the issuance,
pursuant to that certain Warrant Purchase Agreement, dated as of May 21, 1996
among Atlantic, PTR, SCG and Homestead, to Atlantic by Homestead of warrants to
purchase shares of common stock, $0.01 par value per share, of Homestead
("Homestead Common Stock"), Atlantic is willing to provide funds to Homestead
and the Partnership Borrower for the costs incurred in connection with
performing due diligence investigations, securing required development approvals
and otherwise completing the acquisition
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and development of the proposed future Homestead Village projects listed in
Exhibit A (which projects, and any replacement projects approved by Atlantic
pursuant to the provisions of this Agreement, are herein called the "Future
Projects").
E. The execution of this Agreement is a condition to the consummation of
the transactions contemplated by the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS
Section 1.1. CERTAIN DEFINED TERMS. As used herein, the following terms
shall have the following meanings:
"Agreement" shall mean this Funding Commitment Agreement.
"Acquisition Notice" has the meaning set forth in Section 2.3 of this
Agreement.
"Architect" means the architect retained by a Borrower to provide
architectural services for a Project.
"Architect's Agreement" means the agreement for architectural services
executed by a Borrower and an Architect in connection with the design of a
Project, and all exhibits, attachments, riders and addenda thereto.
"Architect's Certificate" means a Certificate from the Architect for a
Project, in form and substance reasonably acceptable to Atlantic, wherein the
Architect acknowledges the collateral assignment of the Architect's Agreement
and the Plans prepared by such Architect from Borrower to Atlantic pursuant to
this Agreement and agrees to perform all of its obligations under the
Architect's Agreement in the event Atlantic takes possession of the subject
Project in connection with the exercise of its remedies hereunder or under the
Security Documents after an Event of Default.
"Atlantic" has the meaning set forth in the Preamble to this Agreement.
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"Borrower" means Homestead, in its capacity as maker under the Corporate
Note, the Partnership Borrower or any Subsidiary, whichever entity is the owner
of the subject Project.
"Business Day" means any day other than Saturday, Sunday, or any other day
on which commercial banks in New Mexico are not required to be open for
business.
"Change Order" means a written order executed by a Borrower authorizing a
Contractor to proceed with a change in the work as provided for in the original
Plans for a Project, which change has been made in accordance with the
applicable provisions of this Agreement.
"Completion and Payment Guaranty" means that certain Guaranty of Completion
and Payment of even date herewith from Homestead to Atlantic in the form
attached as Exhibit B.
"Construction Contract" means the contract for construction executed by a
Borrower and the Contractor in connection with the construction of a Project,
and all exhibits, attachments, riders and addenda thereto.
"Consultant" means any civil engineer or other material consultant, other
than the Architect, retained directly by a Borrower to provide design or
engineering services for a Project.
"Consultant's Agreement" means the agreement for engineering or other
consultant services executed by a Borrower and a Consultant in connection with a
Project, and all exhibits, attachments, riders and addenda thereto.
"Consultant's Certificate" means a Certificate from a Consultant for a
Project, in form and substance reasonably acceptable to Atlantic, wherein the
Consultant acknowledges the collateral assignment of the Consultant's Agreement
and the Plans prepared by such Consultant from Borrower to Atlantic pursuant to
this Agreement and agrees to perform all of its obligations under the
Consultant's Agreement in the event Atlantic takes possession of the subject
Project in connection with the exercise of its remedies hereunder or under the
Security Documents after an Event of Default.
"Contractor" means the general contractor retained by a Borrower to provide
construction services for a Project.
"Contractor's Certificate" means a Certificate from the Contractor for a
Project, in form and substance reasonably acceptable to Atlantic, wherein the
Contractor acknowledges the collateral assignment of the Construction Contract
from Borrower to Atlantic pursuant to this
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<PAGE>
Agreement and agrees to perform all of its obligations under the Construction
Contract in the event Atlantic takes possession of the subject Project in
connection with the exercise of its remedies hereunder or under the Security
Documents after an Event of Default.
"Corporate Loan" has the meaning set forth in Recital A to this Agreement.
"Corporate Note" has the meaning set forth in Recital A to this Agreement.
"Default" means any condition or event that constitutes an Event of Default
or that with the giving of notice or lapse of time or both would, unless cured
or waived, become an Event of Default.
"Development Budget" has the meaning set forth in Section 2.3 of this
Agreement.
"Development Schedule" has the meaning set forth in Section 2.3 of this
Agreement.
"Environmental Laws" means any and all laws, statutes, ordinances, rules,
regulations, orders, or determinations of any governmental authority pertaining
to health or the environment applicable to a Borrower, or a Property owned by
such Borrower, in effect in the jurisdiction in which such Property is located,
or where any hazardous substances generated by or disposed of by a Borrower in
connection with such Property are located, including but not limited to the
Clean Air Act, as amended, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 as amended by the Superfund Amendments
and Reauthorization Act of 1986, as amended ("CERCLA"), the Federal Water
Pollution Control Act, as amended, the Resource Conservation and Recovery Act of
1976, as amended by the Used Oil Recycling Act of 1980, the Solid Waste Disposal
Act Amendments of 1980, and the Hazardous and Solid Waste Amendments of 1984, as
amended ("RCRA"), the Safe Drinking Water Act, as amended, the Toxic Substances
Control Act, as amended, the Hazardous Materials Transportation Act, as amended
any analogous state law of the state in which the Property is located and other
environmental conservation or protection laws. The terms "hazardous substance,"
"release," and "threatened release" shall have the meanings specified in CERCLA,
and the terms "solid waste" and "disposal" (or "disposed") shall have the
meanings specified in RCRA; provided, however, that (i) in the event either
CERCLA or RCRA is amended so as to broaden the meaning of any term defined
thereby, such broader meaning shall apply subsequent to the effective date of
such amendment and (ii) to the extent the laws of the state in which the
Property is located establish a meaning for "hazardous substance," "release,"
"threatened release," "solid waste," or "disposal" which is broader than that
specified in either CERCLA or RCRA, such broader meaning shall apply.
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<PAGE>
"Event of Default" means the occurrence of any of the events specified in
Article 7 hereof.
"Existing Corporate Projects" has the meaning set forth in Recital A to
this Agreement.
"Existing Corporate Security Documents" has the meaning set forth in
Recital A to this Agreement.
"Existing Loan Documents" has the meaning set forth in Recital B to this
Agreement.
"Existing Partnership Loan Documents" has the meaning set forth in Recital
B to this Agreement.
"Existing Partnership Projects" has the meaning set forth in Recital B to
this Agreement.
"Existing Partnership Security Documents" has the meaning set forth in
Recital B to this Agreement.
"Existing Projects" means the Existing Corporate Projects and the Existing
Partnership Projects.
"Expiration Date" has the meaning set forth in Section 2.5 of this
Agreement.
"Final Advance" means the final advance of Loan proceeds to a Borrower for
construction of a Project in accordance with the applicable provisions of this
Agreement.
"Final Completion" means that the requirements of Section 5.5 have been
fully satisfied for a Project.
"Final CO" means a final unconditional certificate of occupancy for a
Project issued by the applicable Governmental Authority.
"Force Majeure" means, with respect to any Project, an event entitling a
Contractor to an extension of time in constructing the Improvements as
established in the Construction Contract and any act of God, war, riots,
unusually severe weather, shortages of labor or materials (but not a shortage of
funds), strikes, lock-outs, explosions, the order of any court or governmental
authority or unavailability of or delay in issuance of any Permits despite a
Borrower's reasonable diligence in securing same, which results in any delay in
whole or in part
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in the design, engineering or construction of a Project, or the duration of any
inspection, testing, or remediation related to any environmental condition or
aspect of a Project.
"Funding Notice" has the meaning set forth in Section 2.3 of this
Agreement.
"Future Project" has the meaning set forth in Recital D to this Agreement.
"Geographic Area" means the States of Alabama, Florida, Georgia, North
Carolina, Tennessee, Maryland and Virginia and the District of Columbia.
"Governmental Authority" means any Federal, state, county, municipal or
other governmental or quasi-governmental department, commission, board, court,
agency or other instrumentality having jurisdiction over a Borrower and any
Project.
"Governmental Requirement" means any law, statute, code, ordinance, order,
rule, regulation, judgment, decree, injunction, franchise, permit, certificate,
license, authorization or other direction or requirement (including, without
limitation, any of the foregoing that relate to environmental standards or
controls, energy regulations and occupational safety and health standards or
controls) of any Governmental Authority.
"Homestead" has the meaning set forth in the Preamble to this Agreement.
"Homestead Common Stock" has the meaning set forth in Recital D to this
Agreement.
"Homestead Affiliate" means (a) an entity that directly or indirectly
controls, is controlled by or is under common control with Homestead or (b) an
entity at least a majority of whose economic interest is owned by Homestead; and
the term "control" means the power to direct the management of such entity
through voting rights, ownership or contractual obligations; provided, however,
in no event shall PTR, Atlantic, SCG or any wholly-owned subsidiary of any of
the foregoing be deemed a Homestead affiliate.
"Homestead Security Documents" means the deeds of trust, deeds to secured
debt and/or mortgage instruments, substantially in the forms attached as Exhibit
C hereto, to be delivered to Atlantic by Homestead in connection with the
funding of any Project acquired by Homestead after the date of this Agreement,
as security for the Corporate Note, the Partnership Note and any Subsidiary Note
executed and delivered after the date hereof, and any other security instruments
delivered by Homestead from time to time as security for the Corporate Note, the
Partnership Note and any such Subsidiary Note.
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"Improvements" means the buildings, structures, and other improvements to
be constructed on the Land as described on the Plans for the subject Project.
"Inspecting A/E" means the inspecting architect or engineer retained by a
Borrower to inspect, monitor and administer the progress of construction of a
Project.
"Land" means the parcel or parcels of land on which a Project is or is to
be located, together with all easements, rights of way and other appurtenances
thereto.
"Lien Waivers" means a waiver of all liens relating to a Project executed
by any and all contractors, subcontractors and/or suppliers of a Borrower who
have provided any goods or services relating to Improvements.
"Loan" means the Corporate Loan, the Partnership Loan, or any Subsidiary
Loan made after the date hereof, as the context may require; and "Loans" means
the Corporate Loan, the Partnership Loan, and any Subsidiary Loans made after
the date hereof, collectively.
"Loan Documents" means this Agreement, the Notes, the Security Documents,
the Completion and Payment Guaranty and any and all other agreements or
instruments now or hereafter executed and delivered by a Borrower, Homestead or
any other person in connection with, or as security for, the payment or
performance of the Notes.
"Material Adverse Effect" means any material and adverse effect on the
business, operations, properties, assets, condition (financial or other),
results of operations or prospects of Homestead and its Subsidiaries, taken as a
whole.
"Material Change" means any change to the Plans or to a Project which would
result in a material increase or decrease in the number of lodging units in such
Project from the number contained in a Prototypical Project, a material increase
or decrease in the overall cost of completing a Project above the costs
contemplated in the Prototypical Project Budget, or would otherwise result in
such Project materially deviating from the product and/or investment concept of
a Prototypical Project as set forth in the Prototypical Plans.
"Maximum Corporate Loan Amount" has the meaning set forth in Recital A to
this Agreement.
"Maximum Loan Amount" means the aggregate of the Maximum Corporate Loan
Amount and the Maximum Partnership Loan Amount.
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"Maximum Partnership Loan Amount" has the meaning set forth in Recital B to
this Agreement.
"Note" means the Corporate Note, the Partnership Note, or any Subsidiary
Note executed and delivered after the date hereof, as the context may require,
and "Notes" means the Corporate Note, the Partnership Note, and any Subsidiary
Notes executed and delivered after the date hereof, collectively.
"Partnership Borrower" has the meaning set forth in the Preamble to this
Agreement.
"Partnership Loan" has the meaning set forth in Recital B to this
Agreement.
"Partnership Note" has the meaning set forth in Recital B to this
Agreement.
"Partnership Security Documents" means the deeds of trust, deeds to secure
debt and/or mortgage instruments, substantially in the forms attached as Exhibit
D hereto, to be delivered to Atlantic by the Partnership Borrower in connection
with the funding of any Project acquired by the Partnership after the date of
this Agreement, as security for the Partnership Note, the Corporate Note and any
Subsidiary Note executed and delivered after the date hereof, and any other
security instruments delivered by the Partnership Borrower from time to time as
security for the Corporate Note, the Partnership Note and any such Subsidiary
Note.
"Permits" shall mean all permits, licenses, registrations, certificates,
authorizations and approvals now or hereafter issued or required to be issued by
any governmental or quasi-Governmental Authority for the lawful ownership,
construction, use and operation of a Project.
"Personalty" means all items of tangible or intangible personal property
owned by a Borrower, or in which a Borrower has any interest, to the extent of
such interest, that now are or hereafter may be purchased, prepared, constructed
or placed for, upon or in a Project owned by such Borrower.
"Plans" means the final plans and specifications for the construction of
the Improvements comprising a Project, together with any modifications or
additions to the same subsequently permitted under the terms of this Agreement
or, to the extent required hereunder, approved by Atlantic in accordance with
the provisions of this Agreement.
"Project" means each Existing Project and each Future Project for which an
Acquisition Notice has been delivered to Atlantic prior to the Expiration Date.
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"Project Budget" means the budget for a Project delivered by a Borrower to
Atlantic.
"Project Schedule" means the schedule for the design and construction of
the Improvements encompassed within a Project delivered by a Borrower to
Atlantic.
"Property" means any property from time to time subject to any of the
Security Documents, including the Land and all Improvements now or hereafter
located thereon and all Personalty associated therewith.
"Proposed Substitute Future Project" has the meaning set forth in Section
2.7 of this Agreement.
"Prototypical Project Budget" means the due diligence, development
approval, land acquisition, design and construction budget for a Prototypical
Project heretofore delivered to, and approved by, Atlantic.
"Prototypical Project Schedule" means the due diligence, development
approval, design and construction schedule for a Prototypical Project heretofore
delivered to, and approved by, Atlantic.
"Prototypical Plans" means the standard plans and specifications for a
Homestead Village extended-stay lodging facility heretofore delivered to, and
approved by, Atlantic.
"Prototypical Project" means a Homestead Village extended-stay lodging
facility designed and constructed in substantial accordance with the
Prototypical Plans.
"PTR" has the meaning set forth in the Preamble to this Agreement.
"Pursuit Costs" has the meaning set forth in Section 2.3 of this Agreement.
"Quarterly Statement" has the meaning set forth in Section 4.14 of this
Agreement.
"Rejected Project" has the meaning set forth in Section 2.7 of this
Agreement.
"Security Documents" means the Homestead Security Documents, the Existing
Corporate Security Documents, the Existing Partnership Security Documents, the
Partnership Security Documents, and any Subsidiary Security Documents,
collectively.
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"Subcontractor" means all persons performing labor or services, or
providing materials, equipment or furnishings in connection with the
construction of Improvements, other than Contractor.
"Subsidiary" means any entity now or hereafter in existence including the
Partnership Borrower, all of the outstanding equity securities of which are
owned by Homestead.
"Subsidiary Loan" means any portion of the Corporate Loan or Partnership
Loan which Homestead may direct Atlantic to advance to a Subsidiary instead of
to Homestead or the Partnership Borrower in accordance with the provisions of
this Agreement.
"Subsidiary Note" means any promissory note, substantially in the form of
the Partnership Note, which a Subsidiary executes and delivers to Atlantic after
the date hereof to evidence a Subsidiary Loan made by Atlantic to such
Subsidiary.
"Subsidiary Security Documents" means the deed of trust or mortgage
instrument to be delivered to Atlantic by a Subsidiary, substantially in the
form of the Homestead Security Documents, in connection with the funding of any
Future Project owned by Subsidiary as security for the Corporate Note, the
Partnership Note and any Subsidiary Note executed and delivered after the date
hereof, and any other security instruments delivered by such Subsidiary from
time to time as security for the Corporate Note, the Partnership Note and any
such Subsidiary Note.
"Title Insurer" means Chicago Title Insurance Company or any other
nationally recognized title insurance company issuing a Title Policy.
"Title Policy" means the lender's policy of title insurance for a Property
issued by the Title Insurer for the benefit of Atlantic and all endorsements
thereto, which insures the lien priority of the Security Documents applicable to
such Property.
"UCC" means the Uniform Commercial Code as in force in the state in which a
Project is located.
Section 1.2. OTHER DEFINITIONAL PROVISIONS.
(a) Except as otherwise specified herein, all references herein (i) to any
person or entity shall be deemed to include such person's or entity's heirs,
legal representatives, successors and assigns, as appropriate, (ii) to any
Governmental Requirement defined or referred to herein shall be deemed
references to such Governmental Requirement as the same may have been or
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may be amended or supplemented from time to time and (iii) to any Loan Document
or other agreement defined or referred to herein shall be deemed references to
such Loan Document or agreement (and, in the case of the Notes or other
instruments, any instrument issued in substitution therefor) as the terms
thereof may have been or may be amended, supplemented, waived or otherwise
modified from time to time in writing.
(b) Whenever the context so requires, the neuter gender includes the
masculine or feminine, the masculine gender includes the feminine, and the
singular number includes the plural, and vice versa.
ARTICLE 2.
THE LOANS
Section 2.1. THE HOMESTEAD LOAN. Subject to the limitations set forth in
Sections 2.5, 2.6 and 2.7 below, Atlantic hereby agrees, upon the terms and
conditions set forth herein and in the other applicable Loan Documents, to
advance to Homestead (or, as Homestead may direct, to any Subsidiary) up to the
amount of the Maximum Corporate Loan Amount for the purpose of paying the costs
and expenses incurred by Homestead (or by any such Subsidiary, as the case may
be) in completing the design and construction of the Existing Projects and in
performing its due diligence review, obtaining all Permits required for
development of and otherwise acquiring the Land for, and completing the design
and construction of, such of the Future Projects hereafter pursued by Homestead
or any such Subsidiary as may be funded under the provisions of this Agreement.
Principal and accrued interest on the Corporate Note shall be due and payable in
accordance with the terms and conditions set forth therein and herein.
Section 2.2. THE PARTNERSHIP LOAN. Subject to the limitations set forth
in Sections 2.5, 2.6 and 2.7 below, Atlantic hereby agrees, upon the terms and
conditions set forth herein and in the other applicable Loan Documents, to
advance to the Partnership Borrower (or, as Homestead may direct, to Homestead
or any Subsidiary) up to the amount of the Maximum Partnership Loan Amount for
the purpose of paying the costs and expenses incurred by the Partnership
Borrower (or by Homestead or any such Subsidiary, as the case may be) in
completing the design and construction of the Existing Projects and in
performing its due diligence review, obtaining all Permits required for
development of and otherwise acquiring the Land for, and completing the design
and construction of the Future Projects hereafter pursued by Homestead, the
Partnership Borrower or any other Subsidiary as may be funded under the
provisions of this Agreement. Principal and accrued interest on the Partnership
Note shall be due and payable in accordance with the terms and conditions set
forth therein and herein.
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Section 2.3. FUTURE PROJECTS. The parties acknowledge and agree that the
Future Projects identified in Exhibit A hereto are in differing stages of
consideration by Homestead and that, at any point in the process of its due
diligence review, the negotiation of definitive acquisition and related
documents and its efforts to obtain all Permits required for development of any
such Future Project, Homestead may determine, in its sole and absolute
discretion, either to proceed with the acquisition of the land for, and
development of, any such Future Project or to discontinue its efforts in respect
of any such Future Project. Requests for advances of Loan proceeds hereunder may
include amounts required to reimburse Homestead for the costs and expenses
incurred by Homestead in its due diligence review of any such Future Project, as
well as all costs incurred in connection with its efforts to secure the Permits
required for development of any such Future Project. Whenever such pursuit costs
("Pursuit Costs") are to be funded with Loan proceeds, prior to the first
advance in respect of a Future Project, Homestead will provided Atlantic with a
notice (a "Funding Notice") identifying the Future Project, together with a
development budget (a "Development Budget") indicating the anticipated costs
that are likely to be incurred prior to the acquisition of such Future Project
by Homestead or a Subsidiary, the amount of such costs to be funded by Loan
proceeds, which amount shall in no event exceed $100,000 per Future Project, and
a schedule setting forth the anticipated time-frames for completing the due
diligence review and obtaining required Permits (a "Development Schedule").
If Homestead elects to proceed with a Future Project, then Homestead shall
provide Atlantic at least 10 Business Days' prior written notice (an
"Acquisition Notice") of the anticipated closing date for the acquisition of the
subject Land, the identity of the Borrower for such transaction, and the
estimated amount of Loan proceeds that will need to be advanced at such closing.
From and after delivery of an Acquisition Notice to Atlantic, the subject
project shall, for all purposes under this Agreement, be deemed a "Project".
Notwithstanding anything to the contrary in the foregoing, funding of the first
advance of Loan proceeds in respect of any such Project shall require the
recordation of Security Documents adding such Project as security for the Loan
and the satisfaction of the other conditions set forth in Section 5.2 as to such
Project.
In the event, however, that Homestead determines from time to time that any
Future Project is unacceptable to it and that Homestead will not expend further
efforts with respect to such Future Project, Homestead shall provide written
notice to Atlantic identifying any such Future Project. In such event, any
Pursuit Costs theretofore funded with Loan proceeds, together with accrued and
unpaid interest thereon due under the terms of the Corporate Note, shall be
repaid by Homestead to Atlantic within 30 days after delivery of such notice to
Atlantic.
Section 2.4. SUBSIDIARY LOANS. With respect to any Future Project for
which an Acquisition Notice is delivered to Atlantic in accordance with Section
2.3 above, Homestead
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shall have the right to determine, in its sole and absolute discretion, that a
Subsidiary acquire the subject Project, in which event, the subject Subsidiary
shall, at such time as it acquires the subject Future Project, execute and
deliver to Atlantic Subsidiary Security Documents in connection therewith
together with an agreement in form and substance satisfactory to Atlantic
pursuant to which such Subsidiary agrees to be bound by the terms of this
Agreement as to such Project. In addition, at the election of Homestead, the
subject Subsidiary shall execute a Subsidiary Note in the amount of the Loan
determined by Homestead to be allocable to such Project and the Maximum
Corporate Loan Amount and/or the Maximum Partnership Loan Amount (as Homestead
may elect) shall be decreased by the amount of any such Subsidiary Note.
Alternatively, Homestead may elect to have funds advanced with respect to such
Project under the Corporate Loan or Partnership Loan and either loan or
contribute, or cause the Partnership Borrower to loan or contribute, the funds
so advanced to the subject Subsidiary. In the event any Subsidiary executes a
Subsidiary Note and/or any Subsidiary Security Documents as contemplated under
this Section 2.4, the parties shall, contemporaneously therewith, execute,
deliver, and, if appropriate, record, such amendments to the Loan Documents as
may reasonably be necessary or appropriate to properly document any resulting
changes in the Maximum Corporate Loan Amount and/or the Maximum Partnership Loan
Amount.
Section 2.5. Duration Of Funding Commitment. The obligation of Atlantic to
advance Loan proceeds in respect of Future Projects for which an Acquisition
Notice has not yet been delivered to Atlantic shall expire on March 31, 1998
(the "Expiration Date"). Notwithstanding anything to the contrary in the
foregoing, Atlantic shall continue to be obligated, subject to and upon the
terms and conditions set forth herein and in the other Loan Documents, to
continue to make advances of Loan proceeds after such date for each Project for
which an Acquisition Notice has theretofore been delivered to Atlantic under the
terms of this Agreement, but shall not have any obligation to make further
advances in respect of Pursuit Costs for any Future Project for which only a
Funding Notice has been delivered to Atlantic. On or before April 30, 1998,
Homestead shall repay, or cause to be repaid, to Atlantic any advances of Loan
proceeds in respect of Pursuit Costs (together with accrued and unpaid interest
thereon) that have not been repaid pursuant to Section 2.3 hereof as of the
Expiration Date.
Section 2.6. Project Specific Funding Commitment. Atlantic's obligation
under this Agreement to make advances of Loan proceeds in respect of a
designated Project shall not exceed the lesser of (i) the actual aggregate hard
and soft costs incurred by the applicable Borrower in connection with the
acquisition, development, design and construction of such Project, or (ii),
except as provided in Section 6.6, the amount allocated to such Project in
Exhibit A hereto, and all costs in respect of a Project in excess of the Loan
amount allocated to such Project shall, except as provided in such Section 6.6,
be funded by Homestead as and when needed. In addition, Atlantic's obligation to
make advances in respect of a designated
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Project shall expire on the second anniversary of the date on which the subject
Land was acquired by Homestead or the applicable Subsidiary. In the event Final
Completion of such Project has not been achieved by such date, Atlantic shall
have no obligation to make any further advances of Loan proceeds in connection
with such Project and all costs required to complete such Project shall be
funded by Homestead as and when required in order to assure that such Project is
completed and placed in operation as soon as is reasonably practicable. If,
however, Final Completion of such Project has not been achieved by the date
which is 30 months after the date of acquisition of the subject Land, then, at
the election of Atlantic, exercised by delivering written notice to Homestead,
Homestead shall repay, or cause the applicable Subsidiary to repay, within 30
days after receipt of such notice the amount of Loan proceeds advanced in
respect of such Project (together with accrued and unpaid interest on such
amount), and upon receipt of such payment, this Agreement, solely as it relates
to such Project, shall terminate and Atlantic shall cause to be released the
Security Documents recorded or filed against such Project.
Section 2.7. Replacement Projects. Homestead agrees that for each Future
Project rejected by Homestead pursuant to Section 2.3 (a "Rejected Project"),
Homestead will propose to Atlantic in writing a proposed substitute future
project (a "Proposed Substitute Future Project") to take the place of such
Rejected Project. Any such Proposed Substitute Future Project shall be located
within the Geographic Area and, except as specifically noted in writing by
Homestead, shall conform, to Homestead's then current knowledge, to the
Prototypical Project requirements. Homestead may select a Proposed Substitute
Future Project from its then contemplated Homestead Village projects which
Homestead is considering pursuing or, if all such contemplated projects are then
already included within the list of Future Projects under this Agreement, then
Homestead may delay in identifying a Proposed Substitute Future Project until,
in the ordinary course of its business, a new site for a contemplated Homestead
Village project is identified within the Geographic Area. Homestead shall not,
however, be obligated to identify a new potential Homestead Village site solely
for the purposes of presenting to Atlantic a Proposed Substitute Future Project.
Atlantic shall have a period of 20 Business Days after receipt of any such
Proposed Substitute Project to approve or reject, in its sole and absolute
discretion, any such proposal, and failure of Atlantic to provide Homestead with
written notice within such 20-Business Day period shall be deemed a rejection by
Atlantic of the subject Proposed Substitute Future Project. If Atlantic timely
approves a Proposed Substitute Future Project, then such project shall be
substituted in the place and stead of the Rejected Project in Exhibit A hereto,
and shall for all purposes under this Agreement thereafter be deemed a Future
Project. The maximum amount of Loan proceeds that will be available to fund such
Future Project (if Homestead thereafter
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delivers an Acquisition Notice for such Project) shall be equal to the Loan
amount originally allocated to the applicable Rejected Project in Exhibit A.
In the event that any Proposed Substitute Future Project is rejected or
deemed rejected by Atlantic, Homestead shall be free to pursue the Proposed
Substitute Future Project on its own. For each Rejected Project, Homestead shall
be required (subject to the limitations set forth above) to propose to Atlantic
up to a maximum of three (3) Proposed Substitute Future Projects. If Atlantic
rejects all three (3) Proposed Substitute Future Projects submitted by Homestead
in respect of a particular Rejected Project, then the Maximum Loan Amount, and
Atlantic's funding commitment hereunder, shall be reduced by the amount
allocated to the Rejected Project in Exhibit A hereto. The obligation of
Homestead to propose to Atlantic Proposed Substitute Future Projects shall in
any event terminate on the Expiration Date.
Section 2.8. Release Of Security Documents. The parties acknowledge and
agree that the Notes are convertible, in whole or in part, into shares of
Homestead Common Stock up to the maximum amount of the unpaid principal amount
of such Notes outstanding from time to time and otherwise pursuant and subject
to the terms and conditions of such Notes. Any such conversion shall reduce the
amount of the debt evidenced by the Notes and secured by the Security Documents
by the amount determined in accordance with the conversion provisions of the
Notes. In connection with any partial conversion of the Notes, Homestead may
request that, in lieu of or in addition to reducing the amount secured by the
Security Documents, Atlantic release any one or more of the Projects then
subject to the Security Documents and having a value equivalent to or less than
the amount of the debt reduction resulting from such conversion. The release of
any Projects from the lien of the Security Documents shall, however, be subject
to the approval of Atlantic, which approval shall not to be unreasonably
withheld or delayed.
At such time as all amounts owing to Atlantic under or in respect of any of
the Loan Documents have been paid in accordance with the provisions of the Loan
Documents or if not paid then, to the extent permitted under the Notes,
converted into Homestead Common Stock, and when Atlantic has no further
obligation to make any advance, disbursement or payment of any kind or to extend
credit under or with respect to any of the Loan Documents, then this Agreement
shall terminate and upon receipt of demand therefor from Homestead, Atlantic
shall execute and deliver to Homestead appropriate instruments of release or
reconveyance of any Security Documents then in effect.
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ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
To induce Atlantic to enter into this Agreement, Homestead and each
Borrower represents and warrants to Atlantic (each representation and warranty
herein being given as of the date of this Agreement and deemed repeated and
reaffirmed on the date of each advance of funds by Atlantic) as follows:
Section 3.1. Existence And Power. Homestead and each Borrower is duly
organized, validly existing and in good standing under the laws of the State of
its organization and to the extent required is qualified to do business in and
is in good standing in each jurisdiction in which it owns property; has full
power and authority to own its assets, to conduct the activities in which it is
engaged, and to own and develop each Project which it owns.
Section 3.2. Authorization and Binding Obligations. The borrowing
evidenced by the Notes and the execution, delivery and performance of this
Agreement and all other Loan Documents by Homestead and each Borrower (i) are
within the power of the subject entity and (ii) have been duly authorized. Each
of the Loan Documents executed by Homestead and/or any Borrower, when executed
and delivered, will constitute the legal, valid and binding obligations of such
entity and are enforceable against such entity in accordance with its respective
terms, subject to bankruptcy and insolvency laws, equitable principles, and laws
affecting creditors rights generally.
Section 3.3. No Legal Bar or Resultant Lien. None of the (i)
execution and delivery of, (ii) fulfillment of the terms and conditions of, or
(iii) the consummation of the transactions contemplated by the Loan Documents to
which Homestead and/or any Borrower is a party (a) violate any provisions of the
articles or certificate of incorporation, bylaws or partnership agreement of
such entity, (b) violate or constitute a default under any contract, agreement
or instrument, or any law, ordinance, rule or regulation of any Governmental
Authority, to which such entity is subject, (c) to such entity's knowledge,
violate or constitute a default under any Governmental Requirement so as to
create a Material Adverse Effect or (d) to such entity's knowledge, result in
the creation or imposition of any lien upon any property of such entity, other
than those permitted by this Agreement.
Section 3.4. No Consent. The execution, delivery and performance of
the Loan Documents to which Homestead and/or each Borrower is a party does not
require the consent or approval of any other person, including, without
limitation, any financial institution or other creditor of such entity, any
trustee, conservator, receiver or administrator, or any regulatory
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authority or governmental body of the United States of America or any state
thereof or any Governmental Authority.
Section 3.5. Compliance with Laws. All Plans, Projects, Properties,
Improvements and their intended use presently comply, and throughout the term of
this Agreement will continue to comply, in all material respects with all
Governmental Requirements and all public and private restrictions or other
agreements affecting each such Property, including, without limitation, building
codes, special use permits, zoning codes, Environmental Laws, applicable
requirements of fire underwriters, restrictive covenants, easements and other
agreements affecting the Property. All Permits currently required by
Governmental Requirements to be obtained for the Projects now subject to this
Agreement have been obtained, and neither Homestead nor any Borrower has any
reason to believe that any Permits that subsequently may be required to enable
it to construct, occupy, operate, use or sell any of the Property will not be
obtained in due course.
Section 3.6. Litigation. Except as disclosed to Atlantic in writing,
at the date of this Agreement there is no litigation, legal, administrative, or
arbitral proceeding, investigation or other action of any nature pending or, to
the knowledge of Homestead or any Borrower, threatened against or affecting any
Borrower or Homestead that involves the possibility of any judgment or liability
(not fully covered by insurance) that would have a Material Adverse Effect.
Section 3.7. Defaults. To the knowledge of Homestead and each
Borrower, neither Homestead nor any Borrower is in default, and no event or
circumstance has occurred that, but for the passage of time or the giving of
notice, or both, would constitute a default, in any respect under any agreement
of instrument that may have a Material Adverse Effect. No Event Default has
occurred hereunder.
Section 3.8. Status of Property. The Borrower delivering any Security
Documents to Atlantic is the fee simple owner of the subject Property free and
clear of all restrictions, covenants, easements, liens and encumbrances,
including, without limitation, mechanics', materialmen's and suppliers' liens
(except liens securing Atlantic and matters reflected in the Title Policy). To
Homestead and each Borrower's knowledge: each Property is a legal lot under
applicable laws, statutes, ordinances and regulations of the governing
jurisdiction; each Property is carried, or is in the process of being changed so
as to be carried, on the tax rolls of the governing jurisdiction as a separate,
subdivided parcel; each Property has, or will have upon completion of
construction, full access to the public highways and to the services of all
utilities, including water, storm sewer, sanitary sewer, electricity and
telephone, required to serve the intended use of the Property; each Property
under construction or completed is zoned under applicable zoning laws and
ordinances so as to permit the construction and development of the
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Project planned for such Property and the use and occupancy of the Property as
contemplated under this Agreement; and each Property under construction or
completed currently complies in all material respects with such laws and
ordinances and with all private restrictions applicable thereto and any special
use permit, variance, exception, or other special zoning authorization
applicable thereto; each Property currently complies in all material respects
with all Governmental Requirements applicable thereto. To Borrower's knowledge,
the liens of the Security Documents executed by it are valid liens covering the
subject Properties.
Section 3.9. Use Of Proceeds. None of the proceeds of the Loans has
been or shall be used to purchase or carry, or to reduce or retire or refinance
any credit incurred to purchase or carry, any margin stock (within the meaning
of Regulations G and U of the Board of Governors of the Federal Reserve System)
or to extend credit to others for the purpose of purchasing or carrying any
margin stock.
Section 3.10. Real Property Environmental Matters. To the actual
knowledge of Homestead and each Borrower, except as disclosed in the
environmental audits prepared for Homestead and/or any such Borrower and
delivered to Atlantic, no hazardous substances or solid waste are located at or
on or have been disposed of or otherwise released on or to any of the Properties
in violation of any Environmental Laws.
Section 3.11. Financial Condition. All financial statements delivered
to Atlantic concerning Homestead and each Borrower fairly and accurately present
the financial condition of such entities as of the date of such statements and
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis, and there are no contingent liabilities not
disclosed thereby which would have a Material Adverse Effect. Since the close of
the period covered by the latest financial statements delivered to Atlantic with
respect to Homestead's and each Borrower's assets, liabilities, or financial
condition, no event has occurred (including, without limitation, any litigation
or administrative proceedings) and no change in such entities' financial
condition exists or, to the knowledge of Homestead or any Borrower, is
threatened, which (i) materially adversely affects a Borrower's ability to
perform its obligations under the Loan Documents, (ii) constitutes or which
after notice or lapse of time, or both, would constitute a Default hereunder, or
(iii) materially adversely affects the validity or priority of the lien of the
Security Documents on any Borrower's Property or the financial condition of
Homestead or any Borrower.
Section 3.12. No Condemnation. No taking of any Property or any
material part thereof, through eminent domain, conveyance in lieu thereof,
condemnation or similar proceeding is pending or, to the best of Homestead's and
each Borrower's knowledge, threatened by any governmental agency.
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Section 3.13. No Actions. There is no action, proceeding or
investigation pending or, to the best of Homestead's and each Borrower's
knowledge, threatened (or any basis therefor) which questions, directly or
indirectly, the validity of this Agreement, the Notes, the Security Documents,
or any other Loan Document or any action taken or to be taken pursuant hereto or
thereto.
Section 3.14. No Adverse Conditions. To the best of Homestead's and
each Borrower's knowledge, there are no existing, pending or threatened events
which could materially adversely affect any of the Properties or the operation
thereof.
ARTICLE 4.
COVENANTS
Each Borrower will, at all times, comply with the covenants contained
in this Article 4 from the date hereof and for so long as any part of the Loans
is outstanding.
Section 4.1. Construction of Improvements. Each Borrower will proceed
with the design, engineering and construction of its Improvements with
reasonable diligence and continuity and will endeavor in good faith to complete
the design, engineering and construction of its Improvements substantially in
accordance with the applicable Project Schedule, subject to Force Majeure, and
substantially in accordance with the Plans for such Improvement and applicable
Governmental Requirements.
Section 4.2. Plans; Project Budgets; Project Schedules and Material
CHANGES. Prior to the date hereof, Homestead has delivered to Atlantic and
Atlantic has approved Homestead's Prototypical Plans, Prototypical Project
Budget and Prototypical Project Schedule. So long as the Plans and Project
Budget (including the Development Budget which is a part of the overall Project
Budget) for a given Project do not contain any Material Change and the Project
Schedule does not deviate in any material respect from the Prototypical
Schedule, no further approval by Atlantic of the Plans, Project Schedule or
Project Budget for a Project shall be required. Borrower shall not, however,
make any Material Change in the Plans for any of its Projects or construct any
Improvements which are not substantially in accordance with the Prototypical
Plans or make any change to any Plans or install any material or equipment which
would constitute a Material Change, without Homestead's obtaining in each
instance Atlantic's prior written consent, which consent shall not be
unreasonably withheld or delayed. Homestead shall promptly notify Atlantic in
writing of any Material Change desired by a Borrower, which notice shall be
accompanied by such plans or other information as may reasonably be necessary
for
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Atlantic to evaluate the proposed Material Change. Atlantic shall deliver
written notice to Homestead within 10 Business Days after receipt of the
requested Material Change stating whether such Material Change has been approved
or disapproved by Atlantic.
Section 4.3. Inspection and Examination. Borrower will permit
representatives and agents of Atlantic to enter each Property owned by such
Borrower at all reasonable times to inspect the progress of the construction of
the subject Improvements and all materials to be used therein and to examine all
detailed plans and shop drawings which are or may be kept at the construction
site, and such Borrower will use reasonable efforts to cause the Contractor and
all Subcontractors to cooperate with Atlantic or its representatives in such
inspections or examinations. Homestead and each other Borrower shall also permit
representatives and agents of Atlantic to examine their respective books,
records and accounting data applicable to the Loans and the subject Projects
(and to make extracts therefrom or copies thereof) and, to the extent Homestead
or such Borrower has such right, all Contractor's and Subcontractors' books,
records and accounting data applicable to the subject Project.
Section 4.4. Permits and Approvals. Borrower will comply in all material
respects with, and keep in full force and effect, all Permits necessary for
ownership, development and operation of the Projects owned or operated by it.
Section 4.5. Governmental Requirements. Borrower will cause all
Governmental Requirements and all restrictive covenants affecting its Projects
to be complied with in all material respects (except matters contested in good
faith by appropriate proceedings).
Section 4.6. Books and Records. Borrower will implement and maintain
payment and accounting systems which will assure accurate and complete records
of all amounts owed and paid in connection with the completion of each Project.
Borrower shall require each Contractor and each Subcontractor having a
subcontract in excess of $100,000 to deliver lien waivers or releases as a
condition to receiving payments. Contractor lien waivers shall cover the amount
paid to the Contractor under its application for payment for the month or other
payment period just ending; Subcontractor lien waivers shall cover the amount
paid to such Subcontractor pursuant to the Contractor's application for payment
for the immediately preceding month or other payment period.
Section 4.7. Title to Property and Improvements. Neither the legal or
beneficial title and ownership of a Borrower in the Property(ies) and
Improvements or any portion thereof owned by it will be conveyed, pledged or
encumbered in any way other than to Homestead or a Homestead Affiliate without
the consent of Atlantic, which may be granted or denied in Atlantic's sole and
absolute discretion. Borrower will promptly pay and discharge prior to the
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date when any interest or penalties shall accrue thereon, all taxes, levies,
charges, impositions, water and sewer rents, and assessments of every kind or
nature, whether foreseen or unforeseen and whether general or special, which are
now or shall hereafter be charged or assessed against the Property(ies) or the
Improvements owned by it, or any part thereof, or which may become a lien
thereon (except matters contested in good faith by appropriate proceedings and
for which adequate reserves have been provided).
Section 4.8. Costs and Expenses. Borrower shall pay any out-of-pocket
expenses reasonably incurred by Atlantic in the enforcement or collection of the
Loans, including without limitation, attorneys' fees and expenses, records
searches, documentary stamps, transfer taxes and recording taxes and court
costs.
Section 4.9. Use of Advances. Borrower shall not apply any advances of
Loan proceeds to costs other than those incurred in connection with the subject
Future Project or Project for which the advance has been made. Borrower shall
not apply such advances to the cost of acquiring any additional real property
other than a Project. Borrower shall not receive or apply advances of Loan
proceeds except to the purposes for which such proceeds have been advanced by
Atlantic, and in accordance with the provisions of the Loan Documents generally.
Section 4.10. Insurance. Borrower shall keep in full force and effect at
all times the policies of insurance applicable to the Property owned by it and
required by the Security Documents, and Borrower shall provide Atlantic with
evidence of such insurance upon receipt or request therefor.
Section 4.11. Environmental Matters. Borrower shall not, by any act or
omission, cause or permit any hazardous substances, solid wastes or other
pollutants to exist on or about any Project in violation of Environmental Laws.
In the event of a breach of the foregoing provision, Homestead and the subject
Borrower shall remove the same (or if removal is prohibited by law, take
whatever action is required by law) promptly upon discovery at Homestead's and
such Borrower's sole expense. Homestead will promptly notify Atlantic in writing
of any existing, pending or threatened action, investigation or inquiry by any
Governmental Authority of which it has knowledge relating to any Property in
connection with any Environmental Laws.
Section 4.12. Selection of Architects; Contractors; Inspecting A/e's.
Prior to the date hereof, Homestead has delivered to Atlantic and Atlantic has
approved, a list of potential Contractors, Architects, Consultants and
Inspecting A/E's that Homestead, or any of its Subsidiaries, has or may retain
in connection with any Project funded, or to be funded, under this Agreement.
Homestead may, from time to time, subject to the prior written approval of
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Atlantic, add Contractor, Architect, Consultant and Inspecting A/E names to such
list. So long as any Contractor, Architect, Consultant and Inspecting A/E
retained by Homestead or a Subsidiary in connection with a Project is on such
pre-approved list, no further approval of such hiring by Atlantic shall be
required. If Homestead or any Subsidiary desires to retain a Contractor,
Architect, Consultant or Inspecting A/E not on the current pre-approved list,
then prior to retaining such individual or entity, Homestead shall be required
to obtain the prior written approval of Atlantic, such approval not to be
unreasonably withheld or delayed, and such approval shall be deemed given if
Atlantic does not deliver written notice of objection to Homestead within 10
Business Days after receipt by Atlantic of a request for approval from
Homestead.
Section 4.13. Further Assurances. Homestead and each Borrower shall
execute such further documents, agreements and instruments, and take all other
actions, as may reasonably be necessary to carry out the purposes of the Loan
Documents or to protect and enforce the validity and priority of the Security
Documents.
Section 4.14. Quarterly Statements. Within 20 Business Days after the
expiration of each calendar quarter, Homestead shall deliver to Atlantic a
written summary (each, a "Quarterly Statement") containing a status report for
each Future Project or Project then being funded pursuant to this Agreement,
indicating whether and to what extent each such Future Project or Project is
proceeding substantially on schedule and on budget or, if not, the amount of any
overrun and/or schedule slippage and setting forth in reasonable detail any
efforts being undertaken to remedy any noted material problems. Each Quarterly
Statement shall also include any pertinent information in respect of Future
Projects and the anticipated timing of when any such Future Projects may be
acquired and construction commenced and such other information as Homestead may
deem appropriate, or Atlantic may reasonably request, to keep Atlantic
reasonably apprised of the status of the Future Projects.
Section 4.15. Continued Existence. Homestead and each Borrower shall at
all times preserve and keep in full force and effect its existence and rights
and franchises material to its business and rights and franchises material to
its business and properties.
Section 4.16. Defaults Under Other Loans. Borrower shall notify Atlantic
in writing within fifteen (15) days following Borrower's receipt of notice of a
default under any document or instrument governing, evidencing, securing, or
otherwise relating to any loan (other than the Loan) made to Borrower.
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ARTICLE 5.
ADVANCE CONDITIONS
Section 5.1. Conditions Precedent to First Advance under this
Agreement. Atlantic shall not be obligated to advance funds pursuant to this
Agreement until each of the following conditions is fulfilled:
(a) Receipt by Atlantic of each of the following:
(i) evidence reasonably satisfactory to Atlantic that Homestead,
either directly or through one or more of its Subsidiaries, has
expended at least $16,824,509 of its own funds in developing and
placing in operation Homestead Village projects in the Geographic
Area (the "Equity Projects");
(ii) duly executed Security Documents creating first and prior liens
on all of the Equity Projects;
(iii) a fully executed copy of this Agreement;
(iv) duly executed copies of each of the Notes from any Subsidiaries
owning Projects for which a Funding Notice or Acquisition Notice
has been delivered to Atlantic and Security Documents for any
Land then owned or to be acquired with such initial funding by
Homestead or any Subsidiary for which the subject Project is to
be financed with Loan proceeds, the Completion and Payment
Guaranty and all other Loan Documents Atlantic may reasonably
require to be executed and delivered in connection with the first
advance hereunder;
(v) Title Policies for all Properties then subject to Security
Documents or to be made subject to Security Documents
contemporaneously with the first advance of Loan proceeds (or an
irrevocable commitment to issue each such Title Policy),
effective as of the date of the Notes, in form and substance
satisfactory to Atlantic in its reasonable judgment, confirming
the first priority status and validity of the lien of the
Security Documents on the Property to secure the obligations
under the Notes, the Security Documents and the other Loan
Documents;
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(vi) for each Project then subject to this Agreement, a survey of the
subject Land, and a geotechnical report and environmental audit,
satisfactory to Atlantic, in its reasonable judgment;
(vii) opinions of counsel reasonably satisfactory to Atlantic
addressing the following matters:
(A) each Borrower then executing and delivering any Loan
Documents is duly organized and validly existing, and in
good standing and authorized to do business in each state in
which it owns a Project, with power and authority to own its
Projects and to perform its obligations under the Loan
Documents to which it is a party and to carry on its
business as it is now being conducted;
(B) the execution, delivery and performance of the Loan
Documents delivered by each such Borrower have been duly and
validly authorized by all necessary action of such Borrower;
and
(C) the Loan Documents executed by each such Borrower constitute
valid and binding obligations of such Borrower, enforceable
against such Borrower in accordance with their respective
terms, except as such enforcement may be limited by
applicable bankruptcy laws and other customary exceptions;
(viii) for each Project then under construction or completed,
certificates of insurance confirming the existence of all
insurance required by Section 4.9 hereof;
(ix) Copies of the Plans, Project Budget and Project Schedule for each
Project then under construction or then being added to this
Agreement; and
(x) Certification from Homestead that any Property(ies) then being
added to this Agreement either contain no Material Changes or any
Material Changes have previously been approved by Atlantic.
(b) The Title Insurer shall have been paid all title insurance premiums,
filing fees, recording fees and taxes required for proper recording of the
Security Documents to be recorded at such time and any other Loan Document to be
filed or recorded at such time.
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(c) There shall not have occurred and be continuing any Default.
(d) There shall be no actual or threatened condemnation of all or any
portion of the Land comprising any Property then subject to any of the Security
Documents.
(e) Neither Homestead nor any Borrower shall be the subject of any
bankruptcy or similar proceeding.
(f) There shall not have occurred and be continuing beyond any applicable
cure or grace period any default under any of the Prior Loan Documents.
(g) The representations and warranties set forth in Article 3 hereof shall
be true and correct in all material respects with respect to each Project then
subject to the Security Documents.
Section 5.2. Conditions Precedent To First Advance For New Project.
Atlantic shall not be obligated to advance funds in respect of a new Future
Project for which Pursuit Costs are to be funded or for any Project to be
acquired by Homestead or any Subsidiary until each of the following conditions
is fulfilled:
(a) The conditions precedent set forth in Section 5.1 shall remain
satisfied.
(b) Receipt by Atlantic of each of the following for each Future Project
for which Pursuit Costs are to be funded:
(i) a Funding Notice for the subject Future Project;
(ii) if applicable, a fully executed copy of any agreement to be
delivered by a Subsidiary in connection with such Future Project
whereby such Subsidiary agrees to be bound by the terms of this
Agreement with respect to the subject Future Project; and
(iii) a Development Budget and Development Schedule for the subject
Future Project.
(c) Receipt by Atlantic of each of the following for each Project:
(i) an Acquisition Notice for the subject Project;
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(ii) if applicable, a fully executed copy of any agreement to be
delivered by a Subsidiary in connection with such Project
whereby such Subsidiary agrees to be bound by the terms of this
Agreement with respect to the subject Project;
(iii) duly executed copies of any Homestead Security Documents,
Partnership Security Documents or Subsidiary Security Documents,
any Subsidiary Note, and any other Loan Documents which Atlantic
may reasonably require to be executed and delivered in
connection with such Project;
(iv) an opinion of counsel addressing, as to the subject Borrower and
the Loan Documents then being executed by such Borrower, the
matters set forth in Section 5.1(a)(viii) above;
(v) the Title Policy for the subject Property (or irrevocable
commitment to issue such Title Policy), effective as of the date
of the first advance in respect of such Project, in form and
substance satisfactory to Atlantic in its reasonable judgment,
confirming the first priority status and validity of the lien of
the Security Documents on the Property to secure the obligations
under the Notes, the Security Documents and the other Loan
Documents;
(vi) a survey of the subject Land, and a soils report, geotechnical
report and environmental audit of the Land, satisfactory to
Atlantic, in its reasonable judgment; and
(vii) Copies of the Plans, Project Budget and Project Schedule for the
subject Project.
(d) With respect to each Project, the Title Insurer shall have been paid
all title insurance premiums, filing fees, recording fees and taxes required for
proper recording of the Security Documents to be recorded at such time and any
other Loan Document to be filed or recorded at such time.
(e) There shall not have occurred and be continuing any Default.
(f) There shall be no actual or threatened condemnation of all or any
portion of the Land comprising the Property.
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(g) The Completion and Payment Guaranty shall be in full force and effect.
Section 5.3. INITIAL IMPROVEMENT ADVANCE CONDITIONS. Atlantic's initial
obligation to advance any of the Loan proceeds to a Borrower for construction of
Improvements is conditioned upon the conditions precedent set forth in Sections
5.1 and 5.2 remaining satisfied and, if requested by Atlantic, receipt of the
following:
(a) Evidence of the issuance of all Permits required by any Governmental
Authority as a condition to the commencement of construction of the subject
Improvements.
(b) A copy of the Construction Contract, Architect's Agreement and any
Consultants' Agreements for the subject Project.
(c) Certificates of insurance and other certificates or information in
form and substance reasonably satisfactory to Atlantic confirming the existence
of all insurance required by Section 4.9 hereof.
(d) An executed Contractor's Certificate, Architect's Certificate and
Consultants' Certificates from the Contractor, Architect and Consultants
performing services to the subject Project.
(e) Such further financing statements and security agreements, executed
and acknowledged by the subject Borrower, relating to construction materials for
the subject Project as Atlantic may reasonably require.
(f) Evidence of the availability of utilities and access to and from the
subject Project sufficient for its intended use.
Section 5.4. ADDITIONAL IMPROVEMENT ADVANCE CONDITIONS. After the initial
advance, additional advances made for the purpose of constructing any subject
Improvements shall be subject to the following conditions:
(a) The conditions precedent set forth in Sections 5.1, 5.2 and 5.3 shall
remain satisfied.
(b) All Permits required under Governmental Requirements for construction
of the subject Improvements shall be legally valid and in force and effect.
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(c) The subject Property and Improvements shall not have suffered any
damage or deterioration without provision for arrangements satisfactory to
Atlantic for the restoration and replacement of the damage or deterioration to
such Property or Improvements.
Section 5.5. FINAL-ADVANCE CONDITIONS. Atlantic's obligation to advance
any of the Loan proceeds to a Borrower for the Final Advance for the
Improvements comprising a Project is conditioned upon the following and, if
requested by Atlantic, receipt by Atlantic of evidence reasonably satisfactory
to Atlantic that such conditions have been satisfied:
(a) The completion of all Improvements in substantial accordance with the
Plans.
(b) Receipt by the Borrower of all Final CO's issued by the appropriate
Governmental Authorities for the Improvements and all other Permits necessary
for use of the subject Improvements and Property.
(c) The Inspecting A/E for the Project shall have executed a certificate
of final completion with respect to all of the Improvements required under the
applicable Construction Contract.
(d) The Contractor, all Subcontractors and other parties (including
Architects and Consultants, if applicable) who performed work for the subject
Project have been paid (or with the application of the final advance of Loan
proceeds for such Project, will have been paid) in full, except for amounts
which the Borrower in good faith disputes and/or amounts which Homestead and/or
the subject Borrower intends to pay with its own funds provided any liens filed
against the Project have been released or bonded over.
(e) Receipt by Borrower of an as-built survey showing the location of all
Improvements, including parking areas, streets and the location of all utilities
and other easements, encroachments and building set back lines, if any, together
with delivery to Atlantic of an endorsement to the Title Policy removing any
exception for matters of survey.
(f) All remaining punchlist items have been completed by the Contractor
and approved by the Borrower.
(g) All conditions precedent to the "Final Payment" required under the
Construction Contract shall have been satisfied.
(h) The Project is otherwise ready for immediate occupancy by guests.
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ARTICLE 6.
PROCEDURE FOR ADVANCES; RESERVES
Section 6.1. GENERAL. Atlantic will disburse the proceeds of the Loans on
a monthly basis for the cost categories set forth in the applicable Development
Budgets and Project Budgets. Homestead shall submit a written request for
advance in a form approved by Atlantic by the 25th day of each month and,
provided Atlantic determines that all conditions precedent to the advance have
been satisfied, disbursements will be made by the 1st day of the immediately
following month. Each request for advance shall set forth, on a Project-by-
Project basis, Homestead's reasonable estimate of the hard and soft costs and
expenses incurred during the month just ending and for which reimbursement is
being sought. With each request for advance after the first, Homestead shall
also provide a reconciliation indicating the amount by which the immediately
preceding advance made by Atlantic exceeded the actual hard and soft costs for
the period covered by such advance and the amount by which the request for
advance for the month just ending has been adjusted on account of any over- or
underpayment by Atlantic for the preceding month. With respect to the final
advance of Loan proceeds in respect of a Project, if the final reconciliation
submitted in the month following such advance reflects that Loan proceeds in
excess of actual costs were advanced, such overpayment (together with accrued
and unpaid interest thereon) shall be repaid by Borrower to Atlantic within 15
days after such reconciliation is delivered to Atlantic. Any additional Loan
proceeds owing to Borrower on the basis of such final reconciliation shall be
advanced by Atlantic with the balance of the monthly advance made by Atlantic
under this Section 6.1.
All disbursements with respect to any request for an advance submitted
other than on the 25th day of a month will be made within ten (10) business days
after the later of (i) receipt by Atlantic of a written request for an advance
from Homestead in a form approved by Atlantic and (ii) Atlantic's determination
that all conditions precedent to the advance have been satisfied.
All disbursements shall be made in accordance with any instructions
contained in the Homestead request for advance.
Section 6.2. PAYMENTS TO ATLANTIC. Notwithstanding any other provisions of
this Agreement, Atlantic may, at it's option and without notice or authorization
by Homestead or any Borrower, use any Loan proceeds to pay, as and when due, any
interest on the Loans. The parties acknowledge that the Loans provide for
interest reserves in amounts sufficient to pay all interest due and payable in
respect of each Project through completion of same, and Homestead and each
Borrower specifically authorizes Atlantic to advance portions of such interest
reserves to pay interest on the Loans as and when the same comes due.
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Section 6.3. RETAINAGE AND CONTRACTOR'S FEE HOLDBACK. The parties
acknowledge that Atlantic shall retain, and Homestead shall not request
disbursement, of any retainages provided for under any Construction Contract,
which amounts shall be retained by Atlantic to secure full and complete
performance of all construction obligations hereunder (hereinafter, the
"Retainage Holdback"). Provided no Default exists hereunder, Atlantic shall
disburse the Retainage Holdback in accordance with the provisions of the
applicable Construction Contract as requested by Homestead in its requests for
advances. Upon the occurrence of a Default hereunder, Atlantic shall have no
obligation to make further disbursements from the Retainage Holdback, and no
Borrower shall be entitled to any such disbursements, until such Default is
cured. Upon the occurrence of an Event of Default hereunder, Atlantic may apply
the Retainage Holdback against any of the obligations secured by the Security
Documents as Atlantic sees fit or, in Atlantic's discretion, to the completion
of any incomplete Improvements. Subject to the foregoing terms and provisions,
to the extent not theretofore disbursed, Atlantic will disburse the amounts in
the Retainage Holdback in respect of a Project concurrently with the Final
Advance for such Project.
Section 6.4. INTEREST RESERVE. Atlantic shall, on the date hereof,
withhold from the proceeds of the Loans available for distribution the amount of
Six Million, Eight Hundred Thirty-Five Thousand, Seven Hundred Thirty-Six
Dollars ($6,835,736) (the "Interest Reserve"). Provided no Default exists
hereunder, the Interest Reserve shall be disbursed for the payment of interest
on the Loans as such interest becomes due and payable. Upon the occurrence of a
Default hereunder, Atlantic shall have no obligation to make further
disbursements from the Interest Reserve, and no Borrower shall be entitled to
any such disbursements, until such Default is cured. Should interest payable on
the Loans exceed the amount of the Interest Reserve, the Borrowers shall
promptly pay such amounts. Upon the occurrence of an Event of Default, Atlantic
may apply any undisbursed portion of the foregoing reserve against any of the
obligations secured by the Security Documents as it sees fit or, at Atlantic's
discretion, to the completion of and incomplete Improvements.
Section 6.5. OWNER'S CONTINGENCY. The parties acknowledge that each
Project Budget shall contain an owner's contingency (an "Owner's Contingency")
equal to no less than 2% of Project hard and soft costs contained within the
Project Budget. Provided no Default exists hereunder, the Owner's Contingency
for a Project shall be disbursed by Atlantic to the subject Borrower to cover
unanticipated Project costs, costs associated with change orders and hard and
soft cost overruns (before such Borrower or Homestead, as guarantor under the
Completion and Payment Guaranty, shall be required to cover such additional
costs pursuant to the provisions of Section 6.6 hereinbelow or the Completion
and Payment Guaranty) as and when such payments are due and payable. Requests
for disbursement of portions of the Owner's Contingency shall be made with
Homestead's monthly requests for advance of Loan proceeds.
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Upon the occurrence of a Default hereunder, Atlantic shall have no obligation to
advance any portion of the Owner's Contingency until such Default is cured. Upon
the occurrence of an Event of Default, Atlantic may apply the Owner's
Contingency against any of the obligations secured by the Security Documents as
Atlantic sees fit, or at Atlantic's option, to the completion of any incomplete
Improvements.
Section 6.6. COST OVERRUNS AND SAVINGS; CHANGE ORDER RESERVE. In the event
that the costs to acquire and complete any Project in its entirety, including,
without limitation, the furnishing thereof, exceed the amount of Loan proceeds
available for the subject Project (including the applicable Owner's
Contingency), then the subject Borrower shall with its own funds pay all costs
and expenses which may be required to complete the subject Project as and when
such costs and expenses become due and payable. In the event the costs to
acquire and complete any Project are less than the amount of Loan proceeds
allocated to the subject Project, then the unapplied portion of the Loan
proceeds (including any unexpended portion of the applicable Owner's Contingency
and amounts required to be refunded by Borrower under Section 6.1 for any
overpayments of Loan proceeds made in the final advance for a Project) shall be
retained by Atlantic as a reserve for Change Orders on other Projects which are
made in accordance with the requirements of this Agreement (the "Change Order
Reserve"). Provided no Default exists hereunder, the Change Order Reserve shall
be disbursed by Atlantic to any Borrower from time to time to cover the costs of
Change Orders to the extent any such Change Order results in Project costs
exceeding the Project Budget, including the Owner's Contingency, for such
Project (before such Borrower or Homestead, as guarantor under the Completion
and Payment Guaranty, shall be required to cover such additional costs pursuant
to the provisions of this Section 6.6 or the Completion and Payment Guaranty).
Requests for disbursement of portions of the Change Order Reserve shall be made
with Homestead's monthly requests for advance of Loan proceeds. Upon the
occurrence of a Default hereunder, Atlantic shall have no obligation to advance
any portion of the Change Order Reserve until such Default is cured. Upon the
occurrence of an Event of Default, Atlantic may apply the Change Order Reserve
against any of the obligations secured by the Security Documents as Atlantic
sees fit or, at Atlantic's option, to the completion of any incomplete
Improvements.
ARTICLE 7.
EVENTS OF DEFAULT
The occurrence of any one or more of the following shall constitute an
Event of Default under this Agreement:
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Section 7.1. FAILURE TO PAY. The failure by a Borrower to pay when due any
sums required to be paid under the Notes, the Security Documents, this Agreement
or any other Loan Documents, and such failure is not cured within 10 days after
receipt of written notice from Atlantic.
Section 7.2. OTHER LOAN DOCUMENT DEFAULTS. To the extent any such failure,
breach or inaccuracy has, or would have, a Material Adverse Effect, the failure
by a Borrower or Homestead to perform or observe, as and when required, any
covenant, agreement, obligation or condition required to be performed or
observed under this Agreement or under any of the other Loan Documents other
than as set forth elsewhere in this Article 7 (for which no additional grace or
cure period is given by this Section 7.2, or the existence of any breach or
inaccuracy in any of the representations, covenants or warranties set forth in
this Agreement or in any of the other Loan Documents, provided, however, that
(i) no Event of Default shall exist hereunder on account of a breach of any
representation, warranty or covenant set forth in any of the other Loan
Documents (other than this Agreement) until Homestead or such Borrower, as
applicable, shall have failed to cure such breach within any applicable notice
and cure period therein provided; and (ii) no Event of Default shall exist
hereunder on account of a breach of any representation, warranty or covenant
contained herein unless and until Atlantic shall provide written notice of such
breach to Homestead or such Borrower and such entity shall fail to cure the same
within 30 days after receipt of such notice, provided if such breach is of such
a nature that it cannot be cured within such 30 day period, it shall not
constitute an Event of Default hereunder so long as Homestead or such Borrower,
as applicable, commences its cure of such breach within such 30 day period and
thereafter diligently and continuously proceeds with the curing of same within a
reasonable period of time not to exceed 180 days.
Section 7.3. JUDGMENT OR ATTACHMENT. The entry by any court of a final
judgment in excess of $500,000 against Homestead or a Borrower that is not
satisfactorily stayed or discharged within 30 days from the date thereof, or any
attachment of any of the Properties or any of the proceeds of the Loans that
shall not be released, stayed or otherwise provided for to Atlantic's
satisfaction within 30 days after the occurrence thereof; provided that in the
case of a stay, Homestead or the subject Borrower, as applicable, shall have
reserved for the full amount thereof.
Section 7.4. VIOLATION OF GOVERNMENTAL REQUIREMENTS. The institution of
any judicial or administrative proceeding alleging that any of the Improvements
violate any Governmental Requirements if such violation gives rise to a Material
Adverse Effect and the failure to have such proceeding dismissed or such
violation corrected within 30 days after the institution thereof, except that
Homestead or the applicable Borrower shall have the right to contest any such
proceeding beyond such 30 day period, provided that Atlantic is satisfied that
the prosecution
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of such proceeding will neither have any Material Adverse Effect nor materially
impair Atlantic's security.
Section 7.5. INSOLVENCY, ETC. The occurrence of any of the following:
(a) Homestead or any Borrower shall generally not pay its debts as they
become due or shall admit in writing its inability to pay its debts, or shall
make a general assignment for the benefit of creditors;
(b) Homestead or any Borrower shall commence any case, proceeding or other
action seeking reorganization, arrangement, adjustment, liquidation, dissolution
or composition of it or its debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, or seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or any
substantial part of its property;
(c) Homestead or any Borrower shall take any corporate action to authorize
any of the actions set forth above in paragraphs (a) or (b); or
(d) Any case, proceeding or other action against Homestead or any Borrower
shall be commenced seeking to have an order for relief entered against it as
debtor, or seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, or seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its property, and such case, proceeding or
other action (i) results in the entry of an order for relief against it which is
not fully stayed within 15 Business Days after the entry thereof or (ii) remains
undismissed for a period of 60 days.
Section 7.6. UNAPPROVED TRANSFER. Any sale, conveyance, transfer,
disposition, alienation, hypothecation, leasing (except in the ordinary course
of business) or further encumbrancing of a Project, or any portion thereof or
any interest therein, by any Borrower, other than any conveyance of a portion of
the unimproved land associated with such Project which is in excess of what is
needed for such Project (which conveyance is permitted), or a sale, conveyance,
transfer, disposition, alienation, hypothecation or encumbrancing of any legal
or equitable interest in a Borrower or Homestead in violation of the Loan
Documents shall be an Event of Default as of the date of such transfer, without
any right to cure. In the case of a permitted conveyance of excess land, as
hereinbefore provided, Lender shall, upon request of Homestead, execute a
partial release, releasing the lien of any Security Documents applicable to such
excess land.
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ARTICLE 8.
REMEDIES
Section 8.1. GENERAL. Upon the occurrence of any Event of Default as
defined in Article 7 of this Agreement, Atlantic, at its option, shall have the
following rights and remedies:
(a) Atlantic may declare any one or more of the Notes to be immediately due
and payable, whereupon the Notes shall become forthwith due and payable without
presentment, demand, protest or further notice of any kind.
(b) Atlantic may bring a foreclosure action with respect to the Security
Documents, take possession of any one or more of the Properties or exercise any
other remedy provided for in the Security Documents.
(c) Atlantic shall be entitled to proceed simultaneously, or selectively
and successively, to enforce its rights and remedies under the Notes, the
Security Documents, the Completion and Payment Guaranty or this Agreement, and
to exercise any or all other rights and remedies available to Atlantic at law or
in equity.
(d) In the event Atlantic shall elect to enforce its rights selectively
under any one or more of the Loan Documents, such action shall not be deemed a
waiver or discharge of any lien or encumbrance securing payment of the Notes
until such time as Atlantic shall have been paid in full all sums due under the
Notes or secured by the Security Documents, including any sums advanced or
disbursed pursuant to this Agreement. The foreclosure of any lien provided
pursuant to this Agreement or the Security Documents, without the simultaneous
foreclosure of all such liens, shall not merge the liens granted which are not
foreclosed with any interest which Atlantic might obtain as a result of such
selective and successive foreclosure.
(e) Atlantic shall have the right, but not the obligation, to take
possession of any one or more of the Properties and proceed to complete the
Improvements thereto according to the applicable Plans. For this purpose, each
Borrower hereby conditionally assigns to Atlantic as additional security for the
repayment of the Loans all of each such Borrower's rights to the Plans for the
Projects owned by it, any contracts pertaining to the Project owned by such
Borrower, whether for construction, sale or otherwise, and any Permits
pertaining to the subject Property(ies); provided, Atlantic shall, upon
occurrence of an Event of Default, have the option to exercise this assignment,
but shall not be obligated to accept this assignment or to assume any liability
of any Borrower under any such Plans, contracts or Permits. Furthermore, each
Borrower hereby constitutes and appoints Atlantic as its true and lawful
attorney-in-fact with full
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power of substitution to complete, or cause to be completed, the Improvements
owned by such Borrower in the name of such Borrower and hereby empowers said
attorney or attorneys as follows: (i) to use any funds of Borrower, including
any balance that may be held in escrow and any funds which may remain unadvanced
hereunder, for the purpose of completing the Improvements being built by such
Borrower; (ii) to make such additional changes and corrections in the Plans for
such Improvements as may reasonably be necessary or desirable to complete such
Improvements in substantially the manner contemplated by the Plans for such
Improvements and in a good and workmanlike manner; (iii) to employ such
contractors, subcontractors, agents, architects and inspectors as shall be
required for said purposes; (iv) to pay, settle or compromise all existing bills
and claims that are or may become liens against the subject Property(ies) or any
part thereof or may be necessary or desirable for the completion of the subject
Improvements or the clearance of title; (v) to execute all applications and
certificates in the name of Borrower which may be required by law or by any
contract relating to the subject Improvements; and (vi) to do any and every act
with respect to the applicable Property(ies) which such Borrower may do in its
own behalf. It is understood and agreed that this power of attorney shall be
deemed to be a power coupled with an interest which cannot be revoked. Atlantic,
as attorney-in-fact, shall also have the power to defend, to the extent Atlantic
reasonably deems necessary, at such Borrower's cost, all actions or proceedings
in connection with the subject Improvements and Property(ies). At the time
Atlantic takes possession of a Property(ies), or any part thereof, all materials
on such Property owned by Borrower shall become the property of Atlantic for the
purpose of completing the subject Improvements. In addition, any materials or
equipment paid for with the proceeds of the Notes but stored at a location other
than the subject Property(ies) shall become the property of Atlantic when it
takes possession of the subject Property(ies). Such Borrower shall pay Atlantic
the cost of completion. Each Borrower hereby authorizes Atlantic to add such
costs to the indebtedness of the Borrowers to Atlantic, which costs shall be
secured by the Security Documents. Any of the foregoing actions by Atlantic
shall not relieve the Borrowers of their responsibility to repay the Notes. The
foregoing provision shall not be construed as creating any third party
beneficiary contract and nothing in the foregoing shall be construed as giving
or conferring any rights or benefits whatsoever to or upon any other person or
entities other than the parties to this Agreement. Homestead shall indemnify,
defend and hold harmless Atlantic from and against any and all claims,
liabilities, loss, damages, suits, actions, expenses (including reasonable
attorneys' fees) and costs arising from any actions taken by Atlantic in
accordance with the power of attorney herein granted except to the extent
attributable to the gross negligence or willful misconduct of Atlantic.
(f) Atlantic shall not have any obligation to make any advances under the
Notes pursuant to this Agreement after the occurrence and during the continuance
of an Event of
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Default and at any time during such period, may unilaterally elect to terminate
any obligation of Atlantic to make any future advances under the Notes pursuant
to this Agreement.
Section 8.2. REMEDIES CUMULATIVE. No failure or delay by Atlantic in the
exercise of any rights or remedies available to it under the Loan Documents or
at law or in equity shall operate as a waiver thereof, nor shall any single or
partial exercise by Atlantic of any such right or remedy preclude any further
exercise thereof or of any other right or remedy. The remedies provided in the
Loan Documents or available at law or in equity are cumulative and not
alternative.
ARTICLE 9.
MISCELLANEOUS
Section 9.1. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations, warranties and covenants contained herein shall survive the
execution of this Agreement, the making of the Loans and the delivery of the
Notes and other Loan Documents and the release of any portion of the liens of
the Security Documents, and shall remain in full force and effect until the
termination of this Agreement in accordance with Section 2.8 hereof.
Section 9.2. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon,
and inure to the benefit of, the parties hereto and their respective heirs,
personal representatives, successors, assigns and affiliates, but shall not be
assignable by any party hereto without the prior written consent of the other
party hereto; provided that Homestead and/or the Partnership Borrower may assign
its rights hereunder in whole or in part to a Homestead Affiliate or Subsidiary.
Other than to a Homestead Affiliate or Subsidiary, no Borrower shall, without
the prior written consent of Atlantic, which consent Atlantic may withhold in
its sole discretion, directly or indirectly assign, transfer or convey (i) this
Agreement or any of the other Loan Documents, (ii) any of Borrower's rights or
obligations under any of the Loan Documents, (iii) any portion of the proceeds
of the Notes, (iv) any legal or equitable interest in the Property or (v) any
legal or equitable interest in such Borrower.
Section 9.3. NOTICES. Any notice or other communication provided for herein
or given hereunder to a party hereto shall be in writing and shall be given by
delivery, by telex, telecopier or by mail (registered or certified mail, postage
prepaid, return receipt requested) to the respective parties as follows:
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If to Homestead:
Homestead Village Incorporated
125 Lincoln Avenue, Suite 300
Santa Fe, New Mexico 87501
Attention: David C. Dressler, Jr.
Facsimile: (505) 982-2925
If to Atlantic:
Security Capital Atlantic Incorporated
7777 Market Center Avenue
El Paso, Texas 79912
Attention: James C. Potts
Facsimile: (915) 877-3301
or to such other address with respect to a party as such party shall notify the
other in writing.
Section 9.4. WAIVER. No party may waive any of the terms or conditions of
this Agreement, except by a duly executed writing referring to the specific
provision to be waived.
Section 9.5. AMENDMENT. This Agreement may be amended only by a writing
duly executed by both Homestead and Atlantic.
Section 9.6. SEVERABILITY. Insofar as is possible, each provision of this
Agreement shall be interpreted so as to render it valid and enforceable under
applicable law and severable from the remainder of this Agreement. A finding
that any such provision is invalid or unenforceable in any jurisdiction shall
not affect the validity or enforceability of any other provision or the validity
or enforceability of such provision under the laws of any other jurisdiction.
Section 9.7. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement, and supersedes all other prior agreements and understandings, both
written and oral, among the parties hereto and their affiliates, with respect to
the subject matter hereof. The provisions of this Agreement supersede any
provisions set forth in the Existing Loan Documents relating to the disbursement
of Loan proceeds for the Projects.
Section 9.8. EXPENSES. Except as otherwise expressly contemplated herein to
the contrary, regardless of whether the transactions contemplated hereby are
consummated, each
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party hereto shall pay its own expenses incident to preparing for, entering into
and carrying out this Agreement and the consummation of the transactions
contemplated hereby.
Section 9.9. CAPTIONS. The Article, Section and Paragraph captions herein
are for convenience of reference only, do not constitute part of this Agreement
and shall not be deemed to limit or otherwise affect any of the provisions
hereof.
Section 9.10. GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of New Mexico.
Section 9.11. NO JOINT VENTURE OR PARTNERSHIP. Nothing contained in this
Agreement or in any of the other Loan Documents and no other aspect of the
relationship between Homestead or any Borrower and Atlantic shall be construed
as creating a partnership, joint venture, or other relationship of or between
Homestead or any Borrower and Atlantic other than the lending relationship of
lender and borrower. All rights and obligations granted to or undertaken by
either of the parties hereto shall be construed as incidents of such lending
relationship.
Section 9.12. NO THIRD PARTY BENEFICIARY RIGHTS CREATED. The parties hereto
expressly declare that it is their joint and mutual intention that this
Agreement and the transactions contemplated hereby shall not be construed as
creating a third party beneficiary contract, and neither this Agreement nor any
of the other Loan Documents shall be construed as giving or conferring any
rights or benefits whatsoever to or upon any other persons or entities other
than Homestead, any Borrower and Atlantic.
Section 9.13. INCORPORATION BY REFERENCE. This Agreement, the Notes and the
Security Documents are intended to be construed as part of the same transaction,
and all of the covenants, agreements, conditions, terms and provisions contained
in any one of the Loan Documents shall be deemed to be included in each of the
other Loan Documents with the same force and effect as though set forth in full
therein. In the event any of the provisions of this Agreement are in conflict
with or inconsistent with the provisions of the Security Documents, this
Agreement shall govern and control.
Section 9.14. COUNTERPARTS. This Agreement may be executed in counterpart
copies, each of which shall constitute an original, and all of which together
shall constitute one and the same document.
Section 9.15. SCOPE OF REVIEW OF PLANS. Neither the approval of the Plans
nor any subsequent inspections or approvals of the Improvements during
construction shall constitute a
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warranty or representation by Atlantic or any of its agents, representatives or
designees as to the technical or legal sufficiency, adequacy or safety of the
structures or any of their component parts, including without limitation
fixtures, equipment or furnishings, nor shall such approvals or inspections
constitute such a warranty or representation as to the subsoil conditions
involved in the Property or any other physical condition or feature pertaining
to the Property. All acts, including any failure to act, relating to the
Property by any agents, representatives or designees of Atlantic are performed
solely for the benefit of Atlantic to assure repayment of the Loans and are not
for the benefit of Borrower or any other person, including without limitation
purchasers, guests or other occupants.
Section 9.16. GOVERNMENTAL REGULATION. Anything contained in this Agreement
to the contrary notwithstanding, Atlantic shall not be obligated to extend
credit to Borrower in an amount in violation of any limitation or prohibition
provided by any applicable governmental statute or regulation.
Section 9.17. SUBORDINATION. Each Borrower hereby subordinates all rights,
liens and claims for any of the proceeds and advances under the Notes to the
liens, operation and effect of the Security Documents.
Section 9.18. INDEMNITY. Homestead and each Borrower agree to indemnify,
defend and hold Atlantic harmless from and against any and all claims, injuries,
damages and liabilities that may be asserted or claimed against Atlantic by any
person as a result or by reason of, or that may be incurred or suffered by
Atlantic as a result or by reason of, the construction contemplated herein or
the operation of the ownership or Encumbered Property or any part thereof.
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IN WITNESS WHEREOF, each of the undersigned has executed this Agreement, or
caused this Agreement to be duly executed on its behalf, as of the date first
set forth above.
HOMESTEAD VILLAGE INCORPORATED
By: /s/ David C. Dressler, Jr.
--------------------------
David C. Dressler, Jr.
Chairman
SECURITY CAPITAL ATLANTIC INCORPORATED
By: /s/ James C. Potts
------------------
James C. Potts
Co-Chairman
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GUARANTY OF COMPLETION AND PAYMENT Exhibit 10.5
----------------------------------
THIS GUARANTY OF COMPLETION AND PAYMENT (this "Guaranty") is made and
entered into as of the 17th day of October, 1996, by (i) HOMESTEAD VILLAGE
INCORPORATED ("Guarantor"), to and for the benefit of (ii) SECURITY CAPITAL
PACIFIC TRUST, a Maryland real estate investment trust ("PTR").
RECITALS
--------
A. Pursuant to that certain Funding Commitment Agreement (the "Funding
Agreement") dated as of the date hereof, by and among Guarantor, PTR and PTR
Homestead Village Limited Partnership, a Delaware limited partnership, PTR has
agreed to loan up to an aggregate maximum amount of $221,333,620 (the "Loan") to
Guarantor and/or any Subsidiary (as such term is in the Funding Agreement) for
the purpose of acquiring and developing the Projects (as defined in the Funding
Agreement). The Loan is (i) evidenced by certain Amended and Restated
Promissory Notes in the aggregate face amount of the Loan (which notes, together
with any other notes delivered from time to time to evidence the Loan, and all
amendments and restatements to any of such notes are collectively called the
"Notes"), and (ii) secured by various Security Documents (as defined in the
Funding Agreement).
B. All terms used herein, but not defined herein, shall have the meanings
ascribed to them in the Funding Agreement.
C. PTR is willing to advance the funds of the Loan pursuant to the
Funding Agreement only on condition that the Guarantor deliver this Guaranty.
D. Guarantor has a direct or indirect financial interest in each
Subsidiary, and is therefore benefitted by the making of the Loan.
AGREEMENT
---------
NOW, THEREFORE, in consideration of these Recitals, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Guarantor hereby covenants and agrees as follows:
1. Recitals. The foregoing Recitals are hereby incorporated herein and
made a substantive part hereof.
<PAGE>
2. Completion Guaranty.
-------------------
(a) Construction Matters. So long as PTR disburses the proceeds of
the Loan in accordance with the terms and provisions of the Funding Agreement,
Guarantor irrevocably and unconditionally fully guarantees to PTR the following:
(a) payment of all costs of the design, engineering and construction of each
Project (including the furnishing thereof) undertaken by a Subsidiary; and (b)
completion of construction of each Project undertaken by a Subsidiary (including
the furnishing thereof) substantially in accordance with the Plans for such
Project and in compliance with applicable codes, ordinances, laws, statutes,
rules and regulations of any governmental authority having jurisdiction.
(b) Excess Costs. In the event that the actual cost of the design,
engineering and construction of a Project undertaken by a Subsidiary exceeds the
amount available for such Project from the Loan proceeds, including any Owner's
Contingency in the Project Budget for such Project, Guarantor shall pay such
costs ("Excess Costs") as and when they become due and payable. It is understood
that Guarantor's obligation under the preceding sentence is not subject to the
subject Subsidiary's initial obligation to do so pursuant to the terms of the
Funding Agreement.
(c) Completion. For the purposes of this Guaranty, the construction
of the Improvements shall be deemed to have been completed at such time as Final
Completion has occurred pursuant to the terms of the Funding Agreement.
(d) Indemnification of PTR and Trustees. Guarantor shall indemnify
and hold PTR, the trustees under the Security Documents executed by a Subsidiary
(collectively, the "Trustees") and their respective agents, officers and
employees harmless from and against all claims, expenses, loss and liability of
any and every kind other than those arising out of the gross negligence or
willful misconduct of PTR, including, without limitation, attorneys' fees,
arising out of or in connection with the design, engineering, construction and
completion of each Project and, so long as PTR disburses the proceeds of the
Loan in accordance with the terms and provisions of the Funding Agreement, shall
protect each Project from any mechanic's, materialmen's or similar liens that
may be filed against such Project. Guarantor shall not have any right of
recourse against PTR, Trustees or their respective agents and employees by
reason of any action such parties may take or omit to take under the provisions
of this Guaranty or under the provisions of the Funding Agreement.
(e) Completion of Construction. If Guarantor shall fail to cause
Final Completion of a Project undertaken by a Subsidiary with Loan Proceeds to
be achieved, or shall otherwise fail to pursue diligently the performance of the
obligations of Guarantor hereunder, immediately upon receipt of a written demand
given to Guarantor by PTR in the manner herein provided, PTR, at its option,
shall have the right to cause the completion of the subject Project either
before or after or simultaneously with any other remedy of PTR against Guarantor
and/or such Subsidiary, with such changes or modifications in the Plans and in
any contracts and
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subcontracts relating thereto which PTR deems reasonably necessary, and to
expend such sums as PTR deems proper in its sole and unreviewable discretion in
order to so complete the same and to pay costs of construction of the same
theretofore incurred by the subject Subsidiary and/or Guarantor, and Guarantor
shall pay all such amounts (which constitute Excess Costs) with interest thereon
at the default rate provided for in the Notes calculated from the date of
Guarantor's default, to PTR upon demand. So long as all conditions precedent to
PTR's obligations to make disbursements under the Funding Agreement are
satisfied, PTR shall continue to make disbursements in the manner specified in
the Funding Agreement.
(f) No Release. The liability of Guarantor shall not be terminated,
affected, impaired or reduced in any way by any delay, failure or refusal of PTR
to exercise any right or remedy PTR may have against any person, including,
without limitation, any Subsidiary, any general contractor, any subcontractor or
any other guarantors liable for all or any part of the costs of construction of
a Project guaranteed herein by Guarantor, or by the release of any Subsidiary
from performance or observance of any of the agreements, covenants, terms or
conditions contained in the Funding Agreement, by the operation of law or
otherwise, whether made with or without notice to Guarantor.
(g) Termination of Completion Guaranty. Satisfaction by Guarantor of
any liability hereunder at any one time with respect to payment of any amounts
required under this Guaranty shall not discharge Guarantor with respect to any
further amounts that may be required hereunder at any other time for the subject
Project or any other Project, it being the intent hereof that this Guaranty and
the obligations of Guarantor under this Guaranty shall be continuing and
irrevocable until the date on which Final Completion of all Subsidiary Projects
funded under the Funding Agreement has occurred and all costs and expenses
incurred in connection therewith have been paid in full (the "Completion
Termination Date"). Further, if at any time all or any part of any payment made
by Guarantor under or with respect to this Guaranty is or must be rescinded or
returned for any reason whatsoever (including, but not limited to, the
insolvency, bankruptcy or reorganization of a Subsidiary or Guarantor), then
Guarantor's obligations hereunder shall, to the extent of the payment rescinded
or returned, be deemed to have continued in existence, notwithstanding such
previous payment made by Guarantor or receipt of payment by PTR, and Guarantor's
obligations hereunder shall continue to be effective or be reinstated, as the
case may be, as to such payment, all as though such previous payment by
Guarantor had never been made.
(h) Modifications by PTR. Guarantor acknowledges that any Subsidiary
may (and/or PTR may at any time enter into agreements with any Subsidiary
receiving Loan proceeds to) amend, modify or change the Plans applicable to such
Subsidiary's Project, any contracts or subcontracts relating to the Project
and/or the Funding Agreement or any other documents evidencing, securing or
relating to the Loan, or may at any time waive or release any provision or
provisions thereof and, with reference thereto, may make and enter into all such
agreements as such Subsidiary and/or PTR may deem proper or desirable, without
any notice or further
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assent from Guarantor, and without in any manner impairing or affecting this
Guaranty or any of PTR's rights hereunder or any of Guarantor's obligations
hereunder.
3. Guaranty of Payment. Guarantor also irrevocably and unconditionally
fully guarantees to PTR to pay and perform when due the Liabilities.
"Liabilities" shall mean all obligations of the Subsidiaries to PTR of any kind
whatsoever, howsoever created, arising or evidenced, whether pursuant to a
covenant, representation, warranty, indemnity or other agreement of kind,
whether direct or indirect, absolute or contingent, now or hereafter existing,
or due or to become due, under the Notes or any of the other Loan Documents.
Obligations under the Loan Documents shall include the obligation to pay
interest under the Notes executed by any Subsidiary, including interest at the
post-maturity or default rate.
4. Nature of the Guaranty. This Guaranty shall be direct, immediate, and
primary, and is one of payment and performance and not just collection. PTR
shall be under no obligation to pursue its rights against a Subsidiary or any
other right or remedy available to it or pursue any collateral or security
before proceeding against Guarantor. Guarantor expressly waives all rights it
may have now or in the future under any statute, or at common law, or at law or
in equity, or otherwise, including, without limitation, any rights Guarantor may
have to compel PTR to proceed in respect of the Guarantor's obligation hereunder
against any Subsidiary or any other party or against any security for the
payment or performance of Guarantor's obligation hereunder before proceeding
against, or as a condition to proceeding against, Guarantor. All payments made
pursuant to this Guaranty shall be made in United States currency to PTR in
immediately available funds, without reduction for any recoupment, set-off,
counterclaim or defense based upon any claim that Guarantor may have against any
Subsidiary. The obligations and liabilities of Guarantor pursuant to this
Guaranty shall be unconditional, irrespective of the genuineness, validity,
priority, regularity or enforceability of the Notes or the Loan Documents or any
other circumstance which might otherwise constitute a legal or equitable
discharge of a surety or guarantor.
5. Rights of PTR to Deal With Subsidiaries and Guarantor. Guarantor
hereby assents to any and all terms and agreements between PTR and any
Subsidiaries receiving Loan proceeds or between PTR and any person, including
Guarantor, who guarantees in whole or in part the payment or performance of any
Subsidiary's obligations with respect to PTR, and all amendments and
modifications thereof, whether presently existing or hereafter made and whether
oral or in writing. PTR may, without compromising, impairing, diminishing, or
in any way releasing Guarantor from any obligations hereunder and without
notifying or obtaining the prior approval of Guarantor at any time or from time
to time: (a) waive or excuse a default or defaults by a Subsidiary or any
person who has guaranteed in whole or in part any of such Subsidiary's
obligations, or delay in the exercise by PTR of any or all of PTR's rights or
remedies with respect to such default or defaults; (b) grant extensions of time
for payment or performance by a Subsidiary or any person who has guaranteed in
whole or in part any of such Subsidiary's obligations, including Guarantor; (c)
release, substitute, exchange, surrender or add collateral of a Subsidiary or of
any person who has guaranteed in whole or in part any of such
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Subsidiary's obligations, or waive, release or subordinate, in whole or in part,
any lien or security interest held by PTR on any real or personal property
securing payment or performance, in whole or in part, of a Subsidiary's
obligations, including Guarantor; (d) release a Subsidiary or any person who has
guaranteed in whole or in part any of such Subsidiary's obligations, including
Guarantor; (e) apply payments made by a Subsidiary, or by any person who has
guaranteed in whole or in part, any of such Subsidiary's obligations, including,
without limitation, Guarantor, to any sums owed by a Subsidiary to PTR, in any
order or manner, or to any specific account or accounts, as PTR may elect; (f)
modify, change, renew, extend or amend in any respect PTR's agreement with a
Subsidiary or any person who has guaranteed in whole or in part any of such
Subsidiary's obligations, including Guarantor, or any documents, instrument or
writing embodying or reflecting the same.
6. Waivers by Guarantor. Guarantor waives (a) any and all notices
whatsoever with respect to this Guaranty or with respect to any Subsidiary's
obligations, including, but not limited to, notice of: (i) PTR's acceptance
hereof or PTR's intention to act, or PTR's action, in reliance hereon; (ii) the
present existence or future incurring of any Subsidiary's obligations or any
terms or amounts thereof or any change therein; (iii) default by a Subsidiary or
any surety, pledgor, grantor of security, guarantor or other person who has
guaranteed or secured in whole or in part such Subsidiary's obligations,
including Guarantor; and (iv) the obtaining or release of any guaranty or surety
agreement (in addition to this Guaranty), pledge, assignment or other security
for any of a Subsidiary's obligations; and (b) (i) presentment and demand for
payment of any sum due from a Subsidiary or any person who has guaranteed in
whole or in part any of such Subsidiary's obligations, including Guarantor, and
protest of nonpayment; (ii) notice of default by a Subsidiary or any person who
has guaranteed in whole or in part any of such Subsidiary's obligations and
notice of any extension of time for payment or performance under the Note and
any other indulgences granted by PTR to a Subsidiary; (iii) demand for
performance by a Subsidiary or any person who has guaranteed in whole or in part
any of such Subsidiary's obligations, including Guarantor; (iv) to the fullest
extent legally possible, any and all defenses which may now or hereafter exist
by virtue of any statutes of limitations, valuation, marshaling, forbearance,
redemption, exemption, appraisement, stay or moratorium laws or other similar
laws now or hereafter in effect; and (v) all other notices and demands otherwise
required by law which Guarantor may lawfully waive. PTR may (without notice to
or consent of the Guarantor, and with or without consideration) release,
compromise, settle with or proceed against Guarantor without releasing,
lessening or affecting the obligations hereunder or under any of the documents
relating to the Loan. It is the intention hereof that Guarantor shall remain
liable as a principal until payment in full of all indebtedness and performance
and observance of the terms, covenants and conditions of the Notes and of each
other Loan Document to be performed and observed by any Subsidiaries,
notwithstanding any act, omission or thing which might otherwise operate as a
legal or equitable discharge of Guarantor. Guarantor shall be responsible for
obtaining information regarding its Subsidiaries, including, but not limited to,
any changes in the business or financial condition of any Subsidiaries, and PTR
shall have no duty to notify Guarantor of any such information.
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7. Collection Expenses. Guarantor shall pay to PTR, upon demand, all
losses, costs and expenses, including attorneys' fees, if collection is referred
to an attorney, that may be incurred by PTR in attempting to cause satisfaction
of Guarantor's liability under this Guaranty.
8. Invalidity of Any Part. If any provision or part of any provision of
this Guaranty shall for any reason be held invalid, illegal or unenforceable in
any respect, such other provisions or the remaining part of any effective
provisions of this Guaranty shall be construed as if such invalid, illegal or
unenforceable provision or part thereof had never been contained herein, but
only to the extent of its invalidity, illegality or unenforceability.
9. Impairment of Subrogation Rights. Guarantor agrees that it shall have
no right of subrogation whatsoever with respect to the Notes, or to the monies
due or unpaid thereon, or to any collateral securing the same, unless and until
PTR shall have received payment in full of all sums due under the Notes and the
Loan Documents. Guarantor waives and releases PTR from any damages which
Guarantor may incur as a result of any intentional or unintentional or negligent
action or inaction of PTR impairing, diminishing or destroying any rights of
subrogation which Guarantor may have upon payment of any of the Subsidiaries'
obligations. Guarantor further agrees that all the present and future
indebtedness to Guarantor of any Subsidiary receiving Loan proceeds shall be and
hereby is subordinated, assigned and transferred to PTR. Notwithstanding any
other provision of this Guaranty to the contrary, if Guarantor is or becomes an
"insider" (as defined in Section 101 of the United States Bankruptcy Code) with
respect to its Subsidiaries or any other guarantor, Guarantor irrevocably waives
any and all rights of contribution, indemnification, reimbursement or any
similar right against any of its Subsidiaries and/or such other guarantor
(including any right of subrogation), whether such rights arise under an express
or implied contract or by operation of law; it being the specific intention of
this sentence that in any bankruptcy or insolvency proceeding filed by or
against such Subsidiary or any other guarantor, no guarantor, including the
Guarantor, shall be deemed a "creditor" (as defined in Section 101 of the United
State Bankruptcy Code) of any Subsidiary or any other guarantor by reason of the
existence of this Guaranty with the result that the exercise of such rights
would require PTR to return to the bankruptcy estate of any Subsidiary or any
other guarantor any payments received by PTR on account of the obligations
guaranteed hereby. Subject to the limitations set forth in the preceding
sentence, until all of the obligations guaranteed hereby have been duly and
punctually performed to the satisfaction of PTR, Guarantor shall not be
subrogated to any right of PTR against any Subsidiary, any other guarantor or
any collateral, and any moneys, property or other consideration received at any
time by Guarantors from any Subsidiary in connection with such rights of
subrogation prior to the performance by such Subsidiary of all the obligations
guaranteed hereby shall be held in trust for PTR and shall be paid or
transferred to PTR upon demand therefor. Guarantor agrees not to assert any
right of contribution against any other guarantor of the obligations guaranteed
hereby in any manner that is inconsistent with the preceding two sentences.
10. Remedies Cumulative. Each right, power and remedy of PTR under this
Guaranty, the Note, the Loan Documents or any other agreement or instrument
signed by a
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Subsidiary or Guarantor or under applicable laws shall be cumulative and
concurrent, and the exercise of any one or more of them shall not preclude the
simultaneous or later exercise by PTR of any or all such other rights, powers or
remedies at law or in equity or under this Guaranty. No failure or delay by PTR
to insist upon the strict performance of any one or more of its rights, powers
or remedies consequent upon a breach thereof or default hereunder shall
constitute a waiver thereof, or preclude PTR from exercising any such right,
power or remedy. By accepting partial payment on this Guaranty, PTR shall not
be deemed to have waived the right either to require prompt payment when due and
payment of all other amounts payable under this Guaranty or to exercise any
rights and remedies available to it in order to collect all such other amounts.
No modification, change, waiver or amendment of this Guaranty shall be deemed to
be made by PTR unless in writing and signed by PTR, and each such waiver, if
any, shall apply only with respect to the specific instance involved and only to
the extent expressly provided therein.
11. No Action By PTR to Impair Enforcement of Rights Hereunder. No act of
commission or omission of any kind or at any time upon the part of PTR in
respect of any matter whatsoever, shall in any way affect or impair its right to
enforce any right, power or benefit under this Guaranty, and no set-off,
counterclaim, reduction or diminution of an obligation, or any defense of any
kind or nature which Guarantor has or may have against PTR, shall be available
to Guarantor or against PTR.
12. Limitation of Liability of Subsidiary Not to Affect Liability of the
Guarantor Hereunder. Without limiting the foregoing, it is specifically
understood that any impairment, modification, limitation or discharge of the
liability of any Subsidiary under any Note or any other Loan Document arising
out of or by virtue of any act of bankruptcy, or any arrangement, reorganization
or similar proceeding for relief of debtors under Federal or state law initiated
by or against such Subsidiary shall not affect, impair, modify, limit or
discharge the liability of Guarantor hereunder in any manner whatsoever, and
this Guaranty shall remain and continue in full force and effect. It is the
intent and purpose of this Guaranty that Guarantor shall and do hereby waive all
rights and benefits which might accrue to them by reason of any such
proceedings, and Guarantor agrees that it shall be liable for the full amount of
the obligations guaranteed by them hereby, irrespective of, and without regard
to, any impairment, modification, limitation or discharge of the liability of
such Subsidiary under such Note or any or all of the Loan Documents that may
result from any such proceedings.
13. Independent Obligations of Guarantor. The obligations of Guarantor
hereunder are irrevocable and are independent of the Loan or other obligations
of any Subsidiary, and a separate action or actions may be brought and
prosecuted against Guarantor, regardless of whether any action is brought
against such Subsidiary or whether such Subsidiary is joined in any such action
or actions.
14. Choice of Law; Consent to Jurisdiction; Venue. This Guaranty, having
been executed, sealed and delivered in the State of New Mexico shall be
construed, interpreted and
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enforced under the internal laws (and not the laws pertaining to conflicts or
choice of law) of the State of New Mexico. Should any provision of this
Guaranty require judicial interpretation, it is agreed that the court
interpreting or considering same shall not apply the presumption that the terms
hereof shall be more strictly construed against a party by reason of the rule or
conclusion that a document should be construed more strictly against the party
who itself or through its agent prepared the same, it being agreed that all
parties hereto have participated in the preparation of this Guaranty and that
each party consulted (or had the opportunity to consult) legal counsel before
the execution of this Guaranty. Guarantor consents to the jurisdiction of the
courts of any county in the State of New Mexico selected by PTR and to the
jurisdiction of any United States District Court in the State of New Mexico, if
jurisdiction exists.
15. Counterparts. This Guaranty may be executed in any number of
counterparts, each of which shall be considered an original for all purposes;
provided, however, that all such counterparts shall together constitute one and
the same instrument.
16. Binding Nature. This Guaranty shall inure to the benefit of, and be
enforceable by, PTR and its successors and assigns, and shall be binding upon
and enforceable against the Guarantor and its legal and personal
representatives, heirs, successors and assigns. This Guaranty may be assigned
by PTR, or any other holder of the Note at any time or from time to time.
17. Joint and Several Nature. In the event there exists more than one
Guarantor, all obligations, responsibilities, warranties, representations and
liabilities hereunder shall be joint and several.
18. Notices. Any and all notices or other communications hereunder shall
be deemed to have been duly given if in writing and if transmitted by hand-
delivery, Federal Express, Express Mail or other nationally recognized overnight
courier or by certified mail, return receipt requested, as follows:
To PTR: Security Capital Pacific Trust
7777 Market Center Avenue
El Paso, Texas 79912
Attention: C. Ronald Blankenship
To Guarantor: Homestead Village Incorporated
125 Lincoln Avenue, Suite 300
Santa Fe, New Mexico 87501
Attention: David C. Dressler, Jr.
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With a copy to: Mayer, Brown & Platt
141 East Palace Avenue
Santa Fe, New Mexico 87501
Attention: Caroline Brower, Esquire
or to such other address as either party may furnish to the other by notice in
accordance with this Paragraph 18.
19. Tense; Gender. As used herein, the plural shall refer to and include
the singular, and the singular the plural, and the use of any gender shall
include and refer to any other gender.
20. Time of Essence. Guarantor and PTR expressly agree that time shall be
of the essence in the performance of obligations of Guarantor under this
Guaranty.
21. Entire Agreement. This Guaranty sets forth the final and entire
agreement between the parties hereto with respect hereto and is intended to be
an integration of all prior negotiations and understandings. PTR and Guarantor
and their respective agents shall not be bound by any terms, conditions,
statements, warranties or representations, oral or written, express or implied,
not set forth or incorporated herein.
22. WAIVER OF JURY TRIAL, ETC. GUARANTOR AND PTR (BY ITS ACCEPTANCE
HEREOF) WAIVES ANY RIGHT TO A TRIAL BY JURY OF ANY OR ALL ISSUES ARISING IN ANY
ACTION OR PROCEEDING BETWEEN GUARANTOR AND PTR OR THEIR SUCCESSORS OR ASSIGNS,
UNDER OR CONNECTED WITH THE LOAN, THIS GUARANTY OR ANY OF ITS PROVISIONS OR ANY
OF THE LOAN DOCUMENTS, AND AGREES THAT THE OBLIGATION EVIDENCED BY THIS GUARANTY
IS AN EXEMPTED TRANSACTION UNDER THE TRUTH-IN-LENDING ACT, 15 U.S.C. SECTION
1601, ET SEQ. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY
PTR AND GUARANTOR, AND GUARANTOR ACKNOWLEDGES THAT NEITHER PTR NOR ANY PERSON
ACTING ON BEHALF OF PTR HAS MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS
WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT.
GUARANTOR FURTHER ACKNOWLEDGES THAT IT HAS BEEN OR HAD THE OPPORTUNITY TO BE
REPRESENTED IN THE SIGNING OF THIS GUARANTY AND IN THE MAKING OF THIS WAIVER BY
INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE
OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
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IN WITNESS WHEREOF, Guarantor has duly executed this Guaranty of Completion
and Payment as of the date first set forth above.
GUARANTOR:
HOMESTEAD VILLAGE INCORPORATED
ATTEST:
/s/ Jeffrey A. Klopf By:/s/ David C. Dressler, Jr.
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Jeffrey A. Klopf, Secretary Its:
-------------------------
[Corporate Seal]
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INVESTOR AND REGISTRATION RIGHTS AGREEMENT Exhibit 10.7
THIS INVESTOR AND REGISTRATION RIGHTS AGREEMENT (this "Agreement"), is
entered into as of October 17, 1996, between Homestead Village Incorporated, a
Maryland corporation ("Homestead"), and Security Capital Atlantic Incorporated,
a Maryland corporation ("Atlantic").
WHEREAS, on the date hereof, the parties are entering into a series of
transactions as described in that certain Merger and Distribution Agreement,
dated as of May 21, 1996, among Atlantic, Security Capital Pacific Trust
("PTR"), Security Capital Group Incorporated ("SCG") and Homestead (the "Merger
Agreement"), pursuant to which, among other things, Homestead will acquire all
of Atlantic's assets relating to its operation of extended-stay lodging
facilities;
WHEREAS, pursuant to the Merger Agreement, Atlantic and Homestead are
entering into a Funding Commitment Agreement (the "Funding Commitment
Agreement"), pursuant to which Atlantic will agree to make certain loans to
Homestead, which loans will be secured by mortgages, and the notes evidencing
such loans will be convertible into shares of Common Stock, $0.01 par value per
share ("Common Stock"), of Homestead on the terms and conditions described
therein;
WHEREAS, pursuant to a Warrant Purchase Agreement (the "Warrant
Purchase Agreement"), dated as of May 21, 1996, among Homestead, SCG, Atlantic
and PTR, Homestead has agreed to issue to Atlantic warrants to acquire Common
Stock; and
WHEREAS, the execution of this Agreement is a condition to the
consummation of the transactions contemplated by the Merger Agreement, the
Funding Commitment Agreement and the Warrant Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
Section 1. Board Representation. Until March 31, 1998 and for so long
thereafter as Atlantic shall continue to have the right to convert in excess of
$20 million in principal amount of loans made pursuant to the Funding Commitment
Agreement, Homestead shall not increase the number of members of its Board of
Directors to more than seven (7) members and Atlantic shall be entitled to
designate one person for nomination to the Homestead Board of Directors (such
person, a "Nominee") and Homestead will use its best efforts to cause the
election of such Nominee. The Nominee of Atlantic may, but need not, include the
same person or persons nominated by SCG pursuant to the Investor Agreement of
even date herewith between SCG and Homestead or the person nominated by PTR
pursuant to the Investor and Registration Rights Agreement of even date herewith
between PTR and Homestead.
<PAGE>
Section 2. Inspection. Until March 31, 1998 and for so long
thereafter as Atlantic shall continue to have the right to convert any principal
amount of loans made, pursuant to the Funding Commitment Agreement, at any time
during regular business hours and as often as reasonably requested of
Homestead's officers, Homestead shall permit Atlantic or any authorized
employee, agent or representative of Atlantic to examine and make copies and
abstracts from the records and books of account of, and to visit the properties
of, Homestead and to discuss the affairs, finances, and accounts of Homestead
with any of its officers of directors; provided, that all costs and expenses of
such inspection shall be borne by Atlantic.
Section 3. Registration Rights.
(a) Demand. At any time prior to the first anniversary of the date on
which the Common Stock is registered under Section 12(b) or 12(g) of the
Exchange Act of 1934, as amended (the "Exchange Act"), Atlantic may request
one registration of all or any part of its Registrable Securities (as
defined in sub-section (h) below) under the Securities Act of 1933, as
amended (the "Securities Act"), by delivering written notice (which notice
shall state that Atlantic intends to dispose of such securities through a
public distribution thereof) to Homestead specifying the number of
Registrable Securities that Atlantic desires to distribute and Homestead
shall use its reasonable efforts to effect the registration of such
Registrable Securities under the Securities Act in accordance with the
further provisions of this Section 3.
(b) Shelf Registration. At any time after the first anniversary of
the date on which the Common Stock is registered under Section 12(b) or
12(g) of the Exchange Act, Atlantic may request, on up to three separate
occasions, registration of all or any part of its Registrable Securities
pursuant to Rule 415 under the Securities Act by delivering written notice
(which notice shall state that Atlantic intends to dispose of such
securities through a public distribution thereof) to Homestead and
Homestead shall use its reasonable efforts to effect the registration of
such Registrable Securities under the Securities Act in accordance with the
further provisions of this Section 3.
(c) Registration Procedures. If and whenever Homestead is required by
any of the provisions of this Section 3 to use its reasonable efforts to
effect the registration of any of the Registrable Securities under the
Securities Act, Homestead shall:
(i) prepare and file with the Securities and Exchange Commission
(the "Commission") a registration statement with respect to such
securities and use its reasonable efforts to cause such registration
statement to become effective and remain effective for as long as
shall be necessary to complete the distribution of the Registrable
Securities so registered;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection
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therewith as may be necessary to keep such registration statement
effective for so long as shall be necessary to complete the
distribution of the Registrable Securities so registered and to comply
with the provisions of the Securities Act with respect to the sale or
other disposition of all securities covered by such registration
statement whenever Atlantic shall desire to sell or otherwise dispose
of the same within such period;
(iii) furnish to Atlantic such numbers of copies of such
registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement, including any
preliminary prospectus, and any amendment or supplement thereto, and
such other documents, as Atlantic may reasonably request in order to
facilitate the sale or other disposition of the Registrable
Securities;
(iv) use its reasonable efforts to register and qualify the
securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as Atlantic shall
reasonably request, and do any and all other acts and things
reasonably requested by Atlantic to assist it to consummate the public
sale or other disposition in such jurisdictions of the securities
owned by Atlantic, except that Homestead shall not for any such
purpose be required to qualify to do business as a foreign corporation
in any jurisdiction wherein it is not so qualified or to file therein
any general consent to service of process;
(v) otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months,
beginning with the first fiscal quarter beginning after the effective
date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act;
(vi) use its reasonable efforts to list such securities on any
securities exchange or quotation system on which any securities of
Homestead are then listed, if the listing of such securities is then
permitted under the rules of such exchange or quotation system; and
(vii) notify Atlantic, at any time when a prospectus relating to
the Registrable Securities is required to be delivered under the
Securities Act, of the happening of any event of which it has
knowledge as a result of which the prospectus included in such
registration statement, as then in effect, contains an untrue
statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then
existing.
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<PAGE>
(d) Homestead's Ability to Postpone. Homestead shall have the right
to postpone the filing of a registration statement under this Section 3 for
a reasonable period of time (not exceeding 60 days) if Homestead furnishes
Atlantic with a certificate signed by the Chairman of the Board or the
President of Homestead stating that, in its good faith judgment,
Homestead's Board of Directors has determined that effecting the
registration at such time would adversely affect a material financing,
acquisition, disposition of assets or stock, merger or other comparable
transaction or would require Homestead to make public disclosure of
information the public disclosure of that would have a material adverse
effect upon Homestead.
(e) Expenses. All expenses incurred in the registration of
Registrable Securities under this Agreement shall be paid by Homestead. The
expenses shall include, without limitation, the expenses of preparing the
registration statement and the prospectus used in connection therewith and
any amendment or supplement thereto, printing and photocopying expenses,
all registration and filing fees under Federal and state securities laws,
and expenses of complying with the securities or blue sky laws of any
jurisdictions, provided, however, that Atlantic shall be responsible for
the fees and disbursements of its own counsel.
(f) Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 3:
(i) Indemnity by Homestead. Without limitation of any other
indemnity provided to Atlantic, to the extent permitted by law,
Homestead will indemnify and hold harmless Atlantic and its officers,
directors and any individual, partnership, corporation, trust,
unincorporated organization or other entity (a "Person") if any, who
controls Atlantic (within the meaning of the Securities Act or the
Exchange Act), against any losses, claims, damages, liabilities and
expenses (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages, liabilities and expenses (or
actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of
a material fact contained in any registration statement (including any
preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto), (ii) the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or (iii) any
violation or alleged violation by Homestead of the Securities Act, the
Exchange Act, any state securities law or any rule or regulation
promulgated under the Securities Act, the Exchange Act or any state
securities law, and Homestead will reimburse Atlantic and its
officers, directors and any controlling person thereof for any
reasonable legal or other expenses
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incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, expense or action; provided,
however, that Homestead shall not be liable in any such case for any
such loss, claim, damage, liability, expense or action to the extent
that it arises out of or is based upon a Violation that occurs in
reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by Atlantic or
any officer, director or controlling person thereof.
(ii) Indemnity by Atlantic. In connection with any registration
statement in which Atlantic is participating, Atlantic will furnish to
Homestead in writing such information and affidavits as Homestead
reasonably requests for use in connection with any such registration
statement or prospectus and, to the extent permitted by law, will
indemnify Homestead, its directors and officers and each Person who
controls Homestead (within the meaning of the Securities Act or
Exchange Act) against any losses, claims, damages, liabilities and
expenses resulting from any Violation, but only to the extent that
such Violation is contained in any information or affidavit so
furnished in writing by Atlantic; provided, that the obligation to
indemnify will be several and not joint and several with any other
Person and will be limited to the net amount received by Atlantic from
the sale of Registrable Securities pursuant to such registration
statement.
(iii) Notice; Right to Defend. Promptly after receipt by an
indemnified party under this Section 3(f) of notice of the
commencement of any action (including any governmental action), such
indemnified party will, if a claim in respect thereof is to be made
against any indemnifying party under this Section 3(f), deliver to the
indemnifying party a written notice of the commencement thereof and
the indemnifying party shall have the right to participate in, and, if
the indemnifying party agrees in writing that it will be responsible
for any costs, expenses, judgments, damages and losses incurred by the
indemnified party with respect to such claim, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof
with counsel mutually satisfactory to the parties; provided, however,
that an indemnified party shall have the right to retain its own
counsel, with the fees and expenses to be paid by the indemnifying
party, if the indemnified party reasonably believes that
representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding. The
failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall relieve
such indemnifying party of any liability to the indemnified party
under this Section 3(f) only if and to the extent that such failure is
prejudicial to its ability to defend such action, and the omission so
to deliver written notice to the indemnifying party will not relieve
it
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of any liability that it may have to any indemnified party other than
under this Section 3(f).
(iv) Contribution. If the indemnification provided for in this
Section 3(f) is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss,
liability, claim, damage or expense referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage
or expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the
indemnified party on the other hand in connection with the statements
or omissions which resulted in such loss, liability, claim, damage or
expense as well as any other relevant equitable considerations. The
relevant fault of the indemnifying party and the indemnified party
shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission
to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. Notwithstanding the
foregoing, the amount Atlantic shall be obligated to contribute
pursuant to this Section 3(f)(iv) shall be limited to an amount equal
to the aggregate value of the Registrable Securities distributed by
Atlantic pursuant to the registration statement which gives rise to
such obligation to contribute (less the aggregate amount of any
damages which Atlantic has otherwise been required to pay in respect
of such loss, claim, damage, liability or action or any substantially
similar loss, claim, damage, liability or action arising from the
distribution of such Registrable Securities).
(v) Survival of Indemnity. The indemnification provided by this
Section 3(f) shall be a continuing right to indemnification and shall
survive the registration and sale of any securities by any Person
entitled to indemnification hereunder and the expiration or
termination of this Agreement.
(g) Limitations on Registration Rights.
(i) Homestead shall not, without the prior written consent of
Atlantic, include in any registration in which Atlantic has a right to
participate pursuant to this Agreement any securities of any Person
other than Atlantic and PTR.
(ii) Atlantic shall not, without the prior written consent of
Homestead, effect any public sale or distribution (including sales
pursuant to Rule 144 under the Securities Act) of securities of
Homestead during any period commencing 30 days prior to and ending 60
days after the effective date any registration statement
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filed by Homestead on behalf of any Person (including Homestead),
other than a registration statement on Form S-8 or any successor form.
(h) Registrable Security. The term Registerable Security means (i)
any shares of Common Stock issuable to Atlantic pursuant to the conversion
of notes issuable pursuant to the terms of the Funding Commitment Agreement
or otherwise held by Atlantic, (ii) any other shares of Common Stock owned
by Atlantic and (iii) any shares of Common Stock or other securities that
may subsequently be issued with respect to such shares of Common Stock as a
result of a stock split or dividend or any sale, transfer, assignment or
other transaction by Homestead involving the shares of Common Stock and any
securities into which the shares of Common Stock may thereafter be changed
as a result of merger, consolidation, recapitalization or otherwise. As to
any particular Registrable Securities, such securities will cease to be
Registrable Securities when they have been distributed to the public
pursuant to an offering registered under the Securities Act. All
Registrable Securities shall cease to be Registrable Securities when all
such securities may be sold in any three-month period pursuant to Rule 144,
or any successor to such rule, under the Securities Act.
Section 4. File Reports. For so long as Atlantic owns any Registrable
Securities, Homestead shall file on a timely basis all annual, quarterly and
other reports required to be filed by it under Section 13 and 15(d) of the
Exchange Act, and the rules and regulations of the Commission thereunder, as
amended from time to time.
Section 5. Miscellaneous.
(a) Survival of Covenants. All covenants contained herein shall survive
the execution of this Agreement and shall remain in full force and effect until
terminated in accordance with this Agreement.
(b) Successors and Assigns. This Agreement shall be binding upon, and
inure to the benefit of, the parties hereto and their respective heirs, personal
representatives, successors, assigns and affiliates.
(c) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, sent via a recognized
overnight courier with delivery confirmed in writing or sent via facsimile to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
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If to Homestead:
Homestead Village Incorporated
125 Lincoln Avenue, Suite 300
Santa Fe, New Mexico 87501
Attention: David C. Dressler, Jr.
Facsimile: (505) 982-2925
If to Atlantic:
Security Capital Atlantic Incorporated
Six Piedmont Center, Sixth Floor
Atlanta, Georgia 30385
Attention: James C. Potts
Facsimile: (404) 233-2379
(d) Waiver. No party may waive any of the terms or conditions of this
Agreement, except by a duly executed writing referring to the specific provision
to be waived.
(e) Amendment. This Agreement may be amended only by a writing duly
executed by both Homestead and Atlantic.
(f) Severability. Insofar as is possible, each provision of this
Agreement shall be interpreted so as to render it valid and enforceable under
applicable law and severable from the remainder of this Agreement. A finding
that any such provision is invalid or unenforceable in any jurisdiction shall
not affect the validity or enforceability of any other provision or the validity
or enforceability of such provision under the laws of any other jurisdiction.
(g) Entire Agreement. This Agreement constitutes the entire agreement,
and supersedes all other prior agreements and understandings, both written and
oral, between the parties hereto and their affiliates, with respect to the
subject matter hereof.
(h) Expenses. Except as otherwise expressly contemplated herein to the
contrary, regardless of whether the transactions contemplated hereby are
consummated, each party hereto shall pay its own expenses incident to preparing
for, entering into and carrying out this Agreement and the consummation of the
transactions contemplated hereby.
(i) Captions. The Section and Paragraph captions herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
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<PAGE>
(j) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
(k) Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Maryland.
* * * * *
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IN WITNESS WHEREOF, each of the undersigned has executed this Agreement, or
caused this Agreement to be duly executed on its behalf, as of the date first
set forth above.
HOMESTEAD VILLAGE INCORPORATED
By: /s/ David C. Dressler, Jr.
--------------------------
David C. Dressler, Jr.
Chairman
SECURITY CAPITAL ATLANTIC INCORPORATED
By: /s/ James C. Potts
------------------
James C. Potts
Chairman
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Exhibit 10.8
INVESTOR AND REGISTRATION RIGHTS AGREEMENT
THIS INVESTOR AND REGISTRATION RIGHTS AGREEMENT (this "Agreement"), is
entered into as of October 17, 1996, between Homestead Village Incorporated, a
Maryland corporation ("Homestead"), and Security Capital Pacific Trust, a
Maryland real estate investment trust ("PTR").
WHEREAS, on the date hereof, the parties are entering into a series of
transactions as described in that certain Merger and Distribution Agreement,
dated as of May 21, 1996, among Security Capital Atlantic Incorporated
("Atlantic"), PTR, Security Capital Group Incorporated ("SCG") and Homestead
(the "Merger Agreement"), pursuant to which, among other things, Homestead will
acquire all of PTR's assets relating to its operation of extended-stay lodging
facilities;
WHEREAS, pursuant to the Merger Agreement, PTR and Homestead are entering
to a Funding Commitment Agreement (the "Funding Commitment Agreement"), pursuant
to which PTR will agree to make certain loans to Homestead, which loans will be
secured by mortgages, and the notes evidencing such loans will be convertible
into shares of Common Stock, $0.01 par value per share ("Common Stock"), of
Homestead on the terms and conditions described therein;
WHEREAS, pursuant to a Warrant Purchase Agreement (the "Warrant Purchase
Agreement"), dated as of May 21, 1996, among Homestead, SCG, Atlantic and PTR,
Homestead has agreed to issue to PTR warrants to acquire Common Stock; and
WHEREAS, the execution of this Agreement is a condition to the consummation
of the transactions contemplated by the Merger Agreement, the Funding Commitment
Agreement and the Warrant Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
Section 1. Board Representation. Until March 31, 1998 and for so long
thereafter as PTR shall continue to have the right to convert in excess of $20
million in principal amount of loans made pursuant to the Funding Commitment
Agreement, Homestead shall not increase the number of members of its Board of
Directors to more than seven (7) members and PTR shall be entitled to designate
one person for nomination to the Homestead Board of Directors (such person, a
"Nominee") and Homestead will use its best efforts to cause the election of such
Nominee. The Nominee of PTR may, but need not, include the same person or
persons nominated by SCG pursuant to the Investor Agreement of even date
herewith between SCG and Homestead or the person nominated by Atlantic pursuant
to the Investor and Registration Rights Agreement of even date herewith between
Atlantic and Homestead.
<PAGE>
Section 2. Inspection. Until March 31, 1998 and for so long thereafter as
PTR shall continue to have the right to convert any principal amount of loans
made, pursuant to the Funding Commitment Agreement, at any time during regular
business hours and as often as reasonably requested of Homestead's officers,
Homestead shall permit PTR or any authorized employee, agent or representative
of PTR to examine and make copies and abstracts from the records and books of
account of, and to visit the properties of, Homestead and to discuss the
affairs, finances, and accounts of Homestead with any of its officers or
directors; provided, that all costs and expenses of such inspection shall be
borne by PTR.
Section 3. Registration Rights.
(a) Demand. At any time prior to the first anniversary of the date
on which the Common Stock is registered under Section 12(b) or 12(g) of the
Exchange Act of 1934, as amended (the "Exchange Act"), PTR may request one
registration of all or any part of its Registrable Securities (as defined
in sub-section (h) below) under the Securities Act of 1933, as amended (the
"Securities Act"), by delivering written notice (which notice shall state
that PTR intends to dispose of such securities through a public
distribution thereof) to Homestead specifying the number of Registrable
Securities that PTR desires to distribute and Homestead shall use its
reasonable efforts to effect the registration of such Registrable
Securities under the Securities Act in accordance with the further
provisions of this Section 3.
(b) Shelf Registration. At any time after the first anniversary of
the date on which the Common Stock is registered under Section 12(b) or
12(g) of the Exchange Act, PTR may request, on up to three separate
occasions, registration of all or any part of its Registrable Securities
pursuant to Rule 415 under the Securities Act by delivering written notice
(which notice shall state that PTR intends to dispose of such securities
through a public distribution thereof) to Homestead and Homestead shall use
its reasonable efforts to effect the registration of such Registrable
Securities under the Securities Act in accordance with the further
provisions of this Section 3.
(c) Registration Procedures. If and whenever Homestead is required
by any of the provisions of this Section 3 to use its reasonable efforts to
effect the registration of any of the Registrable Securities under the
Securities Act, Homestead shall:
(i) prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement with respect to
such securities and use its reasonable efforts to cause such
registration statement to become effective and remain effective for as
long as shall be necessary to complete the distribution of the
Registrable Securities so registered;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection
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therewith as may be necessary to keep such registration statement
effective for so long as shall be necessary to complete the
distribution of the Registrable Securities so registered and to comply
with the provisions of the Securities Act with respect to the sale or
other disposition of all securities covered by such registration
statement whenever PTR shall desire to sell or otherwise dispose of
the same within such period;
(iii) furnish to PTR such numbers of copies of such
registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement, including any
preliminary prospectus, and any amendment or supplement thereto, and
such other documents, as PTR may reasonably request in order to
facilitate the sale or other disposition of the Registrable
Securities;
(iv) use its reasonable efforts to register and qualify the
securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as PTR shall
reasonably request, and do any and all other acts and things
reasonably requested by PTR to assist it to consummate the public sale
or other disposition in such jurisdictions of the securities owned by
PTR, except that Homestead shall not for any such purpose be required
to qualify to do business as a foreign corporation in any jurisdiction
wherein it is not so qualified or to file therein any general consent
to service of process;
(v) otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months,
beginning with the first fiscal quarter beginning after the effective
date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act;
(vi) use its reasonable efforts to list such securities on any
securities exchange or quotation system on which any securities of
Homestead are then listed, if the listing of such securities is then
permitted under the rules of such exchange or quotation system; and
(vii) notify PTR, at any time when a prospectus relating to the
Registrable Securities is required to be delivered under the
Securities Act, of the happening of any event of which it has
knowledge as a result of which the prospectus included in such
registration statement, as then in effect, contains an untrue
statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then
existing.
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(d) Homestead's Ability to Postpone. Homestead shall have the right
to postpone the filing of a registration statement under this Section 3 for
a reasonable period of time (not exceeding 60 days) if Homestead furnishes
PTR with a certificate signed by the Chairman of the Board or the President
of Homestead stating that, in its good faith judgment, Homestead's Board of
Directors has determined that effecting the registration at such time would
adversely affect a material financing, acquisition, disposition of assets
or stock, merger or other comparable transaction or would require Homestead
to make public disclosure of information the public disclosure of that
would have a material adverse effect upon Homestead.
(e) Expenses. All expenses incurred in the registration of
Registrable Securities under this Agreement shall be paid by Homestead.
The expenses shall include, without limitation, the expenses of preparing
the registration statement and the prospectus used in connection therewith
and any amendment or supplement thereto, printing and photocopying
expenses, all registration and filing fees under Federal and state
securities laws, and expenses of complying with the securities or blue sky
laws of any jurisdictions, provided, however, that PTR shall be responsible
for the fees and disbursements of its own counsel.
(f) Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 3:
(i) Indemnity by Homestead. Without limitation of any other
indemnity provided to PTR, to the extent permitted by law, Homestead
will indemnify and hold harmless PTR and its officers, trustees and
any individual, partnership, corporation, trust, unincorporated
organization or other entity (a "Person") if any, who controls PTR
(within the meaning of the Securities Act or the Exchange Act),
against any losses, claims, damages, liabilities and expenses (joint
or several) to which they may become subject under the Securities Act,
the Exchange Act or other federal or state law, insofar as such
losses, claims, damages, liabilities and expenses (or actions in
respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i)
any untrue statement or alleged untrue statement of a material fact
contained in any registration statement (including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto), (ii) the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading, or (iii) any violation or alleged
violation by Homestead of the Securities Act, the Exchange Act, any
state securities law or any rule or regulation promulgated under the
Securities Act, the Exchange Act or any state securities law, and
Homestead will reimburse PTR and its officers, trustees and any
controlling person thereof for any reasonable legal or other expenses
incurred by them in connection with
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investigating or defending any such loss, claim, damage, liability,
expense or action; provided, however, that Homestead shall not be
liable in any such case for any such loss, claim, damage, liability,
expense or action to the extent that it arises out of or is based upon
a Violation that occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with
such registration by PTR or any officer, trustee or controlling person
thereof.
(ii) Indemnity by PTR. In connection with any registration
statement in which PTR is participating, PTR will furnish to Homestead
in writing such information and affidavits as Homestead reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, will indemnify
Homestead, its directors and officers and each Person who controls
Homestead (within the meaning of the Securities Act or Exchange Act)
against any losses, claims, damages, liabilities and expenses
resulting from any Violation, but only to the extent that such
Violation is contained in any information or affidavit so furnished in
writing by PTR; provided, that the obligation to indemnify will be
several and not joint and several with any other Person and will be
limited to the net amount received by PTR from the sale of Registrable
Securities pursuant to such registration statement.
(iii) Notice; Right to Defend. Promptly after receipt by an
indemnified party under this Section 3(f) of notice of the
commencement of any action (including any governmental action), such
indemnified party will, if a claim in respect thereof is to be made
against any indemnifying party under this Section 3(f), deliver to the
indemnifying party a written notice of the commencement thereof and
the indemnifying party shall have the right to participate in, and, if
the indemnifying party agrees in writing that it will be responsible
for any costs, expenses, judgments, damages and losses incurred by the
indemnified party with respect to such claim, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof
with counsel mutually satisfactory to the parties; provided, however,
that an indemnified party shall have the right to retain its own
counsel, with the fees and expenses to be paid by the indemnifying
party, if the indemnified party reasonably believes that
representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding. The
failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall relieve
such indemnifying party of any liability to the indemnified party
under this Section 3(f) only if and to the extent that such failure is
prejudicial to its ability to defend such action, and the omission so
to deliver written notice to the indemnifying party will not relieve
it
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of any liability that it may have to any indemnified party other than
under this Section 3(f).
(iv) Contribution. If the indemnification provided for in this
Section 3(f) is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss,
liability, claim, damage or expense referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage
or expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the
indemnified party on the other hand in connection with the statements
or omissions which resulted in such loss, liability, claim, damage or
expense as well as any other relevant equitable considerations. The
relevant fault of the indemnifying party and the indemnified party
shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission
to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. Notwithstanding the
foregoing, the amount PTR shall be obligated to contribute pursuant to
this Section 3(f)(iv) shall be limited to an amount equal to the
aggregate value of the Registrable Securities distributed by PTR
pursuant to the registration statement which gives rise to such
obligation to contribute (less the aggregate amount of any damages
which PTR has otherwise been required to pay in respect of such loss,
claim, damage, liability or action or any substantially similar loss,
claim, damage, liability or action arising from the distribution of
such Registrable Securities).
(v) Survival of Indemnity. The indemnification provided by this
Section 3(f) shall be a continuing right to indemnification and shall
survive the registration and sale of any securities by any Person
entitled to indemnification hereunder and the expiration or
termination of this Agreement.
(g) Limitations on Registration Rights.
(i) Homestead shall not, without the prior written consent of
PTR, include in any registration in which PTR has a right to
participate pursuant to this Agreement any securities of any Person
other than Atlantic and PTR.
(ii) PTR shall not, without the prior written consent of
Homestead, effect any public sale or distribution (including sales
pursuant to Rule 144 under the Securities Act) of securities of
Homestead during any period commencing 30 days prior to and ending 60
days after the effective date any registration statement filed
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by Homestead on behalf of any Person (including Homestead), other than
a registration statement on Form S-8 or any successor form.
(h) Registrable Security. The term Registrable Security means (i)
any shares of Common Stock issuable to PTR pursuant to the conversion of
notes issuable pursuant to the terms of the Funding Commitment Agreement or
otherwise held by PTR, (ii) any other shares of Common Stock owned by PTR
and (iii) any shares of Common Stock or other securities that may
subsequently be issued with respect to such shares of Common Stock as a
result of a stock split or dividend or any sale, transfer, assignment or
other transaction by Homestead involving the shares of Common Stock and any
securities into which the shares of Common Stock may thereafter be changed
as a result of merger, consolidation, recapitalization or otherwise. As to
any particular Registrable Securities, such securities will cease to be
Registrable Securities when they have been distributed to the public
pursuant to an offering registered under the Securities Act. All
Registrable Securities shall cease to be Registrable Securities when all
such securities may be sold in any three-month period pursuant to Rule 144,
or any successor to such rule, under the Securities Act.
Section 4. File Reports. For so long as PTR owns any Registrable
Securities, Homestead shall file on a timely basis all annual, quarterly and
other reports required to be filed by it under Section 13 and 15(d) of the
Exchange Act, and the rules and regulations of the Commission thereunder, as
amended from time to time.
Section 5. Miscellaneous.
(a) Survival of Covenants. All covenants contained herein shall survive
the execution of this Agreement and shall remain in full force and effect until
terminated in accordance with this Agreement.
(b) Successors and Assigns. This Agreement shall be binding upon, and
inure to the benefit of, the parties hereto and their respective heirs, personal
representatives, successors, assigns and affiliates.
(c) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, sent via a recognized
overnight courier with delivery confirmed in writing or sent via facsimile to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
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If to Homestead:
Homestead Village Incorporated
125 Lincoln Avenue, Suite 300
Santa Fe, New Mexico 87501
Attention: David C. Dressler, Jr.
Facsimile: (505) 982-2925
If to PTR:
Security Capital Pacific Trust
7777 Market Center Avenue
El Paso, Texas 79912
Attention: C. Ronald Blankenship
Facsimile: (915) 877-3301
(d) Waiver. No party may waive any of the terms or conditions of this
Agreement, except by a duly executed writing referring to the specific provision
to be waived.
(e) Amendment. This Agreement may be amended only by a writing duly
executed by both Homestead and PTR.
(f) Severability. Insofar as is possible, each provision of this Agreement
shall be interpreted so as to render it valid and enforceable under applicable
law and severable from the remainder of this Agreement. A finding that any such
provision is invalid or unenforceable in any jurisdiction shall not affect the
validity or enforceability of any other provision or the validity or
enforceability of such provision under the laws of any other jurisdiction.
(g) Entire Agreement. This Agreement constitutes the entire agreement, and
supersedes all other prior agreements and understandings, both written and oral,
between the parties hereto and their affiliates, with respect to the subject
matter hereof.
(h) Expenses. Except as otherwise expressly contemplated herein to the
contrary, regardless of whether the transactions contemplated hereby are
consummated, each party hereto shall pay its own expenses incident to preparing
for, entering into and carrying out this Agreement and the consummation of the
transactions contemplated hereby.
(i) Captions. The Section and Paragraph captions herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
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(j) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
(k) Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Maryland.
(l) Limitation of Liability. Any obligation or liability whatsoever of
PTR which may arise at any time under this Agreement or any obligation or
liability which may be incurred by it pursuant to any other instrument,
transaction or undertaking contemplated hereby shall be satisfied, if at all,
out of PTR's assets only. No such obligation or liability shall be personally
binding upon, nor shall resort for the enforcement thereof be had to, the
property of any of its shareholders, trustees, officers, employees or agents,
regardless of whether such obligation or liability is in the nature of contract,
tort or otherwise.
* * * * *
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IN WITNESS WHEREOF, each of the undersigned has executed this Agreement, or
caused this Agreement to be duly executed on its behalf, as of the date first
set forth above.
HOMESTEAD VILLAGE INCORPORATED
By: /s/ David C. Dressler, Jr.
--------------------------
David C. Dressler, Jr.
Chairman
SECURITY CAPITAL PACIFIC TRUST
By: /s/ C. Ronald Blankenship
-------------------------
C. Ronald Blankenship
Chairman
S-1
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ESCROW AGREEMENT Exhibit 10.9
THIS ESCROW AGREEMENT (this "Agreement"), is made in Boston, Massachusetts,
this 17th day of October, 1996, among Homestead Village Incorporated, a Maryland
corporation ("Homestead"), Security Capital Group Incorporated, a Maryland
corporation ("SCG"), and State Street Bank and Trust Company, a national banking
association, as Escrow Agent (in such capacity, the "Escrow Agent").
WHEREAS, Homestead and SCG have entered into a Merger and Distribution
Agreement, dated as of May 21, 1996 (the "Merger Agreement"), pursuant to which,
among other things, SCG will be entitled to receive certain shares of common
stock, $0.01 par value per share (the "Common Stock"), of Homestead;
WHEREAS, a portion of the shares of Common Stock (the "Escrowed Shares")
issuable to SCG are payable based upon the projected value of certain expected
cash flows contributed in connection with the Merger Agreement by SCG (or one of
its subsidiaries) to Homestead with respect to certain properties of Homestead
which are not currently operational (individually, a "Property" and
collectively, the "Properties");
WHEREAS, pursuant to the Merger Agreement, the Escrowed Shares shall be
delivered into the escrow created hereby;
WHEREAS, the number of Escrowed Shares and the pro rata share (the "Pro
Rata Share") of such Escrowed Shares attributable to each Property are set forth
on Schedule I hereto;
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
Section 1. Escrow.
Section 1.1 Creation of Escrow. Homestead has delivered, concurrently
with the execution of this Agreement, to the Escrow Agent, to be held in escrow
pursuant hereto, a stock certificate, registered in the name of the Escrow Agent
(as nominee for the beneficial owners of such shares), representing the Escrowed
Shares and the Escrow Agent has delivered a receipt therefor to SCG. The parties
hereto agree and acknowledge that the certificate relating to the Escrowed
Shares is registered in the name of the Escrow Agent merely as a matter of
administrative convenience pending the determination pursuant to this Agreement
of the number of Escrowed Shares to be delivered to SCG or returned to Homestead
by the Escrow Agent.
Section 1.2 Disbursement of Escrowed Shares. On January 1, 2000, or the
first business day thereafter, the Escrow Agent shall (i) deliver to The First
National Bank of Boston, the transfer agent for the Common Stock (the "Transfer
Agent"), a certificate representing the
<PAGE>
Escrowed Shares which have not been the subject of a prior SCG Funding
Certificate, with instructions for the Transfer Agent to cancel such shares on
the records of the Transfer Agent and (ii) deliver to Homestead the Pro Rata
Share of the Proceeds (as defined below) with respect to such Escrowed Shares.
Section 1.3 Notice by SCG. In the event that SCG from time to time
delivers to the Escrow Agent a certificate (a copy of which shall also be
delivered concurrently to Homestead) on or before December 31, 1999 (the
"Termination Date") (each, an "SCG Funding Certificate"), which certificate
shall be substantially in the form of Exhibit A hereto, shall be signed by any
Managing Director, any Senior Vice President or the Secretary of SCG and shall
(i) set forth that Security Capital Pacific Trust ("PTR") or Security Capital
Atlantic Incorporated ("Atlantic") has advanced funds to Homestead (or one of
its subsidiaries) with respect to a Property or Properties pursuant to a funding
commitment agreement between PTR and Homestead (or one of its subsidiaries) or
between Atlantic and Homestead (or one of its subsidiaries) (each, a "Funding
Commitment Agreement"), (ii) identify the Property or Properties as to which
such funding has been made and (iii) the number of Escrowed Shares to which each
such Property relates, then the Escrow Agent shall distribute the Escrowed
Shares in accordance with this Section 1.3 as follows:
(a) if, within 10 days after receiving an SCG Funding Certificate,
the Escrow Agent shall have received a certificate (the "Hold-Back
Certificate") signed by a senior officer of Homestead, which certificate
shall be substantially in the form of Exhibit B hereto, shall be delivered
concurrently to SCG and shall state (i) the Property or Properties, if any,
identified in the SCG Funding Certificate as to which Homestead believes
were improperly included therein and (ii) the number of Escrowed Shares, if
any, as to which a dispute exists (the "Disputed Shares"), then the Escrow
Agent shall, within 5 business days of receipt of the Hold-Back
Certificate, (A) deliver to the Transfer Agent the certificate representing
the Escrowed Shares with instructions for the Transfer Agent to issue new
certificates (x) to SCG representing, subject to Section 3.3 hereof, the
total number of Escrowed Shares set forth in the Hold-Back Certificate as
to which no dispute exists, and (y) to the Escrow Agent certificates
representing the Disputed Shares and the remaining Escrowed Shares (other
than the shares released to SCG in the previous provision (x)) subject to
this Agreement, (B) deliver to SCG the Pro Rata Share of the Proceeds
relating to the Escrowed Shares as to which no dispute exists and (C)
unless otherwise instructed in writing signed by each of SCG and Homestead,
surrender the Disputed Shares, together with a Pro Rata Share of the
Proceeds relating to such Disputed Shares, to a court for determination of
proper disposition in accordance with the procedures as set forth in
Section 1.4 hereof.
(b) if, within 10 days after receiving an SCG Funding Certificate,
the Escrow Agent shall not have received from Homestead a Hold-Back
Certificate, then the Escrow Agent shall not accept thereafter a Hold-Back
Certificate with respect to the Properties and Escrowed Shares subject to
such SCG Funding Certificate, and shall, within 5
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business days after the expiration of such 10-day period (i) deliver to the
Transfer Agent the certificate representing the Escrowed Shares with
instructions for the Transfer Agent to issue (A) to SCG a new certificate,
subject to Section 3.3 hereof, in the name of SCG representing the Escrowed
Shares which were the subject of the SCG Funding Certificate and (B)
deliver to the Escrow Agent a certificate representing the remaining
Escrowed Shares and (ii) deliver to SCG a Pro Rata Share of the Proceeds
relating to such Escrowed Shares.
Section 1.4 Interpleader. The Escrow Agent shall, within 60 calendar days
upon receipt of a certificate representing any Disputed Shares, interplead such
shares to any state or Federal court of competent jurisdiction located in
Suffolk County, State of Massachusetts, and such court shall determine whether
such shares are to be delivered to or withheld from SCG pursuant to the terms of
this Agreement. Upon interpleading such shares, SCG and Homestead agree to file
a joint motion permitting the Escrow Agent to be dismissed with prejudice and
all fees and costs of the Escrow Agent, including reasonable attorneys' fees,
shall be paid by Homestead on such date.
2. Substitution of Properties. Homestead may, from time to time prior to
the Termination Date, amend Schedule I to this Agreement to substitute
properties for existing Properties. To amend Schedule I to substitute
Properties, Homestead shall deliver written notice (the "Substitution Notice"),
which notice shall certify that such substitution was made in accordance with
the provisions of a Funding Commitment Agreement, to the Escrow Agent and shall
concurrently furnish a copy of such Substitution Notice to SCG. The Substitution
Notice shall set forth the name of the Property or Properties proposed to be
removed from Schedule I and the name of the Property or Properties proposed to
be substituted therefor. The Property or Properties so substituted shall succeed
to the respective number of Escrowed Shares attributable to the Property or
Properties for which they are substituted; under no circumstances shall any
party hereto be entitled to change or in any way modify the number of Escrowed
Shares to which a Property or Properties relate.
Section 3. Rights of Parties in Respect of Escrowed Shares.
-----------------------------------------------
Section 3.1 Distributions. All dividends or other distributions, if any,
and any proceeds thereon (such dividends, distributions and proceeds,
collectively referred to herein as "Proceeds") paid by Homestead in respect of
the Escrowed Shares and delivered to the Escrow Agent shall be retained by the
Escrow Agent for the benefit of SCG with respect to those Escrowed Shares
ultimately issued to SCG pursuant to Section 1.3 and for the benefit of
Homestead with respect to those Escrowed Shares to be returned to Homestead
pursuant to Section 1.2. The Escrow Agent shall invest Proceeds, in accordance
with the written instructions of Homestead, in short-term bank time or demand
deposits, short-term certificates of deposit, short-term United States
government securities or other short-term United States government guaranteed
money instruments and any other investment permitted under Rule 15c2-4 under the
Securities Exchange Act of 1934, as amended; provided, however, that such
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<PAGE>
investments shall be made in a manner permitting necessary Proceeds to be
available for transfer in accordance with this Agreement.
Section 3.2 Voting. The Escrow Agent shall vote the Escrowed Shares
proportionately in accordance with the vote of all other shareholders of
Homestead as directed by Homestead to the Escrow Agent in writing. In the event
that the Escrow Agent shall not have received written instructions from
Homestead with respect to all or any portion of the Escrowed Shares, the Escrow
Agent shall not vote such Escrowed Shares.
Section 3.3 Fractional Shares. SCG shall have no right to receive, and
the Escrow Agent shall not distribute, fractional Escrowed Shares. In the event
that the distribution of any Escrowed Shares would, but for this Section 3.3,
result in SCG receiving fractional shares of Common Stock, (i) the Escrow Agent
shall instruct the Transfer Agent to issue a certificate in SCG's name for the
number of Escrowed Shares rounded down to the nearest whole share, (ii) the
Escrow Agent shall instruct the Transfer Agent to issue an additional
certificate representing all fractional share interests and the Escrow Agent
shall thereupon deliver such certificate to Homestead, (iii) Homestead shall
deliver to the Escrow Agent an amount of cash representing the aggregate value
of such fractional share interests (based on the last sale price of a share of
Common Stock on the date of the SCG Funding Certificate), and (iv) the Escrow
Agent shall deliver to SCG cash or a check representing SCG's fractional share
interest.
Section 4. General Terms.
-------------
Section 4.1 Definitions. All capitalized terms used but not otherwise
defined herein shall have the meanings ascribed thereto in the Merger Agreement.
Section 4.2 Concerning the Escrow Agent.
---------------------------
(a) If at any time the Escrow Agent shall receive conflicting
notices, claims, demands or instructions or if for any reason it shall be
unable in good faith to determine the party or parties entitled to receive
all or any portion of the Escrowed Shares, the Escrow Agent may refuse to
deliver the Escrowed Shares to the Transfer Agent and shall interplead the
Escrowed Shares as described in Section 1.4 hereof.
(b) Homestead and SCG, jointly and severally, shall indemnify and
hold harmless the Escrow Agent for losses and expenses it incurs, including
reasonable attorneys' fees, in connection with any dispute hereunder or
under the Merger Agreement. This indemnity shall include, but not be
limited to, all costs incurred in connection with any interpleader which
the Escrow Agent may enter into regarding this Agreement; provided,
however, that if it is ultimately determined that SCG is not entitled to
any Escrowed Shares that were interpled, SCG shall reimburse Homestead for
all such costs. In no instance shall the Escrow Agent be bound by the terms
of the Merger Agreement, the Funding Commitment Agreement or any other
agreement by or among the parties to this
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Agreement or charged with knowledge of the terms thereof or have any duty
to comply with or determine compliance with the terms thereof.
(c) Homestead and SCG, jointly and severally, agree to assume any and
all obligations imposed now or hereafter by any applicable tax law with
respect to the payment of Escrowed Shares under this Agreement, and to
indemnify and hold the Escrow Agent harmless from and against any taxes,
additions of late payment, interest, penalties and other expenses, that may
be assessed against the Escrow Agent on any such payment or other
activities under this Agreement. Homestead and SCG undertake to instruct
the Escrow Agent in writing with respect to the Escrow Agent's
responsibility for withholding and other taxes, assessments or other
governmental charges, certifications and governmental reporting in
connection with its acting as Escrow Agent under this Agreement. Homestead
and SCG, jointly and severally, agree to indemnify and hold the Escrow
Agent harmless from any liability on account of taxes, assessments or other
governmental charges, including without limitation the withholding or
deduction or the failure to withhold or deduct same, and any liability for
failure to obtain proper certifications or to properly report to
governmental authorities, to which the Escrow Agent may be or become
subject in connection with or which arises out of this Agreement, including
costs and expenses (including reasonable legal fees and expenses), interest
and penalties. Notwithstanding the foregoing, no distributions will be made
unless the Escrow Agent is supplied with an original, signed W-9 form or
its equivalent prior to distribution.
(d) In performing any of its duties under this Agreement, neither the
Escrow Agent nor any of its directors, officers or employees shall be
liable to the parties hereto for any losses which may be incurred by such
other parties as a result of the Escrow Agent or any of its directors,
officers or employees so acting (or failing to act as a result of a
dispute) and further, the Escrow Agent shall not incur any liability with
respect to any action taken or omitted to be taken in reliance upon advice
of legal counsel or in reliance upon any document delivered in connection
herewith which the Escrow Agent in good faith believes to be valid,
including any of the certificates described herein and included as Exhibits
hereto. In no event shall the Escrow Agent be liable for indirect,
punitive, special or consequential damages.
(e) It is understood and agreed that the duties of the Escrow Agent
are purely ministerial in nature and that it shall not be liable for any
error of judgment, fact or law or any act done or omitted to be done except
for its own willful misconduct or gross negligence. With respect to this
Agreement, the Escrow Agent shall not be required to determine whether an
event or condition hereunder has occurred, been met or satisfied, or as to
whether a provision of this Agreement has been complied with or as to
whether sufficient evidence of the event or condition or compliance with
the provision has been furnished to it. No action in compliance with the
terms of this Agreement, including interpleader, shall subject the Escrow
Agent to any claim, liability or obligation
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whatsoever, even if it shall be found that such action was improper or
incorrect provided only that the Escrow Agent shall not have been guilty of
willful misconduct or gross negligence in making such determination. The
recitals of this Agreement shall not be deemed to be made or represented to
by the Escrow Agent.
(f) Homestead and SCG acknowledge and agree that the Escrow Agent (i)
shall not be responsible for any of the agreements referred to herein but
shall be obligated only for the performance of such duties as are
specifically set forth in this Agreement, (ii) shall not be obligated to
take any legal or other action hereunder which might in its judgment
involve any expense or liability unless it shall have been furnished with
acceptable indemnification; (iii) may rely on and shall be protected in
acting or refraining from acting upon any written notice, instruction,
instrument, statement, request or document furnished to it hereunder and
believed by it to be genuine and to have been signed or presented by the
proper person, and shall have no responsibility for determining the
accuracy thereof, and (iv) may consult counsel satisfactory to it,
including house counsel, and the opinion of such counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in accordance with
the opinion of such counsel.
(g) The Escrow Agent shall have no more or less responsibility or
liability on account of any action or omission of any book-entry depository
or subescrow agent employed by the Escrow Agent than any such book-entry
depository or subescrow agent has to the Escrow Agent, except to the extent
that such action or omission of any book-entry depository or subescrow
agent was caused by the Escrow Agent's own gross negligence or bad faith.
(h) All representations and indemnifications contained in this
Agreement shall survive the termination of this Agreement.
(i) For purposes of this Agreement a "business day" is a day on which
the Escrow Agent is open for business and shall not include a Saturday,
Sunday, or legal holiday. Notwithstanding anything to the contrary in this
Agreement, no action shall be required of the Escrow Agent, Homestead, or
SCG except on a business day and in the event an action is required on a
day which is not a business day, such action shall be required to be
performed on the next succeeding day which is a business day.
(j) All action by the parties hereto shall be performed at the office
of the Escrow Agent.
Section 4.3 Reliance on Instructions. Notwithstanding anything to the
contrary contained in this Agreement, the Escrow Agent shall take any and all
actions as directed by both Homestead and SCG, provided such direction is set
forth in a writing signed by both parties.
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Section 4.4 Assumed Validity of Documents. The Escrow Agent shall not be
responsible for the sufficiency or accuracy of the form, execution, validity or
genuineness of documents deposited hereunder, or of any endorsement thereon, or
for any lack of endorsement thereon, or for any description therein, nor shall
the Escrow Agent be responsible or liable in any respect on the account of the
identity, authority or right of the persons executing or delivering or
purporting to execute or deliver any such document or endorsement.
Section 4.5 Fees. The Escrow Agent shall be entitled to receive a
reasonable fee for its services and to be reimbursed by Homestead for the out-
of-pocket costs and expenses, including legal fees, incurred by the Escrow Agent
in connection with the preparation of this Agreement and in connection with the
ordinary administration of the escrow, including charges for the acceptance and
disbursement of the Escrowed Shares, including legal fees and expenses incurred
in connection with the administration of the escrow created hereby which are in
excess of its compensation for normal services hereunder, including without
limitation, payment of any legal fees incurred by the Escrow Agent in connection
with resolution of any claim by any party hereunder. The schedule of fees is set
forth in Exhibit C. Homestead shall pay all fees and expenses of the Escrow
Agent under this Agreement.
Section 4.6 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, sent via a
recognized overnight courier with delivery confirmed in writing or sent via
facsimile to the parties at the following addresses (or such other address for a
party as shall be specified by like notice):
If to Homestead:
Homestead Village Incorporated
125 Lincoln Avenue, Suite 300
Santa Fe, New Mexico 87501
Attention: David C. Dressler, Jr.
Facsimile: (505) 982-2925
If to SCG:
Security Capital Group Incorporated
125 Lincoln Avenue
Santa Fe, New Mexico 87501
Attention: Jeffrey A. Klopf
Facsimile: (505) 988-8920
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If to the Escrow Agent:
State Street Bank and Trust Company
Corporate Trust Department
P.O. Box 778
Boston, Massachusetts 02102-0778
Attention: Rae Ann Sullivan
Facsimile: (617) 664-5371
4.7 Assignment. A party to this Agreement may not, without the prior
written consent of the other parties hereto, directly or indirectly, sell,
transfer, distribute, assign, pledge (other than a bona fide pledge to a lender
for borrowed money for which the lender has recourse to SCG; it being understood
that in no event shall the Escrowed Shares be delivered to any such pledgee
except in accordance with Section 1 hereof), hypothecate, encumber, grant a
security interest in, or grant, issue, sell or convey any option, warrant or
right to acquire or otherwise dispose of this Agreement or any interest herein,
including the Escrowed Shares other than by operation of law; provided, however,
that notwithstanding anything to the contrary contained herein, no consent of
any party shall be required under this Agreement in connection with any merger
to which Homestead is a party.
4.8 Resignation. The Escrow Agent may at any time resign as Escrow Agent
hereunder by giving thirty (30) days' prior written notice of resignation to
Homestead and SCG. Prior to the effective date of the resignation as specified
in such notice, Homestead will issue to the Escrow Agent a written instruction
authorizing redelivery of the Escrow Funds to a bank or trust company that it
selects subject to the reasonable consent of Homestead. Such bank or trust
company shall have a principal office in Boston, Massachusetts, and shall have
capital, surplus and undivided profits in excess of $50,000,000. If, however,
Homestead shall fail to name such a successor Escrow Agent within twenty (20)
days after the notice of resignation from the Escrow Agent, SCG shall be
entitled to name such successor Escrow Agent. If no successor Escrow Agent is
named by Homestead or SCG, the Escrow Agent may apply to a court of competent
jurisdiction for appointment of a successor Escrow Agent.
4.9 Termination. This Agreement shall terminate and be of no further
force and effect upon and after the date that final distribution of the Escrowed
Shares has been made hereunder and all amounts to be distributed have been
distributed or the Escrow Agent has interplead all Escrowed Shares and has been
dismissed as contemplated by Section 1.4 hereof. The provision of Section 4.2
shall survive the termination of this Agreement.
4.10 Applicable Law. This Agreement shall be governed by and interpreted,
construed and enforced in accordance with the internal laws of the Commonwealth
of Massachusetts without reference to its conflict of laws rules.
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4.11 CONSENT TO JURISDICTION. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED IN SUFFOLK COUNTY, STATE OF MASSACHUSETTS, AS LONG AS SUCH VENUE IS
PROPER, IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY ANY PARTY HERETO WITH
RESPECT TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY AND FURTHER
AGREES THAT NO MOTION RELATING TO FORUM NON CONVENIENS SHALL BE RAISED. IN ANY
SUCH ACTION OR PROCEEDING, HOMESTEAD AND SCG HEREBY ABSOLUTELY AND IRREVOCABLY
WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT, DECLARATION OR OTHER PROCESS
AND HEREBY ABSOLUTELY AND IRREVOCABLY AGREE THAT THE SERVICE THEREOF MAY BE MADE
BY CERTIFIED OR REGISTERED FIRST-CLASS MAIL DIRECTED TO HOMESTEAD AND SCG, AS
THE CASE MAY BE, AT THEIR RESPECTIVE ADDRESSES IN ACCORDANCE WITH SECTION 4.6
HEREOF.
4.12 Counterparts. One or more counterparts of this Agreement may be
signed by the parties, each of which shall be an original but all of which
together shall constitute one and the same instrument.
4.13 Invalidity of Provisions. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity and
enforceability of the remaining provisions contained herein shall not be
affected thereby.
4.14 Headings. The headings in this Agreement are for convenience of
reference only and shall not be deemed to alter or affect the meaning or
interpretation of the provisions hereof.
4.15 Amendment. This Agreement may be amended, modified or supplemented
but only in writing signed by each of Homestead, the Escrow Agent and SCG. No
course of conduct shall constitute a waiver of any of the terms and conditions
of this Agreement, unless such waiver is specified in writing, and then only to
the extent so specified. A waiver of any of the terms and conditions of this
Agreement on one occasion shall not constitute a waiver of the other terms of
this Agreement, or of such terms and conditions on any other occasion. This
Agreement shall be binding upon the respective parties hereto and their heirs,
executors, successors and assigns.
4.16 Force Majeure. Neither Homestead nor SCG nor the Escrow Agent shall
be responsible for delays or failures in performance resulting from acts beyond
its control. Such acts shall include but not be limited to acts of God, strikes,
lockouts, riots, acts of war, epidemics, governmental regulations superimposed
after the fact, fire, communication line failures, power failures, earthquakes
or other disasters.
4.17 Reproduction of Documents. This Agreement and all documents relating
thereto, including, without limitation, (a) consents, waivers and modifications
which may hereafter be
-9-
<PAGE>
executed, and (b) certificates and other information previously or hereafter
furnished, may be reproduced by any photographic, photostatic, microfilm,
optical disk, micro-card, miniature photographic or other similar process. The
parties agree that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence and whether or not such reproduction was made by a
party in the regular course of business, and that any enlargement, facsimile or
further reproductions of such reproduction shall likewise be admissible in
evidence.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers effective as of the day and year
first above written.
HOMESTEAD VILLAGE INCORPORATED
By: /s/ David C. Dressler, Jr.
--------------------------
David C. Dressler, Jr.
Chairman
SECURITY CAPITAL GROUP INCORPORATED
By: /s/ Jeffrey A. Klopf
--------------------
Jeffrey A. Klopf
Senior Vice President
STATE STREET BANK AND TRUST COMPANY,
as Escrow Agent
By: /s/ Jill Olson
--------------
Name: Jill Olson
Title: Assistant Vice President
S-1
<PAGE>
SCHEDULE I
Escrowed Shares
---------------
<TABLE>
<CAPTION>
Property Shares Pro Rata Share
- -------- ------ ---------------
<S> <C> <C>
Pavillion, Austin, TX 44,307 2.06%
Round Rock, Austin, TX 8,325 0.39
Union Hills, Phoenix, AZ 8,131 0.38
Mesa, Phoenix, AZ 45,719 2.13
Inverness, Denver, CO 43,657 2.03
Cherry Creek, Denver, CO 32,862 1.53
Merriam, Kansas City, MO 31,908 1.48
I-40, Albuquerque, NM 39,892 1.85
Redwood, Salt Lake City, UT 39,839 1.85
Ft. Union, Salt Lake City, UT 54,684 2.54
San Mateo, San Francisco, CA 28,437 1.32
Sunnyvale, San Francisco, CA 30,478 1.42
San Jose, San Francisco, CA 47,056 2.19
Milpitas, San Francisco, CA 28,458 1.32
Mtn View, San Francisco, CA 43,802 2.04
San Ramon, San Francisco, CA 68,147 3.17
Mira Mesa, San Diego, CA 64,603 3.00
Mission Valley, San Diego, CA 48,464 2.25
Spectrum, Orange County, CA 48,830 2.27
El Segundo, Los Angeles, CA 66,777 3.10
Bellevue, Seattle, WA 48,210 2.24
Redmond, Seattle, WA 76,791 3.57
North Seattle, Seattle, WA 40,102 1.86
Tukwila, Seattle, WA 33,128 1.54
Sunset East, Portland, OR 47,232 2.20
Lake Oswego, Portland, OR 61,486 2.86
Perimeter, Atlanta, GA 28,461 1.32
Cumberland, Atlanta, GA 33,544 1.56
Roswell, Atlanta, GA 51,666 2.40
Gwinnett Place, Atlanta, GA 43,426 2.02
North Druid Hills, Atlanta, GA 36,571 1.70
Miami Airport, SE Florida 41,536 1.93
Ft. Lauderdale, SE Florida 37,915 1.76
Plantation, SE Florida 34,734 1.61
No. Airport, Tampa, FL 26,667 1.24
Brandon, Tampa, FL 36,953 1.72
St. Pete, Tampa, FL 32,851 1.53
</TABLE>
I-1
<PAGE>
<TABLE>
Property Shares Pro Rata Share
- -------- ------ ---------------
<S> <C> <C>
JTB, Jacksonville, FL 34,520 1.60%
No. Raleigh, Raleigh, NC 33,738 1.57
RTP, Raleigh, NC 32,244 1.50
Hwy 70, Raleigh, NC 50,069 2.33
Airport, Nashville, TN 35,239 1.64
Cool Springs, Nashville, TN 48,369 2.25
Germantown, Washington, D.C. 46,280 2.15
Fair Oaks, Washington, D.C. 42,194 1.96
Merrifield, Washington, D.C. 52,019 2.42
Dulles-South, Washington, D.C. 38,757 1.80
Reston-Sunset, Washington, D.C. 64,761 3.01
Dulles-North, Washington, D.C. 46,254 2.15
BWI, Washington, D.C. 49,608 2.31
Upper Broad, Richmond, VA 41,190 1.92
--------- ------
TOTAL 2,150,892 100.00%
</TABLE>
I-2
<PAGE>
EXHIBIT A
Form of SCG Funding Certificate
-------------------------------
Pursuant to Section 1.3 of that certain Escrow Agreement (the "Escrow
Agreement"), dated as of October 17, 1996 among Homestead Village Incorporated,
a Maryland corporation ("Homestead"), Security Capital Group Incorporated, a
Maryland corporation ("SCG"), and State Street Bank and Trust Company, a
national banking association, as Escrow Agent, the undersigned, being a Managing
Director, Senior Vice President or Secretary of SCG, hereby certifies that
(capitalized terms used but not expressly defined herein shall have the meanings
attributed thereto in the Escrow Agreement):
1. As of the date hereof, PTR and/or Atlantic has advanced funds to
Homestead with respect to each Property identified below and set forth opposite
such Property are the number of Escrowed Shares and Pro Rata Share to which such
Property relates:
Property Escrowed Shares Pro Rata Share
- -------- --------------- -------- -----
2. The undersigned is concurrently herewith delivering a copy of this
certificate to Homestead in accordance with the terms of the Escrow Agreement.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this ____ day
of ______________, 199_.
SECURITY CAPITAL GROUP INCORPORATED
By: _________________________
Its: _________________________
Received by:
STATE STREET BANK AND TRUST COMPANY
as Escrow Agent
this _______ day of _____________, 199__
By:________________________
Name:______________________
Title:_____________________
<PAGE>
EXHIBIT B
Form of Hold-back Certificate
-----------------------------
Pursuant to Section 1.3 of that certain Escrow Agreement (the "Escrow
Agreement), dated as of October 17, 1996 among Homestead Village Incorporated, a
Maryland corporation ("Homestead"), Security Capital Group Incorporated, a
Maryland corporation ("SCG"), and State Street Bank and Trust Company, a
national banking association, as Escrow Agent, the undersigned, being a senior
officer of Homestead, hereby certifies that (capitalized terms used but not
expressly defined herein shall have the meanings attributed thereto in the
Escrow Agreement):
1. As of the date hereof, Homestead believes that the Properties set forth
below were improperly included on the SCG Funding Certificate dated ___________,
199_ and that the number of Escrowed Shares set forth opposite such Properties
constitute the "Disputed Shares":
Property Escrowed Shares Pro Rata Share
- -------- --------------- -------- -----
2. The number of Escrowed Shares (and the Properties to which they relate)
to be released to SCG by the Escrow Agent is as follows:
Property Escrowed Shares Pro Rata Share
- -------- --------------- -------- -----
3. The undersigned is concurrently herewith delivering a copy of this
certificate to SCG in accordance with the terms of the Escrow Agreement.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this ____ day
of ______________, 199_.
HOMESTEAD VILLAGE INCORPORATED
By:
----------------------------
Its:
---------------------------
Received by:
STATE STREET BANK AND TRUST COMPANY
as Escrow Agent
this ____ day of _____________, 199__
By:
--------------------------
Name:
------------------------
Title:
-----------------------
<PAGE>
EXHIBIT C
Fee Schedule
------------
Acceptance Fee $500
Includes review of documents and set up of account. Payable at closing.
Annual Administration Fee $3,000
Includes administrative services performed according to documents. Payable
annually in advance for each year or part thereof in which State Street Bank and
Trust Company acts as Escrow Agent.
Out-of-Pocket Expenses Billed at cost
Escrow Transaction Charges Included in Annual
Administration Fee
Legal Counsel Fees Billed at cost
<PAGE>
GUARANTY OF COMPLETION AND PAYMENT Exhibit 10.10
----------------------------------
THIS GUARANTY OF COMPLETION AND PAYMENT (this "Guaranty") is made and
entered into as of the 17th day of October, 1996, by (i) HOMESTEAD VILLAGE
INCORPORATED ("Guarantor"), to and for the benefit of (ii) SECURITY CAPITAL
ATLANTIC INCORPORATED, a Maryland corporation ("Atlantic").
RECITALS
--------
A. Pursuant to that certain Funding Commitment Agreement (the "Funding
Agreement") dated as of the date hereof, by and among Guarantor, Atlantic and
Atlantic Homestead Village Limited Partnership, a Delaware limited partnership,
Atlantic has agreed to loan up to an aggregate maximum amount of $98,028,471
(the "Loan") to Guarantor and/or any Subsidiary (as such term is in the Funding
Agreement) for the purpose of acquiring and developing the Projects (as defined
in the Funding Agreement). The Loan is (i) evidenced by certain Amended and
Restated Promissory Notes in the aggregate face amount of the Loan (which notes,
together with any other notes delivered from time to time to evidence the Loan,
and all amendments and restatements to any of such notes are collectively called
the "Notes"), and (ii) secured by various Security Documents (as defined in the
Funding Agreement).
B. All terms used herein, but not defined herein, shall have the meanings
ascribed to them in the Funding Agreement.
C. Atlantic is willing to advance the funds of the Loan pursuant to the
Funding Agreement only on condition that the Guarantor deliver this Guaranty.
D. Guarantor has a direct or indirect financial interest in each
Subsidiary, and is therefore benefitted by the making of the Loan.
AGREEMENT
---------
NOW, THEREFORE, in consideration of these Recitals, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Guarantor hereby covenants and agrees as follows:
1. Recitals. The foregoing Recitals are hereby incorporated herein and
made a substantive part hereof.
<PAGE>
2. Completion Guaranty.
(a) Construction Matters. So long as Atlantic disburses the proceeds
of the Loan in accordance with the terms and provisions of the Funding
Agreement, Guarantor irrevocably and unconditionally fully guarantees to
Atlantic the following: (a) payment of all costs of the design, engineering and
construction of each Project (including the furnishing thereof) undertaken by a
Subsidiary; and (b) completion of construction of each Project undertaken by a
Subsidiary (including the furnishing thereof) substantially in accordance with
the Plans for such Project and in compliance with applicable codes, ordinances,
laws, statutes, rules and regulations of any governmental authority having
jurisdiction.
(b) Excess Costs. In the event that the actual cost of the design,
engineering and construction of a Project undertaken by a Subsidiary exceeds the
amount available for such Project from the Loan proceeds, including any Owner's
Contingency in the Project Budget for such Project, Guarantor shall pay such
costs ("Excess Costs") as and when they become due and payable. It is understood
that Guarantor's obligation under the preceding sentence is not subject to the
subject Subsidiary's initial obligation to do so pursuant to the terms of the
Funding Agreement.
(c) Completion. For the purposes of this Guaranty, the construction
of the Improvements shall be deemed to have been completed at such time as Final
Completion has occurred pursuant to the terms of the Funding Agreement.
(d) Indemnification of Atlantic. Guarantor shall indemnify and hold
Atlantic and its agents, officers and employees harmless from and against all
claims, expenses, loss and liability of any and every kind other than those
arising out of the gross negligence or willful misconduct of Atlantic,
including, without limitation, attorneys' fees, arising out of or in connection
with the design, engineering, construction and completion of each Project and,
so long as Atlantic disburses the proceeds of the Loan in accordance with the
terms and provisions of the Funding Agreement, shall protect each Project from
any mechanic's, materialmen's or similar liens that may be filed against such
Project. Guarantor shall not have any right of recourse against Atlantic or its
agents and employees by reason of any action such parties may take or omit to
take under the provisions of this Guaranty or under the provisions of the
Funding Agreement.
(e) Completion of Construction. If Guarantor shall fail to cause
Final Completion of a Project undertaken by a Subsidiary with Loan Proceeds to
be achieved, or shall otherwise fail to pursue diligently the performance of the
obligations of Guarantor hereunder, immediately upon receipt of a written demand
given to Guarantor by Atlantic in the manner herein provided, Atlantic, at its
option, shall have the right to cause the completion of the subject Project
either before or after or simultaneously with any other remedy of Atlantic
against Guarantor and/or such Subsidiary, with such changes or modifications in
the Plans and in any contracts and subcontracts relating thereto which Atlantic
deems reasonably necessary, and to
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<PAGE>
expend such sums as Atlantic deems proper in its sole and unreviewable
discretion in order to so complete the same and to pay costs of construction of
the same theretofore incurred by the subject Subsidiary and/or Guarantor, and
Guarantor shall pay all such amounts (which constitute Excess Costs) with
interest thereon at the default rate provided for in the Notes calculated from
the date of Guarantor's default, to Atlantic upon demand. So long as all
conditions precedent to Atlantic's obligations to make disbursements under the
Funding Agreement are satisfied, Atlantic shall continue to make disbursements
in the manner specified in the Funding Agreement.
(f) No Release. The liability of Guarantor shall not be terminated,
affected, impaired or reduced in any way by any delay, failure or refusal of
Atlantic to exercise any right or remedy Atlantic may have against any person,
including, without limitation, any Subsidiary, any general contractor, any
subcontractor or any other guarantors liable for all or any part of the costs of
construction of a Project guaranteed herein by Guarantor, or by the release of
any Subsidiary from performance or observance of any of the agreements,
covenants, terms or conditions contained in the Funding Agreement, by the
operation of law or otherwise, whether made with or without notice to Guarantor.
(g) Termination of Completion Guaranty. Satisfaction by Guarantor of
any liability hereunder at any one time with respect to payment of any amounts
required under this Guaranty shall not discharge Guarantor with respect to any
further amounts that may be required hereunder at any other time for the subject
Project or any other Project, it being the intent hereof that this Guaranty and
the obligations of Guarantor under this Guaranty shall be continuing and
irrevocable until the date on which Final Completion of all Subsidiary Projects
funded under the Funding Agreement has occurred and all costs and expenses
incurred in connection therewith have been paid in full (the "Completion
Termination Date"). Further, if at any time all or any part of any payment made
by Guarantor under or with respect to this Guaranty is or must be rescinded or
returned for any reason whatsoever (including, but not limited to, the
insolvency, bankruptcy or reorganization of a Subsidiary or Guarantor), then
Guarantor's obligations hereunder shall, to the extent of the payment rescinded
or returned, be deemed to have continued in existence, notwithstanding such
previous payment made by Guarantor or receipt of payment by Atlantic, and
Guarantor's obligations hereunder shall continue to be effective or be
reinstated, as the case may be, as to such payment, all as though such previous
payment by Guarantor had never been made.
(h) Modifications by Atlantic. Guarantor acknowledges that any
Subsidiary may (and/or Atlantic may at any time enter into agreements with any
Subsidiary receiving Loan proceeds to) amend, modify or change the Plans
applicable to such Subsidiary's Project, any contracts or subcontracts relating
to the Project and/or the Funding Agreement or any other documents evidencing,
securing or relating to the Loan, or may at any time waive or release any
provision or provisions thereof and, with reference thereto, may make and enter
into all such agreements as such Subsidiary and/or Atlantic may deem proper or
desirable, without any notice
-3-
<PAGE>
or further assent from Guarantor, and without in any manner impairing or
affecting this Guaranty or any of Atlantic's rights hereunder or any of
Guarantor's obligations hereunder.
3. Guaranty of Payment. Guarantor also irrevocably and unconditionally
fully guarantees to Atlantic to pay and perform when due the Liabilities.
"Liabilities" shall mean all obligations of the Subsidiaries to Atlantic of any
kind whatsoever, howsoever created, arising or evidenced, whether pursuant to a
covenant, representation, warranty, indemnity or other agreement of kind,
whether direct or indirect, absolute or contingent, now or hereafter existing,
or due or to become due, under the Notes or any of the other Loan Documents.
Obligations under the Loan Documents shall include the obligation to pay
interest under the Notes executed by any Subsidiary, including interest at the
post-maturity or default rate.
4. Nature of the Guaranty. This Guaranty shall be direct, immediate, and
primary, and is one of payment and performance and not just collection.
Atlantic shall be under no obligation to pursue its rights against a Subsidiary
or any other right or remedy available to it or pursue any collateral or
security before proceeding against Guarantor. Guarantor expressly waives all
rights it may have now or in the future under any statute, or at common law, or
at law or in equity, or otherwise, including, without limitation, any rights
Guarantor may have to compel Atlantic to proceed in respect of the Guarantor's
obligation hereunder against any Subsidiary or any other party or against any
security for the payment or performance of Guarantor's obligation hereunder
before proceeding against, or as a condition to proceeding against, Guarantor.
All payments made pursuant to this Guaranty shall be made in United States
currency to Atlantic in immediately available funds, without reduction for any
recoupment, set-off, counterclaim or defense based upon any claim that Guarantor
may have against any Subsidiary. The obligations and liabilities of Guarantor
pursuant to this Guaranty shall be unconditional, irrespective of the
genuineness, validity, priority, regularity or enforceability of the Notes or
the Loan Documents or any other circumstance which might otherwise constitute a
legal or equitable discharge of a surety or guarantor.
5. Rights of Atlantic to Deal With Subsidiaries and Guarantor. Guarantor
hereby assents to any and all terms and agreements between Atlantic and any
Subsidiaries receiving Loan proceeds or between Atlantic and any person,
including Guarantor, who guarantees in whole or in part the payment or
performance of any Subsidiary's obligations with respect to Atlantic, and all
amendments and modifications thereof, whether presently existing or hereafter
made and whether oral or in writing. Atlantic may, without compromising,
impairing, diminishing, or in any way releasing Guarantor from any obligations
hereunder and without notifying or obtaining the prior approval of Guarantor at
any time or from time to time: (a) waive or excuse a default or defaults by a
Subsidiary or any person who has guaranteed in whole or in part any of such
Subsidiary's obligations, or delay in the exercise by Atlantic of any or all of
Atlantic's rights or remedies with respect to such default or defaults; (b)
grant extensions of time for payment or performance by a Subsidiary or any
person who has guaranteed in whole or in part any of such Subsidiary's
obligations, including Guarantor; (c) release, substitute, exchange, surrender
or add collateral of a Subsidiary or of any person who has guaranteed in
-4-
<PAGE>
whole or in part any of such Subsidiary's obligations, or waive, release or
subordinate, in whole or in part, any lien or security interest held by Atlantic
on any real or personal property securing payment or performance, in whole or in
part, of a Subsidiary's obligations, including Guarantor; (d) release a
Subsidiary or any person who has guaranteed in whole or in part any of such
Subsidiary's obligations, including Guarantor; (e) apply payments made by a
Subsidiary, or by any person who has guaranteed in whole or in part, any of such
Subsidiary's obligations, including, without limitation, Guarantor, to any sums
owed by a Subsidiary to Atlantic, in any order or manner, or to any specific
account or accounts, as Atlantic may elect; (f) modify, change, renew, extend or
amend in any respect Atlantic's agreement with a Subsidiary or any person who
has guaranteed in whole or in part any of such Subsidiary's obligations,
including Guarantor, or any documents, instrument or writing embodying or
reflecting the same.
6. Waivers by Guarantor. Guarantor waives (a) any and all notices
whatsoever with respect to this Guaranty or with respect to any Subsidiary's
obligations, including, but not limited to, notice of: (i) Atlantic's acceptance
hereof or Atlantic's intention to act, or Atlantic's action, in reliance hereon;
(ii) the present existence or future incurring of any Subsidiary's obligations
or any terms or amounts thereof or any change therein; (iii) default by a
Subsidiary or any surety, pledgor, grantor of security, guarantor or other
person who has guaranteed or secured in whole or in part such Subsidiary's
obligations, including Guarantor; and (iv) the obtaining or release of any
guaranty or surety agreement (in addition to this Guaranty), pledge, assignment
or other security for any of a Subsidiary's obligations; and (b) (i) presentment
and demand for payment of any sum due from a Subsidiary or any person who has
guaranteed in whole or in part any of such Subsidiary's obligations, including
Guarantor, and protest of nonpayment; (ii) notice of default by a Subsidiary or
any person who has guaranteed in whole or in part any of such Subsidiary's
obligations and notice of any extension of time for payment or performance under
the Note and any other indulgences granted by Atlantic to a Subsidiary; (iii)
demand for performance by a Subsidiary or any person who has guaranteed in whole
or in part any of such Subsidiary's obligations, including Guarantor; (iv) to
the fullest extent legally possible, any and all defenses which may now or
hereafter exist by virtue of any statutes of limitations, valuation, marshaling,
forbearance, redemption, exemption, appraisement, stay or moratorium laws or
other similar laws now or hereafter in effect; and (v) all other notices and
demands otherwise required by law which Guarantor may lawfully waive. Atlantic
may (without notice to or consent of the Guarantor, and with or without
consideration) release, compromise, settle with or proceed against Guarantor
without releasing, lessening or affecting the obligations hereunder or under any
of the documents relating to the Loan. It is the intention hereof that
Guarantor shall remain liable as a principal until payment in full of all
indebtedness and performance and observance of the terms, covenants and
conditions of the Notes and of each other Loan Document to be performed and
observed by any Subsidiaries, notwithstanding any act, omission or thing which
might otherwise operate as a legal or equitable discharge of Guarantor.
Guarantor shall be responsible for obtaining information regarding its
Subsidiaries, including, but not limited to, any changes in the business or
financial condition of any Subsidiaries, and Atlantic shall have no duty to
notify Guarantor of any such information.
-5-
<PAGE>
7. Collection Expenses. Guarantor shall pay to Atlantic, upon demand,
all losses, costs and expenses, including attorneys' fees, if collection is
referred to an attorney, that may be incurred by Atlantic in attempting to cause
satisfaction of Guarantor's liability under this Guaranty.
8. Invalidity of Any Part. If any provision or part of any provision of
this Guaranty shall for any reason be held invalid, illegal or unenforceable in
any respect, such other provisions or the remaining part of any effective
provisions of this Guaranty shall be construed as if such invalid, illegal or
unenforceable provision or part thereof had never been contained herein, but
only to the extent of its invalidity, illegality or unenforceability.
9. Impairment of Subrogation Rights. Guarantor agrees that it shall have
no right of subrogation whatsoever with respect to the Notes, or to the monies
due or unpaid thereon, or to any collateral securing the same, unless and until
Atlantic shall have received payment in full of all sums due under the Notes and
the Loan Documents. Guarantor waives and releases Atlantic from any damages
which Guarantor may incur as a result of any intentional or unintentional or
negligent action or inaction of Atlantic impairing, diminishing or destroying
any rights of subrogation which Guarantor may have upon payment of any of the
Subsidiaries' obligations. Guarantor further agrees that all the present and
future indebtedness to Guarantor of any Subsidiary receiving Loan proceeds shall
be and hereby is subordinated, assigned and transferred to Atlantic.
Notwithstanding any other provision of this Guaranty to the contrary, if
Guarantor is or becomes an "insider" (as defined in Section 101 of the United
States Bankruptcy Code) with respect to its Subsidiaries or any other guarantor,
Guarantor irrevocably waives any and all rights of contribution,
indemnification, reimbursement or any similar right against any of its
Subsidiaries and/or such other guarantor (including any right of subrogation),
whether such rights arise under an express or implied contract or by operation
of law; it being the specific intention of this sentence that in any bankruptcy
or insolvency proceeding filed by or against such Subsidiary or any other
guarantor, no guarantor, including the Guarantor, shall be deemed a "creditor"
(as defined in Section 101 of the United State Bankruptcy Code) of any
Subsidiary or any other guarantor by reason of the existence of this Guaranty
with the result that the exercise of such rights would require Atlantic to
return to the bankruptcy estate of any Subsidiary or any other guarantor any
payments received by Atlantic on account of the obligations guaranteed hereby.
Subject to the limitations set forth in the preceding sentence, until all of the
obligations guaranteed hereby have been duly and punctually performed to the
satisfaction of Atlantic, Guarantor shall not be subrogated to any right of
Atlantic against any Subsidiary, any other guarantor or any collateral, and any
moneys, property or other consideration received at any time by Guarantors from
any Subsidiary in connection with such rights of subrogation prior to the
performance by such Subsidiary of all the obligations guaranteed hereby shall be
held in trust for Atlantic and shall be paid or transferred to Atlantic upon
demand therefor. Guarantor agrees not to assert any right of contribution
against any other guarantor of the obligations guaranteed hereby in any manner
that is inconsistent with the preceding two sentences.
-6-
<PAGE>
10. Remedies Cumulative. Each right, power and remedy of Atlantic under
this Guaranty, the Note, the Loan Documents or any other agreement or instrument
signed by a Subsidiary or Guarantor or under applicable laws shall be cumulative
and concurrent, and the exercise of any one or more of them shall not preclude
the simultaneous or later exercise by Atlantic of any or all such other rights,
powers or remedies at law or in equity or under this Guaranty. No failure or
delay by Atlantic to insist upon the strict performance of any one or more of
its rights, powers or remedies consequent upon a breach thereof or default
hereunder shall constitute a waiver thereof, or preclude Atlantic from
exercising any such right, power or remedy. By accepting partial payment on
this Guaranty, Atlantic shall not be deemed to have waived the right either to
require prompt payment when due and payment of all other amounts payable under
this Guaranty or to exercise any rights and remedies available to it in order to
collect all such other amounts. No modification, change, waiver or amendment of
this Guaranty shall be deemed to be made by Atlantic unless in writing and
signed by Atlantic, and each such waiver, if any, shall apply only with respect
to the specific instance involved and only to the extent expressly provided
therein.
11. No Action By Atlantic to Impair Enforcement of Rights Hereunder. No
act of commission or omission of any kind or at any time upon the part of
Atlantic in respect of any matter whatsoever, shall in any way affect or impair
its right to enforce any right, power or benefit under this Guaranty, and no
set-off, counterclaim, reduction or diminution of an obligation, or any defense
of any kind or nature which Guarantor has or may have against Atlantic, shall be
available to Guarantor or against Atlantic.
12. Limitation of Liability of Subsidiary Not to Affect Liability of the
Guarantor Hereunder. Without limiting the foregoing, it is specifically
understood that any impairment, modification, limitation or discharge of the
liability of any Subsidiary under any Note or any other Loan Document arising
out of or by virtue of any act of bankruptcy, or any arrangement, reorganization
or similar proceeding for relief of debtors under Federal or state law initiated
by or against such Subsidiary shall not affect, impair, modify, limit or
discharge the liability of Guarantor hereunder in any manner whatsoever, and
this Guaranty shall remain and continue in full force and effect. It is the
intent and purpose of this Guaranty that Guarantor shall and do hereby waive all
rights and benefits which might accrue to them by reason of any such
proceedings, and Guarantor agrees that it shall be liable for the full amount of
the obligations guaranteed by them hereby, irrespective of, and without regard
to, any impairment, modification, limitation or discharge of the liability of
such Subsidiary under such Note or any or all of the Loan Documents that may
result from any such proceedings.
13. Independent Obligations of Guarantor. The obligations of Guarantor
hereunder are irrevocable and are independent of the Loan or other obligations
of any Subsidiary, and a separate action or actions may be brought and
prosecuted against Guarantor, regardless of whether any action is brought
against such Subsidiary or whether such Subsidiary is joined in any such action
or actions.
-7-
<PAGE>
14. Choice of Law; Consent to Jurisdiction; Venue. This Guaranty, having
been executed, sealed and delivered in the State of New Mexico shall be
construed, interpreted and enforced under the internal laws (and not the laws
pertaining to conflicts or choice of law) of the State of New Mexico. Should
any provision of this Guaranty require judicial interpretation, it is agreed
that the court interpreting or considering same shall not apply the presumption
that the terms hereof shall be more strictly construed against a party by reason
of the rule or conclusion that a document should be construed more strictly
against the party who itself or through its agent prepared the same, it being
agreed that all parties hereto have participated in the preparation of this
Guaranty and that each party consulted (or had the opportunity to consult) legal
counsel before the execution of this Guaranty. Guarantor consents to the
jurisdiction of the courts of any county in the State of New Mexico selected by
Atlantic and to the jurisdiction of any United States District Court in the
State of New Mexico, if jurisdiction exists.
15. Counterparts. This Guaranty may be executed in any number of
counterparts, each of which shall be considered an original for all purposes;
provided, however, that all such counterparts shall together constitute one and
the same instrument.
16. Binding Nature. This Guaranty shall inure to the benefit of, and be
enforceable by, Atlantic and its successors and assigns, and shall be binding
upon and enforceable against the Guarantor and its legal and personal
representatives, heirs, successors and assigns. This Guaranty may be assigned
by Atlantic, or any other holder of the Note at any time or from time to time.
17. Joint and Several Nature. In the event there exists more than one
Guarantor, all obligations, responsibilities, warranties, representations and
liabilities hereunder shall be joint and several.
18. Notices. Any and all notices or other communications hereunder shall
be deemed to have been duly given if in writing and if transmitted by hand-
delivery, Federal Express, Express Mail or other nationally recognized overnight
courier or by certified mail, return receipt requested, as follows:
To Atlantic: Security Capital Atlantic Incorporated
7777 Market Center Avenue
El Paso, Texas 79912
Attention: James C. Potts
To Guarantor: Homestead Village Incorporated
125 Lincoln Avenue, Suite 300
Santa Fe, New Mexico 87501
Attention: David C. Dressler, Jr.
-8-
<PAGE>
With a copy to: Mayer, Brown & Platt
141 East Palace Avenue
Santa Fe, New Mexico 87501
Attention: Caroline Brower, Esquire
or to such other address as either party may furnish to the other by notice in
accordance with this Paragraph 18.
19. Tense; Gender. As used herein, the plural shall refer to and include
the singular, and the singular the plural, and the use of any gender shall
include and refer to any other gender.
20. Time of Essence. Guarantor and Atlantic expressly agree that time
shall be of the essence in the performance of obligations of Guarantor under
this Guaranty.
21. Entire Agreement. This Guaranty sets forth the final and entire
agreement between the parties hereto with respect hereto and is intended to be
an integration of all prior negotiations and understandings. Atlantic and
Guarantor and their respective agents shall not be bound by any terms,
conditions, statements, warranties or representations, oral or written, express
or implied, not set forth or incorporated herein.
22. WAIVER OF JURY TRIAL, ETC. GUARANTOR AND ATLANTIC (BY ITS ACCEPTANCE
HEREOF) WAIVES ANY RIGHT TO A TRIAL BY JURY OF ANY OR ALL ISSUES ARISING IN ANY
ACTION OR PROCEEDING BETWEEN GUARANTOR AND ATLANTIC OR THEIR SUCCESSORS OR
ASSIGNS, UNDER OR CONNECTED WITH THE LOAN, THIS GUARANTY OR ANY OF ITS
PROVISIONS OR ANY OF THE LOAN DOCUMENTS, AND AGREES THAT THE OBLIGATION
EVIDENCED BY THIS GUARANTY IS AN EXEMPTED TRANSACTION UNDER THE TRUTH-IN-LENDING
ACT, 15 U.S.C. SECTION 1601, ET SEQ. THIS WAIVER IS KNOWINGLY, INTENTIONALLY
AND VOLUNTARILY MADE BY ATLANTIC AND GUARANTOR, AND GUARANTOR ACKNOWLEDGES THAT
NEITHER ATLANTIC NOR ANY PERSON ACTING ON BEHALF OF ATLANTIC HAS MADE ANY
REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO
MODIFY OR NULLIFY ITS EFFECT. GUARANTOR FURTHER ACKNOWLEDGES THAT IT HAS BEEN
OR HAD THE OPPORTUNITY TO BE REPRESENTED IN THE SIGNING OF THIS GUARANTY AND IN
THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN FREE
WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
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<PAGE>
IN WITNESS WHEREOF, Guarantor has duly executed this Guaranty of Completion
and Payment as of the date first set forth above.
GUARANTOR:
HOMESTEAD VILLAGE INCORPORATED
ATTEST:
/s/ Jeffrey A. Klopf By:/s/ David C. Dressler, Jr.
- --------------------------- ---------------------------
Jeffrey A. Klopf, Secretary Its:
--------------------------
[Corporate Seal]
S-1
<PAGE>
ADMINISTRATIVE SERVICES AGREEMENT Exhibit 10.11
---------------------------------
THIS ADMINISTRATIVE SERVICES AGREEMENT (this "Agreement") is made and
entered into as of this 17th day of October, 1996, by and between Homestead
Village Incorporated, a Maryland corporation ("Homestead"), and SC Group
Incorporated, a Texas corporation ("SC Group").
WHEREAS, Homestead wishes to purchase from SC Group certain administrative
services designed to assist Homestead in the cost-efficient management of
Homestead's corporate and business affairs in the manner and pursuant to terms
and conditions as more specifically described herein; and
WHEREAS, SC Group desires to provide or cause to be provided those services
requested by Homestead under such terms and conditions; and
WHEREAS, SC Group will perform similar administrative services for other
entities (collectively "SC Group Clients") which may vary from time to time.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, the parties hereto agree as follows:
Section 1. Services.
1.1 Services to be Rendered. SC Group shall provide Homestead with
the services described below (each, a "Service", and collectively, the
"Services"):
(a) Insurance Administration. Assistance in securing all forms of
insurance, including property, casualty, workers' compensation and
directors' and officers' liability coverage; managing insurance policies;
negotiation of premiums; arranging payment terms; managing claims; and
preparation of loss fund analysis. The amount and levels of insurance
shall be determined in the sole and absolute discretion of Homestead.
(b) Accounts Payable. Provision of all accounts payable functions
(currently all non site-level invoices); processing of all employee expense
reports and reimbursements of travel and entertainment expenses; and
maintenance of accounts payable and cash disbursement systems, including
reasonable internal controls.
(c) Internal Audit. Provision of internal audit coverage and audit
support, including property audits, financial audits, operational audits
and information system audits, as requested and authorized in advance by
Homestead.
<PAGE>
(d) Cash Management. Operation and maintenance of collection systems,
concentration systems, and electronic disbursements (including wire
transfers, ACH payments and short term investing); maintenance of bank
accounts, including opening and closing of operating, security deposits,
local depository and petty cash accounts; bank administration, and
maintenance of bank relationships.
(e) Human Resources.
(i) Benefit Administration. Negotiation and administration of
all health, dental, vision, life and long-term and short-term
disability insurance plans as well as 401(k) and flexible spending
plans; and administration of other miscellaneous employee benefits.
(ii) Human Resources Information Systems. Administration and
employee and labor relations including statutory compliance with all
governmental agencies, affirmative action, work force demographics;
processing wage and hour claims and utilization and EEO charges; and
compliance with annual reporting requirements.
(iii) Payroll. Production of payroll and related items;
maintenance of required records; compliance with federal and state
wage and hour regulations; tracking benefit hours; tracking and paying
wage garnishments and related orders; maintenance of Forms W-2; and
production and processing of special payroll checks.
(iv) Pre-Employment. Development of employment policies and
procedures; verification of applicant information such as drivers
license numbers, social security numbers, education, criminal
offenses, and past employment; and drug testing.
(v) Recruiting. Recruiting and retaining employees of Homestead
for the El Paso Operations Center who will perform services for
Homestead, including placement of newspaper advertisements,
contracting and negotiating with search consultants, screening of
candidates, interviews and employee orientation; processing new hires,
terminations, transfers, leaves of absence and miscellaneous status
changes as requested and authorized in advance by Homestead.
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<PAGE>
(f) Management Information Systems.
(i) Applications Development. Development, maintenance and
continuing evolution of system applications to provide technology
solutions to business needs and problems, as requested and authorized
in advance by Homestead.
(ii) Telecommunications. Design, operation and maintenance of
network infrastructure, including telephone and data transmission
lines, voice mail, facsimile machines, cellular phones, pager, etc.;
negotiation of contracts with third party vendors and suppliers; and
local area network and wide area network communications support.
(iii) Operations/Technical Support and User Support. Design,
maintenance and operation of the computing environment, including
business specific applications, network wide applications, electronic
mail and other systems; purchase and maintenance of equipment,
including hardware and software; configuration, installation and
support of computer equipment; and education and training of the user
community.
(g) Tax Administration. Supervision and direction of the preparation,
review and filing of all federal, state and other required tax returns;
supervision and direction of ad hoc requests for assistance on tax related
matters; and coordination of all activities with Homestead's outside tax
preparer, as requested and authorized in advance by Homestead. All tax
matters shall be determined by Homestead in its absolute and sole
discretion.
(h) Special Projects. Direction and support of all special projects,
as requested and authorized in advance by Homestead.
(i) Legal. Coordination and supervision of all third party legal
services; assistance in the preparation of public filings and registration
statement; and oversee processing of claims against Homestead.
(j) Research. Provision of periodic market research reports and
special research assignments as requested by management of Homestead.
(k) Investor Relations/Communications.
(i) Capital Markets. Advice and services relating to capital
raising transactions and relationship with shareholders, but not
including solicitation of investors as a broker, dealer or underwriter
in any capital raising transactions of Homestead.
-3-
<PAGE>
(ii) Communications. Preparation and coordination of annual and
quarterly reports to shareholders; presentations to public; public
relations; preparation of marketing materials; and investor relations
services.
(l) Debt Financing. Advice and services relating to revolving lines
of credit and other issuances of indebtedness.
1.2 Scope of Services and Charges. The parties will agree from time
to time on the scope of Services listed in Section 1.1 and the charges for such
Services. The scope of Services shall consist of the estimated amount of items
to be processed or hours to be spent for a category of the Services in any year
as agreed to by the parties. The charges for Services shall consist of an
amount equal to SC Group's costs incurred in providing such Services, multiplied
by 120%. If the scope of Services actually performed by SC Group in any
category of Services is different than that agreed to by the parties, or if the
scope of Services is increased at the request of Homestead, then the parties
shall negotiate in good faith to revise the scope of Services and to adjust the
charges for such Services. The parties shall review annually the scope of
Services and the charges for such Services and negotiate in good faith and make
appropriate adjustments. The parties agree to complete each annual review not
later than November 30 in each year of this Agreement.
1.3 Performance of Services. SC Group covenants that it will perform
or cause to be performed the Services in a timely, efficient and workmanlike
manner. SC Group further covenants that it will maintain or contract for a
sufficient staff of trained personnel to enable it to perform the Services
hereunder. SC Group may retain third parties or its affiliates to provide
certain of the Services hereunder. In such cases, and notwithstanding anything
herein to the contrary, Homestead shall reimburse SC Group for its actual cost
for arranging for such Services. Any arrangements between SC Group and its
affiliates for the provision of Services hereunder shall be commercially
reasonable and on terms not less favorable than those which could be obtained
from unaffiliated third parties.
1.4 Payment for Services. SC Group shall bill Homestead, at the end
of each calendar month, one-twelfth of the amount agreed to from time to time
pursuant to Section 1.2 for the applicable Service. Such amount shall be
payable by Homestead in full within 30 days of receipt thereof by Homestead. On
the forty-fifth day following the end of each calendar quarter, SC Group shall
provide to Homestead a statement, certified by a senior officer of SC Group,
setting forth by category of Service the amount and nature of such Services
actually performed during the period covered by such statement. Such statement
shall also set forth the dollar amount, if any, by which the amounts previously
paid by Homestead for the provision of each specific category of Services for
such period is greater than the charges agreed for such Services (in each such
case, an "excess", and, if a shortfall, a "shortfall"). Any such excess or
shortfall shall be reflected in an adjustment to the invoice amount for the next
succeeding invoice; provided, that no such adjustment shall be made to an
invoice for any shortfall or excess arising in the last calendar quarter of any
fiscal year during the term of this Agreement.
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<PAGE>
1.5 Reimbursement. Homestead shall reimburse SC Group for all third
party out-of-pocket expenses it incurs on behalf of Homestead not billed
directly to Homestead within 30 days of receipt of the invoice therefor.
Section 2. Facilities. SC Group hereby grants to Homestead the right to
use the Facilities set forth on Exhibit A. Homestead shall not pay any
additional compensation to SC Group for the use of such Facilities during the
twelve-month period following the date of this Agreement. From and after the
expiration of such twelve-month period, Homestead shall pay SC Group rental for
the use of such Facilities as may be agreed between the parties negotiating in
good faith. SC Group and Homestead agree that during the term of this Agreement
they shall cooperate and use reasonable efforts in order to allocate the
Facilities in accordance with the reasonable requests (based on their business
needs) of each of SC Group, Homestead and other SC Group Clients. Homestead
acknowledges and agrees that within 60 days of the expiration of the term of
this Agreement, it shall leave the Facilities in the same condition as at the
commencement of the term of the Agreement, ordinary wear and tear and damage by
casualty excepted.
Section 3. Term. The initial term of this Agreement shall commence on the
date hereof and shall be through December 31, 1997 (the "Initial Term") and
shall be renewable by Homestead every year thereafter, subject to a
determination by a majority of the Independent Directors that SC Group's
performance hereunder has been satisfactory and that the compensation payable to
SC Group hereunder is fair to Homestead. Absent written notice of non-renewal as
provided in this Section 3, this Agreement shall be automatically renewed for
successive one-year terms (each, a "Renewal Term") upon the expiration of the
Initial Term and each Renewal Term. Notice of non-renewal, if given, shall be
given in writing by either party hereto not less than ninety (90) calendar days
before the expiration of the Initial Term or any Renewal Term. As used herein,
the term "Independent Directors" means each member of Homestead's Board of
Directors who is not an employee or officer of Homestead, any person or entity
primarily controlling Homestead or their respective affiliates and performs no
other services for Homestead, any person or entity primarily controlling
Homestead or their respective affiliates, except as a director or trustee.
Section 4. Audit of Services. At any time during regular business hours
and as often as reasonably requested by Homestead's officers, SC Group shall
permit Homestead or its authorized representatives to examine and make copies
and abstracts form the records and books of SC Group for the purpose of auditing
the performance of, and the charges of, SC Group under the terms of this
Agreement; provided, that all costs and expenses of such inspection shall be
borne by Homestead.
Section 5. Prevention of Performance. SC Group shall not be determined to
be in violation of this Agreement if it is prevented from performing any
Services hereunder for any reason beyond its reasonable control, including
without limitation, acts of God, nature, or of
-5-
<PAGE>
public enemy, strikes, or limitations of law, regulations or rules of the
Federal or of any state or local government or of any agency thereof.
Section 6. Indemnification.
6.1 By Homestead. Homestead shall indemnify, defend and hold SC
Group, and its directors, officers, and employees harmless from and against all
damages, losses and out-of-pocket expenses (including fees) incurred by them in
the course of performing the duties on behalf of Homestead and its subsidiaries
as prescribed hereby, except for matters covered by subsection 6.2 hereof.
6.2 By SC Group. SC Group shall indemnify, defend and hold
Homestead, its directors, officers and employees harmless from and against all
damages, losses and out-of-pocket expenses (including fees) caused by or arising
out of any willful misconduct or gross negligence in the performance of any
obligation or agreement of SC Group herein.
6.3 Remedy. Except as otherwise provided in subsection 6.2 hereof,
SC Group does not assume any responsibility under this Agreement other than to
render the services called for under this Agreement in good faith. Except as
otherwise provided in subsection 6.2 hereof, Homestead's sole remedy on account
of the failure of SC Group to render the services as and when required hereunder
shall be to procure services elsewhere and to charge SC Group the difference
between the reasonable increased cost, if any, to procure new services, and the
current cost to Homestead to procure services under this Agreement.
Section 7. Notices.
7.1 Manner of Delivery. Each notice, demand, request, consent,
report, approval or communication (each a "Notice") which is or may be required
to be given by either party to the other party in connection with this Agreement
and the transactions contemplated hereby, shall be in writing, and given by
telecopy, personal delivery, receipted delivery service, or by certified mail,
return receipt requested, prepaid and properly addressed to the party to be
served.
7.2 Addresses. Notices shall be addressed as follows:
If to Homestead:
Homestead Village Incorporated
125 Lincoln Avenue, Suite 300
Santa Fe, New Mexico 87501
Attention: David C. Dressler, Jr.
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<PAGE>
If to SC Group:
SC Group Incorporated
7777 Market Center Avenue
El Paso, Texas 79912
Attention: Bryan J. Flanagan
7.3 Effective Date. Notices shall be effective on the date sent via
telecopy, the date delivered personally or by receipted delivery service, or
three (3) days after the date mailed.
7.4 Change of Address. Each party may designate by notice to the
others in writing, given in the foregoing manner, a new address to which any
notice may thereafter be so given, served or sent.
Section 8. Entire Agreement. This Agreement, together with the Exhibit
hereto, constitutes and sets forth the entire agreement and understanding of the
parties pertaining to the subject matter hereof, and no prior or contemporaneous
written or oral agreements, understandings, undertakings, negotiations,
promises, discussions, warranties or covenants not specifically referred to or
contained herein or attached hereto shall be valid and enforceable. No
supplement, modification, termination in whole or in part, or waiver of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed,
or shall constitute, a waiver of any other provision hereof (whether or not
similar), nor shall any such waiver constitute a continuing waiver unless
otherwise expressly provided.
Section 9. Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto, each of their respective successors
and permitted assigns, but may not be assigned by either party without the prior
written consent of the other party, and no other persons shall have or derive
any right, benefit or obligation hereunder.
Section 10. Headings. The headings and titles of the various paragraphs
of this Agreement are inserted merely for the purpose of convenience, and do not
expressly or by implication limit, define, extend or affect the meaning or
interpretation of this Agreement or the specific terms or text of the paragraph
so designated.
Section 11. Governing Law. This Agreement shall be governed in all
respects, whether as to validity, construction, capacity, performance or
otherwise, by the laws of the State of Texas.
Section 12. Severability. If any provision of this Agreement shall be
held invalid by a court with jurisdiction over the parties to this Agreement,
then and in that event such provision shall be deleted from the Agreement, which
shall then be construed to give effect to the
-7-
<PAGE>
remaining provisions thereof. If any one or more of the provisions contained in
this Agreement or in any other instrument referred to herein shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, then in
that event, to the maximum extent permitted by law, such invalidity, illegality
or enforceability shall not affect any other provisions of this Agreement or any
other such instrument.
Section 13. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall be considered one and the same instrument.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
HOMESTEAD VILLAGE INCORPORATED
By:/s/ David C. Dressler, Jr.
-----------------------------
David C. Dressler, Jr.
Chairman
SC GROUP INCORPORATED
By:/s/ Bryan J. Flanagan
-----------------------------
Bryan J. Flanagan
Senior Vice President
S-1
<PAGE>
EXHIBIT A
DESCRIPTION OF FACILITIES
-------------------------
For purposes of the Administrative Services Agreement, Facilities shall
mean the facilities maintained by SC Group or one of its affiliates at the
following addresses:
7777 Market Center Avenue
El Paso, Texas 79912
125 Lincoln Avenue
Santa Fe, New Mexico 87501
Facilities shall also include any other premises owned, leased or subleased
by SC Group at which Homestead desires to utilize such premises as well as the
fixtures, furniture and equipment used in connection with the operation of such
premises.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,014,618
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,014,618
<PP&E> 1,586,390
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,794,791
<CURRENT-LIABILITIES> 6,884,000
<BONDS> 0
<COMMON> 10
0
0
<OTHER-SE> (89,219)
<TOTAL-LIABILITY-AND-EQUITY> 6,794,791
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 64,844
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,755
<INCOME-PRETAX> (90,209)
<INCOME-TAX> 0
<INCOME-CONTINUING> (90,209)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (90,209)
<EPS-PRIMARY> (90.21)
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