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UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q
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(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
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
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HOMESTEAD VILLAGE INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
-------------------------
MARYLAND
(STATE OR OTHER JURISDICTION
OF INCORPORATION OR ORGANIZATION)
74-2770966
(I.R.S. EMPLOYER
IDENTIFICATION NO.)
2100 RIVEREDGE PARKWAY, 9TH FLOOR
ATLANTA, GEORGIA 30328
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
(770) 303-2200
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
---------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
The number of shares outstanding of the Registrant's common stock as of August
13, 1998 was: 38,262,996
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HOMESTEAD VILLAGE INCORPORATED
TABLE OF CONTENTS
<TABLE>
<CAPTION>
NUMBER
PAGE
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<S> <C>
PART I. Condensed Financial Information
Item 1. Financial Statements
Condensed Balance Sheets - June 30, 1998 (unaudited) and December 31, 1997. 3
Condensed Statements of Operations (unaudited) - Three- and Six-month
Periods Ended June 30, 1998 and 1997...................................... 4
Condensed Statements of Cash Flows (unaudited) - Six-month Periods Ended
June 30, 1998 and 1997.................................................... 5
Notes to Condensed Financial Statements (unaudited)....................... 6
Report of Independent Public Accountants.................................. 11
Item 2. Management's Discussion and Analysis of Financial Condition and Results 12
of Operations.............................................................
PART II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders....................... 18
Item 6. Exhibits and Reports on Form 8-K......................................... 18
</TABLE>
2
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HOMESTEAD VILLAGE INCORPORATED
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS June 30, December 31,
1998 1997
(UNAUDITED)
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<S> <C> <C>
Current assets:
Cash and cash equivalents (including restricted cash of $665 in 1998 and
$657 in 1997).......................................................... $ 14,312 $ 2,974
Accounts receivable, net of allowance of $65 in 1998 and $81 in 1997.... 4,222 1,970
Other current assets.................................................... 457 732
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Total current assets................................................ 18,991 5,676
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Property and equipment...................................................... 998,182 733,321
Less accumulated depreciation............................................... (30,148) (17,824)
----------- -----------
Net investment in property and equipment.................................... 968,034 715,497
----------- -----------
Deposits and pursuit costs, including $5,845 of funds with title companies
for property acquisitions in 1998 and $7,697 in 1997.................... 12,081 12,901
Deferred loan costs, net of accumulated amortization of $45,514 in 1998 and
$43,297 in 1997........................................................... 2,800 632
Trademark and intangibles, net of accumulated amortization of $2,948 in 1998
and $1,768 in 1997........................................................ 45,520 44,447
Other assets................................................................ 6,245 4,796
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Total assets.............................................................. $1,053,671 $ 783,949
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Lines of credit......................................................... $ 178,080 $ 96,808
Development costs payable, including retainage of $17,403 in 1998 and
$21,966 in 1997........................................................ 37,496 34,079
Due to affiliate........................................................ 619 133
Accrued interest payable to affiliates.................................. 2,715 2,540
Accrued real estate taxes............................................... 4,347 2,900
Accounts payable and other accrued expenses............................. 10,921 8,882
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Total current liabilities........................................... 234,178 145,342
Convertible mortgage notes payable to affiliates............................ 319,362 301,606
Other long-term liabilities................................................. 8,068 8,070
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Total liabilities................................................... 561,608 455,018
Commitments and contingencies
Shareholders' equity:
Common stock, $.01 par value, 250,000 shares authorized, 38,263 shares
issued and outstanding in 1998 and 27,805 shares issued and
outstanding in 1997................................................... 383 278
Additional paid-in capital.............................................. 474,554 318,667
Retained earnings....................................................... 18,160 13,098
Less shares in escrow................................................... -- (2,253)
Less deferred compensation.............................................. (1,034) (859)
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Total shareholders' equity.......................................... 492,063 328,931
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Total liabilities and shareholders' equity.......................... $1,053,671 $ 783,949
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</TABLE>
The accompanying notes are an integral part
of the condensed financial statements.
3
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HOMESTEAD VILLAGE INCORPORATED
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE-MONTH PERIODS SIX-MONTH PERIODS
ENDED ENDED
JUNE 30, JUNE 30,
------------------------------------------------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Room revenue.......................... $ 33,009 $ 13,547 $ 59,436 $ 24,499
Other revenue......................... 1,058 409 2,419 544
-------------- ----------- ---------- ---------
Total revenues.................... 34,067 13,956 61,855 25,043
-------------- ----------- ---------- ---------
Operating expenses:
Property operating expenses........... 14,044 5,562 26,297 10,378
Corporate operating expenses.......... 5,243 4,066 10,022 7,148
Depreciation and amortization......... 7,472 2,380 13,859 4,192
-------------- ------------ ---------- ---------
Total operating expenses.......... 26,759 12,008 50,178 21,718
-------------- ------------ ---------- ---------
Operating income.......................... 7,308 1,948 11,677 3,325
Interest income........................... 215 148 504 293
Interest expense, net of capitalized
interest................................ (4,148) -- (7,119) --
-------------- ------------ ----------- ---------
Earnings before income taxes.............. 3,375 2,096 5,062 3,618
Provision for income taxes................ -- -- -- --
-------------- ------------ ----------- ---------
Net earnings..............................$ 3,375 $ 2,096 $ 5,062 $ 3,618
============== ============ =========== =========
Earnings per share:
Weighted average shares outstanding....... 38,263 21,697 37,007 21,082
============== ============ =========== =========
Basic earnings per share..................$ 0.09 $ 0.10 $ 0.14 $ 0.17
============== ============ =========== =========
Diluted weighted average shares
outstanding............................. 38,263 40,019 37,007 37,621
============== ============ =========== =========
Diluted earnings per share................$ 0.09 $ 0.05 $ 0.14 $ 0.10
============= ============ ============ =========
</TABLE>
The accompanying notes are an integral part
of the condensed financial statements.
4
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HOMESTEAD VILLAGE INCORPORATED
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX-MONTH PERIODS ENDED
JUNE 30,
-------------------------
1998 1997
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<S> <C> <C>
Operating activities:
Net earnings.................................................... $ 5,062 $ 3,618
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization................................ 13,859 4,192
Deferred compensation........................................ 325 234
Amortization of deferred loan costs.......................... 1,711 --
Amortization of prepaid rent................................. -- 150
Change in assets and liabilities:
Increase in accounts receivable.............................. (2,252) (1,001)
Decrease (increase) in other current assets.................. 1,447 (94)
Increase (decrease) in accrued real estate taxes............. 274 (97)
Increase in accrued interest on convertible mortgage notes... 174 815
Increase in accounts payable and other accrued expenses...... 2,040 2,567
Increase (decrease) in due to affiliate...................... 487 (74)
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Net cash provided by operating activities................. 23,127 10,310
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Investing activities:
Investment in properties, excluding development costs payable (260,196) (132,014)
Increase in deposits and pursuit costs....................... 821 (3,893)
Increase in other assets..................................... (1,804) (2,298)
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Net cash used in investing activities..................... (261,179) (138,205)
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Financing activities:
Proceeds from lines of credit................................ 181,272 --
Payments on lines of credit.................................. (100,000) --
Deferred loan costs for line of credit....................... (3,135) (610)
Proceeds from convertible mortgage notes payable............. 17,014 93,250
Proceeds from sale of shares, net of expenses................ 154,241 --
Payments on other long-term liabilities...................... (2) --
Repurchase of stock.......................................... -- (126)
Exercise of warrants for common stock........................ -- 38,516
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Net cash provided by financing activities................. 249,390 131,030
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Net increase in cash and cash equivalents........................... 11,338 3,135
Cash and cash equivalents, beginning of period...................... 2,974 7,415
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Cash and cash equivalents, end of period............................ $ 14,312 $ 10,550
=========== ============
Non-cash investing and financing transactions:
Increase in property and equipment, and development
cost payable................................................ $ 3,417 $ 13,222
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Increase in property and equipment from
capitalization of loan costs ............................... $ 1,249 $ 46,905
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Increase in trademark and intangibles arising from
release of shares in escrow................................. $ 2,253 $ 12,161
=========== ============
Loan costs resulting from issuance of convertible
mortgage debt............................................... $ 1,251 $ 6,465
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Decrease in deferred tax asset and deferred tax liability..... $ -- ($ 1,657)
=========== ============
</TABLE>
The accompanying notes are an integral part
of the condensed financial statements.
5
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HOMESTEAD VILLAGE INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
NOTE 1--GENERAL
The financial statements of Homestead Village Incorporated ("Homestead") as
of June 30, 1998 and for the three and six-month periods ended June 30, 1998 and
1997, are unaudited and certain information and footnote disclosures normally
included in financial statements have been omitted. While management of
Homestead believes that the disclosures presented are adequate, these interim
financial statements should be read in conjunction with the financial statements
and notes included in Homestead's 1997 Annual Report on Form 10-K.
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of Homestead's financial
statements for the interim periods presented. The results of operations for the
three and six-month periods ended June 30, 1998 and 1997 are not necessarily
indicative of the results to be expected for the full year.
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.
In April 1998 the Accounting Standards Executive Committee issued Statement
of Position 98-5 ("SOP 98-5") "Reporting on the Costs of Start-Up Activities"
establishing accounting standards requiring the expensing of organizational,
pre-opening, and start-up costs. SOP 98-5 is effective for fiscal years
beginning after December 15, 1998. Restatement of financial statements for
earlier periods is prohibited. Upon adoption, any unamortized organizational,
pre-opening and start-up costs will be written off and charged to 1999
operations as a cumulative effect of adoption of an accounting standard.
Homestead is in the process of evaluating SOP 98-5 and will adopt the standard
in the beginning of its 1999 fiscal year. The impact of adoption of SOP 98-5 on
Homestead's results of operations and financial position has not been
quantified.
NOTE 2--PROPERTY AND EQUIPMENT
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
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(UNAUDITED)
<S> <C> <C>
Completed properties:
Land ..................................... $ 142,624 $ 100,118
Buildings and improvements................. 462,395 329,045
Furniture, fixtures and equipment.......... 78,297 49,773
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683,316 478,936
Properties under construction.................. 228,182 213,283
Properties in planning and owned............... 84,092 32,984
Land held for future development............... -- 1,463
Land held for sale............................. 2,592 6,655
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Total.................................. $998,182 $733,321
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</TABLE>
6
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HOMESTEAD VILLAGE INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--DEBT
Lines of Credit
On April 24, 1998 Homestead renewed its existing revolving line of credit
facility with Commerzbank AG ("CAG"), as agent for a group of lenders, for a
one-year term, with an increase in total borrowing capacity to $150 million,
subject to collateral requirements. Borrowings will bear interest at the
Eurodollar rate plus 1.5% to 2.5% per annum, depending upon the percentage
leverage of borrowings outstanding to the amount of qualifying collateral.
Alternatively, borrowings will bear interest at a base rate defined as the
higher of prime rate plus a margin of 0.5% to 1.5% or the federal funds rate
plus a margin of 1% to 2%, with the margin dependent on the percentage leverage
of borrowings outstanding to the amount of qualifying collateral. Additionally,
a commitment fee of 0.375% per annum of the average unfunded balance will be
owed.
On April 24, 1998 Homestead also entered into a separate $50 million
one-year revolving line of credit facility with CAG of which $20 million is
available for borrowings on a secured basis and $30 million is available for
borrowing on an unsecured basis. The unsecured portion of the line is required
to be collateralized by September 30, 1998 or such unsecured borrowings must be
repaid. Borrowings will bear interest at the Eurodollar rate plus 2.75% per
annum or, alternatively, at a base rate defined as the higher of prime rate plus
1.75% or the federal funds rate plus 2.25%. Average unfunded balances bear a
commitment fee of 0.5% per annum.
On June 15, 1998 Homestead entered into an additional $200 million line of
credit facility with CAG which bears interest at the Eurodollar rate plus 1%
(1.25% after six months) or at a base rate of prime (prime plus 0.25% after six
months). The average unfunded balance bears a commitment fee of 0.25% per annum.
The line expires February 23, 1999. Homestead has obtained a subscription
agreement from Security Capital for $200 million of Homestead subordinated
debentures to secure this obligation. If the subscription is called by Homestead
or Homestead receives proceeds from any offering of securities, the proceeds
must be used to first repay the lines of credit to CAG and second to fund
projects under development which secure the other CAG credit facilities. The
debentures would bear interest at a rate of 0.25% over the rate Homestead incurs
under the $50 million credit facility with CAG. Homestead may repurchase the
debentures with the proceeds of an equity offering within 90 days of issuance of
the debentures, otherwise the debentures convert to Homestead common stock at
the lower of the 20-day average trading price of Homestead common stock
immediately before execution of the subscription agreement or immediately before
the 90th day. The subscription agreement expires the earlier of June 30, 1999 or
two weeks after termination of the $200 million credit agreement. The
subscription obligation is reduced or terminated to the extent Homestead issues
equity securities to any third party, or to Security Capital pursuant to a
separate offering and the proceeds are used to repay this credit facility and
any remaining proceeds are used to fund projects under development which secure
the other CAG credit facilities. In conjunction with Security Capital's entering
into the subscription agreement, Homestead agreed to pay an arrangement fee to
Security Capital of $600,000 of which $200,000 was paid upon execution of the
subscription agreement, $200,000 was paid in July 1998, and the remainder is due
in August 1998.
The CAG lines require maintenance of certain financial covenants,
specifically, aggregate indebtedness of no more than 55% of gross asset value,
as defined, or indebtedness secured by a lien of no more than 50% of gross asset
value, as defined, in each case excluding indebtedness outstanding under the
credit agreement entered into on June 15, 1998. Homestead must also maintain a
minimum debt service coverage ratio of earnings before interest, income taxes,
depreciation, amortization and gains or losses on sales of assets to cash debt
service, as defined, of no less than 1.25 to 1 for the second quarter of 1998,
and, including the $200 million facility, no less than 1.4 to 1 for third and
fourth quarters 1998 and 1.5 to 1 for first quarter of 1999, and excluding the
$200 million facility, no less than 1.5 to 1 for third quarter 1998, 1.6 to 1
for fourth quarter 1998, and no less than 1.75 to 1 thereafter on a quarterly
basis, and not allow stockholders equity to be less than $325 million.
Additionally, Homestead will not enter into any commitment for purchases of land
or construction of projects if such obligations exceed the available borrowing
capacity under all of the lines and internally generated excess funds. The
covenants also restrict payment of dividends without lender approval. Homestead
was in compliance with all such covenants as of June 30, 1998.
7
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HOMESTEAD VILLAGE INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
Subsequent to June 30, 1998 the lines of credit covenant ratios were
amended in conjunction with Homestead entering into the new mortgage note
(described below). As amended, Homestead may incur indebtedness secured by a
lien up to 55% of gross asset value through the earlier of the date the new
mortgage note is repaid or October 1, 1998 or, if the $200 line of credit has
been repaid, until the earlier of June 30, 1999 or the date the new mortgage
note is repaid. Further, until the earlier of June 30, 1999 or the date the new
mortgage note is repaid, the debt service coverage ratio, including debt
outstanding under the $200 million facility, is required to be no less than 1.3
to 1 for third and fourth quarters 1998 and 1.4 to 1 for first quarter of 1999,
and excluding the $200 million facility, is required to be no less than 1.3 to 1
for third quarter 1998, 1.4 to 1 for fourth quarter 1998, and no less than 1.6
to 1 for the first quarter of 1999.
On November 25, 1997, Homestead obtained a $50 million interim credit
agreement with CAG which provided for borrowings, at Homestead's option, at
either the Eurodollar rate plus 2.625% or at base rate (the higher of 1/2 of 1%
in excess of the federal funds rate or the prime rate) plus 1%. Borrowings and
all accrued interest under this agreement were repaid in January 1998 upon the
funding of the proceeds of the Rights Offering. Upon repayment of the interim
borrowings no further commitment was available under this agreement.
Convertible Mortgage Notes Payable
At June 30, 1998 Homestead owed convertible mortgage notes to Security
Capital Pacific Trust ("PTR"), an affiliate, of $221,333,620 and to Security
Capital Atlantic Incorporated ("ATLANTIC"), an affiliate, of $98,028,471. The
notes are collateralized by Homestead properties (54 Homestead properties at
$357 million of historical cost mortgaged to PTR and 26 properties at $221
million of historical cost mortgaged to ATLANTIC at June 30, 1998). The notes
accrue interest at 9.0% on the principal amount, and require interest only
payments every six months on May 28 and November 28. The notes are due October
31, 2006, and are callable on or after May 28, 2001. The notes are convertible,
at the option of the holder, into shares of Homestead common stock at a
conversion ratio equal to one share of common stock for every $11.50 of
principal amount outstanding. Deferred financing costs and the premium and
discount on the respective fundings have been fully amortized as of June 30,
1998.
On July 6, 1998, the ATLANTIC notes were amended and restated (see below)
and ATLANTIC assigned its interest in the mortgage notes to Merrill Lynch
Mortgage Capital Inc ("MLMC"). On July 7, 1998, ATLANTIC merged with and into
PTR, which continued in existence under the name Archstone Communities Trust
("Archstone"). Archstone continues to hold the $221 million convertible mortgage
notes originally held by PTR which continue to have the same terms as at June
30, 1998.
New Mortgage Note
On July 6, 1998, Homestead entered into a mortgage loan purchase agreement
with ATLANTIC and MLMC whereby the $98 million of Homestead convertible mortgage
notes held by ATLANTIC were modified to, among other things, eliminate their
convertibility feature in exchange for a payment of $21.4 million from Homestead
to ATLANTIC. Homestead funded the payment with the proceeds received from the
sale of $24 million of 7.5% convertible subordinated debentures. Also pursuant
to the mortgage loan purchase agreement ATLANTIC sold such amended notes to MLMC
for $98 million. On August 7, 1998, Homestead converted the $98 million of
mortgage notes and the $24 million of 7.5% convertible subordinated debentures
into a $122 million mortgage of a newly formed special purpose subsidiary of
Homestead. The $122 million mortgage note matures June 30, 1999 and provides for
interest only monthly payments of LIBOR plus 1.70% through September 30, 1998,
LIBOR plus 2.0% through November 30, 1998, and LIBOR plus 2.25% thereafter. MLMC
has mutually exclusive extension rights to either give notice by December 15,
1998 to extend the maturity of the mortgage note to June 30, 2001 (the "2 Year
Extension Notice") or give notice by June 10, 1999 to extend the maturity of the
mortgage note to at least June 30, 2006 or as late as June 30, 2009 (the "7 - 10
Year Extension Notice"). If extended, the note will bear interest at LIBOR plus
2.5% (3.5% if the collateral properties do not generate net operating income, as
defined, of $18 million for the year ended June 30, 1999). Homestead may prepay
the mortgage note in whole or in part prior to June 30, 1999 or, if the 2 Year
Extension Notice is given, Homestead may prepay in whole or in part by June 30,
2001.
8
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HOMESTEAD VILLAGE INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
The transaction results in an extinguishment of debt measured as the
difference between the $98 million carrying amount of the original mortgage
notes to ATLANTIC and the amount paid to extinguish the debt, including
transaction costs. Such loss on extinguishment of debt approximates $25 million
and will be recorded as an extraordinary item in third quarter 1998.
The elimination of the conversion option attached to the mortgage notes
reduces Homestead's contingently issuable shares of common stock by
approximately 8.5 million shares.
Interest
Homestead incurred total interest cost of $20,816,000 and $52,450,000 for
the six-month periods ended June 30, 1998 and 1997, respectively, of which
$13,697,000 and $52,450,000 were capitalized, respectively. Interest paid in
cash in the six-month periods ended June 30, 1998 and 1997 was $17,054,000 and
$6,147,000, respectively.
NOTE 4--SHAREHOLDERS' EQUITY
Rights Offering
On January 15, 1998, Homestead completed a Rights Offering for 10,426,840
common shares at $15 per share resulting in gross proceeds of $156,402,600. The
Rights Offering was part of Homestead's present $300,000,000 common stock shelf
registration. After costs of the offering, which included a fee of 1% of gross
proceeds to Security Capital Markets Group Incorporated, a wholly-owned
subsidiary of Security Capital, net proceeds to Homestead were approximately
$154.2 million.
Security Capital, Homestead's majority shareholder, purchased 8,429,225
shares in the Rights Offering (80.8% of the offered shares) at the same price
paid by the public. Upon completion of the Rights Offering Security Capital
owned 69.3% of Homestead's outstanding common shares.
Per Share Data
On December 31, 1997 Homestead adopted Financial Accounting Standards Board
Statement No. 128, Earnings per Share ("SFAS 128"), which requires a
presentation of basic earnings per share, calculated by dividing net earnings
available to common shareholders by weighted average common shares outstanding
and a presentation of diluted earnings per share, calculated by dividing
adjusted earnings available to common shareholders, assuming dilution, by
adjusted weighted average common shares outstanding. Adjusted earnings available
for common shareholders adds back all net interest expense from convertible
mortgage notes. Adjusted weighted average shares outstanding includes the
dilutive effect of options and warrants using the treasury stock method and the
dilutive effect of the convertible mortgage notes. In the three and six-month
period ended June 30, 1998 the effect of assumption of the conversion of the
convertible mortgages is anti-dilutive and thus basic earnings per share is the
most dilutive result. In the three and six-month periods ended June 30, 1997 the
restatement of earnings per share required by SFAS 128 resulted in an increase
of $0.01 and $0.02, respectively in basic earnings per share from the prior
presentation and no change in diluted earnings per share from the prior
presentation.
NOTE 5--INCOME TAXES
Deferred tax assets relate primarily to: (1) the difference in the carrying
amount of deferred financing costs recognized at formation and in connection
with subsequent fundings of convertible mortgage notes payable for financial
reporting purposes and the amount recognized for tax purposes; (2) the
difference in the carrying amount of the convertible mortgage notes and other
liabilities for financial reporting purposes and the amount recognized for tax
purposes; and (3) tax net operating loss. Deferred tax liabilities relate
primarily to the difference in the carrying amount and the methods of
depreciation of certain depreciable assets for financial reporting purposes and
the amount recognized for tax purposes. A valuation allowance has been
recognized to offset the net deferred tax assets, due to uncertainty of
realization of those deferred tax assets in future years.
9
<PAGE>
At June 30, 1998, Homestead had, for federal income tax reporting purposes,
estimated net operating loss carry forwards of approximately $33,100,000, which
expire $4,200,000 in the year 2011, $15,900,000 in the year 2012 and $13,000,000
in the year 2018.
NOTE 6--ADMINISTRATIVE SERVICES AGREEMENT
Homestead and Security Capital have an administrative services agreement
(the "Administrative Services Agreement"), pursuant to which Security Capital
provides Homestead with administrative services with respect to certain aspects
of Homestead's business. These services include, but are not limited to,
insurance administration, accounts payable administration, internal audit, cash
management, human resources, management information systems, tax and legal
administration, research, shareholder communications and investor relations. The
fees payable to Security Capital are based on identifiable costs incurred by
Security Capital on behalf of Homestead plus 20% to cover overhead. Any
arrangements under the Administrative Services Agreement for the provision of
services are required to be commercially reasonable and on terms not less
favorable than those which could be obtained from unaffiliated third parties.
Total administrative services fees for the six-month periods ended June 30, 1998
and 1997 were $1,897,000 and $1,080,000, respectively. The Administrative
Services Agreement, which expires December 31, 1998, is renewable for a one-year
term, subject to approval by a majority of the independent members of the
Homestead Board.
Homestead believes its relationship with Security Capital under this
agreement provides it with certain advantages, including access to greater
quality and depth of management personnel and resources, highly focused
research, information systems, insurance, cash management and legal support
provided at substantial economies of scale.
NOTE 7--COMMITMENTS AND CONTINGENCIES
Unfunded Development Commitments
At June 30, 1998, Homestead had approximately $153 million of unfunded
commitments for developments under construction.
Finder's Agreement
Homestead has a series of agreements with an unaffiliated person ("Finder")
who developed the Homestead Village concept and has performed certain services.
The agreements which expire February 5, 2043, provide for payments 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 agreements, upon the sale of
the additional 35 properties to an unaffiliated third party. No such sales have
occurred to date. Total payments under these agreements for the six-month
periods ended June 30, 1998 and 1997 were $367,000 and $344,000, respectively.
10
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Homestead Village Incorporated:
We have made a review of the accompanying condensed consolidated balance
sheet of Homestead Village Incorporated (a Maryland corporation) and
subsidiaries as of June 30, 1998 and the related condensed consolidated
statements of operations for the three and six-month periods ended June 30, 1998
and the related condensed consolidated statement of cash flows for the six-month
period ended June 30, 1998. 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 obtaining an understanding of the
system for the preparation of interim financial information, 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, the
objective of which is the expression of 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 financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Homestead Village Incorporated and
subsidiaries as of December 31, 1997, and in our report dated January 30, 1998,
we expressed an unqualified opinion on that balance sheet. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of December 31, 1997 is fairly stated, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
August 7, 1998
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with Homestead's
1997 Annual Report on Form 10-K (the "1997 Form 10-K") as well as the financial
statements and the notes thereto in Item 1 of this report. See Homestead's 1997
Form 10-K for a discussion of various risk factors associated with
forward-looking statements made in this document.
Homestead Village(R) is a registered trademark of Homestead Village
Incorporated and all references to the term "Homestead Village" herein shall
include a reference to such registered trademark. The term "in pre-development
planning" means developments in planning and owned (land has been acquired or is
under a long-term ground lease), developments in planning and under control
(land which is under control through contingent contract or letter of intent)
with construction anticipated to commence within 12 months and developments in
planning and under contract (land which is under contract to be purchased
secured with earnest money but construction is not scheduled to start for more
than 12 months). For analysis purposes Homestead categorizes its operating
properties (which include all properties not under construction or in
pre-development planning) as either "stabilized" or "pre-stabilized." For
purposes of this report, the term "stabilized" means those properties which have
been open for 24 weeks or achieved 80% occupancy as of the beginning of a
period, and "pre-stabilized" means all other operating properties.
OVERVIEW
Homestead's overall results of operations and financial position are
significantly influenced by its development activity. During the six-month
period ended June 30, 1998, Homestead started construction on 10 properties
consisting of 1,243 rooms and completed 22 properties consisting of 2,877 rooms.
As of June 30, 1998, Homestead has completed 93 Homestead Village properties
representing in the aggregate 12,551 rooms in 31 cities and had 38 Homestead
Village properties under construction totaling 4,989 rooms within 14 of these
cities as well as 6 additional cities. In addition, Homestead owns 12 sites and
controls through contracts 25 development sites for which it plans to initiate
construction within the next 12 months, and 11 development sites for which
earnest money is on deposit but it plans to start construction beyond the next
12 months, for a total of 179 properties in 40 cities. Rooms completed, under
construction or in pre-development planning aggregate 24,377 rooms.
Homestead's operating results are substantially influenced by (i) the demand
for and supply of extended-stay lodging in Homestead's markets and submarkets,
(ii) occupancy and average weekly rate, (iii) the effectiveness of property
level operations and (iv) the pace and cost at which Homestead can develop
additional extended-stay lodging properties. Capital and credit market
conditions which affect Homestead's cost of capital may influence future
operating results.
RESULTS OF OPERATIONS
Interim Period Comparison
Net earnings increased $1,279,000 (61.0%) for the three-month period ended
June 30, 1998 as compared to the same period in 1997 and increased $1,444,000
(39.9%) for the six-month period ended June 30, 1998 as compared to the same
period in 1997. These increases are primarily attributable to increases in net
property operating income offset by increases in net interest expense, corporate
operating expenses, and depreciation and amortization. A discussion of the major
components of net earnings follows.
12
<PAGE>
Property Operations
The following table sets forth certain information for Homestead's total
operating property portfolio for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weekly RevPAR(1)........................... $217 $199 $210 $196
Average Weekly Rate(2)..................... $302 $254 $293 $252
Occupancy.................................. 72.0% 78.3% 71.6% 77.6%
Number of Operating Properties at
Period End............................... 93 42 93 42
Property Operating Income Margin........... 58.8% 59.5% 57.1% 58.2%
- ----------
<FN>
(1) RevPAR is determined by dividing room revenue by the number of guest room
days available for the period and multiplying by seven.
(2) Average weekly rate is determined by dividing room revenue by the number of
guest room days occupied for the period and multiplying by seven.
</FN>
</TABLE>
Homestead's 58 property openings from the end of the first quarter of 1997
through the end of the second quarter of 1998 were the primary reason for the
reported room revenue increase of $34.9 million for the six months ended June
30, 1998 as compared to the same period in 1997. The increase in room revenue
was also due in part to an increase in the weekly RevPAR of $14 (7.1%) in the
six months ended June 30, 1998 compared to 1997.
Total property operating expenses increased from $10.4 million to $26.3
million over the same period, an increase of $15.9 million for the six months
ended June 30, 1998. The increase is due primarily to an increase in the number
of operating properties as noted above. Homestead's property openings in the
latter part of 1997 and through the second quarter 1998 were the primary reason
for the slight decrease in property operating income margin to 57.1% as such new
openings were in their lease up phase during parts of the six-month period ended
June 30, 1998.
Homestead Stabilized, Comparable Properties
Homestead had 31 properties which were stabilized and operating in both the
six-month periods ended June 30, 1998 and 1997. All but 9 of such comparable
properties are located in Texas. RevPAR for the six months ended June 30, 1998
for these properties increased to $205 from $198 for the same period in 1997.
The RevPAR increase was due primarily to an increase in average weekly rates for
such properties to $265 from $246, respectively, an increase of 7.7%. The
increase in RevPAR due to rate increases was offset in part to a decrease in
occupancy to 77.5% from 80.6% for the first half of 1998 as compared to the same
period in 1997. Property operating margins decreased for the six-month period to
56.8% in 1998 versus 57.4% in 1997 due to increased local advertising costs,
increased costs for new security services, and, most significantly, one-time
additional costs in first quarter of 1998 for the use of Homestead personnel in
returning rooms to service which had been out of service for refurbishment.
Stabilized Properties Operations
The 64 stabilized properties showed improved operating performance over the
31 stabilized properties for the six-month period ended June 30, 1998 as
compared to the same period in 1997 with a 12.1% increase in RevPAR to $222
(from $198 for the six-month period ended June 30, 1997) and an increase in
property operating income margin to 58.4% from 57.4%. These improvements are
primarily attributable to a 17.1% increase in the average weekly rate offset in
part by a decrease in occupancy to 76.9% from 80.6%.
13
<PAGE>
Corporate Operating Expenses
Corporate operating expense increased $2.9 million for the six-month period
ended June 30, 1998 as compared to the same period in 1997. The increase is
attributed to the continued growth of the company since the first half of 1997
when Homestead was still in the process of developing a corporate infrastructure
in support of a rapidly growing entity and includes costs for additional
personnel in operations, development, marketing and finance.
Depreciation and Amortization
Depreciation and amortization increased $9.7 million for the six months
ended June 30, 1998 as compared to the same period in 1997. Depreciation of the
cost of properties and improvements is provided using the straight-line method
over the estimated useful lives of the assets. Depreciation expense (exclusive
of amortization) increased approximately $9.1 million for the six-month period
ended June 30, 1998 as compared to the same period in 1997 due to new properties
open for the six-month period ended June 30, 1998 as compared to the same period
in 1997.
Amortization expense increased $555,000 for the six-month period ended June
30, 1998 as compared to the same period in 1997. The increase was a result of
the amortization of the Homestead Village trademark and other intangibles.
Interest Income
Interest income of $504,000 for the six months ended June 30, 1998 was a
result of interest earned from investment of excess cash on hand.
Interest Cost
Homestead's gross interest cost includes amortization of non-cash financing
costs arising from the issuance of warrants used to obtain the commitment for
the convertible mortgage notes financing and the differential between the
conversion price of the mortgage notes and the merger date value of Homestead's
common stock. Exclusive of such amortized amounts Homestead's interest cost
(comprised of interest on the mortgages, amortization of premiums and discounts
on the mortgages, interest on its lines of credit borrowings, and amortization
of deferred financing costs paid to obtain the lines of credit) increased $2.7
million for the six-month period ended June 30, 1998 as compared to the same
period in 1997. The increase is due to the increase in investments in operating
and under construction properties and the corresponding increase in the
convertible mortgage notes payable and the line of credit borrowings (used to
finance the increase in investments) for the six-month period ended June 30,
1998 as compared to the same period in 1997.
Homestead's total interest cost, including the amortization of non-cash
mortgage financing costs described above, decreased $31.6 million for the
six-month period ended June 30, 1998 compared to the same period in 1997. The
decrease was due to the greater amortization of the non-cash financing costs
associated with the mortgages in 1997 versus 1998. Total interest incurred was
offset by capitalization of interest resulting in net interest expense of $7.1
million and none for the six-month periods ended June 30, 1998 and 1997,
respectively. This increase in net interest expense in 1998 over 1997 is the
result of increases in total debt relative to the amount of construction in
process.
ENVIRONMENTAL MATTERS
Homestead is not aware of, nor does it expect, any environmental
condition on its properties to have a material adverse effect upon its business,
results of operations or financial position.
14
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1998 Homestead had 38 properties under construction, 12
additional sites owned, and 25 sites under contractual control with acquisition
and construction starts expected to occur within twelve months. Homestead
intends to pursue additional sites for acquisition and development in future
periods.
Unfunded development commitments for properties under construction as of
June 30, 1998 approximate $153 million. Expected future investment to develop
the properties owned as of June 30, 1998 is approximately $198 million. The
estimated total investment to acquire and develop the properties under
contractual control approximates $283 million.
In January 1998 Homestead completed a $156.4 million Rights Offering under
its currently effective $300 million common stock shelf registration and
realized net proceeds of approximately $154.2 million. Rights Offering proceeds
of $100 million were used to repay all borrowings under Homestead's lines of
credit and the remaining net proceeds were used for land acquisition and
development costs. Homestead has re-borrowed $178.1 million under its lines of
credit as of June 30, 1998, leaving $221.9 million capacity under the lines,
subject to collateral requirements.
Resources to fund Homestead's development program consist of its remaining
capacity on its revolving line of credit facilities, and, to a lesser extent,
cash from operations in excess of operating needs. In addition, Homestead has
remaining approximately $144 million of common stock under its shelf
registration statement which, if Homestead sought to issue such stock, would be
issued at such time, amount and price as set forth at the time of the offering.
On April 24, 1998 Homestead renewed its existing revolving line of credit
facility with Commerzbank AG ("CAG"), as agent for a group of lenders, for a
one-year term, with an increase in total borrowing capacity to $150 million,
subject to collateral requirements. Borrowings will bear interest at the
Eurodollar rate plus 1.5% to 2.5% per annum, depending upon the percentage
leverage of borrowings outstanding to the amount of qualifying collateral.
Alternatively, borrowings will bear interest at a base rate defined as the
higher of prime rate plus a margin of 0.5% to 1.5% or the federal funds rate
plus a margin of 1% to 2%, with the margin dependent on the percentage leverage
of borrowings outstanding to the amount of qualifying collateral. Additionally,
a commitment fee of 0.375% per annum of the average unfunded balance will be
owed.
On April 24, 1998 Homestead also entered into a separate $50 million
one-year revolving line of credit facility with CAG of which $20 million is
available for borrowings on a secured basis and $30 million is available for
borrowing on an unsecured basis. The unsecured portion of the line is required
to be collateralized by September 30, 1998 or such unsecured borrowings must be
repaid. Borrowings will bear interest at the Eurodollar rate plus 2.75% per
annum or, alternatively, at a base rate defined as the higher of prime rate plus
1.75% or the federal funds rate plus 2.25%. Average unfunded balances bear a
commitment fee of 0.5% per annum.
On June 15, 1998 Homestead entered into an additional $200 million line of
credit facility with CAG which bears interest at the Eurodollar rate plus 1%
(1.25% after six months) or at a base rate of prime (prime plus 0.25% after six
months). The average unfunded balance bears a commitment fee of 0.25% per annum.
The line expires February 23, 1999. Homestead has obtained a subscription
agreement from Security Capital for $200 million of Homestead subordinated
debentures to secure this obligation. If the subscription is called by Homestead
or Homestead receives proceeds from any offering of securities, the proceeds
must be used to first repay the lines of credit to CAG and second to fund
projects under development which secure the other CAG credit facilities. The
debentures would bear interest at a rate of 0.25% over the rate Homestead incurs
under the $50 million credit facility with CAG. Homestead may repurchase the
debentures with the proceeds of an equity offering within 90 days of issuance of
the debentures, otherwise the debentures convert to Homestead common stock at
the lower of the 20-day average trading price of Homestead common stock
immediately before execution of the subscription agreement or immediately before
the 90th day. The subscription agreement expires the earlier of June 30, 1999 or
two weeks after termination of the $200 million credit agreement. The
subscription obligation is reduced or terminated to the extent Homestead issues
equity securities to any third party, or to Security Capital pursuant to a
separate offering and the proceeds are used to repay this credit facility and
any remaining proceeds are used to fund projects under development which secure
the other CAG credit facilities. In conjunction with Security Capital's entering
into the subscription agreement, Homestead agreed to pay an arrangement fee to
Security Capital of $600,000 of which $200,000 was paid upon execution of the
subscription agreement, $200,000 was paid in July 1998, and the remainder is due
in August 1998.
15
<PAGE>
The CAG lines require maintenance of certain financial covenants,
specifically, aggregate indebtedness of no more than 55% of gross asset value,
as defined, or indebtedness secured by a lien of no more than 50% of gross asset
value, as defined, in each case excluding indebtedness outstanding under the
credit agreement entered into on June 15, 1998. Homestead must also maintain a
minimum debt service coverage ratio of earnings before interest, income taxes,
depreciation, amortization and gains or losses on sales of assets to cash debt
service, as defined, of no less than 1.25 to 1 for the second quarter of 1998,
and, including the $200 million facility, no less than 1.4 to 1 for third and
fourth quarters 1998 and 1.5 to 1 for first quarter of 1999, and excluding the
$200 million facility, no less than 1.5 to 1 for third quarter 1998, 1.6 to 1
for fourth quarter 1998, and no less than 1.75 to 1 thereafter on a quarterly
basis, and not allow stockholders equity to be less than $325 million.
Additionally, Homestead will not enter into any commitment for purchases of land
or construction of projects if such obligations exceed the available borrowing
capacity under all of the lines and internally generated excess funds. The
covenants also restrict payment of dividends without lender approval. Homestead
was in compliance with all such covenants as of June 30, 1998.
Subsequent to June 30, 1998 the lines of credit covenant ratios were
amended in conjunction with Homestead entering into the new mortgage note
(described below). As amended, Homestead may incur indebtedness secured by a
lien up to 55% of gross asset value through the earlier of the date the new
mortgage note is repaid or October 1, 1998 or, if the $200 line of credit has
been repaid, until the earlier of June 30, 1999 or the date the new mortgage
note is repaid. Further, until the earlier of June 30, 1999 or the date the new
mortgage note is repaid, the debt service coverage ratio, including debt
outstanding under the $200 million facility, is amended to be no less than 1.3
to 1 for third and fourth quarters 1998 and 1.4 to 1 for first quarter of 1999,
and excluding the $200 million facility, is amended to be no less than 1.3 to 1
for third quarter 1998, 1.4 to 1 for fourth quarter 1998, and no less than 1.6
to 1 for the first quarter of 1999.
On November 25, 1997, Homestead obtained a $50 million interim credit
agreement with CAG which provided for borrowings, at Homestead's option, at
either the Eurodollar rate plus 2.625% or at base rate (the higher of 1/2 of 1%
in excess of the federal funds rate or the prime rate) plus 1%. Borrowings and
all accrued interest under this agreement were repaid in January 1998 upon the
funding of the proceeds of the Rights Offering. Upon repayment of the interim
borrowings no further commitment was available under this agreement.
On July 6, 1998, Homestead entered into a mortgage loan purchase agreement
with ATLANTIC and MLMC whereby the $98 million of Homestead convertible mortgage
notes held by ATLANTIC were modified to, among other things, eliminate their
convertibility feature in exchange for a payment of $21.4 million from Homestead
to ATLANTIC. Homestead funded the payment with the proceeds received from the
sale of $24 million of 7.5% convertible subordinated debentures. Also pursuant
to the mortgage loan purchase agreement ATLANTIC sold such amended notes to MLMC
for $98 million. On August 7, 1998, Homestead converted the $98 million of
mortgage notes and the $24 million of 7.5% convertible subordinated debentures
into a $122 million mortgage of a newly formed special purpose subsidiary of
Homestead. The $122 million mortgage note matures June 30, 1999 and provides for
interest only monthly payments of LIBOR plus 1.70% through September 30, 1998,
LIBOR plus 2.0% through November 30, 1998, and LIBOR plus 2.25% thereafter. MLMC
has mutually exclusive extension rights to either give notice by December 15,
1998 to extend the maturity of the mortgage note to June 30, 2001 (the "2 Year
Extension Notice") or give notice by June 10, 1999 to extend the maturity of the
mortgage note to at least June 30, 2006 or as late as June 30, 2009 (the "7 - 10
Year Extension Notice"). If extended, the note will bear interest at LIBOR plus
2.5% (3.5% if the collateral properties do not generate net operating income, as
defined, of $18 million for the year ended June 30, 1999). Homestead may prepay
the mortgage note in whole or in part prior to June 30, 1999 or, if the 2 Year
Extension Notice is given, Homestead may prepay in whole or in part by June 30,
2001.
The transaction results in an extinguishment of debt measured as the
difference between the $98 million carrying amount of the original mortgage
notes to ATLANTIC and the amount paid to extinguish the debt, including
transaction costs. Such loss on extinguishment of debt approximates $25 million
and will be recorded as an extraordinary item in third quarter 1998.
16
<PAGE>
Extinguishment of the convertible mortgage loan to ATLANTIC and
establishment of the new mortgage loan reduces Homestead's contingently issuable
shares by approximately 8.5 million shares.
Capital resources in addition to those described above will be needed to
fund Homestead's planned developments. Homestead may seek additional credit
facilities and may issue long-term debt and additional equity securities.
However, there is no assurance that Homestead will be able to obtain such
financing as and when required or on acceptable terms.
Operating Activities
Net cash flow provided by operating activities increased by $12.8 million
for the six months ended June 30, 1998 as compared to 1997. The increases are
due primarily to the growing number of Homestead operating properties as
described under "Results of Operations" as well as improvements in operations.
Investing Activities
During the six months ended June 30, 1998 and 1997, Homestead invested
$260.2 million and $132.0 million, respectively, in Homestead Village
properties. The amounts invested in the six months ended June 30, 1998 were
financed primarily from proceeds from borrowings under the line of credit and
proceeds from the Rights Offering. The amounts invested in the six months ended
June 30, 1997 were financed primarily from the proceeds of convertible mortgage
loans from PTR and ATLANTIC and proceeds from exercise of warrants.
17
<PAGE>
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders held on May 27, 1998, shareholders elected
Michael D. Cryan to office as a Class I Director with 35,648,952 shares voted in
favor and 99,099 shares withheld.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1 Second Amendment to Credit Agreement and Other Loan Documents Among
Homestead Village Incorporated, the Lenders Named Therein, and
Commerzbank AG, New York Branch, as Agent for the Lenders dated as of
April 24, 1998
10.2 $50,000,000 Credit Agreement Among Homestead Village Incorporated, the
Lenders Named Therein, and Commerzbank AG, New York Branch, as Agent
for the Lenders dated as of April 24, 1998
10.3 $200,000,000 Credit Agreement Among Homestead Village Incorporated,
the Lenders Named Therein, and Commerzbank AG, New York Branch, as
Agent for the Lenders dated as of June 15, 1998
10.4 Subscription Agreement Between Security Capital Group Incorporated and
Homestead Village Incorporated
10.5 Homestead Village Incorporated Convertible Subordinated Debenture Due
December 31, 1999
15 Letter regarding unaudited interim financial information
27 Financial Data Schedule
(b) No reports were filed during this period on Form 8-K.
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
HOMESTEAD VILLAGE INCORPORATED
/S/ ROBERT C. ALDWORTH
---------------------------------------
Robert C. Aldworth, Senior Vice President
And Chief Financial Officer
(Principal Financial Officer)
/S/ BRYAN J. FLANAGAN
---------------------------------------
Bryan J. Flanagan, Senior Vice President
And Controller
(Principal Accounting Officer)
Date: August 13, 1998
SECOND AMENDMENT
TO
CREDIT AGREEMENT
AND
OTHER LOAN DOCUMENTS
AMONG
HOMESTEAD VILLAGE INCORPORATED,
THE LENDERS NAMED HEREIN,
AND
COMMERZBANK AG,
NEW YORK BRANCH, AS AGENT FOR THE LENDERS
DATED AS OF APRIL 24, 1998
-0-
<PAGE>
SECOND AMENDMENT TO CREDIT AGREEMENT AND OTHER LOAN DOCUMENTS
SECOND AMENDMENT TO CREDIT AGREEMENT AND OTHER LOAN DOCUMENTS
(this "Amendment"), dated as of April 24, 1998, among HOMESTEAD VILLAGE
INCORPORATED, a Maryland corporation (the "Borrower"), COMMERZBANK AG, LOS
ANGELES BRANCH, and the other lenders listed on Exhibit A attached to the
Agreement (as hereinafter defined), as amended from time to time (each a
"Lender" and collectively, the "Lenders") and COMMERZBANK AG, NEW YORK BRANCH,
as agent for the Lenders (the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower entered into a revolving credit facility
in an amount up to $50,000,000.00 with the Lenders pursuant to a Credit
Agreement dated as of May 6, 1997, among the Borrower, as borrower, the Lenders,
as lenders and the Agent, as amended by the First Amendment to the Credit
Agreement and Other Loan Documents on August 25, 1997 (the "Agreement"); all
capitalized terms used herein and not defined herein shall have the meanings
ascribed respectively thereto in the Agreement;
WHEREAS, pursuant to Borrower's request, Lenders have agreed
to modify the Agreement and the other Loan Documents, as more particularly
hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Agreement and the other Loan
Documents are hereby modified as follows:
1. Amendment to Credit Agreement. The Agreement is
hereby amended as follows:
(a) The term "Alternate Rate" as defined in Section 1.1 of the
Agreement shall mean, as of any Applicable Margin Adjustment Date, a
per annum rate equal to th e greater of (a) the Prime Lending Rate plus
the Prime Rate Applicable Margin, and (b) the Federal Funds Rate plus
the Federal Funds Applicable Margin;
(b) The term "Applicable Margin" as defined in Section 1.1 of
the Agreement and as referred to in Section 2.6(a) shall be
changed to "LIBOR Applicable Margin" an d shall mean, as of any
Applicable Margin Adjustment Date (i) if the Leverage Percentage as of
such Applicable Margin Adjustment Date is less than fifteen percent
(15%), one hundred fifty (150) basis points, (ii) if the Leverage
Percentage as of such Applicable Margin Adjustment Date is equal to or
greater than fifteen percent (15%) but less than twenty-five percent
(25%), two hundred (200) basis points, and (iii) if the Leverage
Percentage as of such Applicable Margin Adjustment Date is equal to or
greater than twenty-five percent (25%) and up to a maximum of
thirty-eight percent (38%), two hundred fifty (250) basis points.
(c) The term "Applicable Margin Adjustment Date" shall be
added to Section 1.1 of the Agreement and shall mean the date on which
any Applicable Margin Adjustment Event occurs.
-1-
<PAGE>
(d) The term "Applicable Margin Adjustment Event" shall be
added to Section 1.1 of the Agreement and shall mean (i) the making of
any Advance, and (ii) the receipt and collection by Agent, on behalf of
the Lenders, of any portion of the unpaid principal balance of the
Loan.
(e) The term "Debt Service" as defined in Section 1.1 shall
now include Construction Interest.
(f) The term "Federal Funds Applicable Margin" shall be added
to Section 1.1 of the Agreement and shall mean as of any Applicable
Margin Adjustment Date (i) if the Leverage Percentage as of such
Applicable Margin Adjustment Date is less than fifteen percent (15%),
one hundred (100) basis points, (ii) if the Leverage Percentage as of
such Applicable Margin Adjustment Date is equal to or greater than
fifteen percent (15%) but less than twenty-five percent (25%), one
hundred fifty (150) basis points, and (iii) if the Leverage Percentage
as of such Applicable Margin Adjustment Date is equal to or greater
than twenty-five percent (25%) and up to a maximum of thirty-eight
percent (38%), two hundred (200) basis points.
(g) The term "Leverage Percentage" shall be added to Section
1.1 and shall mean, as of any Applicable Margin Adjustment Date and
after giving effect to any Applicable Margin Adjustment Event giving
rise thereto, the quotient of the outstanding principal amount of the
Loan, divided by Eligible Costs, expressed as a percentage. In no event
shall such Leverage Percentage be permitted to exceed 38%.
(h) The term "Maturity Date" as defined in Section 1.1 of the
Agreement shall mean April 23, 1999.
(i) The term "Mortgaged Properties" as defined in Section 1.1
shall be amended by inserting after the word "which" the words "is
located in a Suburban Area and which".
(j) The term "Prime Rate Applicable Margin" shall be added to
Section 1.1 of the Agreement and shall mean as of any Applicable Margin
Adjustment Date (i) if the Leverage Percentage as of such Applicable
Margin Adjustment Date is less than fifteen percent (15%), fifty (50)
basis points, (ii) if the Leverage Percentage as of such Applicable
Margin Adjustment Date is equal to or greater than fifteen percent
(15%) but less than twenty-five percent (25%), one hundred (100) basis
points, and (iii) if the Leverage Percentage as of such Applicable
Margin Adjustment Date is equal to or greater than twenty-five percent
(25%) and up to a maximum of thirty-eight percent (38%), one hundred
fifty (150) basis points.
(k) The term "Suburban Area" shall be added to Section 1.1 of
the Agreement and shall mean such area outside a major metropolitan
city.
(l) The term "Commitment" as defined in Section 2.1(b) of the
Agreement shall mean $150,000,000;
-2-
<PAGE>
(m) The following shall be added as last sentence to Section
2.6(a):
"The LIBOR Applicable Margin, Federal Funds
Application Margin and Prime Rate Application Margin
shall be recalculated, and the interest on each
Advance shall be correspondingly increased or
decreased, on and as of each Applicable Margin
Adjustment Date. In the event that the date on which
the interest on any Advance is converted to, or
otherwise commences to accrue at, the Alternate Rate
is a date that is not an Applicable Margin Adjustment
Date, then the Alternate Rate shall be calculated on
the basis of the Leverage Percentage as of the most
recent Applicable Margin Adjustment Date."
(n) Add Section 2.9(c) which shall state as follows:
"The Borrower shall apply upon receipt (i) all net
proceeds from its equity offerings to repay on a pari
passu basis the Loan and the Indebtedness referred to
in Section 5.3(a)(vii) of the Agreement, and (ii) all
other amounts and fees due to the Agent and the
Lenders under this Agreement and the other Loan
Documents."
(o) The first sentence of Section 2.10 of the Agreement is
hereby deleted in its entirety and replaced with the following:
"Section 2.10 Fees. The Borrower shall pay to the
Agent for the account of the Lenders a commitment fee
(the "Commitment Fee") equal to 0.375 per annum of
the Average Undrawn Balance of the Commitment."
(p) Add new section 5.3(a)(vii) which shall state as follows:
"Indebtedness under that certain Credit Agreement
dated as of April 24, 1998, between Borrower, Agent
and one or more lenders with regard to a revolving
credit facility of up to an aggregate principal
amount of $50,000,000.00."
(q) The covenant for "Total Debt" as set forth in Section
5.3(b) of the Agreement is hereby deleted in its entirety and replaced
with the following:
"(b) Total Debt. Permit there to be aggregate
Indebtedness of the Borrower of more than an amount
equal to fifty-five percent (55%) of Gross Asset
Value, or permit there to be aggregate Indebtedness
of the Borrower which is secured by a Lien of more
than an amount equal to fifty percent (50%) of Gross
Asset Value."
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(r) The covenant for "Debt Service Ratios" as set forth in
Section 5.3(c) of the Agreement is hereby deleted in its entirety and
replaced with the following:
"(c) Debt Service Ratios. Maintain a ratio of EBITDA
to Debt Service on a quarterly basis (i) for the
first calender quarter of 1998 of less than 1.1:1.0,
(ii) for the second calender quarter of 1998 of less
than 1.25:1.0, and (iii) of less than 1.75:1.0 after
the second calender quarter of 1998."
(s) The covenant for "Stockholders Equity" as set forth in
Section 5.3(c) of the Agreement is hereby deleted in its entirety and
replaced with the following:
"(f) Stockholders Equity. Permit Stockholders'
Equity to be less than $325,000,000.00."
(t) Add new Section 6.1(i) which shall state as follows:
"(i) New Credit Agreement. An Event of Default
(as defined in that certain Credit Agreement referred
to in Section 5.3(a)(vii)) shall occur.
(u) Exhibit A attached to the Agreement is deleted in its
entirety and replaced with Exhibit A attached hereto.
(v) Exhibit B attached hereto is added to the Agreement as
Exhibit O.
2. Amendment to All Loan Documents. Simultaneously herewith
the Borrower has executed and delivered to Agent a (i) Second Amended and
Restated Promissory Note which effectuates certain of the amendments contained
herein, and (ii) a Letter of Comfort from Security Capital Group Incorporated in
the form of Exhibit O to the Agreement confirming its commitment to fund all the
capital needs of the Borrower other than debt during the term of the Agreement
up to an amount of $150,000,000 (the "Letter of Comfort"). All references in the
Loan Documents to the "Promissory Note" shall be deemed to refer to the Second
Amended and Restated Promissory Note. All references in the Loan Documents to
the "Credit Agreement" shall be deemed to refer to the Agreement as modified
pursuant to the terms hereof. All references in any one of the Loan Documents to
any of the other Loan Documents shall be deemed to refer to such other Loan
Documents as modified pursuant to the terms hereof. In the event of any
inconsistency or conflict between the terms and provisions of any of the Loan
Documents and the terms and provisions of this Second Amendment, the terms and
provisions of this Second Amendment shall control and be binding, it being the
agreement and intent of the Borrower, Lenders and Agent that the terms and
provisions contained or referred to in the Loan Documents shall hereby be and be
deemed to be amended and modified to the extent, but only to the extent,
necessary to give effect to the terms and provisions of this Second Amendment.
3. Borrower's Representations. Borrower hereby certifies that
the following statements are true on the date hereof:
(a) No Default or Event of Default has occurred and is
continuing;
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(b) Other than the representation in the second sentence of
Section 4.5(a) of the Credit Agreement which shall apply as of the
Closing Date, all representations and warranties contained in the
Agreement, before and after giving effect to this Amendment are true
and correct in all material respects with the same effect as though
such representations and warranties are being made as of the date
hereof and the Borrower, before and after giving effect to this
Amendment is in compliance in all material respects with all covenants
and agreements contained in the Agreement and the other Loan Documents;
(c) There has been no Material Adverse Change;
(d) All statements and certifications contained in the most
recent certificate delivered to Agent pursuant to Section 5.2(e) of the
Agreement, before and after giving effect to this Amendment are true
and correct in all material respects with the same effect as though
such statements and certifications are being made as of the date
hereof;
(e) Except as expressly modified hereby, the Agreement and
other Loan Documents remain unmodified and in full force and effect and
are hereby ratified and confirmed in all respects;
(f) The Borrower has no offsets, counterclaims or defenses to
the enforcement of, or otherwise with respect to, the Agreement and/or
other Loan Documents as hereby modified; and
(g) This Second Amendment is hereby incorporated into and made
a part of the Loan Documents. This Second Amendment and the Letter of
Comfort shall constitute Loan Documents for all purposes.
4. Execution in Counterparts. This Amendment may be executed
in separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute one
and the same instrument.
5. Governing Law. This Amendment shall be governed by and
construed in accordance with the internal laws of the State of New York.
6. Headings. Section headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose.
[Signatures are on the Following Page]
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IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be executed by their respective officers and officer of the General
Partner, as the case may be, hereunto duly authorized as of the date first above
written.
HOMESTEAD VILLAGE INCORPORATED
By:___________________________
Name:
Title:
COMMERZBANK AG, New York Branch,
as Agent
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
COMMERZBANK AG, Los Angeles Branch,
as a lender
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
WELLS FARGO BANK NATIONAL ASSOCIATION
as a lender
By:________________________________
Name:
Title:
$50,000,000
CREDIT AGREEMENT
AMONG
HOMESTEAD VILLAGE INCORPORATED,
THE LENDERS NAMED HEREIN,
AND
COMMERZBANK AG,
NEW YORK BRANCH, AS AGENT FOR THE LENDERS
DATED AS OF APRIL 24, 1998
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CREDIT AGREEMENT
CREDIT AGREEMENT (this "Agreement"), dated as of April 24, 1998, among
HOMESTEAD VILLAGE INCORPORATED, a Maryland corporation (the "Borrower"),
COMMERZBANK AG, LOS ANGELES BRANCH, and the other lenders listed on Exhibit A
attached hereto, as amended from time to time (each a "Lender" and collectively,
the "Lenders") and COMMERZBANK AG, NEW YORK BRANCH, as agent for the Lenders
(the "Agent").
W I T N E S S E T H:
WHEREAS, the Agent has agreed to arrange a revolving credit facility in the
amount of $50,000,000 on behalf of the Borrower;
WHEREAS, certain of the Borrower's obligations under this Agreement will be
secured by a lien on the Collateral;
WHEREAS, in consideration of the fees, representations, warranties,
covenants and agreements of the Borrower set forth herein and in the Loan
Documents, the Lenders are willing to establish such revolving credit facility
upon the terms and conditions set forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION
Section 1.1 Definitions. As used herein, the following terms shall have the
following meanings:
"Acquisition Costs" means the actual purchase price paid by Borrower to
acquire the property constituting a Mortgaged Property or that portion of a
Mortgaged Property (the portion of such actual purchase price allocable to such
portion of a Mortgaged Property to be determined in a manner reasonably
acceptable to Agent) upon which it shall construct an extended stay facility and
such ancillary facilities which are related to the purpose, and shall enhance
the value, of the extended stay facility (the "ancillary facilities"), as
evidenced by the documentation and certificate of Borrower furnished to Agent
pursuant to Section 3.2(g)(i)(1) and (2) hereof, excluding, without limitation,
all fees, costs and expenses incurred with regard to use, planning and zoning
rules and regulations relating to such Mortgaged Property, but including such
other expenses as the Agent approves in its sole discretion.
"Adjusted Eurodollar Rate" means, with respect to each Interest Period, the
rate obtained by dividing (i) the Eurodollar Rate for such Interest Period by
(ii) a percentage equal to one minus the actual rate (stated as a decimal) of
all reserves then actually required to be maintained by each Lender (provided
that reasonable evidence of the imposition of such requirement is furnished
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to Borrower) against "eurocurrency liabilities" as specified in Regulation D (or
against any other category of liabilities that includes deposits by reference to
which the interest rate on Eurodollar Advances is determined or any category of
extensions of credit or other assets that includes loans by a non-United States
office of the Agent to United States residents) or by any other Requirement of
Law relating to reserve or capital adequacy requirements.
"Advance" has the meaning provided in Section 2.1(a).
"Affiliate" means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with such Person,
whether through the ownership of voting securities, by contract, or otherwise. A
Person shall be deemed to control a corporation if such Person possesses,
directly or indirectly, the power to (i) vote 50% or more of the securities
having ordinary voting power for the election of directors of such corporation
or (ii) direct or cause the direction of the management and policies of such
corporation, through the ownership of voting securities, by contract or
otherwise.
"Agent" shall mean Commerzbank AG, New York Branch, in its capacity as
agent for the Lenders hereunder, or such successor Agent as may be appointed
pursuant to Section 7.9 of this Agreement.
"Agreement" means this Agreement, as amended, supplemented, or modified
from time to time.
"Alternate Rate" means as of any date of determination a per annum rate
equal to the greater of (a) the Prime Lending Rate plus one hundred seventy-five
(175) basis points per annum, and (b) the Federal Funds Rate plus two hundred
twenty-five (225) basis points per annum.
"Applicable Margin" means two hundred seventy-five (275) basis
"Average Undrawn Balance" shall mean the average daily amount of the
Commitment which remained undrawn upon by the Borrower for the related period of
determination (on the basis of a year of 365/366 days for the actual number of
days which have elapsed during such period).
"Bankruptcy Code" has the meaning provided in Section 6.1(g).
"Borrower" has the meaning set forth in the introductor paragraph to this
Agreement.
"Borrower's Authorized Representative" means any duly elected officer
designated by the Borrower in a written notice to the Agent, as such officer may
be changed from time to time by written notice to the Agent.
"Budget" means, for any Mortgaged Property (i) until the Final Budget for
such Mortgaged Property is received by Agent, the Initial Budget for such
Mortgaged Property, and (ii) upon and after such time as the Final Budget for
such Mortgaged Property is received by Agent, the Final Budget for such
Mortgaged Property.
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"Business Day" means any day excluding Saturday, Sunday, and any other day
on which banks are required or authorized to close in New York City or on which
trading is not carried on by and between banks in Dollar deposits in the
applicable interbank Eurodollar market.
"Capital Stock" means any and all shares, interests, participation, or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests, including but not limited to partnership
interests, in a Person (other than a corporation), and any and all warrants or
options to purchase any of the foregoing.
"Closing Date" means April 24, 1998, or such other Business Day selected by
the parties to be the first day on which funds under the Commitment under this
Agreement will be first made available, but in no event prior to the execution
hereof and satisfaction of all conditions precedent set forth in Section 3.1.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor thereto.
"Collateral" means, collectively, the Mortgaged Properties and all other
property and interests in property now owned or hereafter acquired and upon
which a Lien has been or is purported or intended to have been granted in favor
of the Agent.
"Central Business District" means the downtown section of a city, generally
consisting of retail, office, hotel, entertainment, and governmental land uses
with some high density housing.
"Commitment" has the meaning provided in Section 2.1(b).
"Construction Interest" means all interest expense of the Borrower and its
Subsidiaries for the construction of projects which is capitalized in accordance
with GAAP.
"Contractual Obligation" means as to any Person, any material provision of
any security issued by such Person or of any agreement, instrument, or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Credit Exposure" has the meaning provided in Section 7.17.
"Debt Service" shall mean for any period the sum of (i) all interest
obligations required to be paid in respect of any Indebtedness of the Borrower
or its Subsidiaries, including Construction Interest, (ii) all payments of
principal required to be made with respect to any Indebtedness of the Borrower
or its Subsidiaries during such period, other than balloon payments or scheduled
amortizing payments on senior Indebtedness, and (iii) all other payments
required to be made in respect of any Indebtedness of the Borrower or its
Subsidiaries.
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"Decisions" has the meaning set forth in Section 7.14.
"Default" means any condition or event that, with the giving of notice or
the lapse of time or both, would constitute an "Event of Default" hereunder or
under the Promissory Notes or the other Loan Documents.
"Default Rate" has the meaning set forth in Section 2.6(b) hereof.
"Development Encumbrances" means all easements, restrictions and
encumbrances customary and appropriate for the development of property as an
extended stay facility with such ancillary facilities related thereto and which
do not and will not materially impair the use of the Mortgaged Property affected
thereby as an extended stay facility or such ancillary facilities related
thereto or the expected value of the Mortgaged Property affected thereby.
"Direct Costs" means, for each Mortgaged Property, the aggregate costs of
all items described under the categories entitled "Hard Costs-Contractor Costs",
"Hard Costs-Other Hard Costs", "Hard Costs-Hard Costs Contingency" and "Hard
Costs-Furniture, Fixtures & Equipment" in the Budget for such Mortgaged Property
actually paid which are necessary for the completion of construction of an
extended stay facility and such ancillary facilities related thereto on such
Mortgaged Property in accordance with the Plans and Specifications, as evidenced
by the documentation and certificate of Borrower furnished to Agent pursuant to
Sections 3.2(g)(i)(1) and (2) hereof.
"Dollar" and the sign "$" each mean lawful currency of the United States of
America.
"EBITDA" means, for any period and for any Person, the amount derived from
(i) net earnings plus (ii) depreciation, amortization, interest expense and
income taxes plus or minus (iii) any losses or gains resulting from sales,
write-downs, write-ups, write-offs or other valuation adjustments of assets or
liabilities of such Person, in each case as determined on a consolidated basis
in accordance with GAAP for such Person for such period.
"Eligible Acquisition Costs" means, for each Mortgaged Property, the lesser
of (i) the Acquisition Costs with respect to such Mortgaged Property, and (ii)
the amount budgeted, in the aggregate, for Acquisition Costs as shown on the
Budget for such Mortgaged Property (including any contingency for Acquisition
Costs shown on such Budget).
"Eligible Costs" means Eligible Acquisition Costs, Eligible Direct Costs
and Eligible Indirect Costs.
"Eligible Direct Costs" means, for each Mortgaged Property, the lesser of
(i) the Direct Costs with respect to such Mortgaged Property, and (ii) the
amount budgeted, in the aggregate, for Direct Costs as shown on the Budget for
such Mortgaged Property (including any contingency for Direct Costs shown on
such Budget).
"Eligible Indirect Costs" means, for each Mortgaged Property, the lesser of
(i) the Indirect Costs with respect to such Mortgaged Property, and (ii) the
amount budgeted, in the aggregate, for Indirect Costs as shown on the Budget
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for such Mortgaged Property (including any contingency for Indirect Costs shown
on such Budget).
"Environment" shall mean soil, surface waters, groundwaters, land, stream,
sediments, surface or subsurface strata and ambient air.
"Environmental Discharge" means any discharge of pollutants or effluent
into any aquifer or water source or system (whether naturally occurring
or man made), gaseous emissions (including, without limitation, air emissions),
particulate emissions and noise emissions, in each case, in violation of any
Relevant Environmental Law.
"Environmental Indemnity" means that certain Environmental Indemnity
to be executed by the Borrower in favor of the Agent, substantially in the form
attached hereto as Exhibit E.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" means each trade or business (whether or not
incorporated) that together with the Borrower or a Subsidiary of the Borrower
would be deemed to be a "single employer" within the meaning of Section 4001 of
ERISA.
"Eurodollar Rate" means:
(a) the rate per annum appearing on the Telerate page 3750 (the "Telerate
Screen") at or about 11:00 a.m. (New York time), subject to corrections (if any)
made on the Telerate service, two Business Days prior to the commencement of the
Interest Period for which such Eurodollar Rate will apply (the "Rate Fixing
Day") for the offering of deposits in Dollars for a period comparable to the
Interest Period for which such Eurodollar Rate will apply; or
(b) if
(i) no relevant rate appears on the Telerate Screen for the purposes
of the foregoing subparagraph (a), or
(ii) the Agent determines that no rate for a period of comparable
duration to that Interest Period appears on the Telerate Screen at the
relevant time,
the arithmetic mean (rounded upwards, if necessary, to two decimal places) of
the respective rates, as supplied to the Agent at its request, quoted by the
Lenders to leading banks in the London Interbank Market at or about 11:00 a.m.
(New York time) on the Rate Fixing Day for the offering of deposits in Dollars
for a period comparable to the Interest Period for which such Eurodollar Rate
will apply. If any of the Lenders is unable or otherwise fails to supply an
offered rate by 11:30 a.m. (New York time) on the Rate Fixing Day, Eurodollar
Rate shall, subject to Section 2.12 hereof, be determined on the basis of the
quotations of the remaining Lenders.
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"Event of Default" has the meaning provided in Article VI.
"Exchange Act" shall mean the Securities and Exchange Act of 1934, as
amended.
"Federal Funds Rate" means, for any day of determination, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100th of one percent)
equal to the weighted average of the rates on overnight Federal Funds transacted
with members of the Federal Reserve System arranged by Federal Funds brokers on
such date, as published by the Federal Reserve Bank of New York on the Business
Day next succeeding such day, provided that (i) if such day is not a Business
Day, the Federal Funds Rate for such day shall be such rate on such transactions
on the next preceding Business Day as so published on the next succeeding
Business Day, and (ii) if no such rate is so published on such next succeeding
Business Day, the Federal Funds Rate for such day shall be the average rate
quoted to the Agent on such day on such transactions as determined by the Agent.
"Financing Statements" means UCC-1 Financing Statements made by the
Borrower, as debtor, in favor of the Agent, as secured party, covering all
fixtures, equipment and personal property of the Borrower at the Mortgaged
Properties.
"Final Budget" means, for any Mortgaged Property, a final budget with
respect to such Mortgaged Property in the same form as the Initial Budget for
such Mortgaged Property (as the form of such final budget may be changed from
time to time by Borrower upon the prior written consent of Agent) showing the
amounts budgeted for the Total Costs (including contingencies) for such
Mortgaged Property, provided that Total Costs (including contingencies) as shown
on such final budget do not exceed, in the aggregate, the amount equal to 110%
of the Total Costs (including contingencies) as shown on such Initial Budget, in
the aggregate.
"GAAP" means generally accepted accounting principles as in effect at the
time of application applied on a consistent basis; provided, however, if any
change is adopted after the Closing Date in generally accepted accounting
principles which either Borrower or Agent determines to be adverse, and if
either such party notifies the other of such determination, then both Borrower
and Agent shall negotiate in good faith the extent to which such change shall be
adopted with respect to the matters to which the definition of "GAAP" is
applicable under the Loan Documents, and the term "GAAP" shall mean (i) in the
event a written agreement with respect to such change is executed and delivered
by both Borrower and Agent within 30 days following such notice, generally
accepted accounting principles applied on a consistent basis giving effect to
such agreement, or (ii) in any other event, generally accepted accounting
principles as in effect at the time immediately prior to the adoption of such
change applied on a consistent basis.
"Governmental Authority" means any nation and any state or other political
subdivision thereof, and any entity exercising executive, legislative, judicial,
regulatory, or administrative functions of or pertaining to government,
including, but not limited to, the Federal Reserve Board, any Federal Reserve
Bank, any other central banking authority, or any agency or subdivision thereof.
"Gross Asset Value" means the value of all cash, cash equivalents and the
value of all real property assets owned by Borrower valued at one hundred
percent (100%) of cost.
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"Guarantee Obligation" means, as to any Person (the "Guaranteeing Person"),
any obligation of (a) the Guaranteeing Person or (b) another Person (including,
without limitation, any bank under any letter of credit) to induce the creation
of which the Guaranteeing Person has issued a reimbursement, counterindemnity,
or similar obligation, in either case guaranteeing any Indebtedness, leases,
dividends, or other obligations (the "primary obligations") of any other third
Person (the "primary obligor") in any manner, whether directly or indirectly,
including, without limitation, any obligation of the Guaranteeing Person,
whether or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds (x) for the purchase or payment of any such primary obligation or
(y) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (iii) to
purchase property, securities, or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (iv) otherwise to assure or hold
harmless the owner of any such primary obligation against loss in respect
thereof; provided, however that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any Guaranteeing Person
shall be deemed to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such Guaranteeing Person
may be liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which such
Guaranteeing Person may be liable are not stated or determinable, in which case
the amount of such Guarantee Obligation shall be such Guaranteeing Person's
maximum reasonably anticipated liability in respect thereof as determined by the
Lenders in good faith.
"Hazardous Materials" shall mean any substance in quantities and/or form:
(a) the presence of which requires or shall hereafter require
notification, investigation or remediation under any Relevant Environmental
Law; or
(b) which is or becomes defined as a "hazardous waste", "hazardous
material" or "hazardous substance" or "controlled industrial waste" or
"Pollutant" or "contaminant" under any Relevant Environmental Law,
including without limitation, which contains gasoline, diesel fuel or other
petroleum hydrocarbons or volatile organic compounds, or which contains
polychlorinated biphenyls or asbestos or urea formaldehyde foam insulation,
or which contains or emits radioactive particles, waves or material,
including radon gas; or
(c) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is or
becomes regulated under any Relevant Environmental Law or by any
Governmental Authority; or
(d) pursuant to applicable Relevant Environmental Laws, the presence
of which on the Mortgaged Property causes or threatens to cause a nuisance
upon the Mortgaged Property or adjacent properties; or poses or threatens
to pose a hazard to the Mortgaged Property or to the health or safety of
persons or property on or about the Mortgaged Property.
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"Indebtedness" of any Person means as of the date of any determination
thereof:
(i) all obligations of such Person for borrowed money and for the
deferred purchase price of property or services, and obligations
evidenced by bonds, debentures, notes, or other similar instruments;
(ii) all rental or other obligations under leases required to be
capitalized under GAAP;
(iii) all Guarantee Obligations of such Person;
(iv) all liabilities in respect of currency or interest rate
swap, cap or collar arrangements or any similar derivative instrument;
provided that if such currency or interest rate swap, cap or collar
arrangements or any similar derivative instrument has been entered
into in order to hedge the currency or interest rate exposure of such
Person in respect of current or contemplated Indebtedness, the amount
of any liability in respect of such arrangement or instrument shall
not be included in the determination of Indebtedness; and
(v) Indebtedness of others secured by any Lien upon property
owned by such Person, whether or not assumed by such Person.
"Indirect Costs" means the aggregate costs of all items described in the
line items entitled "Title Insurance", "Commissions", "Closing Costs/Escrow
Fees", "Property Taxes", "Legal" and "Soft Costs Contingency" and under the
categories entitled "Soft Costs-Design Costs", "Soft Costs-Permits & Fees", and
"Soft Costs-Other Soft Costs" in the Budget for such Mortgaged Property actually
paid, in all cases as evidenced by the documentation and certificate of Borrower
furnished to Agent pursuant to Section 3.2(g)(i)(1) and (2) hereof, it being
understood that Indirect Costs shall in no event include, with respect to any
Mortgaged Property, any portion of the legal fees for zoning and planning board
approval and similar matters.
"Initial Budget" means, for any Mortgaged Property, a pro forma budget with
respect to such Mortgaged Property in the form of Exhibit G annexed hereto (as
the form of such pro forma budget may be changed from time to time by Borrower
upon the prior written consent of Agent) showing the amounts budgeted for the
Total Costs (including contingencies) for such Mortgaged Property, which pro
forma budget is acceptable in form and substance to the Agent in its sole
discretion.
"Intellectual Property" has the meaning set forth in Section 4.12.
"Interest Period" has the meaning set forth in Section 2.7.
"Leases" means all leases, licenses and other arrangements pursuant to
which any Person has the right or option to occupy or use any portion of any
Mortgaged Property, and shall include all right, title and interest to receive
all rent and other revenue thereunder, and shall include all guaranties of the
obligations of all such Persons.
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"Lender" or "Lenders" has the meaning set forth in the introductory
paragraph of this Agreement, and any successors and assigns.
"Lending Office" shall mean, with respect to any of the Lenders, the branch
or branches (or affiliate or affiliates) from which any of such Lender's
Advances are made or maintained and for the account of which all payments of
principal of, and interest on, such Lender's Advances are made, as designated in
writing from time to time to the Agent and the Borrower.
"Lien" means with respect to any asset: any mortgage, pledge, security
interest, encumbrance, lien, charge, or deposit arrangement or other arrangement
having the practical effect of the foregoing and shall include the interest of a
vendor or lessor under any conditional sale agreement, capitalized lease, or
other title retention agreement relating to such asset or the filing of any
financing statement under the UCC or comparable law.
"Loan" means, collectively, the loans made by the Lenders pursuant to the
Loan Documents.
"Loan Documents" means, collectively, this Agreement, the Promissory Notes,
all Mortgages, all Financing Statements, the Environmental Indemnity, all
Subsidiary Mortgagor Guaranties and all other documents, certificates,
affidavits and other instruments executed and delivered by the Borrower and its
Affiliates pursuant thereto or in connection therewith, as each of the same may
be amended, modified or otherwise supplemented from time to time.
"Loss" has the meaning provided in Section 7.16(c).
"Margin Stock" has the meaning provided in Regulation U.
"Market Studies" means, for any Mortgaged Property, all of the following
with respect to such Mortgaged Property in the form of the examples of the
following attached hereto as Exhibit H: (i) a target submarket overview, (ii) a
comparison with the Borrower's acquisition criteria, (iii) an area map, (iv) a
neighborhood map, (v) an aerial photograph, (vi) a contextual site plan, (vi) a
preliminary site plan, (vii) a map indicating retail and restaurant support,
(viii) the identity of and information respecting demand generators and area
employers, (ix) a demand location map, (x) a competitive survey, and (xi) a
competitive survey map.
"Material Adverse Change" means any change, event or circumstance which has
or is reasonably likely to have a material adverse effect on (i) the ability of
the Borrower and its Subsidiaries to perform their respective obligations under
this Agreement or any of the other Loan Documents, or (ii) the business,
condition (financial or otherwise) or results of operation of the Borrower and
its Subsidiaries when taken as a whole.
"Maturity Date" means April 23, 1999, and any extensions thereof.
"Maximum Availability Amount" means, as of any date of determination, the
sum of:
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(a) forty-five (45%) percent of the aggregate Eligible Acquisition
Costs for all of the Mortgaged Properties, and
(b) thirty-five (35%) percent of the sum of: (1) the aggregate
Eligible Direct Costs for all of the Mortgaged Properties, and (2) the
aggregate Eligible Indirect Costs for all of the Mortgaged Properties.
"Mortgaged Properties" means, collectively, each New Mortgage Property of
the Borrower or any Subsidiary Mortgagor which is located in a Central Business
District and which subsequent to the Closing Date is (and for so long as same
is) mortgaged to the Agent pursuant to the terms hereof, and shall include all
of the "Property", as such term is defined in the Mortgages.
"Mortgages" means those certain deeds of trust, deeds to secure debt,
mortgages and security agreements with assignments of rents and fixture filings
delivered by the Borrower or any Subsidiary Mortgagor in favor of the Agent and
covering the Mortgaged Properties (which such Mortgages are recorded or
unrecorded), substantially (i.e., with such modifications as may be required by,
or, in the Agent's reasonable judgment, appropriate for, the jurisdiction in
which a particular Mortgaged Property is located) in the form attached hereto as
Exhibit N, as the same may be amended, modified, or otherwise supplemented from
time to time.
"Net Operating Income" means, with respect to the most recent twelve (12)
months or, at the option of the Agent, the most recent fiscal quarter of the
Borrower calculated on a year to date basis, the gross revenues from the
Mortgaged Properties for such period less all direct operating expenses of the
Mortgaged Properties, including, without limitation, expenses for the following
to the extent same relate to the Mortgaged Properties: personnel, landscaping,
contracts, utilities, housekeeping, repairs and maintenance, marketing,
administrative duties, insurance and real estate taxes for such period (other
than interest expense, depreciation, amortization and expenditures capitalized
in accordance with GAAP).
"New Mortgaged Property" means any property and all rights, titles and
interests appurtenant thereto which the Borrower or any Subsidiary Mortgagor
proposes to encumber by a Mortgage at any time subsequent to the Closing Date.
"Non-public Information" means any information delivered by the Borrower to
the Agent or the Lenders (in their capacities as such) pursuant to this
Agreement which is not publicly disclosed or known, or which cannot be readily
derived from information which is publicly disclosed or known.
"Notice of Borrowing" has the meaning provided in Section 2.3.
"Notifying Lender" has the meaning provided in Section 2.13.
"Participant" has the meaning provided in Section 7.17.
"Payment Office" means the office of the Agent located at 2 World Financial
Center, New York, New York 10281-1050.
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"Percentage" shall mean each Lender's percentage share of the Commitment as
set forth on Exhibit A hereto.
"Period Fraction" means, with respect to any period of time, a fraction,
the numerator of which is the actual number of days in such period, and the
denominator of which is 360.
"Permissible Assumed Indebtedness" has the meaning provided in Section
5.3(a)(iv).
"Permitted Encumbrances" means, with respect to each of the Mortgaged
Properties, (i) all exceptions to title insurance coverage set forth in the
title insurance policies insuring the Mortgages covering such Mortgaged
Properties, other than standard printed exceptions, as of the date such policies
are issued, (ii) all liens for real estate taxes and assessments provided either
(x) that the last day by which such taxes or assessments may be paid without the
imposition of any interest, fine or penalty has not occurred, or (y) the amount
or validity of such taxes or assessments are being contested in good faith by
appropriate proceedings which have the effect of staying enforcement or
execution of such liens and with respect to which adequate reserves in
conformity with GAAP have been provided on the books of Borrower, (iii)
Development Encumbrances, (iv) mechanics' and materialmen's liens, the existence
of which do not constitute or create a Material Adverse Change, and which remain
unsatisfied, unbonded or unstayed for no more than 30 days other than those the
amount or validity of which are being contested in good faith by appropriate
proceedings which have the effect of staying enforcement or execution of such
liens and with respect to which adequate reserves in conformity with GAAP have
been provided on the books of Borrower, and (v) Leases which are subordinate to
the lien of the Mortgages.
"Permitted Purpose" shall mean reimbursement to the Borrower of a portion
of the Total Costs with respect to each Mortgaged Property, and in addition,
with respect only to Unsecured Advances, for Borrower's working capital
purposes.
"Person" means any individual, partnership, firm, corporation, association,
joint venture, joint stock company, trust, unincorporated organization or other
entity, or any governmental or political subdivision or agency, department, or
instrumentality thereof.
"Plan" means any multiemployer plan or single employer plan, as defined in
Section 4001 and subject to Title IV of ERISA, which is maintained, or at any
time during the five calendar years preceding the date of this Agreement was
maintained, for employees of the Borrower or a Subsidiary of the Borrower or an
ERISA Affiliate.
"Plans and Specifications" has the meaning specified in Section 3.2(g).
"Presence" means, when used in connection with Hazardous Materials,
treatment, use, storage, handling, repair, encapsulation, disposal,
transportation, spill, discharge and release.
"Prime Lending Rate" means the rate at which the Agent announces from time
to time as its prime lending rate, as in effect from time to time. The Prime
Lending Rate is a reference rate and does not necessarily represent the lowest
or best rate actually charged to any customer. The Agent and each Lender may
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make commercial loans or other loans at rates of interest at, above or below the
Prime Lending Rate.
"Proforma Operating Statement" means, for any Mortgaged Property, a
completed pro forma operating statement with respect to such Mortgaged Property
in the form of Exhibit I attached hereto, accurate as of the date of such
statement, and containing the information required to complete such schedule in
the manner and detail contemplated by such Exhibit, which shall be acceptable in
form and substance to the Agent in its sole discretion.
"Project Cost Report" means, for any Mortgaged Property, a completed
project cost report with respect to such Mortgaged Property in the form of
Exhibit J attached hereto, accurate as of the date of such form, and containing
the information required to complete such schedule in the manner and detail
contemplated by such Exhibit, and including, without limitation, the current
actual and projected Total Costs with respect to such Mortgaged Property and the
deviations of same (on line-item by line-item basis) from the Budget furnished
to Agent with respect to such Mortgaged Property.
"Promissory Notes" means the promissory notes made by the Borrower to each
Lender substantially in the form annexed hereto as Exhibit C.
"Purchasing Lender" has the meaning provided in Section 7.18.
"Regulation D" and "Regulation U" mean Regulation D and Regulation U,
respectively, of the Board of Governors of the Federal Reserve System as from
time to time in effect and any successor thereto.
"Realty" means SC Realty Incorporated, a Nevada corporation.
"Release" has the meaning provided in Section 8.11.
"Release Parcel" has the meaning provided in Section 8.11.
"Release Request" has the meaning provided in Section 8.11.
"Relevant Environmental Laws" means all Requirements of Law and all other
applicable Federal, state and local environmental statutes, regulations, rules,
ordinances, codes, licenses, permits, approvals, plans, authorizations,
guidelines, concessions, franchises, orders and similar items, and rules of
common law (whether now existing or hereafter enacted or promulgated and whether
now contemplated, anticipated or foreseeable or not) of all courts and
Governmental Authorities, and all applicable judicial and administrative and
regulatory decrees, judgments and orders, including common law rulings and
determinations, relating to injury to or the protection of the Environment,
including, without limitation, all requirements pertaining to reporting,
licensing, permitting, investigation, remediation and removal of emissions,
discharges, releases or threatened releases of Hazardous Materials into the
Environment, or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials.
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"Required Lenders" means the Lenders holding at least 66-2/3% of the
Commitment.
"Requirement of Law" means, as to any Person, the certificate of
incorporation and by-laws, certificate of partnership and partnership agreement
or other organizational or governing documents of such Person, and any law,
treaty, rule, or regulation or determination of an arbitrator or a court or
other Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property is
subject.
"Stockholders' Equity" means stockholders' equity as reflected on the
balance sheet of the Borrower determined in accordance with GAAP.
"Studies" means environmental studies and investigations respecting (i) the
condition and circumstances of the Environment on, under, about or affecting any
Mortgaged Property, (ii) any actual or suspected Environmental Discharge or
Presence of any Hazardous Materials on, under, about or affecting any Mortgaged
Property, and (iii) any actual or suspected violation of any Relevant
Environmental Laws on, under, about or related to any Mortgaged Property.
"Subsidiary" of any Person means a corporation (or partnership) of which a
majority of the outstanding shares of stock (or beneficial interests) of each
class having ordinary voting power is owned by such Person, by one or more
Subsidiaries of such Person, or by such Person and one or more of its
Subsidiaries.
"Subsidiary Mortgagor" means any Subsidiary of Borrower or any other Person
which owns any portion of or interest in any New Mortgaged Property.
"Subsidiary Mortgagor Guaranty" has the meaning provided in Section 3.3(b).
"Taxes" has the meaning provided in Section 2.17.
"Total Costs" means, for each Mortgaged Property, the sum of (i) the
Acquisition Costs with respect to such Mortgaged Property, (ii) the Direct Costs
with respect to such Mortgaged Property, and (iii) the Indirect Costs with
respect to such Mortgaged Property.
"UCC" means the Uniform Commercial Code as from time to time in effect in
the relevant jurisdiction.
"Unsecured Advances" has the meaning provided in Section 3.4.
"Use Requirements" means any and all building codes or permits,
certificates of occupancy or compliance, restrictions of record, easements,
reciprocal easements or other agreements, subdivision, zoning, wetlands
protection, or land use laws or ordinances and any and all applicable rules or
regulations of any Governmental Authority affecting any part of any Mortgaged
Property.
Section 1.2 Accounting Terms and Determinations. Unless otherwise defined
or specified herein, all accounting terms shall be construed herein, all
accounting determinations hereunder shall be made, all financial statements
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required to be delivered hereunder shall be prepared, and all financial records
shall be maintained in accordance with GAAP.
Section 1.3 Other Definitional Terms. The words "hereof," "herein," and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement, and Article, section, schedule, exhibit, and like references are to
this Agreement unless otherwise specified. References to agreements,
instruments, documents, statutes, and regulations include all amendments,
supplements, and modifications thereof as may be in effect from time to time.
ARTICLE II
AMOUNTS AND TERMS OF LOANS
Section 2.1 Commitment.
(a) Subject to and upon the terms and conditions herein set forth,
each Lender, severally and not jointly, agrees to make loans (each an "Advance"
and collectively, the "Advances") pro rata in accordance with such Lender's
Percentage to the Borrower from time to time on and/or after the Closing Date.
(b) The aggregate principal amount outstanding of all Advances made
pursuant hereto by the Lenders shall not exceed $50,000,000 (the "Commitment").
The aggregate principal amount outstanding of all Advances (other than Unsecured
Advances) shall not exceed the then Maximum Availability Amount. The aggregate
principal amount outstanding of all Unsecured Advances shall not exceed
$30,000,000. There may not be more than one Advance made on any day. Within the
foregoing limits and subject to the conditions set out in this Agreement, the
Borrower may borrow Advances under this Section 2.1, repay Advances under
Section 2.8, and reborrow Advances.
(c) The aggregate principal amount of each Advance hereunder shall
be not less than $500,000 and shall be in integral multiples of $100,000.
Section 2.2 Advances. (a) The Lenders will make Advances of the Loan for
(and only for) any Permitted Purpose subject to and in accordance with the terms
and conditions of this Agreement, including, without limitation, subject to
satisfaction of all conditions precedent to Advances set forth herein.
(b) The initial Advance of the loan proceeds will be made upon
satisfaction of the conditions set forth in Article III of this Agreement, and
all subsequent advances shall be made no more frequently than (i) twice during
any calendar month thereafter and (ii) once every 12 days, provided, that for
Unsecured Advances, such Advances can be made as frequently as once each week.
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Section 2.3 Notices of Borrowing. Whenever the Borrower desires to receive
an Advance hereunder, it shall give the Agent at least five Business Days' prior
written notice of the proposed Advance to be made hereunder, such notice to be
given prior to 12:00 noon (New York time) on the date specified. Each such
notice (each a "Notice of Borrowing") shall be in the form of Exhibit B, be
irrevocable, and specify the principal amount of the Advance to be made and the
date (which shall be a Business Day) of the Advance.
Section 2.4 Disbursement of Funds. The Agent shall promptly (but in no
event less than three Business Days prior to the date of the Advance) notify
each Lender of its Percentage of each Advance and the date of such Advance. On
the date so specified, each Lender shall make available to the Agent at the
Payment Office no later than 11:00 a.m. (New York time) in immediately available
funds an amount equal to such Lender's Percentage of such Advance. No later than
1:00 p.m. (New York time) on the date of each Advance, the Agent will make
available to the Borrower at the Payment Office the full amount of the Advance.
Section 2.5 Promissory Notes; Collateral.
(a) The Borrower's obligation to pay the principal of, and
interest on, the Advances made by each Lender shall be evidenced by one or more
Promissory Notes in the face amount of each such Lender's Percentage of the
Commitment, with blanks as to payee, date and principal amount appropriately
completed. The determination by the Agent of the amount of principal
outstanding hereunder or under any Promissory Note shall, except for patent
error, be final, conclusive and binding upon the Borrower for all purposes.
(b) Each borrowing, prepayment and reborrowing hereunder shall be
recorded by the Agent; provided, however, that no failure to make or error in
making a recordation of an Advance shall in any way limit, affect or modify the
obligation of the Borrower to repay any obligations, or the rights of the Agent
and the Lenders to any amounts due under this Agreement, the Loan Documents and
the Promissory Notes.
(c) Except as otherwise set forth in the Loan Documents, each
item of Collateral shall secure the payment and performance of all
indebtedness and obligations of the Borrower under this Agreement, including
without limitation, any increased cost under Section 2.14 hereof, and each other
Loan Document.
Section 2.6 Interest on Advances.
(a) The Borrower agrees to pay interest in respect of the unpaid
principal amount of each Advance from the date such Advance is made at a rate
per annum for each Interest Period equal to the Applicable Margin plus the
relevant Adjusted Eurodollar Rate. Interest on each Advance shall accrue
from and including the date of such Advance to but excluding the date of any
repayment thereof and shall be payable (i) (x) with respect to all Advances
other than Advances the Interest Period applicable to which is six months, in
arrears on the last day of the Interest Period for each such Advance, and (y)
with respect to all Advances the Interest Period applicable to which is six
months, in arrears on the 90th day following the first day of such Interest
Period and on the last day of such Interest Period, (ii) at maturity (whether by
acceleration or otherwise), and (iii) after maturity, on demand. Notwithstanding
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the foregoing, interest on each Advance bearing interest at the Alternate Rate
pursuant to the terms of this Agreement shall be payable in arrears on the last
day of each calendar month during the Interest Period applicable to such
Advance and on the last day of such Interest Period, (ii) at maturity (whether
by acceleration or otherwise), and (iii) after maturity, on demand.
(b) Overdue principal and, to the extent permitted by law, overdue
interest in respect of each Advance, and all other overdue amounts owing
hereunder, shall bear interest for each day that such amounts are overdue at a
rate (the "Default Rate") per annum equal to three percent per annum plus
the interest rate otherwise applicable thereto from the first day such amounts
are overdue to but excluding the date such overdue amounts are paid.
(c) The Agent, upon determining the Adjusted Eurodollar Rate for
any Interest Period, shall promptly notify by telephone (confirmed in writing)
or in writing the Borrower thereof.
(d) It is expressly stipulated and agreed to be the intent of the
Lenders and Borrower at all times to comply with the applicable law governing
the highest lawful interest rate. If the applicable law is ever judiciall
interpreted so as to render usurious any amount called for under this Agreement
or under any of the other Loan Documents, or contracted for, charged, taken,
reserved or received with respect to the Indebtedness evidenced thereby, or if
acceleration of the maturity of the obligations, or the rights of the Agent and
the Lenders to any amounts due, under this Agreement, the Loan Documents and the
Promissory Notes, any prepayment by Borrower, or any other circumstance
whatsoever, results in Borrower having paid any interest, penalty, fee or other
amount in excess of that permitted by applicable law, the it is the express
intent of Borrower and Lenders that all excess amounts theretofore collected by
Lenders be credited on the principal balance of the Advances (or, at Lenders'
option, paid over to Borrower), and the provisions of this Agreement and the
other Loan Documents immediately be deemed reformed and the amounts thereafter
collectible hereunder and thereunder reduced, without the necessity of the
execution of any new document, so as to comply with the applicable law, but
so as to permit the recovery of the fullest amount otherwise called for
hereunder and thereunder. The right to accelerate maturity of the obligations,
or the rights of the Agent and the Lenders to any amounts due, under this
Agreement, the Loan Documents and the Promissory Notes, does not include the
right to accelerate any interest which has not otherwise accrued on the date of
such acceleration, and Lenders do not intend to collect any unearned interest in
the event of acceleration. All sums paid or agreed to be paid to Lenders for
the use, forbearance or detention of the obligations, or the rights of the
Agent and the Lenders to any amounts due, under this Agreement, the Loan
Documents and the Promissory Notes shall, to the extent permitted by applicable
law, be amortized, prorated, allocated and spread throughout the full term of
such obligations and amounts until payment in full so that the rate or amount
of interest on account of such secured obligations does not exceed the maximum
rate or amount of interest permitted under applicable law.
Section 2.7 Interest Periods. In connection with each Advance bearing
interest at the rate described in Section 2.6(a) above, an interest period (each
an "Interest Period") shall be applicable thereto, which shall be a period of
one, two, three or six months as selected by the Borrower in the Notice of
Borrowing for such Advance, provided that:
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(i) the initial Interest Period for any Advance shall commence on the
date of such Advance;
(ii) subject to the provisions of Section 6.2 hereof and provided that
no Event of Default shall have occurred and be continuing, at the end of
the initial Interest Period, and each subsequent Interest Period for any
Advance, the Borrower shall be permitted to select an additional Interest
Period for such Advance by delivering a written notice thereof, in the form
of Exhibit B-1, to the Agent at any time prior to 12:00 noon (New York
time) on the third Business Day prior to the expiration of the then current
Interest Period applicable to such Advance, provided that if no Interest
Period selection is delivered to the Agent by such time, the Borrower shall
be deemed to have selected an Interest Period of one month and such
Interest Period selected or deemed to have been selected for such Advance
may not be changed without the consent of the Agent;
(iii) if any Interest Period would otherwise expire on a day which is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day, provided that if any Interest Period in respect of
an Advance (other than an Advance referred to in Section 2.13(b)(ii) or
Section 2.14(b)(ii)) would otherwise expire on a day that is not a Business
Day but is a day of the month after which no further Business Day occurs in
such month, such Interest Period shall expire on the next preceding
Business Day;
(iv) any Interest Period in respect of an Advance which begins on the
last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (v) below, end on the last
Business Day of a calendar month;
(v) no Interest Period shall extend beyond the Maturity Date; and
(vi) there shall be no more than six Interest Periods in effect at any
time.
Section 2.8 Repayment of Advances. The Borrower shall repay to the Agent,
for the account of the Lenders, the unpaid principal amount of each Advance made
by the Lenders hereunder, together with all accrued and unpaid interest thereon
and any other sums due and payable to the Lenders hereunder or under the other
Loan Documents on the Maturity Date.
Section 2.9 Prepayments of Advances.
(a) The Borrower may prepay all outstanding Advances, any one
Advance or portion thereof on any Business Day without penalty, premium or
additional charge, except as set forth in Section 2.16 hereof; provided such
prepayment shall be at least equal to the lesser of $100,000 or the outstanding
amount of such Advance. Upon three (3) days written notice to the Agent, the
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Borrower may terminate the Commitment by prepaying all outstanding Advances
and all other amounts and fees due to the Agent and the Lenders under this
Agreement and the other Loan Documents.
(b) The Borrower shall be liable for all amounts payable pursuant to
Section 2.16 with respect to a prepayment of an Advance on any date other than
the last day of the Interest Period related to such Advance where no new
Interest Period shall have been selected or deemed to have been selected
pursuant to Section 2.7(ii) for such Advance.
(c) The Borrower shall apply upon receipt (i) all net proceeds from
its equity offerings to repay on a pari passu basis the Loan and the
Indebtedness referred to in Section 5.3(a)(vii) of this Agreement, and (ii) all
other amounts and fees due to the Agent and the Lenders under this Agreement
and the other Loan Documents.
Section 2.10 Fees. The Borrower shall pay to the Agent for the account of
the Lenders a commitment fee (the "Commitment Fee") equal to 0.50% per annum of
the Average Undrawn Balance of the Commitment. Such Commitment Fee shall be due
and payable (i) quarterly in arrears on the last day of each calendar quarter,
and (ii) on the Maturity Date. Each payment on account of the Commitment Fee for
a period which is less than a full calendar quarter shall be prorated.
Section 2.11 Payments, Etc.
(a) All payments under this Agreement shall be pro rata among the
Lenders in accordance with their Percentages and shall be made by the Borrower,
without defense, setoff, or counterclaim, to the Agent not later than 12:00 noon
(New York time) on the date when due and shall be made in Dollars in immediately
available funds at the Payment Office and any funds received by the Agent after
such time shall, for all purposes of this Agreement, be deemed to have been paid
on the next succeeding Business Day. The Agent shall thereafter cause to be
distributed to the Lenders, on the Business Day when paid, in like funds their
Percentage of payments so received.
(b) Whenever any payment to be made hereunder or under the
Promissory Notes shall be stated to be due on a day which is not a Business Day,
the due date thereof shall be extended to the next succeeding Business Day
(unless the relevant Interest Period expires on the next preceding Business Day
pursuant to Section 2.7(iii), in which case the due date shall be the next
preceding Business Day) and, with respect to payments of principal, interest
thereon shall be payable at the applicable rate during such extension.
(c) All computations of interest on the Advances shall be made on
the basis of a year of (x) in the case of Advances on which interest is computed
on the basis of the Eurodollar Rate, 360 days, and (y) in the case of Advances
on which interest is computed on the basis of the Alternate Rate, 365/366 days,
in either case for the actual number of days (including the first day but
excluding the last day) occurring in the period for which such interest is
payable.
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Section 2.12 Interest Rate Not Ascertainable, Etc. If the Agent shall have
determined (which determination shall be conclusive and binding upon the
Borrower) that on any date for determining the Eurodollar Rate for any Interest
Period, by reason of any circumstances affecting the interbank Eurodollar market
generally, adequate and fair means do not exist for ascertaining the applicable
interest rate on the basis provided for in the definition of Adjusted Eurodollar
Rate, then, and in any such event, the Agent shall forthwith give notice (by
telephone confirmed in writing) to the Borrower of such determination. Until the
Agent notifies the Borrower that the circumstances giving rise to the suspension
described herein no longer exist:
(i) any Advance made hereunder shall bear interest at the then
applicable Alternate Rate; and
(ii) if any Advance affected is then outstanding, each such Advance
shall immediately convert into an Advance bearing interest at the then
applicable Alternate Rate with an Interest Period ending on the date on
which the Interest Period applicable to the Advance affected expires.
Section 2.13 Illegality.
(a) If any Lender (a "Notifying Lender") shall have determined at
any time that the making or continuance of any Advance has become unlawful by
compliance by such Lender in good faith with any applicable Requirement of Law
adopted or becoming effective after the date hereof, then, in any such event,
the Notifying Lender shall give prompt notice (by telephone confirmed in
writing) to the Agent and the Borrower of such determination.
(b) Upon the giving of the notice to the Agent and the Borrower
referred to in subsection (a) above, (i) the Borrower's right to request
and the Notifying Lender's obligation to make Advances shall be immediately
suspended, and (ii) if any Advance of the Notifying Lender affected thereby
is then outstanding, each such Advance shall immediately convert into an Advance
bearing interest at the then applicable Alternate Rate with an Interest Period
ending on the date on which the Interest Period applicable to the Advance
affected expires.
Section 2.14 Increased Costs.
(a) If, by reason of (x) after the date hereof, the implemen-
tation of or any change (including, without limitation, any change by way of
imposition or increase of reserve or capital adequacy requirements) in, or in
the interpretation by any Governmental Authority or any other recognized
authority of, any law or regulation, or (y) the compliance with any guideline or
request from any central bank or other Governmental Authority or quasi-
Governmental Authority exercising control over banks or financial institutions
generally (whether or not having the force of law) adopted or becoming effective
after the date hereof:
(i) any Lender (or its Lending Office) shall be subject to any tax,
duty, or other charge, with respect to the Advances or its obligation to
make Advances, or shall change the basis of taxation of payments to any
Lender of the principal of or interest on the Advances or its obligation to
make Advances (except for changes in the rate of tax on the overall net
income
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of such Lender or its Lending Office imposed by the jurisdiction in which
such Lender's principal executive office or Lending Office is located); or
(ii) any reserve, special deposit, or similar requirement (including,
without limitation, any reserve, special deposit, or similar requirement
imposed by the Board of Governors of the Federal Reserve System) against
assets of, deposits with or for the account of, or credit extended by, any
Lender or its Lending Office shall be imposed or deemed applicable or any
other condition affecting the Advances shall be imposed on such Lender or
its Lending Office or the interbank Eurodollar market;
and as a result thereof there shall be any cost to such Lender of agreeing to
make or maintain the Advances, or there shall be a reduction in the amount
received or receivable by such Lender or its Lending Office, then the Borrower
shall from time to time, upon written notice and demand (including such Lender's
reasonable details with respect to such increased cost) promptly given by the
Agent, pay to the Agent for the account of such Lender, within five Business
Days after the date specified in such notice and demand, additional amounts
sufficient to indemnify such Lender against such increased cost. In the event
that a Lender becomes aware of the imposition of a cost to such Lender or a
reduction in the amount to be received or receivable by such Lender or its
Lending Office which is an additional cost pursuant to this Section 2.14, such
Lender shall promptly notify the Agent and the Borrower in writing of such
imposition or reduction, which notice shall include such Lender's reasonable
details with respect to such increased cost. With respect to costs or reductions
incurred by a Lender pursuant to this Section 2.14 relating to any period in
which the Commitment is in effect, the provisions of this Section 2.14 shall
survive the termination of this Agreement and the payment of the Promissory
Notes and all other amounts payable hereunder.
(b) If the Lenders shall notify the Borrower in writing that at
any time, because of the circumstances described in clause (x) or (y) in
Section 2.14(a) or any other circum stances arising after the Closing Date and
relating to any period in which the Commitment is in effect affecting the
interbank Eurodollar market generally, the then applicable Adjusted Eurodollar
Rate, as determined by the Agent, will not adequately and fairly reflect the
cost to the Lenders of funding the Advances, then, subject to Section 2.14(c),
thereafter:
(i) any Advance made hereunder shall bear interest at the Alternate
Rate; and
(ii) if the affected Advance is then outstanding, the Borrower shall
immediately, or if permitted by applicable law, no later than the date
permitted thereby, upon at least one Business Day's written notice to the
Lenders, convert each such Advance into an Advance bearing interest at the
Alternate Rate with an Interest Period ending on the date on which the
Interest Period applicable to the affected Advance expires.
(c) If the Lenders shall notify the Borrower in writing that
at any time, because of the circumstances described in clause (x) or (y) in
Section 2.14(a) or any other circumstances arising after the Closing Date and
relating to any period in which the Commitment is in effect affecting the
interbank Eurodollar market generally, then the Borrower shall be entitled to
require each Lender to which such circumstances apply to assign its Credit
Exposure at par to any Person selected by Borrower that is a financial
institution reasonably acceptable to the Agent, which assignment shall be
effected pursuant to Section 7.18 hereof.
Section 2.15 Change of Lending Office. Each Lender agrees that it will use
reasonable efforts to designate an alternate Lending Office with respect to its
Advances affected by the matters or circumstances described in Section 2.12,
2.13 or 2.14 to reduce the liability of the Borrower or avoid the results
provided thereunder, so long as such designation is not disadvantageous to such
Lender as determined by such Lender in its sole discretion.
Section 2.16 Funding Losses. The Borrower shall compensate each Lender,
upon such Lender's written request to the Agent and the Agent's delivery thereof
to the Borrower (which request shall set forth in reasonable detail the basis
for requesting such amounts), for all losses, expenses, and liabilities
(including, without limitation, any interest paid by such Lender to lenders of
funds borrowed by it to make or carry its Advances to the extent not recovered
by such Lender in connection with the re-employment of such funds but excluding
loss of anticipated profits), which such Lender may sustain: (i) if for any
reason (other than a default by such Lender) an Advance does not occur on the
date specified therefor in a Notice of Borrowing (whether or not withdrawn);
(ii) if any repayment of any Advance occurs on a date which is not the Maturity
Date or the last day of an Interest Period applicable to such Advance (subject
to Section 2.9(b)); (iii) if, for any reason, the Borrower defaults in its
obligation to repay any Advances when required by the terms of this Agreement;
or (iv) the occurrence of any of the events described in Sections 2.12, 2.13 or
2.15. With respect to losses, expenses and liabilities which a Lender may
sustain as described in this Section 2.16 relating to any period in which the
Commitment is in effect, the provisions of this Section 2.16 shall survive the
termination of this Agreement and the payment of the Promissory Notes and all
other amounts payable hereunder.
Section 2.17 Taxes. (a) All payments made by the Borrower under this
Agreement and the Promissory Notes shall be made free and clear of, and without
deduction or withholding for or on account of, any present or future income,
stamp, or other taxes, levies, imposts, duties, charges, fees, deductions,
reserves or withholdings, now or hereafter imposed, levied, collected, withheld
or assessed by any Governmental Authority, excluding in the case of each Lender,
net income taxes and franchise taxes (imposed in lieu of net income taxes)
imposed on such Lender as a result of a present or former connection between the
jurisdiction of the government or taxing authority imposing such tax and such
Lender (excluding a connection arising solely from such Lender having executed,
delivered, or performed its obligations or received a payment under, or
enforced, this Agreement or the Promissory Notes) or any political subdivision
or taxing authority thereof or therein (all such non-excluded taxes, levies,
imposts, duties, charges, fees, deductions and withholdings being hereinafter
called "Taxes"). If any Taxes are required to be withheld from any amounts
payable to any Lender hereunder or under the Promissory Notes, the amounts so
payable to such Lender shall be increased to the extent necessary to yield to
such Lender (after payment of all Taxes) interest or any such other amounts
payable hereunder at the rates or in the amounts specified in this Agreement and
the appropriate Promissory Note. Whenever any Taxes are payable by the Borrower
pursuant to applicable law, as promptly as possible thereafter the Borrower
shall send to the Agent a certified copy of an original official receipt
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received by the Borrower showing payment thereof. If any Borrower fails to pay
any Taxes when due to the appropriate taxing authority or fails to remit to the
Agent the required receipts or other required documentary evidence (other than
any such failure due to failure of any Lender to furnish the documents required
to be furnished by such Lender pursuant to Section 2.17(b)), the Borrower shall
indemnify, defend and hold harmless the Agent and each Lender for any
incremental taxes, interest, or penalties that may become payable by the Agent
or any Lender as a result of any such failure. With respect to any obligations
of the Borrower pursuant to this Section 2.17 relating to any period in which
the Commitment is in effect, the agreements in this Section 2.17, as they apply
to any Advance, shall survive the termination of this Agreement and the payment
of the Promissory Notes and all other amounts payable hereunder.
(b) Agent and each Lender shall furnish Borrower, at least 30
days prior to the date on which the first payment to each Lender (including each
Purchasing Lender) is due, and annually thereafter during the term of the Loan,
with United States Internal Revenue Service Form 1001, 4224, W-8 or W-9 (or any
other successor form) or any other document evidencing such Lender's exemption
from withholding of Taxes from any amounts payable to such Lender hereunder
under as of the Closing Date. If any Taxes are required to be withheld from any
amounts payable to any Lender hereunder or under the Promissory Notes, then the
Borrower shall be entitled to require such Lender to assign its Credit Exposure
at par to any Person selected by Borrower that is a financial institution
reasonably acceptable to the Agent, which assignment shall be effected pursuant
to Section 7.18 hereof.
Section 2.18 Extension of Maturity Date. At least sixty (60) days prior to
the first anniversary of the Closing Date, the Borrower may, by notice to Agent,
request that Agent and each Lender review whether or not it is willing to extend
the Maturity Date. In the event and to the extent that the Agent and all of the
Required Lenders agree, in their respective sole and absolute discretion, to
extend the Maturity Date on such terms and conditions as shall be acceptable to
the Agent and all of the Required Lenders, in their respective sole and absolute
discretion, then the Agent shall so advise the Borrower. If the terms and
conditions to such extension are acceptable to Borrower, in its sole and
absolute discretion, then the Borrower shall so notify the Agent within the time
period set forth in such notice to the Borrower and, provided that all of the
conditions to the effectiveness of such extension as set forth in such notice to
the Borrower are satisfied, the Maturity Date shall be extended pursuant to such
terms and conditions and the provisions of this Section. Notwithstanding the
foregoing or anything else to the contrary, the Agent and each Lender shall have
the right to refuse to extend the Maturity Date for any reason or for no reason
whatsoever. If the Maturity Date is extended pursuant to this Section but less
than all of the Lenders agree to such extension, then either (i) the Commitment,
for all purposes during the period of such extension, shall be equal to the
product of the Commitment times the aggregate Percentage of the Lenders agreeing
to such extension, or (ii) the Borrower shall be entitled to require each Lender
which does not agree to such extension to assign its Credit Exposure at par to
any Person selected by Borrower that is a financial institution reasonably
acceptable to the Agent, which assignment shall be effected pursuant to Section
7.18 hereof.
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ARTICLE III
CONDITIONS TO BORROWINGS
The obligation of the Lenders to make an Advance to the Borrower is subject
to the satisfaction of the following conditions:
Section 3.1 Conditions Precedent to Closing. On or prior to the Closing
Date, all obligations of the Borrower hereunder to the Agent and the Lenders
incurred prior to the Closing Date and any amounts payable to the Agent or the
Lenders on the Closing Date (other than legal fees payable pursuant to the last
paragraph of this Section 3.1), shall have been paid in full. In addition, the
following conditions shall be satisfied:
(a) Receipt of Documents. The Agent shall have received or
waived in writing the following, each dated as of or prior to the Closing Date,
in form and substance satisfactory to the Agent:
(i) an officer's certificate, dated the Closing Date, signed by any
Co-Chairman, the President, any Senior Vice President, any Vice President
or the Controller of the Borrower, and attested to by the Secretary or any
Assistant Secretary of the Borrower, in the form of Exhibit D with
appropriate insertions, together with copies of the Articles of
Incorporation of Borrower certified by the Secretary of State of the State
of the Borrower's incorporation and the By-Laws of Borrower and the
resolutions of the Borrower referred to in such certificate; and certified
copies of all other documents, if any, evidencing corporate action or
governmental authorization or approval with respect to this Agreement, the
Promissory Notes, the Advances and the Loan Documents;
(ii) duly executed and completed Promissory Notes payable to the order
of each Lender;
(iii) a duly executed and delivered Environmental Indemnity;
(iv) an opinion of counsel to the Borrower addressed to the Agent and
the Lenders as to the matters set forth in Exhibit F and F-1 and in form
reasonably acceptable to the Agent;
(v) financial statements in the forms prescribed by Sections
5.2(a)-(d) for the most recent fiscal year and fiscal quarter;
(vi) copies of all financial statements, reports, and proxy statements
mailed to the Borrower's shareholders within the last year, and copies of
all registration statements, periodic reports, and other documents filed by
the Borrower with the Securities and Exchange Commission (or any successor
thereto) and any national securities exchange within the last year;
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(vii) such consents or acknowledgements, with respect to such of the
transactions hereunder, from such Persons as the Agent or its counsel may
reasonably determine to be necessary or appropriate;
(viii) (A) a good standing certificate from the State of Maryland in
respect of the Borrower as of a recent date; and (B) a certificate of the
Secretary of State of each state in which the Borrower owns a Mortgaged
Property or is required to qualify to do business, as to due qualification
to do business as a foreign entity and good standing of Borrower as of a
recent date; and
(ix) a letter of comfort from Security Capital Group Incorporated
substantially in the form of Exhibit O attached hereto.
Execution and delivery of this Agreement by Borrower shall constitute Borrower's
agreement and covenant to pay to the Agent, promptly upon demand (together with
a reasonably detailed invoice(s) in respect thereof), all reasonable fees and
disbursements of counsel to the Agent and the Lenders incurred prior to or on
the Closing Date.
Section 3.2 Conditions Precedent to Each Advance. At the time of the making
by the Lenders of each Advance (before as well as after giving effect to such
Advance and to the proposed use of the proceeds thereof):
(a) The Agent shall have received a timely Notice of Borrowing
from the Borrower in accordance with Article II;
(b) No Default or Event of Default shall have occurred and be
continuing;
(c) Such Advance shall not cause (i) the aggregate principal
amount of all outstanding Advances to exceed the Commitment, (ii) the aggregate
principal amount of all outstanding Advances (other than Unsecured Advances) to
exceed the then Maximum Availability Amount, and (iii) the aggregate principal
amount of all outstanding Unsecured Advances to exceed $30,000,000;
(d) Subject to the provisions of Section 5.5 hereof, all
representations and warranties contained herein and incorporated herein by
reference (other than representations and warranties which are expressly
provided as being made only as of the Closing Date) shall be true and correct in
all material respects with the same effect as though such representations and
warranties had been made on and as of the date of such Advance and the Borrower
shall be in compliance in all material respects with all covenants and
agreements contained in Article V hereof and elsewhere in this Agreement;
(e) There shall have been no Material Adverse Change and no
Requirement of Law or Contractual Obligation of the Borrower or any Subsidiary
could reasonably be expected to result in a Material Adverse Change;
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(f) No litigation, investigation or proceeding before or by any
arbitrator or Governmental Authority shall be continuing or threatened against
the Borrower or any of the officers or directors of any Subsidiary thereof in
connection with this Agreement and the other Loan Documents which would result
in a Material Adverse Change;
(g) Agent shall have received:
(i) prior to any Advance (other than Unsecured Advances) with
respect to any Mortgaged Property (and, notwithstanding anything to
the contrary, no portion of the Total Costs with respect to such
Mortgaged Property shall be included in the computation of the Maximum
Availability Amount unless the Agent shall have received): (1) such
supporting documentation for Total Costs as Agent may require and such
supporting documentation evidencing that the Mortgaged Property is
located in a Central Business District as Agent may require, (2)
Borrower's certificate to the effect that it has actually incurred the
Total Costs for which it is seeking reimbursement with respect to the
requested Advance, that such costs have not been made the basis for
any other request for an Advance under this Agreement, that no
Material Adverse Change has occurred since the immediately preceding
Advance, and that the requested Advance will be used for (and only
for) the Permitted Purpose, (3) a notice of title continuation or an
endorsement to each title policy referred to in Section 3.3(a)(iii)
dated no more than seven (7) days prior to the date of any such
Advance, indicating that since the date of the last preceding Advance
there has been no change in the state of title not theretofore
approved by Agent, which endorsement shall have the effect of redating
the title policy to a date no more than seven (7) days prior to the
date of any such Advance, and increasing the coverage thereof by the
amount of the Advance then being made, together with Borrower's
certificate dated on the date of any such Advance to the effect that
there has been no change in the state of title since the date of such
title continuation or endorsement or title policy, as the case may be,
and the date of such Advance; or in the case of a New Mortgaged
Property, a title policy as referred to in Section 3.3(a)(iii) dated
the date on any such Advance, and (4) a Project Cost Report for such
Mortgaged Property, dated as of the date of the Notice of Borrowing;
(ii) prior to any Advance (other than Unsecured Advances) with
respect to any Acquisition Cost for any Mortgaged Property (and,
notwithstanding anything to the contrary, no portion of the Total
Costs with respect to such Mortgaged Property shall be included in the
computation of the Maximum Availability Amount unless the Agent shall
have received): (1) a Budget for such Mortgaged Property, together
with a full copy of the material agreement(s) (together with all
amendments thereto) pursuant to which such Mortgaged Property was
acquired, certified by the Borrower as being true, complete and
accurate; (2) Borrower's certification that, and evidence reasonably
satisfactory to Agent that, the zoning district in which the Mortgaged
Property is located permits the development, use and operation of the
Mortgaged Property as an extended stay facility with such ancillary
facilities related thereto, and that all zoning, planning board and
similar approvals required to be obtained under any Requirements of
Law or Use Requirements for the development, use and operation of an
extended stay facility with such ancillary facilities related thereto
on such Mortgaged Property have been obtained and are in full force
and effect; and (3) Borrower's certificate to the effect that the
building permit and all other permits, authorizations and approvals
required to be obtained
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under any Requirements of Law or Use Requirements for the construction
and operation of an extended stay facility with such ancillary
facilities related thereto on such Mortgaged Property will be promptly
and duly applied for, are capable of being obtained, and that Borrower
will pursue the obtainment of such permits, authorizations and
approvals with due diligence, and that the construction and operation
of an extended stay facility with such ancillary facilities related
thereto on such Mortgaged Property shall at all times comply in all
material respects with all applicable Requirements of Law and Use
Requirements; and
(iii) prior to any Advance (other than Unsecured Advances) with
respect to any Direct Cost for any Mortgaged Property (and,
notwithstanding anything to the contrary, no portion of the Direct
Costs with respect to such Mortgaged Property shall be included in the
computation of the Maximum Availability Amount unless the Agent shall
have received): (1) Borrower's certification that the building permit
and all other permits, authorizations and approvals then required to
be obtained under any Requirements of Law or Use Requirements for the
construction and operation of an extended stay facility with such
ancillary facilities related thereto on such Mortgaged Property (i.e.,
only to the extent such permits, authorizations and approvals are
required to have been obtained for an extended stay facility and such
ancillary facilities related thereto on such Mortgaged Property as
constructed and/or operated as of the date of such Advance) have been
obtained and are in full force and effect in all material respects;
(2) Borrower's certificate to the effect that final plans and
specifications (the "Plans and Specifications") for the construction
of an extended stay facility with such ancillary facilities related
thereto on such Mortgaged Property have been duly filed with all
Governmental Authorities having jurisdiction over the construction of
such facility; (3) a Final Budget for such Mortgaged Property; and (4)
prior to the first Advance with respect to any Direct Cost for any
particular Mortgaged Property, Borrower's certificate to the effect
that agreements with the general contractor and all major trade
contractors and subcontractors required for the construction of an
extended stay facility and such ancillary facilities related thereto
on such Mortgaged Property have been duly executed and delivered by
all parties thereto and are in full force and effect.
(iv) prior to the first Advance (other than Unsecured Advances)
with respect to the Indirect Cost for any Mortgaged Property (and,
notwithstanding anything to the contrary, no portion of the Indirect
Costs with respect to such Mortgaged Property shall be included in the
computation of the Maximum Availability Amount unless the Agent shall
have received): (1) Borrower's certification that construction shall
commence in accordance with the Plans and Specifications for such
Mortgaged Property not later than ninety (90) days of the first
advance for Indirect Costs for such Mortgaged Property, and (2) all
other documents required under clauses (i), (ii) and (iii) above.
(h) The Borrower shall have commenced construction of each
extended stay facility, including the ancillary facilities related thereto, to
be constructed on a Mortgaged Property in accordance with the Plans and
Specifications therefor not later than ninety (90) days from the date that
Borrower receives the first Advance with respect to Indirect Costs for such
Mortgaged Property; provided, however, notwithstanding the foregoing, if either
(x) despite the use of commercially reasonable efforts, such construction cannot
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be commenced within such 90-day period as a result of conditions or
circumstances outside of the Borrower's control (it being agreed that conditions
or circumstances which can be cured by the payment of money on commercially
reasonable terms shall not be deemed outside of the Borrower's control), or (y)
commencement of construction within such 90-day period shall or is reasonably
likely to result in the Direct Costs or Indirect Costs with respect to such
Mortgaged Property being materially greater than the amount thereof set forth in
the Budget for such Mortgaged Property, then, in either such event, Borrower
shall have an additional thirty days to commence construction on such Mortgaged
Property. In the event construction is not commenced with 120 days after the
first advance of Indirect Costs with respect to such Mortgaged Property, then no
additional Advances for such Mortgaged Property shall be made until construction
commences..
(i) The Agent shall have received such other documents or legal
opinions as the Agent or counsel to the Agent may reasonably request,
all in form and substance reasonably satisfactory to the Agent; and
(j) (1) The Agent shall have received payment of all costs and
expenses (other than the legal fees described in the following clause
(2) of this subparagraph) incurred by Agent in connection with
reviewing and evaluating the items furnished and the actions
purporting to satisfy the conditions and requirements to be satisfied
pursuant to this Section 3.2, and (2) receipt of a Notice of Borrowing
for each Advance shall constitute Borrower's agreement and covenant to
pay to the Agent, promptly upon demand (together with a reasonably
detailed invoice(s) in respect thereof), all reasonable legal fees and
expenses incurred in connection with preparing and/or reviewing all
documents relating to, and rendering at the request of Agent all
advice respecting, such items, actions, conditions and requirements.
Each request for an Advance by the Borrower, each selection or deemed
selection by the Borrower of an additional Interest Period for any Advance
pursuant to Section 2.7(ii), shall constitute a representation and warranty by
the Borrower, as of the date of the Advance, the selection or deemed selection
of such additional Interest Period, as the case may be, that the conditions
specified in subsections (a)-(j) of this Section 3.2 have been satisfied.
Borrower shall use reasonable efforts to furnish, with respect to each
request for an Advance, unless otherwise directed by Agent, all documents
referred to in Sections 3.2(g)(i)(3), 3.2(g)(ii)(2), 3.2(h), 3.3(a) (other than
those referred to in subsections (viii) and (ix) thereof) and 3.3(b), to the
extent applicable to such Advance, to Agent's counsel, Robinson Silverman Pearce
Aronsohn & Berman LLP, 1290 Avenue of the Americas, New York, New York 10104,
Attention: Michael B. Levy, Esq., or at such other address or to such other
counsel as Agent may from time to time designate by notice to Borrower.
Notwithstanding the foregoing: (i) the failure of any such documents to be
furnished to such counsel shall not constitute a Default or Event of Default
(provided, however, nothing herein shall negate or vitiate any requirement
hereunder to cause the Agent to receive any such documents), and (ii) copies of
all of the foregoing documents delivered to such counsel shall also be given to
Agent as provided herein.
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Section 3.3 Additional Conditions Precedent to an Advance in Respect of New
Mortgaged Property. Notwithstanding anything to the contrary, no portion of the
Total Costs with respect to a New Mortgaged Property shall be included in the
computation of the Maximum Availability Amount unless the following conditions
are satisfied with respect to each such New Mortgaged Property:
(a) Receipt of Documents. The Agent shall have received the
following in form and substance satisfactory to the Agent:
(i) a Mortgage for the New Mortgaged Property duly authorized,
executed, acknowledged and delivered in recordable form and (except as
otherwise expressly provided in Section 3.3(c)) evidence of the
recording of such instrument as may be necessary or, in the opinion of
the Agent, desirable to perfect and protect the Liens or rights
purported to be created thereby;
(ii) Financing Statements for the New Mortgaged Property
(including, without limitation, all furniture, fixtures and equipment
the cost of which is or has been included in Total Costs for purposes
of computing the Maximum Availability Amount), duly authorized and
executed and delivered in form suitable for recording and filing in
all necessary and appropriate recorders and filing offices, with
evidence of the recording and filing of each such Financing Statement
in such offices;
(iii) with respect to the New Mortgaged Property (i) a
mortgagee's policy of title insurance issued by a reputable national
title insurance company reasonably acceptable to the Agent, in form
and substance satisfactory to the Agent, (x) insuring the Agent and
the Lenders in an amount acceptable to the Agent with respect to the
New Mortgaged Property, that, except for unrecorded Mortgages pursuant
to Section 3.3(c), each Mortgage constitutes a valid first mortgage
lien on the Borrower's fee interest in the New Mortgaged Property, (y)
providing full coverage against all mechanics' and materialmen's
liens, and (z) containing the endorsements described on Schedule 5
attached hereto and such other endorsements and affirmative coverage
as reasonably required by the Agent to the extent available under
applicable law and with such reinsurance (with direct access
provisions) as the Agent may reasonably request; and the Agent shall
also have received evidence that the premiums in respect of such title
insurance policies have been paid; (ii) a survey by a licensed
surveyor reasonably satisfactory to the Agent and such title insurance
company, containing the certification set forth on Schedule 6 attached
hereto and certified to the Agent, the Lenders, the Borrower, and the
title insurance company, showing no state of facts reasonably
unacceptable to the Agent; and (iii) a copy of all recorded documents
referred to, or listed as exceptions to title in, the title policies
referred to in this Section 3.3(a)(iii), including copies of
appurtenant easements affecting or benefitting the New Mortgaged
Property;
(iv) studies, in each case reasonably satisfactory to the Agent
(and conducted by an experienced and reputable engineering firm as
demonstrated to Agent by evidence reasonably satisfactory
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to Agent) confirming that there are no Hazardous Materials on or under
the New Mortgaged Property, except as set forth in such Studies and
acceptable to the Agent in its sole discretion;
(v) UCC lien searches with respect to the Borrower, whether filed
against the New Mortgaged Property or otherwise;
(vi) copies of each policy of insurance required hereunder and
under the other Loan Documents, and, with respect to policies of
insurance covering the New Mortgaged Property, to the extent such New
Mortgaged Property is not insured under existing policies of insurance
required hereunder and under the other Loan Documents, certificates or
binders naming the Agent and each Lender as an additional insured
thereunder, accompanied by a certification stating that all insurance
required hereunder and under the other Loan Documents has been
obtained, such insurance satisfies the requirements hereof and
thereof, and is in full force and effect and that all current due
premiums therefor have been paid in full;
(vii) an opinion of counsel to the Borrower addressed to the
Agent and the Lenders as to the matters set forth in Exhibit F and F-1
and in form reasonably acceptable to the Agent;
(viii) copies of Market Studies acceptable to the Agent in its
reasonable discretion with respect to the New Mortgaged Property;
(ix) a Proforma Operating Statement acceptable in form and
substance to the Agent in its sole discretion for each New Mortgaged
Property, dated as of a recent date;
(x) Intentionally omitted;
(xi) such consents or acknowledgements from such Persons as the
Agent or its counsel may reasonably determine to be necessary;
(xii) such other documents and instruments as the Agent or the
Lenders may deem reasonably necessary or appropriate as a condition to
its granting of the Borrower's request to add New Mortgaged Properties
to the Collateral; and
(xiii) (1) The Agent shall have received payment of all costs and
expenses (other than the legal fees described in the following clause
(2) of this subparagraph) incurred by Agent in connection with
reviewing and evaluating the items furnished and the actions
purporting to satisfy the conditions and requirements to be satisfied
pursuant to this Section 3.3, and (2) receipt of any of the documents
or instruments described in this Section 3.3 shall constitute
Borrower's agreement and covenant to pay to the Agent, promptly upon
demand (together with a reasonably detailed invoice(s) in respect
thereof), all reasonable legal fees and expenses incurred in
connection with preparing and/or reviewing all documents relating to,
and rendering at the request of rendering at the request of Agent all
advice respecting, such items, actions, conditions and requirements.
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(b) Subsidiary-Owned New Mortgaged Properties. With respect to
each Mortgaged Property any portion of or interest in which is owned by any
Subsidiary Mortgagor, the Agent shall have received the following in form and
substance satisfactory to the Agent: (x) a guaranty of the Indebtedness
hereunder in the form of Exhibit K attached hereto from such Subsidiary
Mortgagor (the "Subsidiary Mortgagor Guaranty"), (y) all of the documents and
instruments described in Section 3.3(a) hereof, and (z) the documents and
instruments described in Section 3.1(a)(i) with respect to the authority,
execution and delivery of documents and instruments by, and the performance of
the obligations thereunder by, such Subsidiary Mortgagor, and the documents and
instruments described in Section 3.1(a)(viii). For purposes of this Section
3.3(b) (and for no other purpose), all references to "Borrower" in Sections
3.1(a)(i), 3.1(a)(viii) and 3.3(a) (and in the definitions and other provisions
referred to in such Sections) shall be deemed to include such Subsidiary
Mortgagor.
(c) Unrecorded Mortgages of Subsidiary Mortgagor. Subject to and
in accordance with the terms of this Section 3.3(c), the Mortgage with respect
to any Mortgaged Property may remain unrecorded provided that all of the
following conditions are satisfied: (i) the mortgage recording tax that would be
payable by the mortgagor under such Mortgage with the jurisdiction in which such
Mortgaged Property is located as a condition precedent to the recordation in
such jurisdiction of such Mortgage, shall exceed 1.0% of the Eligible Costs with
respect to such Mortgaged Property, (ii) such Mortgaged Property is owned by a
Subsidiary Mortgagor that is and shall remain a single-purpose entity which,
among other things, (A) has the ability and capacity as determined in the sole
discretion of the Agent to pay the mortgage recording tax, (B) does not and
shall not engage in any business other than owning and operating such Mortgaged
Property, or acquire or own assets other than such Mortgaged Property and
incidental personal property without the prior written consent of the Agent,
which consent may be withheld for any reason or no reason, (C) has no debt as of
the date hereof and shall not incur or create any debt except such debt agreed
to in advance by the Agent in writing, (D) maintains its assets in a way which
segregates and identifies such assets separate and apart from the assets of any
other person or entity, (E) holds itself out to the public as a separate legal
entity from any other person or entity, and (F) conducts business solely in its
own name, (iii) the entire stock, partnership, membership and other ownership
interests and privileges in such Subsidiary Mortgagor and any other property
owned by such Subsidiary Mortgagor under clause (ii)(B) above are assigned and
pledged to the Lenders pursuant to a Pledge and Security Agreement in the form
of Exhibit P and appropriate Financing Statements are filed evidencing the
collateral under the Pledge and Security Agreement , (iv) the jurisdiction in
which such Mortgaged Property is located permits the immediate recordation of
such Mortgage at no cost or expense to the Agent or the Lenders other than
payment of such mortgage recording tax and nominal recording charges, (v) the
Borrower provides written evidence, accompanying the Initial Budget with respect
to such Mortgaged Property, satisfactory to the Agent that the conditions set
forth in clauses (i), (ii) and (iv) above are satisfied, (vi) the Agent shall
have received an opinion of counsel to the Borrower addressed to the Agent and
the Lenders as set forth in Exhibits F and F-1 in form and substance reasonably
acceptable to the Agent, (vii) the Agent shall have received payment of all
costs and expenses (other than the legal fees described in the following
subclause of this clause (vii)) incurred by Agent in connection with reviewing
and evaluating the items furnished and the actions purporting to satisfy the
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conditions and requirements to be satisfied pursuant to this Section 3.3(c), and
receipt of a Notice of Borrowing for the first Advance with respect to such
Mortgaged Property shall constitute Borrower's agreement and covenant to pay to
the Agent, promptly upon demand (together with a reasonably detailed invoice(s)
in respect thereof), all reasonable legal fees and expenses incurred in
connection with preparing and/or reviewing all documents relating to, and
rendering at the request of Agent all advice respecting, such items, actions,
conditions and requirements, (viii) all of the conditions set forth in Section
3.3(b) shall have been satisfied with respect to such Mortgaged Property (other
than the condition that such Mortgage be recorded and evidence thereof delivered
to the Agent), (ix) the Agent consents to such Mortgage not being recorded, and
(x) the form and substance of all of the foregoing evidence, opinion letters and
other documents are satisfactory to the Agent in all respects. Failure for any
reason of any of the foregoing conditions to be satisfied prior to or
contemporaneously with the giving of the Notice of Borrowing for the first
Advance, or with regard to clauses (vi), (vii) and (ix) above, by the date of
the first Advance, with respect to such Mortgaged Property shall constitute an
irrevocable waiver by Borrower of its right to request that such Mortgage not be
recorded. Notwithstanding anything to the contrary, the Borrower irrevocably
agrees that each and every unrecorded Mortgage may be recorded at any time (A)
immediately upon an Event of Default described in Section 6.1(a), (B) for any
insubstantial, immaterial, technical Default in the Agent's reasonable
discretion, at the earlier of ninety (90) days following such Default (unless
such Default has been cured) or immediately upon an Event of Default, and (C)
for any Default not covered in either (A) or (B) above, immediately, after such
Default (unless such Default has been cured) or after the Agent, in its sole
discretion, reasonably believes that a Default is likely to occur. Borrower
shall pay upon demand all mortgage recording taxes, charges, fees, cost and
expenses incurred by the Agent or any of the Lenders in connection with such
recordation.
Section 3.4 Additional Conditions Relating to Unsecured Advances. Subject
to and in accordance with the terms of this Section 3.4, Borrower may elect to
receive certain Advances without satisfying the conditions set forth in Section
3.2(g) with respect to such Advance. All such Advances made hereunder which do
not satisfy the conditions set forth in Section 3.2(g) are referred to in this
Agreement as "Unsecured Advances". No Unsecured Advance shall be made unless all
of the conditions and requirements set forth in Article III (other than the
conditions set forth in Section 3.2(g)) and all of the other provisions of this
Agreement and the other Loan Documents to be satisfied as a condition to any
Advance shall be satisfied as a condition to the making of any Unsecured Advance
(including, without limitation, that the aggregate principal amount of all
outstanding Unsecured Advances shall not exceed $30,000,000). Notwithstanding
anything to the contrary, no Unsecured Advance shall be made after September 30,
1998. The Borrower shall repay to the Agent, for the account of the Lenders, the
unpaid principal amount of all Unsecured Advances, together with all accrued and
unpaid interest thereon, on September 30, 1998, unless, on or before such date,
(i) the conditions set forth in Section 3.2(g) with respect to any Unsecured
Advances not so repaid are satisfied, and (ii) as of the date on which the
conditions set forth in Section 3.2(g) with respect to any Unsecured Advances
not so repaid are satisfied, all of the other conditions and requirements set
forth in Article III and all of the other provisions of this Agreement and the
other Loan Documents to be satisfied as a condition to any Advance shall be
satisfied.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants the following as of the date hereof and,
except with respect to the representations and warranties expressly provided
herein as being made only as of the Closing Date, further represents and
warrants on the date of each Advance:
Section 4.1 Corporate Existence. Borrower is duly organized and validly
existing under the laws of the jurisdiction of its incorporation. In addition,
Borrower is in good standing under the laws of the jurisdiction of its
incorporation, is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction where it owns property or where the
conduct of its business or the ownership of its property or assets (including,
without limitation, the Mortgaged Properties) requires such qualification
(unless the failure to be so qualified or in good standing would not constitute
a Material Adverse Change), and has all corporate powers and all governmental
licenses, authorizations, consents, and approvals required to carry on its
business as is now or is proposed to be conducted (unless the failure to have
same would not constitute a Material Adverse Change).
Section 4.2 Authorization of Agreement; No Violation. The execution,
delivery, and performance by Borrower of this Agreement and of the Loan
Documents (i) are within the Borrower's powers, (ii) have been duly authorized
by all necessary action, and (iii) do not violate or create a default under any
Requirement of Law, the Borrower's Certificate of Incorporation and By-Laws or
any Contractual Obligation binding on or affecting the Borrower or its property
(other than any violation or default that would not constitute a Material
Adverse Change).
Section 4.3 Governmental Approvals. No authorization or approval or other
action by, and no notice to or filing or registration with, any Governmental
Authority is required in connection with the execution, delivery, and
performance by Borrower of this Agreement or the other Loan Documents (unless
the failure to have obtained or made same would not constitute a Material
Adverse Change).
Section 4.4 Binding Effect. This Agreement and the other Loan Documents
have each been duly executed by Borrower and each constitutes a legal, valid,
and binding obligation of Borrower, enforceable against Borrower in accordance
with its terms, except as enforcement thereof may be subject to (i) the effect
of any applicable bankruptcy, insolvency, reorganization, moratorium, or similar
law affecting creditors, rights generally, and (ii) general principles of equity
(regardless of whether such enforcement is sought in a proceeding in equity or
at law).
Section 4.5 Financial Information and No Material Adverse Change.
(a) Each of the financial statements delivered pursuant to
Sections 3.1(a)(v) and 3.1(a)(vi) were prepared in accordance with GAAP and
fairly present the financial condition and results of operation of the Persons
and/or properties covered thereby on the dates and for the periods covered
thereby, except as disclosed in the notes thereto and, with respect to normally
recurring year-end adjustments. As of the date hereof Borrower does not have any
material liability, absolute or contingent, not reflected in such financial
statements, the notes thereto or Schedule 2 hereof.
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(b) Since December 31, 1997, there has been no Material
Adverse Change.
Section 4.6 Litigation. There is no action, suit, or proceeding, or any
governmental investigation or any arbitration, in each case pending or, to the
knowledge of the Borrower, threatened against Borrower, or any property of the
Borrower before any court or arbitrator or any governmental or administrative
body, agency, or official (i) which challenges the validity of this Agreement or
any of the other Loan Documents or (ii) which, as reasonably likely to be
determined, and taking into account any insurance with respect thereto, would
constitute a Material Adverse Change.
Section 4.7 Compliance with Law. The Borrower is in compliance with all
Requirements of Law, the Borrower's Certificate of Incorporation and By-Laws and
all Contractual Obligations binding on or affecting it or any of its properties
(other than where the failure to so comply would not constitute a Material
Adverse Change). The execution and delivery by Borrower of this Agreement, the
Promissory Notes and the Loan Documents do not, and the performance by Borrower
of this Agreement, the Promissory Notes and each of the Loan Documents will not,
(a) violate any Requirement of Law, (b) violate or contravene any provision of
the Borrower's Certifi cate of Incorporation and By-Laws, or any law, rule,
regulation, order, writ, judgment, decree, determination or award applicable to
the Borrower, (c) violate, contravene or result in a breach of or constitute a
default under any Contractual Obligation, or (d) result in, or require the
creation or imposition of, any Lien upon or with respect to any of its property
or assets (including, without limitation, the Mortgaged Properties) other than
the Liens created by the Loan Documents (other than, in any such case, where
such violation, contravention, default or result would not constitute a Material
Adverse Change).
Section 4.8 Labor Matters.
(a) There are no strikes, work stoppages, slowdowns or lockouts
pending, or reasonably likely to occur in the immediate future, against or
involving the Borrower or any of its Subsidiaries, other than those which in the
aggregate would not constitute or result in a Material Adverse Change.
(b) There are no arbitrations or grievances pending against or
involving the Borrower or any of its Subsidiaries, nor, to the best knowledge of
Borrower, are there any arbitrations or grievances threatened involving the
Borrower or any of its Subsidiaries, other than those which in the aggregate
would not constitute or result in a Material Adverse Change.
(c) Neither the Borrower nor any of its Subsidiaries are parties
to, or have any obligations under, any collective bargaining agreement, other
than collective bargaining agreement(s) copies of which (certified by the
Borrower as being true, correct and complete) have been furnished to the Agent.
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(d) There are no representation proceedings pending, or, to the
best knowledge of the Borrower, threatened with the National Labor Relations
Board, and no labor organization or group of employees of the Borrower or any of
its Subsidiaries have made a pending demand for recognition, other than those
which in the aggregate would not constitute or result in a Material Adverse
Change.
(e) There are no unfair labor practice charges, grievances or
complaints pending or in process or, to the best knowledge of Borrower,
threatened by or on behalf of any employee or group of employees of the Borrower
or any of its Subsidiaries other than those which in the aggregate would not
constitute or result in a Material Adverse Change.
(f) There are no complaints or charges against the Borrower or
any of its Subsidiaries pending or, to the best knowledge of Borrower,
threatened to be filed with any Governmental Authority or arbitrator based on,
arising out of, in connection with, or otherwise relating to the employment by
the Borrower or any of its Subsidiaries of any individual, other than those
which in the aggregate would not constitute or result in a Material Adverse
Change.
(g) The Borrower and each of its Subsidiaries is in compliance
with all laws, and all orders of any court, governmental agency or arbitrator,
relating to the employment of labor, including all such laws relating to wages,
hours, collective bargaining, discrimination, civil rights, and the payment of
withholding and/or social security and similar taxes, other than such non
compliances as in the aggregate would not constitute or result in a Material
Adverse Change.
Section 4.9 ERISA. As of the date of this Agreement and throughout the term
of this Agreement, (i) the Borrower is not and will not be an "employee benefit
plan" as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA,
(ii) the assets of the Borrower do not and will not constitute "plan assets" of
one or more such plans within the meaning of 29 C.F.R. ss. 2510.3-101 and (iii)
the Borrower is not and will not be a "government plan" within the meaning of
Section 3(32) of ERISA.
Section 4.10 No Default. The Borrower is not in default under, or with
respect to, any of its Contractual Obligations in any respect which could
reasonably be expected to result in a Material Adverse Change and no Default or
Event of Default has occurred and is continuing.
Section 4.11 Improvements. Subject to the provisions of Section 5.5 hereof:
(a) Except for portions of the Mortgaged Property under
construction or which are to be demolished in the course of construction, all of
the improvements located on the Mortgaged Properties and the use of such
improvements are covered by existing valid certificates of occupancy and all
other certificates and permits required by applicable laws, rules, regulations,
and ordinances or in connection with the use, occupancy, and operation thereof.
(b) No material portion of any of the Mortgaged Properties, nor
any improvements located on such Mortgaged Properties that are material to the
operation, use, or value thereof, have been damaged in any respect as a result
of any fire, explosion, accident, flood, or other casualty, except to the extent
that the same have been or will with due diligence and in compliance with this
Agreement and all of the other Loan Documents be restored to their condition
prior thereto.
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(c) No written notices of violation of any federal, state, or
local law or ordinance or order or requirement have been received with respect
to any Mortgaged Properties.
Section 4.12 Intellectual Property. Borrower owns, or is licensed to use,
all trademarks, trade names, copyrights, technology, know-how, and processes
necessary for the conduct of its business as currently conducted (the
"Intellectual Property") except for those the failure to own or license which
could not reasonably be expected to have a Material Adverse Change. No claim has
been asserted and is pending by any Person challenging or questioning the use of
any such Intellectual Property or the validity or effectiveness of any such
Intellectual Property, nor does the Borrower know of any valid basis for any
such claim (other than claims which would not constitute a Material Adverse
Change). The use of such Intellectual Property by the Borrower does not infringe
on the rights of any Person, except for such claims and infringements that, in
the aggregate, could not reasonably be expected to have a Material Adverse
Change.
Section 4.13 Unrecorded Mortgages. Each Subsidiary Mortgagor which owns a
Mortgaged Property for which the Mortgage encumbering such Mortgaged Property
remains unrecorded pursuant to Section 3.3(c) is and shall remain a
single-purpose entity which, among other things, (i) has the ability and
capacity to pay the mortgage recording tax, (B) does not engage and has not
engaged in any business other than owning and operating such Mortgaged Property,
and has not acquired and does not own any assets other than such Mortgaged
Property, any incidental personal property, or such other property which has
been acquired without the prior written consent of the Agent, (C) has incurred
no debt as of the date hereof and shall not incur or create any debt except such
debt agreed to in advance by the Agent in writing, (D) maintains its assets in a
way which segregates and identifies such assets separate and apart from the
assets of any other person or entity, (E) holds itself out to the public as a
separate legal entity from any other person or entity, and (F) conducts business
solely in its own name.
Section 4.14 Taxes. Borrower has filed or caused to be filed all tax
returns that, to the knowledge of Borrower, are required to be filed and has
paid all taxes shown to be due and payable on such returns or on any assessments
made against it or any of its property and all other taxes, fees, or other
charges now due and payable imposed on it or any of its property by any
Governmental Authority (other than any the amount or validity of which are
currently being contested in good faith by appropriate proceedings and with
respect to which adequate reserves in conformity with GAAP have been provided on
the books of Borrower). No tax Lien has been filed which could constitute a Lien
senior in priority to the Lien of any of the Mortgages or Financing Statements
and which has not been (or will not be) removed or discharged of record within
10 days after Borrower's notice of such Lien (or the taxes to which such Lien
relates are being contested in good faith by appropriate proceedings which have
the effect of staying enforcement or execution of such Lien and with respect to
which adequate reserves in conformity with GAAP have been provided on the books
of Borrower).
Section 4.15 Investment Company Act; Other Regulations. Borrower is not an
"investment company," or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended. Borrower
is not subject to regulation under any Federal or state statute or regulation
which limits its ability to incur Indebtedness.
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Section 4.16 Intentionally omitted.
Section 4.17 Insurance. Subject in all events to the provisions of Section
5.5 hereof, notwithstanding anything to the contrary contained in the Mortgages
and subject to Section 4.17(b), the Borrower maintains upon or in connection
with each of the Mortgaged Properties:
(a) Property and casualty insurance coverage evidenced by
original or certified copies of insurance policies or binders for such
insurance, together with evidence that the premiums for such policies have been
paid current. Such insurance policies shall insure each of the Mortgaged
Properties for 100% of their full replacement cost (exclusive of footings and
foundations) in so-called "all risk" form and with coverage for floods,
earthquakes (except as provided in Section 4.17(b)) and such other hazards
(including "collapse" and "explosion") as the Lenders may require for each of
the Mortgaged Properties and as are consistent with reasonable and customary
requirements in the industry. Such insurance policies shall contain replacement
cost and agreed amount endorsements (with no reduction for depreciation), an
endorsement providing Building Ordinance Coverage and an endorsement covering
the costs of demolition and increased costs of construction due to the
enforcement of building codes or ordinances. To the extent there exists a boiler
on the premises of any of the Mortgaged Properties, Borrower shall also furnish
insurance providing boiler and machinery comprehensive coverage for all
mechanical and electrical equipment at each of such Mortgaged Properties
insuring against breakdown or explosion of such equipment on a replacement cost
value basis. Borrower shall also furnish business interruption or loss of rental
income insurance in connection with all policies covering property and boiler
and machinery insurance for a period of not less than one (1) year endorsed,
other than with respect to boiler and machinery insurance, to provide a 180 day
extended period of indemnity. All insurance required under Section 4.17 shall be
with companies and in amounts and with coverage and deductibles satisfactory to
the Lenders. All insurance required under this Section 4.17(a) with respect to
the Mortgaged Properties shall include endorsements naming the Lenders as loss
payees, and shall have endorsed thereon the standard mortgagee clause in favor
of the Lenders. All companies issuing policies required under Section 4.17 shall
have a current Best Insurance Reports rating no less favorable than "A-", and
all such companies shall be licensed to do business in the states where the
applicable Mortgaged Property is located. All policies required under Section
4.17 shall provide that (i) the insurance evidenced thereby shall not be
canceled or modified without, in the case of non-payment of premiums, at least
ten (10) days' prior written notice from the insurance carrier to the Agent, or,
in any other circumstance, at least thirty (30) days' prior written notice from
the insurance carrier to the Agent; and (ii) no act or thing done by the
Borrower, or any Affiliate of any of Borrower shall invalidate the policy as
against the Lenders. The Borrower shall deliver renewal certificates of all
policies of insurance required under Section 4.17, together with written
evidence that the premiums are paid current, at least ten (10) days prior to the
expiration of the then current policy.
(b) earthquake insurance provided for in Section 4.17(a)
only for the Mortgaged Properties and only to the extent (i) any Mortgaged
Property is located in an earthquake prone area and (ii) such insurance is
available at commercially reasonable rates.
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(c) Liability and worker's compensation insurance evidenced by
original or certified copies of insurance policies, binders for such insurance
policies, or certificates of insurance, together with evidence that the premiums
for such policies have been paid current. Such insurance shall provide for (i)
commercial general liability (including contractual liability) covering each of
the Mortgaged Properties and the Borrower's operations thereon in an amount not
less than $1,000,000 per occurrence and not less than $1,000,000 per occurrence
in the aggregate; (ii) commercial automobile liability with a limit not less
than $1,000,000 combined single limit and be endorsed to cover owned, hired and
non-owned automobiles; and (iii) worker's compensation insurance covering all of
the Borrower's employees and contracted parties (including their employees)
situated at the Mortgaged Properties in accordance with the statutory
requirements of the states where the applicable Mortgaged Property is located
and including an endorsement for employer's liability coverage. The Borrower
shall also furnish umbrella liability coverage in excess of the foregoing
liability coverage with a limit of not less than $9,000,000. The commercial
general liability and automobile policies and umbrella liability policy shall
name the Lenders as additional insureds. Such policies shall also contain a
so-called "products-completed operations endorsement."
(d) Insurance insuring against loss or damage by perils
customarily included under standard "builder's risk completed value
non-reporting form" and which include all insurance required to be carried by
Borrower, as "owner," under the provisions of all construction contracts let by
Borrower; provided that such insurance shall insure all construction on all of
the Mortgaged Properties, including, without limitation, the construction of an
extended stay facility and such ancillary facilities related thereto on each
Mortgaged Property, including all materials in storage and while in transit
during construction.
Section 4.18 Properties. Subject to the provisions of Section 5.5 hereof:
(a) Borrower and/or each Subsidiary Mortgagor has good and
marketable title to all of the Mortgaged Properties, subject to no mortgage,
security interest, pledge, lien, charge, encumbrance or title retention or other
security agreement or arrangement of any nature whatsoever, except Permitted
Encumbrances. Borrower shall, and shall cause each Subsidiary Mortgagor to,
forever warrant and defend the title of their respective Mortgaged Properties
against the lawful claims and demands of all persons whomsoever subject to the
Permitted Encumbrances.
(b) There are no pending or, to the best knowledge of Borrower,
threatened proceedings or actions to revoke, attack, invalidate, rescind, or
modify in any material respect (i) the zoning of any Mortgaged Property or any
part thereof, or (ii) any building or other permits heretofore issued with
respect to any Mortgaged Property or any part thereof, or asserting that any
such zoning or permits do not permit the operation of any Mortgaged Property or
any part thereof or that any improvements located on such Mortgaged Property
cannot be operated in accordance with its intended use or is in violation of
applicable Use Requirements.
(c) The Mortgage covering each such Mortgaged Property
creates a valid and, except for unrecorded Mortgages, enforceable first Lien, on
such property described therein, as security for the repayment of the
Indebtedness incurred by the Borrower hereunder and under the other Loan
Documents, subject only to the Permitted Encumbrances applicable to such
property.
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(d) The Collateral is now, and so long as the Commitment remains
in effect or any monetary obligation to the Agent or the Lenders hereunder or
under the Promissory Notes or the other Loan Documents shall remain unpaid, will
be owned solely by the Borrower, and said Collateral, including the proceeds
resulting from the sale or other disposition (other than Permitted Transfers of
the Mortgaged Property) thereof, is and will remain free and clear of any Liens
except the Liens granted pursuant to the Loan Documents to the Agent and the
Lenders, which Liens to the Agent and the Lenders shall, at all times, be first
and prior on the Collateral and all proceeds resulting from the sale or other
disposition thereof, and no further action need be taken to perfect said Liens.
(e) Neither the existence of any improvements upon a Mortgaged
Property nor the intended use or condition of any Mortgaged Property violates in
any material respect any Use Requirements. With respect to each Mortgaged
Property, neither the zoning nor any other right to carry on the use of such
Mortgaged Property as an extended stay facility, including such ancillary
facilities related thereto, is to any extent dependent upon or related to any
other real estate. Each Mortgaged Property may be operated as an extended stay
facility with such ancillary facilities related thereto and the Borrower has
received no written notices from any Governmental Authorities alleging any
violation by any Mortgaged Property of any Requirement of Law, including but not
limited to applicable Use Requirements.
(f) There are no pending or, to the knowledge of the Borrower,
threatened proceedings relating to any (i) taking by eminent domain or other
condemnation of any portion of any Mortgaged Property, (ii) condemnation or
relocation of any roadways abutting any Mortgaged Property and (iii) denial of
access to any Mortgaged Property from any point of access to such Mortgaged
Property, in any such case not accounted for in the Plans and Specifications.
(g) Each Mortgaged Property has adequate and permanent legal
access to water, gas, and electrical supply, storm, and sanitary sewerage
facilities, other required public utilities (with respect to each of the
aforementioned items by means of either a direct connection to the source of
such utilities or through connections available on publicly dedicated roadways
directly abutting such Mortgaged Property), and means of access between such
Mortgaged Property and public highways over recognized curb cuts, and all of the
foregoing comply with all applicable Use Requirements.
(h) Each Mortgaged Property constitutes a legally subdivided lot
under all applicable Use Requirements (or, if not subdivided, no subdivision or
platting of such Mortgaged Property is required under applicable Requirements of
Law), and for all material purposes each Mortgaged Property may be mortgaged,
conveyed, and otherwise dealt with as an independent parcel.
Section 4.19 Full and Accurate Disclosure. No statement of fact made by or
on behalf of the Borrower in this Agreement or in any of the other Loan
Documents (other than any Loan Documents to which neither the Borrower nor any
Affiliate is a party), or any certificate or financial statement furnished by
the Borrower to the Agent when made or deemed made or the date as of which such
certificate or statement speaks or is deemed to speak, as the case may be,
contains any untrue statement of a material fact or, to the best of Borrower's
knowledge, omits to state any material fact necessary to make statements
contained herein or therein not misleading.
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Section 4.20 Solvency. Within the meaning of Section 548 of the Bankruptcy
Code, the Uniform Fraudulent Transfer Act and the Uniform Fraudulent Conveyance
Act as in effect in any relevant jurisdiction, and any similar laws or statutes,
and after giving effect to the transactions contemplated hereby: the fair
saleable value of the Borrower's assets exceeds and will, immediately following
the making of the Advances, exceed the Borrower's total liabilities including,
without limitation, subordinated, unliquidated, disputed, and contingent
liabilities; the fair saleable value of the Borrower's assets is and will,
immediately following the making of each Advance, be greater than the Borrower's
probable liabilities, including the maximum amount of its contingent liabilities
on its debts as such debts become absolute and matured; the Borrower's assets do
not and, immediately following the making of the Advances will not, constitute
unreasonably small capital to carry out its business as conducted or as proposed
to be conducted; and the Borrower does not intend to, and does not believe that
it will, incur debts and liabilities (including without limitation contingent
liabilities and other commitments) beyond its ability to pay such debts as they
mature (taking into account the timing and amounts of cash to be received by the
Borrower and the amounts to be payable on or in respect of obligations of the
Borrower).
Section 4.21 Not Foreign Person. The Borrower is not a "foreign person"
within the meaning of Section 1445(f)(3) of the Code.
Section 4.22 Assessments. Subject to the provisions of Section 5.5 hereof,
except as set forth in the Budget with respect to the applicable Mortgaged
Property, there are no pending or, to the Borrower's knowledge, proposed special
or other assessments for public improvements or otherwise affecting any
Mortgaged Property, nor, to the Borrower's knowledge, are there any contemplated
improvements to any Mortgaged Property that may result in such special or other
assessments.
Section 4.23 Flood Zone. Except as disclosed by a survey delivered pursuant
to Section 3.3(a)(iii), no Mortgaged Property is located in a flood hazard area
as defined by the Federal Emergency Management Agency.
Section 4.24 Physical Condition. Subject to the provisions of Section 5.5
hereof, except for portions of any Mortgaged Property which are to be demolished
in the course of construction of an extended stay facility and such related
ancillary facilities thereon, each Mortgaged Property is free of material
structural defects and all building systems contained therein are in good
working order subject to ordinary wear and tear.
Section 4.25 Operation of Premises. Subject to the provisions of Section
5.5 hereof, except for portions of any Mortgaged Property which are to be
demolished in the course of construction of an extended stay facility and such
related ancillary facilities thereon, each Mortgaged Property is being operated
and maintained in accordance with the Borrower's usual and customary business
practices.
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Section 4.26 Margin Regulations. The Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying any
margin stock or margin securities (within the meaning of Regulations G, T, U and
X issued by the Board of Governors of the Federal Reserve System), and no
proceeds of any Advance will be used, directly or indirectly, to purchase or
carry any margin stock or margin securities or to extend credit to others for
the purpose of purchasing or carrying any margin stock or margin securities.
None of the transactions contemplated by this Agreement will violate or result
in a violation of Section 7 of the Securities Exchange Act of 1934, as amended.
Section 4.27 Hazardous Materials. Subject to the provisions of Section 5.5
hereof, except as disclosed in the Studies, to the best of the Borrower's
knowledge, no Hazardous Materials are located on or about the Mortgaged
Properties, and the Mortgaged Properties do not contain any underground tanks
for the storage or disposal of Hazardous Materials. Further, subject to the
provisions of Section 5.5 hereof, except as disclosed in the Studies, (i) the
Borrower has not, and to the knowledge of the Borrower no other party has, (A)
stored or treated Hazardous Materials on the Mortgaged Properties, (B) disposed
of Hazardous Materials or incorporated Hazardous Materials on the Mortgaged
Properties, and (C) permitted any underground storage tanks to exist on the
Mortgaged Properties, (ii) no complaint, order, citation or notice with regard
to air emissions, water discharges, noise emissions, or Hazardous Materials, if
any, or any other environmental, health, or safety matters affecting the
Mortgaged Properties or any portion thereof, from any person, government or
entity, has been issued to the Borrower which has not been remedied or cured,
and (iii) the Borrower has complied with all Requirements of Law affecting the
Mortgaged Properties.
Section 4.28 Representations and Warranties in the Loan Documents. Subject
to the provisions of Section 5.5 hereof, the representations and warranties in
each of the Loan Documents (except with respect to the representations and
warranties expressly provided as being made only as of the Closing Date) are
true, complete and correct in all material respects, and the Borrower hereby
confirms each such representation and warranty as being true, complete and
correct in all material respects as of the relevant dates with the same effect
as if set forth in its entirety herein.
Section 4.29 Loan Documents. The provisions of the Loan Documents are each
effective to create, in favor of the Agent, a legal, valid and enforceable Lien
on or security interest in all of the collateral described therein, and when the
appropriate recordings and filings have been effected in the appropriate public
offices (or, in the case of collateral represented by certificates, when such
certificates have been pledged to and received by the Agent), the Loan Documents
will constitute a perfected first Lien on and security interest in all right,
title, estate and interest of the Borrower in the collateral described therein,
prior and superior to all other Liens except for Permitted Encumbrances and as
otherwise permitted under this Agreement.
Section 4.30 Balloon Payments. Except as reflected on Schedule 2 hereof, as
of the Closing Date, there are no balloon payments, scheduled balloon amortizing
payments or scheduled amortizing payments required to be paid at any time in
respect of any Indebtedness (other than Permissible Assumed Indebtedness) of the
Borrower or its Subsidiaries.
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Section 4.31 Subsidiary Mortgagors. Each Subsidiary Mortgagor is a
Subsidiary of Borrower.
Section 4.32 Nature of Business. Neither the Borrower nor any Subsidiary
Mortgagor is engaged in any business other than the ownership, construction,
development, operation and management of extended stay facilities (other than
businesses incidental to the development, operation and management of extended
stay facilities).
ARTICLE V
COVENANTS
Section 5.1 Certain Affirmative Covenants. So long as the Commitment
remains in effect or any amounts due to the Agent or the Lenders hereunder or
under the Promissory Notes or the other Loan Documents shall remain unpaid, the
Borrower will, and, to the extent any of the following relates to a Mortgaged
Property any portion of or interest in which is owned by any Subsidiary
Mortgagor, the Borrower will cause each such Subsidiary Mortgagor, with respect
to such Mortgaged Property, to (unless expressly waived by the Agent or the
Lenders as provided herein):
(a) Payment. Duly and punctually pay or reimburse when due or,
if there is no specified due date, when demanded, the principal and interest on
the Promissory Notes and all other amounts due under this Agreement and the
other Loan Documents.
(b) Existence, Etc. (i) Preserve and maintain its existence in
Maryland, and (ii) preserve and maintain its rights and franchises in each state
in which there exists a Mortgaged Property (unless the failure to so preserve
and maintain its rights and franchises would not constitute a Material Adverse
Change).
(c) Compliance With Laws, Etc. Subject to the provisions of
Section 5.5 hereof, comply with all applicable Requirements of Law, Use
Requirements and all agreements and grants of easements or rights-of-way,
permits, declarations of covenants, conditions and restrictions, disposition and
development agreements, planned unit development agreements, management or
parking agreements, party wall agreements or other instruments affecting the
Mortgaged Properties.
(d) Payment of Taxes and Claims, Etc. Pay (i) all taxes,
assessments and governmental charges imposed upon it or upon its property (other
than the Mortgaged Property), unless the failure to so pay would not constitute
or result in a Material Adverse Change, (ii) subject to the provisions of
Section 5.5 hereof and subparagraph (iii) of this Section, all taxes,
assessments and governmental charges imposed upon the Mortgaged Properties, and
all claims (including, without limitation, claims for labor, materials,
supplies, or services) which might, if unpaid, become a Lien upon the Mortgaged
Properties or any of them unless, in each case, the validity or amount thereof
is being contested in good faith by appropriate proceedings and the Borrower has
maintained adequate reserves with respect thereto, and (iii) all taxes,
assessments and governmental charges imposed upon the Mortgaged Properties which
would, if unpaid, become a Lien senior in priority to the Lien of any of the
Mortgages within 10 days after Borrower's notice of such Lien (unless the taxes,
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assessments or governmental charges to which such Lien relates are being
contested in good faith by appropriate proceedings which have the effect of
staying enforcement or execution of such Lien and with respect to which adequate
reserves in conformity with GAAP have been provided on the books of Borrower).
(e) Keeping of Books. Keep accurate records and books of account
in which full, accurate and correct entries shall be made of all dealings or
transactions in relation to its business and affairs in accordance with GAAP.
Upon reasonable prior notice and during normal business hours, the Borrower
shall permit representatives of any Lender to visit its offices and inspect,
examine and make abstracts from any of its books and records, and to discuss the
business, operations, and financial and other condition of the Borrower with
officers and employees of the Borrower and with its independent certified public
accountants, if any, in the presence of a representative of the Borrower.
(f) Visitation, Inspection, Etc. Permit any representative of the
Agent or the Lenders to visit and inspect any of the Mortgaged Properties, to
examine its books and records and to make copies and take extracts therefrom,
and to discuss its affairs, finances, and accounts with its officers,
accountants, and agents, all upon reasonable notice from the Agent during normal
business hours.
(g) Maintenance of Property. Keep all Mortgaged Properties in
good working order and condition and operate Mortgaged Properties in a manner
consistent with the operation thereof as an extended stay facility with such
ancillary facilities related thereto and otherwise consistent with prudent
business practices.
(h) Management of Properties. Subject to the provisions of
Section 5.5 hereof, Borrower shall directly or indirectly operate and manage the
business of the Borrower at each of the Mortgaged Properties; provided, however,
that with the prior written consent of the Agent, which consent shall not be
unreasonably withheld, the Borrower may hire another Person to operate and
manage any Mortgaged Property.
(i) Hazardous Materials Removal. Subject to the provisions of
Section 5.5 hereof, abate and/or remove any Hazardous Materials present in, on
or under any of the Mortgaged Properties in violation of any applicable
Requirement of Law.
(j) Covenants in the Loan Documents. Subject to the provisions
of Section 5.5 hereof, perform all covenants (affirmative and negative)
contained in each of the Loan Documents with the same effect as if set forth in
their entirety herein.
(k) Insurance. Subject to the provisions of Section 5.5 hereof,
keep the Mortgaged Properties insured in the manner and in the amounts set forth
in Section 4.17.
(l) Further Assurances. The Borrower agrees upon demand of the
Agent (i) to do any act or execute any additional documents (including, but not
limited to, security agreements on any personalty included or to be included in
the Collateral) as may be reasonably required by the Agent to confirm the Lien
of the Loan Documents or to exercise or enforce its rights under this Agreement,
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the Promissory Notes or the Loan Documents and to realize thereon, and (ii) to
execute and deliver to the Agent and/or the Lenders such additional documents
and to provide such additional information as the Agent and/or the Lenders may
reasonably require to carry out or confirm the terms of this Agreement or the
other Loan Documents. This covenant shall survive the termination of this
Agreement until payment in full of all amounts due hereunder or under the
Promissory Notes and the Loan Documents, provided that the covenant shall be
reinstated if any payment of all amounts due hereunder or under the Promissory
Notes and the Loan Documents is required to be returned to the payor or any
other party under any applicable bankruptcy law.
(m) Application of Proceeds From Equity Offerings. Subject to the
provisions of Section 5.5 hereof, the Borrower shall apply upon receipt (i) all
net proceeds from its equity offerings to repay on a pari passu basis the Loan
and the Indebtedness referred to in Section 5.3(a)(vii) of this Agreement, and
(ii) all other amounts and fees due to the Agent and the Lenders under this
Agreement and the other Loan Documents.
Section 5.2 Reporting Covenants. So long as the Commitment remains in
effect or any monetary obligation to the Agent or the Lenders hereunder or under
the Promissory Notes or the other Loan Documents shall remain unpaid, the
Borrower will furnish to the Agent at the Borrower's sole cost and expense
(unless expressly waived by the Agent or the Lenders as provided herein):
(a) Annual Financial Statements With Respect to the Borrower.
As soon as available and in any event within 90 days after the end of each
fiscal year (unless the filing requirements have been extended by the Securities
and Exchange Commission ("SEC"), in which case the 90-day period shall be
extended until the earlier of the date of filing with the SEC or such extended
date granted by the SEC), a consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such year and the related consolidated statements
of income, retained earnings, and cash flow of the Borrower and its Subsidiaries
for such fiscal year, setting forth in each case in comparative form the figures
for the previous fiscal year, all in reasonable detail and accompanied by a
report thereon of Ernst & Young or other independent public accountants of
comparable recognized national standing acceptable to the Agent, which such
report shall be unqualified as to scope of audit and shall state that such
consolidated financial statements present fairly the consolidated financial
condition as at the end of such fiscal year, and the consolidated results of
operations and changes in cash flow for such fiscal year, of the Borrower and
its Subsidiaries in accordance with GAAP.
(b) Quarterly Financial Statements With Respect to the Borrower.
As soon as available and in any event within 60 days after the end of each
fiscal quarter other than the last fiscal quarter of a fiscal year (unless the
filing requirements have been extended by the SEC in which case the 60-day
period shall be extended until the earlier of the date of filing with the SEC or
such extended date granted by the SEC), a consolidated balance sheet of the
Borrower and its Subsidiaries as at the end of such quarter and the related
consolidated statements of income and cash flow of the Borrower and its
Subsidiaries for such fiscal quarter and/or for the portion of the Borrower's
fiscal year ended at the end of such quarter, setting forth in each case in
comparative form the figures for the corresponding quarter and the corresponding
portion of the Borrower's previous fiscal year, all in reasonable detail and
certified by the Controller or chief financial officer of the Borrower that they
are complete and correct and that they fairly present the consolidated financial
condition as at the end of such fiscal quarter, and the consolidated results of
operations and changes in cash flow for such fiscal quarter and/or such portion
of the Borrower's fiscal year, of the Borrower and its Subsidiaries in
accordance with GAAP (subject to normal, year-end audit adjustments).
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(c) Annual Financial Statements With Respect to Operating
Mortgaged Properties. As soon as available and in any event within 90 days after
the end of each fiscal year of the Borrower or at such time as the financial
statements described in Section 5.2(a) above are furnished to the Agent, a
statement with respect to each of the operating Mortgaged Properties for such
fiscal year, each of which statements shall (i) be in the form of Exhibit L
attached hereto, and contain in comparative form the information required to
complete such Exhibit in the manner and detail contemplated by such Exhibit,
(ii) set forth the Net Operating Income of each such Mortgaged Property in
comparative form, and (iii) be certified by the Controller or chief financial
officer of the Borrower that they are complete and correct and that they fairly
present the information required to complete such Exhibit for each such property
as at the end of such fiscal year, in accordance with GAAP and (iv) state that
such statement presents fairly the information required to complete such Exhibit
for each such property as at the end of such fiscal year, in accordance with
GAAP.
(d) Quarterly Financial Statements With Respect to the Operating
Mortgaged Properties. As soon as available and in any event within 45 days after
the end of each fiscal quarter of the Borrower or at such time as the financial
statements described in Section 5.2(b) are furnished to the Agent, a statement
with respect to each of the operating Mortgaged Properties as at the end of such
quarter, each of which statements shall (i) be in the form of Exhibit L attached
hereto, and contain in comparative form the information required to complete
such Exhibit in the manner and detail contemplated by such Exhibit, (ii) set
forth the Net Operating Income of each such Mortgaged Property in comparative
form, (iii) be certified by the Controller or chief financial officer of the
Borrower that they are complete and correct and that they fairly present the
information required to complete such Exhibit for each such property as at the
end of such fiscal quarter, in accordance with GAAP (subject to normal, year-end
audit adjustments).
(e) No Default/Compliance Certificate. Together with the
financial statements required pursuant to subsections (a), (b), (c) and (d)
above, a certificate of the President, the Controller or the chief financial
officer of the Borrower to the effect that, based upon a review of the
Borrower's activities and such financial statements during the period covered
thereby, there exists no Event of Default and no Default under this Agreement,
or if there exists an Event of Default or a Default hereunder, specifying the
nature thereof and the Borrower's actions taken or proposed to be taken in
response thereto. The President or the chief financial officer or the Controller
of the Borrower shall complete the form of certificate attached as Exhibit D to
this Agreement and shall certify thereon that the Borrower is in compliance with
all financial covenants under this Agreement.
(f) Notice of Default or Events of Default. Promptly after
acquiring knowledge of the occurrence of a Default or an Event of Default, a
certificate of the president or chief financial officer or the Controller of the
Borrower specifying the nature thereof and the Borrower's proposed response
thereto.
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(g) Litigation. Promptly after (i) the occurrence thereof, the
Borrower shall deliver notice of the institution of or any development in any
action, suit, or proceeding or any governmental investigation or any
arbitration, before any court or arbitrator or any governmental or
administrative body, agency, or official, against the Borrower or any Mortgaged
Property in writing, (ii) the Borrower receives actual knowledge thereof, the
Borrower shall deliver notice of the threat of any such action, suit,
proceeding, investigation, or arbitration, or (iii) receipt thereof, the
Borrower shall deliver notice of any claims relating to the Lenders' interests
or any proposal by a Governmental Authority to acquire any part of the Mortgaged
Properties (other than any such proceeding or development which, as reasonably
likely to be determined, would not constitute or result in a Material Adverse
Change).
(h) Adverse Change. Immediately after the Borrowe knows of the
occurrence of any Material Adverse Change, a certificate of any Co-Chairman, the
President, any Senior Vice President, any Vice President or the Controller or
chief financial officer of the Borrower specifying the nature of such change.
(i) Shareholder Communications, Filings, Etc. Promptly upon the
mailing or filing thereof, the Borrower shall deliver copies of all financial
statements, reports, and proxy statements mailed to the Borrower's shareholders
generally, and copies of all final registration statements and other final
documents filed with the Securities and Exchange Commission (or any successor
thereto) or any national securities exchange.
(j) Intentionally omitted.
(k) Other Information. With reasonable promptness, such other
information about the Borrower, Realty and the Mortgaged Properties as the Agent
or the Lenders may reasonably request from time to time.
Section 5.3 Certain Negative Covenants. So long as any portion of the
Commitment remains in effect or any monetary obligations to the Agent or the
Lenders hereunder or under the Promissory Notes or the other Loan Documents
shall remain unpaid, the Borrower will not:
(a) Indebtedness. Create, incur, assume, or suffer to exist,
any Indebtedness other than:
(i) the Indebtedness hereunder and under the other Loan
Documents; and
(ii) Indebtedness outstanding on the date hereof which is
reflected in the Borrower's financial statements referred to in
Section 4.5(a) and in Schedule 2;
(iii) unsecured liabilities (not the result of borrowing)
incurred in the ordinary course of business for current purposes and
not represented by any note or other evidence of Indebtedness and
which are not past due more than 90 days;
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(iv) non-recourse Indebtedness ("Permissible Assumed
Indebtedness");
(v) liability to a surety under performance bonds or similar
instruments incurred in connection with the Borrower's construction of
extended stay facilities on the Borrower's property;
(vi) Indebtedness due and payable solely to a Subsidiary of
Borrower; and
(vii) Indebtedness under that certain Credit Agreement dated as
of May 6, 1997, as amended, between Borrower, Agent and one or more
lenders with regard to a revolving credit facility of up to an
aggregate principal amount of $150,000,000.00.
(b) Total Debt. Permit there to be aggregate Indebtedness of the
Borrower of more than an amount equal to fifty-five percent (55%) of Gross Asset
Value, or permit there to be aggregate Indebtedness of the Borrower which is
secured by a Lien of more than an amount equal to fifty percent (50%) of Gross
Asset Value.
(c) Debt Service Ratios. Maintain a ratio of EBITDA to Debt
Service on a quarterly basis (i) for the first calendar quarter of 1998 of less
than 1.1:1.0, (ii) for the second calender quarter of 1998 of less than
1.25:1.0, and (iii) of less than 1.75:1.0 after the second calender quarter of
1998.
(d) Available Amount. Permit the aggregate principal amount of
all outstanding Advances at any time to exceed the lesser of (i) the Commitment,
and (ii) the Maximum Availability Amount at such time.
(e) Dividends. Make any dividend or distribution to the share-
holders of Borrower, without the prior written consent of the Agent, which
consent may be withheld in the Agent's sole discretion.
(f) Stockholders Equity. Permit Stockholders' Equity to be less
than $325,000,000.00.
(g) Sales, Transfers. Sell, transfer or enter into any agreement
for the sale or transfer, except for operating leases, of any of the Mortgaged
Properties without the prior written consent of the Agent, which consent may be
withheld in the Agent's sole discretion, other than a sale or transfer or an
agreement for the sale or transfer of a Release Parcel with respect to which all
conditions and requirements to the Release thereof pursuant to Section 8.11
hereof are (as of the date of such agreement) capable of being, and upon such
sale or transfer shall be, satisfied.
(h) Liens. Create, incur, assume, or suffer to exist any Lien on
any Mortgaged Property to secure any Indebtedness of the Borrower or any other
Person, other than Permitted Encumbrances.
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(i) Mergers, Sales, Etc. (i) Merge into or consolidate with any
other Person; (ii) sell, assign, lease, transfer, convey or otherwise
dispose of (in one transaction or a series of transactions) all or
substantially all of the Borrower's assets to any Person or group (as
such term is used in Section 13(d)(3) of the Exchange Act), (iii) the
liquidation or dissolution of the Borrower or the adoption of a plan
by the stockholders of the Borrower relating to the dissolution or
liquidation of the Borrower; (iv) the acquisition by any Person or
group (as such term is used in Section 13(d)(3) of the Exchange Act),
except for Realty or Affiliates thereof, of a direct or indirect
majority interest (more than 50%) of the voting power of the capital
stock of the Borrower by way of purchase, merger or consolidation or
otherwise; or (v) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board
of Directors of the Borrower (which includes any new directors whose
election by such Board of Directors or whose nomination for election
by the stockholders of the Borrower was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who were either
directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of the
Borrower.
(j) Changes in Property or Business. Except in connection with
the development of an extended stay facility and such ancillary facilities
related thereto or with the prior written consent of the Agent:
(A) Make or allow any material change to be made in the nature of
the use of any Mortgaged Property, or any part thereof from that in
effect on the date hereof or the date acquired, as the case may be; or
(B) Initiate or acquiesce in any change in any Use Requirements
now or hereafter in effect and affecting any Mortgaged Property or any
part thereof.
(k) Transactions with Affiliates. Purchase, acquire, or lease
any property from, or sell, transfer, or lease any property to, or lend or
advance any money to, or borrow any money from, or guarantee any obligation of,
or acquire any stock, obligations, or securities of, or enter into any merger or
consolidation agreement, or any management or similar agreement with, any
Affiliate, or enter into any other transaction or arrangement or make any
payments to (including, without limitation, on account of any management fees,
service fees, office charges, consulting fees, technical service charges, or tax
sharing charges) or otherwise deal with, in the ordinary course of business or
otherwise, any Affiliate on terms other than arm's-length commercially
reasonable terms (other than (i) any such transactions in effect on the Closing
Date and described in Schedule 7 attached hereto, and (ii) any such transactions
between the Borrower and any of its Subsidiaries and between Subsidiaries of
Borrower).
(l) Use of Proceeds. Use the proceeds of the Advances for other
than any Permitted Purpose.
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(m) Change of Business. Make or allow any material change in the
nature or scope of the business of the Borrower or any Subsidiary.
(n) Hazardous Materials. Subject to the provisions of Section
5.5 hereof:
(i) Use or permit or suffer use of any Mortgaged Property or any
part thereof or any interest therein or conduct any activity or
operations thereon in any manner which:
(A) would involve or result in the occurrence or presence of or
exposure to Hazardous Materials at, upon, under, across or within any
Mortgaged Property or any part thereof not in the ordinary course of
operation;
(B) would violate any Relevant Environmental Laws; or
(C) would result in the occurrence of any Environmental
Discharge.
(ii) Install or suffer or permit installation or Presence on, in
or under any Mortgaged Property or any part thereof of any underground
or above-ground containers for the storage of fuel oil, gasoline or
other petroleum products or by-products, except (i) such above-ground
containers that are required for the operation of the Mortgaged
Property and that are at all times in compliance with all Relevant
Environmental Laws and any other applicable Requirements of Law and
(ii) such underground containers that are required for the operation
of the Mortgaged Property and are at all times in compliance with all
Relevant Environmental Laws and any other applicable Requirements of
Law.
Section 5.4 Material Casualties. The Borrower agrees that if at any time
prior to the repayment in full of the Advances and the termination of the
Commitment (including, but not limited to, at any time, prior to or after an
Event of Default) any Mortgaged Property is damaged by fire, earthquake or other
casualty in such a manner or to such an extent so that it is unlikely, in the
Agent's reasonable judgment, that such Mortgaged Property will be restored on or
prior to the Maturity Date to the same physical, leased and operating condition
as it exists prior to such casualty, the Borrower shall, within twenty (20) days
of the Agent's written request, direct that the insurance proceeds from the
casualty be delivered over to the Agent, to be applied by the Agent to repayment
of or the Borrower's obligations under this Agreement and the other Loan
Documents.
Section 5.5 Effect of Certain Representations or Covenants Being Inaccurate
or Breached. In the event that any of the representations and warranties
contained in Sections 4.11, 4.17, 4.18, 4.22, 4.24, 4.25, 4.27 and 4.28 of this
Agreement (or any representation or warranty contained in any other Loan
Document which is substantially similar to any of the foregoing representations
and warranties) are not accurate when made or deemed made, or in the event that
any of the covenants contained in Sections 5.1(c), (d)(ii), (h), (i), (j), (k)
and (m) and 5.3(n) (or any covenant contained in any other Loan Document which
is substantially similar to any of the foregoing covenants) are breached, then,
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notwithstanding anything to the contrary, such breach or inaccuracy shall not
constitute or be deemed a Default or Event of Default, and Borrower shall not be
deemed to have made any misrepresentation, or breached any warranty or covenant
unless and until (but shall, at Agent's option, constitute and be deemed a
Default and Event of Default, and Borrower shall be deemed to have made such
misrepresentation, or breached such warranty or covenant, if and when):
(a) (i) Borrower is given notice of the circumstances which, but for
this Section 5.5, would constitute such misrepresentation, or
breach of warranty or covenant and such circumstances are not
remediated (i.e, the circumstances which would otherwise
constitute such misrepresentation, or breach of warranty or
covenant no longer exist) within (1) in the case of circumstances
which can be remediated by the payment of a sum of money only, 10
days after such notice is given, and (2) in the case of all other
circumstances, 30 days after such notice is given plus, if such
circumstances cannot reasonably be remediated within 30 days
after such notice is given and the Borrower has during such
30-day period commenced to remediate such circumstances and
thereafter diligently pursues all necessary efforts to effect
such remediation, such additional period of time as may be
required to effect such remediation; provided, however, that if
at any time during any cure period described above regarding
circumstances the cost to remediate which are quantifiable,
Borrower shall not have provided evidence satisfactory to the
Agent that the Borrower has available to it sufficient funds
(other than from borrowings pursuant to this Agreement) to
promptly effect any such remediation, then the cure period
provided for above regarding such circumstances shall immediately
expire; and
(ii) upon the expiration of the applicable cure period described in
Section 5.5(a)(i), if such circumstances have not been
remediated, the aggregate principal amount of all outstanding
Advances at such time exceeds the "Eligible Maximum Availability
Amount", as herein defined, at such time. The term "Remediation
Amount" means the amount which Borrower certifies
------------------ to Agent in writing (Borrower hereby agreeing
to so certify such amount promptly upon Agent's request) as being
Borrower's reasonable estimate (determined in a manner reasonably
acceptable to Agent, the basis for which determination shall be
set forth in reasonable detail in such certification) of the
aggregate cost of remediating all circumstances which would
constitute a misrepresentation or breach of warranty or covenant
of any of the representations, warranties or covenants described
above in this Section 5.5. The term "Eligible Maximum
Availability Amount" means, as of the date of
------------------------------------ expiration of such
applicable cure period, the Maximum Availability Amount as of
such date recomputed by subtracting from the Eligible Costs as of
such date the amount by which the Remediation Amount exceeds, if
at all, the lesser of (x) $3,000,000.00, and (y) the greater of
(A) $300,000.00, and (B)
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3% of the Eligible Costs as of such date; provided, however,
notwithstanding the foregoing, the aggregate principal amount of
all outstanding Advances shall not at any time exceed the lesser
of (i) the Commitment, and (ii) the Maximum Availability Amount
at such time; or
(b) all circumstances which would constitute a misrepresentation
or breach of warranty or covenant of any of the representations,
warranties or covenants described above in this Section 5.5, when
taken as a whole, constitute a Material Adverse Change.
In the event that any misrepresentation or breach of warranty or covenant with
respect to one or more Mortgaged Properties occurs which, pursuant to the
provisions of this Section 5.5, constitutes or will constitute a Default and
Event of Default, then, subject to the terms hereof, Borrower shall have the
right to substitute for such affected Mortgaged Properties one or more other
properties of the Borrower or its Subsidiaries, provided that (i) all of such
proposed substitute properties are acceptable in all respects to the Agent in
its sole, absolute and subjective discretion, (ii) all other conditions herein
to a property becoming a Mortgaged Property are satisfied and complied with, and
(iii) both before and after giving effect to such proposed substitution, no
Default or Event of Default (other than as a result of such misrepresentation or
breach of warranty or covenant) shall exist.
ARTICLE VI
EVENTS OF DEFAULT
Section 6.1 Events of Default. The occurrence and continuance of any of the
following specified events shall constitute an "Event of Default":
(a) Payments. The Borrower shall fail to pay (i) any principal
of the Advances hereunder when due, or (ii) within three (3) days when due
(including, without limitation, by mandatory prepayment) (1) any interest on any
of the Advances or any fees or (2) any other amount payable hereunder or under
the other Loan Documents.
(b) Certain Property Representations and Covenants. Any
misrepresentation or breach of warranty or covenant occurs which, pursuant to
the provisions of Section 5.5 hereof, constitutes a Default and Event of
Default.
(c) Other Covenants. The Borrower shall fail to observe or perform any
covenant or agreement (other than those referred to in Sections 6.1(a) and (b))
and such failure shall remain unremedied (i) in the case of any amounts payable
hereunder or under the other Loan Documents, for 3 days after notice from the
Agent, (ii) in the case of covenants or agreements contained in Section 5.2(a),
(b), (c) and (d) of this Agreement, for 20 Business Days after the occurrence
thereof; or (iii) in all other cases, for 30 days after the occurrence thereof.
In the event that a breach of a covenant described in clause (iii) above cannot
be cured within 30 days after the occurrence thereof and the Borrower has during
such 30-day period commenced to cure such breach and thereafter diligently
pursues all necessary efforts to effect a cure, an Event of Default shall be
deemed only to have occurred if the breach either cannot be remedied, or remains
unremedied, for 60 days after the occurrence thereof.
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(d) Representations. Any representation, warranty, or statement
(other than those referred to in Section 6.1(b)) made or deemed to be made by
the Borrower or any other Person (other than the Agent or any Lender) that is a
party to any Loan Document under or in connection with any Loan Document shall
have been incorrect in any material respect as of the date hereof, or as of the
date deemed to have been made.
(e) Non-Payments of Other Indebtedness. The Borrower shall fail
to make any payment of principal of or interest on any Indebtedness of the
Borrower (other than any Indebtedness under this Agreement or the other Loan
Documents and other than Permissible Assumed Indebtedness), in an aggregate
principal amount of not less than $5,000,000.00 within the applicable cure
period or any event specified in any note, agreement, indenture or other
document evidencing or relating to any such Indebtedness shall occur; and the
effect of such failure or event is to accelerate, or to permit the holder of
such aggregate Indebtedness or any other Person to accelerate, the maturity of
such Indebtedness; or such Indebtedness shall be required to be prepaid (other
than by a regularly scheduled required prepayment) in whole or in part prior to
its stated maturity.
(f) Defaults Under Loan Documents. The Borrower or any other
Person (other than the Agent or any Lender) that is a party to any Loan Document
shall fail to observe or perform any covenant or agreement (other than those
referred to in Sections 6.1(a) and (b)) contained in any other Loan Document, or
any default shall occur under any other Loan Document (other than those referred
to in Sections 6.1(a) and (b)) and such failure or default shall remain
unremedied (i) in the case of any amounts payable under the other Loan
Documents, for 3 days after notice from the Agent, (ii) in the case of covenants
or agreements similar to the covenants or agreements contained in Section
5.2(a), (b), (c) and (d) of this Agreement, for 20 Business Days after the
occurrence thereof; or (iii) in all other cases, for 30 days after the
occurrence thereof. In the event that a breach of a covenant described in clause
(iii) above cannot be cured within 30 days after the occurrence thereof and the
Borrower or such other Person has during such 30-day period commenced to cure
such breach and thereafter diligently pursues all necessary efforts to effect a
cure, an Event of Default shall be deemed only to have occurred if the breach
either cannot be remedied, or remains unremedied, for 60 days after the
occurrence thereof.
(g) Bankruptcy. The Borrower shall commence a voluntary case
concerning itself under Title 11 of the United States Code entitled "Bankruptcy"
as now or hereafter in effect, or any successor thereto (the "Bankruptcy Code");
or an involuntary case is commenced against the Borrower and the petition is not
dismissed within 90 days, after commencement of the case; or a custodian (as
defined in the Bankruptcy Code) is appointed for, or takes charge of, all or any
substantial part of the property of the Borrower; or the Borrower commences any
other proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency, or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Borrower or
there is commenced against the Borrower any such proceeding which remains
undismissed for a period of 90 days; or the Borrower is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or the Borrower suffers any appointment of any custodian
or the like for it or any substantial part of its property to continue
undischarged or unstayed for a period of 90 days; or the Borrower makes a
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general assignment for the benefit of creditors; or the Borrower shall fail to
pay, or shall state that it is unable to pay, or shall be unable to pay, its
debts generally as they become due; or the Borrower shall call a meeting of its
creditors with a view to arranging a composition or adjustment of its debts; or
the Borrower shall by any act or failure to act indicate its consent to,
approval of, or acquiescence in any of the foregoing; or any action is taken by
the Borrower for the purpose of effecting any of the foregoing; or any of the
foregoing shall occur with respect to any Subsidiary Mortgagor.
(h) Money Judgement. A judgment or order for the payment of money
in excess of $5,000,000 shall be rendered against the Borrower and such judgment
or order shall continue unsatisfied (in the case of a money judgment) and in
effect for a period of 30 days during which execution shall not be effectively
stayed or deferred (whether by action of a court, by agreement, or otherwise)
(or, if such judgment is covered by insurance, such longer period during which
the Borrower is appealing or otherwise contesting such judgment in good faith).
(i) Second Amendment to Credit Agreement and Other Loan Documents. An
Event of Default (as defined in that certain Credit Agreement referred to
in Section 5.3(a)(vii)0 shall have occurred.
Section 6.2 Global Remedies. Upon the occurrence and continuation of an
Event of Default, and at any time thereafter, if any Event of Default shall then
be continuing, the Lenders may, by written notice to the Borrower, take any or
all of the following actions, without prejudice to the rights of the Lenders to
enforce its claims against the Borrower: (i) declare the Commitment terminated,
whereupon the Commitment shall terminate immediately; (ii) declare all or any
portion of the principal of and any accrued interest on the Advances and all
other obligations owing hereunder and under the other Loan Documents, to be,
whereupon the same shall become, forthwith due and payable without presentment,
demand, protest, or other notice of any kind, all of which are hereby waived by
the Borrower; (iii) foreclose on any Collateral concurrently or in such order as
the Agent may from time to time see fit; or (iv) take any action permitted under
any Loan Document; provided, that, if any Event of Default specified in Section
6.1(g) shall occur, the actions specified in clauses (i) and (ii) above shall be
deemed to have immediately and automatically occurred without the giving of any
notice to the Borrower.
Section 6.3 Marshalling; Waiver of Certain Rights; Recapture. Neither the
Agent nor the Lenders shall be under any obligation to marshall any assets in
favor of the Borrower or any other party or against or in payment of any or all
of the obligations of such parties. To the extent permitted by law the Borrower
waives and renounces the benefit of all valuation, appraisement, homestead,
exemption, stay, redemption, and moratorium rights under or by virtue of the
constitution and laws of the state in which the Mortgaged Properties are located
and of any other state or of the United States, now existing or hereafter
enacted. To the extent the Agent or any Lender receives any payment by or on
behalf of the Borrower, which payment or any part thereof is subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to the Borrower or its estate, trustee, receiver, custodian, or any
other party under any bankruptcy law, state or federal law, common law, or
equitable cause, then to the extent of such payment or repayment, the obligation
or part thereof which has been paid, reduced, or satisfied by the amount so
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repaid shall be reinstated by the amount so repaid and shall be included within
the liabilities of the Borrower to such party as of the date such initial
payment, reduction, or satisfaction occurred, together with interest at the
Default Rate. The Borrower agrees that (i) the Agent on behalf of the Lenders
shall have the right to pursue all of its rights and remedies in one proceeding,
or separately and independently in separate proceedings from time to time, as
the Agent, in its sole and absolute discretion, shall determine from time to
time, (ii) the Collateral may be sold at such proceeding or proceedings in one
or more sales and in such portions or combinations as the Agent, in its sole and
absolute discretion, shall determine, (iii) the Agent on behalf of the Lenders
shall not be required to marshall assets, sell any of the Collateral in any
inverse order of alienation, or be subject to any "one action" or "election of
remedies" law or rule, (iv) the exercise by the Lenders of any remedies against
any one item of Collateral will not impede the Lenders from subsequently or
simultaneously exercising remedies against any other item of Collateral, and (v)
all Liens and other rights, remedies, or privileges provided to the Agent and
the Lenders under this Agreement and the other Loan Documents shall remain in
full force and effect until the Agent and the Lenders have exhausted all of
their remedies against the Collateral and all of the Collateral has been
foreclosed, sold or otherwise realized upon in satisfaction of the Promissory
Notes and the other obligations of the Borrower to the Agent and the Lenders.
Each Lender and its officers, directors, shareholders, employees, counsel and
agents shall not incur any liability as a result of the sale of the Collateral,
or any part thereof, in accordance with the provisions of this Agreement or any
Loan Document, or for the failure to sell or offer for sale the Collateral, or
any part thereof, for any reason whatsoever. The Borrower waives any claims
against each Lender and its officers, directors, shareholders, employees,
counsel and agents arising with respect to the price at which the Collateral, or
any part thereof, may have been sold by reason of the fact that such price was
less than the aggregate amount of the indebtedness due under the Promissory
Notes, this Agreement and the other Loan Documents.
Section 6.4 Application of Proceeds. (a) All proceeds received by the Agent
or the Lenders in respect of the repayment of any sums due hereunder or in
connection with a foreclosure sale of all or any portion of the Collateral after
the occurrence of an Event of Default shall be applied, first, to the costs of
enforcement of the Lenders' rights hereunder and under the other Loan Documents;
second, to pay any accrued and unpaid interest (including all interest owing at
the Default Rate), the principal amount of the Advances and any unpaid fees
payable under this Agreement and the other Loan Documents in such order of
priority as the Agent, in its sole and absolute discretion shall determine but
subject to the rights of the Lenders; and third, if any excess proceeds exist,
to the Borrower or any party entitled thereto as a matter of law. If the amount
of all proceeds received in liquidation of the Collateral which shall be applied
to payment of the indebtedness due in respect of this Agreement, the Promissory
Notes and the Loan Documents shall be insufficient to pay all such indebtedness
or obligations in full, the Borrower acknowledges that it shall remain liable
for any deficiency, together with interest thereon and costs of collection
thereof (including reasonable counsel fees and legal expenses).
(b) The Agent shall have the right, but not the obligation, to
deposit any proceeds in its possession which are available under clause third of
Section 6.4(a) above into a court of competent jurisdiction for determination by
such court of the disposition of such excess proceeds and upon such deposit, the
Agent shall have no further liability with respect to such proceeds. All costs
and expenses of the Agent in connection with such action may be deducted or
charged by the Agent against such excess proceeds and shall otherwise be
reimbursed by the Borrower upon demand. The Agent shall have the right, but not
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the obligation, to request and rely on the instructions of the Borrower in
connection with the disposition of any such excess proceeds and, upon compliance
with such instructions, shall have no further liability with respect to such
proceeds.
Section 6.5 Attorneys-in-Fact. The Borrower hereby makes, constitutes and
appoints the Agent, and its agents and designees, the true and lawful agents and
attorneys-in-fact of the Borrower, with full power of substitution, to take any
or all of the following actions during the continuance of an Event of Default:
(i) to receive, open and dispose of all mail addressed to the Borrower relating
to the Collateral, (ii) to notify and direct the United States Post Office
authorities by notice given in the name of the Borrower and signed on its
behalf, to change the address for delivery of all mail addressed to the Borrower
relating to the Collateral to an address to be designated by the Agent, and to
cause such mail to be delivered to such designated address where the Agent may
open all such mail and remove therefrom any notes, checks, acceptances, drafts,
money orders or other instruments in payment of the Collateral in which the
Agent has a security interest hereunder and any documents relative thereto, with
full power to endorse the name of the Borrower upon any such notes, checks,
acceptances, drafts, money orders or other form of payment or on Collateral or
security of any kind and to effect the deposit and collection thereof, and the
Agent shall have the further right and power to endorse the name of the Borrower
on any documents otherwise relating to such Collateral, and (iii) to do any and
all other things necessary or proper to carry out the intent of this Agreement
and to perfect and protect the liens and rights of the Agent created under this
Agreement, including, without limitation, to claim, bring suit, settle or adjust
any insurance proceeds claims relating to the Collateral. The Borrower agrees
that neither the Lenders nor any of their officers, directors, shareholders,
employees, counsel, agents, designees or attorneys-in-fact will be liable for
any acts of commission or omission, or for any error of judgment or mistake of
fact or law, except for any acts of gross negligence or willful misconduct. The
powers granted hereunder are coupled with an interest and shall be irrevocable
during the term hereof.
ARTICLE VII
AGENCY AND INTERCREDITOR RELATIONSHIPS
Section 7.1 Appointment. Each Lender hereby irrevocably designates and
appoints Commerzbank AG, New York Branch, as the Agent of such Lender under the
Loan Documents, and each such Lender irrevocably authorizes Commerzbank AG, New
York Branch, to act as the Agent for such Lender, to take such action on its
behalf under the provisions of this Agreement and the Loan Documents and to
exercise such powers and perform such duties as are expressly delegated to the
Agent by the terms of this Agreement and the Loan Documents, together with such
other powers as are reasonably incidental thereto. The Agent shall not have any
duties or responsibilities, except those expressly set forth in this Agreement
and the Loan Documents, or any fiduciary relationship with any Lender, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities on the part of the Agent shall be read into any of the Loan
Documents or otherwise exist against the Agent. The provisions of this Article
VII are solely for the benefit of the Agent and the Lenders, and the Borrower
shall not have any rights as a third-party beneficiary or otherwise under any of
the provisions of this Article VII. In performing its functions and duties under
the Loan Documents, the Agent shall act solely as the agent of the Lenders and
does not assume nor shall the Agent be deemed to have assumed any obligation or
relationship of trust or agency with or for the Borrower or any of such party's
respective successors and assigns.
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Section 7.2 Delegation of Duties. The Agent may execute any of its duties
under the Loan Documents by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel (including its internal counsel) concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
Section 7.3 Exculpatory Provisions. The Agent shall not be (a) liable for
any action lawfully taken or omitted to be taken by it or any Person described
in Section 7.2 under or in connection with any Loan Document (except for those
actions arising from the Agent's own gross negligence or willful misconduct), or
(b) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by the Borrower contained in any
Loan Document, or by the Borrower in any certificate, report, statement or other
document referred to or provided for in, or received under or in connection with
any Loan Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of any Loan Document or any such certificate,
report, statement or other document, or for any failure of the Borrower, or any
Lender to perform or observe its respective obligations hereunder or thereunder.
Unless the Agent shall have been requested to do so by a Lender on such Lender's
behalf, the Agent shall not be under any obligation to any Lender to ascertain
or to inquire as to the observance or performance of any of the agreements
contained in, or conditions of any Loan Document, or to inspect the properties,
or the books or records of the Borrower. This Section 7.3 is intended to govern
solely the relationship between the Agent, on the one hand, and the Lenders, on
the other.
Section 7.4 Reliance by the Agent. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or conversation (including
by telephone) believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, its internal counsel and counsel
to the Borrower), independent accountants and other experts selected by the
Agent. The Agent shall be fully justified in failing or refusing to take any
action under any Loan Document unless it shall first receive such advice or
concurrence of the Lenders required pursuant to this Agreement or it shall first
be indemnified to its satisfaction by the Lenders against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action.
Section 7.5 Notice of Default. (a) The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default unless
(i) the Agent has received notice from a Lender or the Borrower referring to
this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default," or (ii) the Agent, in its capacity as a
Lender, has actual knowledge of such Default or Event of Default. In the event
that the Agent receives such a notice, the Agent shall promptly give notice
thereof to the Lenders. The Agent shall take such action with respect to such
Default or Event of Default as shall be directed by the Required Lenders;
provided that unless and until the Agent shall have received such directions,
the Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as the
Agent shall deem advisable and in the best interests of the Lenders.
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(b) Each Lender agrees that it shall promptly notify the Agent in
writing after it first has knowledge of any Default or Event of Default or of
any matter which in such Lender's judgment adversely affects any Lender's
respective interests in the Commitment, which notice will describe the Default
or Event of Default or matter in reasonable detail. The Agent shall give a copy
of any such notice received by the Agent to the other Lenders if such notice
pertains to a Decision by the Lenders pursuant to Section 7.14 or 7.15 hereof.
Section 7.6 Non-Reliance on the Agent and the Other Lenders. Each Lender
expressly acknowledges that neither the Agent, nor any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates has made any
representations or warranties to it and that no act by the Agent hereafter
taken, including, without limitation, any review of the affairs of the Borrower
shall be deemed to constitute any representation or warranty by the Agent. Each
Lender represents and warrants to the Agent that it has, independently and
without reliance upon the Agent or any other Lender and based on such documents
and information as it has deemed appropriate, (a) made its own appraisal of and
investigation into the business, operations, property, prospects, financial and
other condition, creditworthiness and solvency of the Borrower, (b) satisfied
itself as to the due execution, legality, validity, enforceability, genuineness,
sufficiency and value of all of the Loan Documents and all other instruments and
documents furnished pursuant to any Loan Document, and (c) made its own decision
as to its Percentage of the Commitment pursuant to this Agreement. Each Lender
also represents that it will, independently and without reliance upon the Agent
or any other Lender, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analyses,
appraisals and decisions in taking or not taking action under this Agreement,
and to make such investigation as it deems necessary to inform itself as to the
business, operations, property, prospects, financial and other condition and
creditworthiness of the Borrower. Except for notices, reports and other
documents expressly required pursuant to the Loan Documents to be furnished by
the Agent to the Lenders, the Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the business,
operations, property, prospects, financial and other condition or
creditworthiness of the Borrower which may come into the possession of the Agent
or any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates.
Section 7.7 Indemnification. The Lenders agree to indemnify the Agent (in
its capacity as such) and its officers, directors, employees, representatives
and agents (to the extent not reimbursed by the Borrower and without limiting
the obligation, if any, of the Borrower to do so), ratably in accordance with
their Percentages, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever (including, without limitation,
the fees and disbursements of counsel for the Agent or such Person in connection
with any investigative, administrative or judicial proceeding commenced or
threatened, whether or not the Agent or such Person shall be designated a party
thereto) that may at any time be imposed on, incurred by or asserted against the
Agent or such Person as a result of, or arising out of, or in any way related to
or by reason of, any of the transactions contemplated by the Loan Documents or
the execution, delivery or performance of any Loan Document (but excluding any
such liabilities, obligations, losses, damages, penalties, actions, judgments,
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suits, costs, expenses or disbursements resulting solely from the gross
negligence or willful misconduct of the Agent or such Person as determined by a
court of competent jurisdiction). The agreements in this subsection shall
survive the payment of the Promissory Notes and all other amounts payable
hereunder.
Section 7.8 The Agent in Its Individual Capacity. The Agent and its
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Borrower as though it were not the Agent hereunder.
With respect to Advances made or renewed by it and any Promissory Note issued to
it, the Agent shall have the same rights and powers under this Agreement as any
Lender and may exercise the same as though it were not the Agent.
Section 7.9 Agent's Resignation. The Agent may resign at any time by giving
notice thereof to the Lenders and the Borrower. Upon any such resignation, the
Required Lenders shall designate within 45 days in writing another Person as the
successor Agent. Provided that no Event of Default shall have occurred and be
continuing, Borrower shall have the right to approve such successor Agent. If
such proposed successor Agent agrees in writing to act as the Agent in
accordance with the terms hereof, such successor Agent shall thereupon succeed
to and become vested with all the rights, powers, privileges, duties and
obligations of the resigning Agent, and the resigning Agent shall be discharged
from its duties and obligations as Agent under this Agreement. After any
retiring Agent's resignation hereunder, the provisions of this Article VII shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was the Agent under this Agreement.
Section 7.10 Appointment of a Substitute Agent. (a) Commerzbank AG, New
York Branch, shall be the initial Agent under this Agreement and the Loan
Documents until the Loan Documents have been terminated and the Lenders have
been paid in full. In the event that any Agent determines, for good cause
(including, without limitation, a conflict which, in such Agent's judgment, is
material), that it is not in the best interest of the Agent to continue to act
as the Agent, then the Agent may, at its option and upon thirty (30) days' prior
written notice to the Borrower and the Lenders, request a substitute Agent be
selected in accordance with the terms of this Section to act as the Agent with
respect to such matters. Within fifteen (15) days after receipt of such notice,
the Required Lenders shall select a proposed substitute agent and shall notify
the Borrower of the identity of such proposed substitute agent. In addition, the
Required Lenders, on not less than thirty (30) days' notice to the Agent, may
elect to appoint a substitute Agent in the event that the Agent has acted
hereunder with willful misconduct, gross negligence or exhibited a continuing
pattern of negligence with respect to its duties and obligations hereunder.
Provided that no Event of Default shall have occurred and be continuing,
Borrower shall have the right to approve any such proposed substitute agent. The
succeeding substitute Agent shall have all the rights, powers and duties of the
Agent and the term "Agent" shall mean such substitute Agent, effective upon its
appointment. In the event that the substitute Agent wishes to resign, it may do
so upon thirty (30) days' prior notice to the Borrower, the Agent and the
Lenders, and a new substitute Agent shall be appointed in accordance with this
Section. After any retiring substitute Agent's resignation hereunder as
substitute Agent, the provisions of this Section 7.10 and Section 8.4 hereof
shall inure to the benefit of such retired substitute Agent as to any actions
taken or omitted to be taken by it while it was substitute Agent under this
Agreement.
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Section 7.11 Loans. Each Lender shall make available to the Borrower such
Lender's portion of the Commitment subject to and in accordance with the
provisions of the Loan Documents. The Borrower shall look solely to each Lender
for the performance of such Lender's obligations, covenants and agreements under
the Loan Documents on the part of each Lender to be performed or observed with
respect to each such portion of the Commitment, subject to and upon the
conditions, limitations and restrictions set forth herein and in the other Loan
Documents, as evidenced by the signature of each such party hereto. In the event
any Lender has not made available its Percentage of any Advance, the Agent may
(but shall not be obligated to), and each Lender authorizes the Agent to,
advance for such Lender's account, pursuant to the terms hereof, the amount of
the Advance to be made by such Lender and each Lender agrees to reimburse the
Agent in immediately available funds for any amount so advanced on its behalf.
If any such reimbursement is not made in immediately available funds on the same
day on which the Agent shall have made such amount available on behalf of any
Lender, such Lender shall also pay interest thereon to the Agent at the Federal
Funds Rate.
Section 7.12 Priority of Loans. Each Lender's portion of the Commitment
shall be of equal priority with each other Lender's portion of the Commitment,
and no portion of the Commitment shall have priority or preference over any
other portion of the Commitment or the security therefor, except as provided in
Sections 7.20 through 7.24 hereof.
Section 7.13 Books and Records. The Agent will keep customary books and
records relating to the Advances, and such books and records shall be available
at the Agent's office for the Lenders' reasonable inspection during the Agent's
normal business hours. The original Loan Documents shall be kept at the New York
office of the Agent or at such other office of the Agent or at such other place
as may be designated from time to time by the Agent and shall be made available
to any Lender for inspection at such office within a reasonable period of time
following such Lender's written request to inspect same.
Section 7.14 Decisions of the Lenders. (a) Except as expressly set forth in
Sections 7.15 and 7.16 hereof, all decisions, consents, waivers, approvals and
other actions (collectively, "Decisions") authorized to be taken under or in
connection with this Agreement and the other Loan Documents by any Lender shall
be taken by the Agent in its discretion reasonably exercised, subject to the
provisions of Section 7.4 hereof. Except as expressly provided in Sections 7.15
and 7.16 hereof, the Agent (i) may consent or withhold consent to any action by
the Borrower, (ii) may exercise or refrain from exercising any power, rights or
remedies hereunder or under the other Loan Documents or otherwise in respect of
the Advances, and/or (iii) may waive any conditions in any Loan Documents, so
long as such consent, exercise or waiver would not, in the Agent's judgment
reasonably exercised, represent a departure from the standards followed by the
Agent in the administration of loans held by the Agent entirely for its own
account. The Agent may request a Decision with respect to matters described in
Sections 7.15 and 7.16 hereof at any time by making a request for such Decision
in writing to all of the Lenders. Any such request (x) shall contain an adequate
description together with relevant background information of the Decision being
requested, (y) shall specify the reasons for such request, and (z) shall state
the effect of not responding to such notice as set forth in this Section. The
Agent will provide the Lenders with such additional information as the Lenders
may reasonably request to assist such Lenders in reaching a Decision, to the
extent such information is in the Agent's possession or under its control. The
requested Decision shall be deemed approved by the Lenders if and when the Agent
receives written approval from the required percentage of the Lenders as
specified in Sections 7.15 and 7.16 hereof, as the case may be. If a Lender does
not deliver to the Agent a written objection thereto within ten (10) Business
Days after hand delivery, mailing or delivery to an express courier service
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of the request by the Agent, the Agent shall make a second written request for a
Decision from that Lender. If the Lender does not deliver to the Agent a written
objection within five (5) Business Days after hand delivery, mailing or delivery
to an express courier service of such a second request, such Lender shall be
deemed to have approved the requested Decision. If the Agent is unable to
contact the usual representatives of a Lender for any reason, the Agent will
make a good faith effort to contact other representatives of such Lender as
necessary to reach a Decision within the allotted time. To the extent that the
Agent reasonably deems necessary, any such Decision may also be requested
telephonically by the Agent from each Lender with such telephonic request to be
confirmed in writing by the Agent. Any Decision as to which the Agent has made
telephonic requests for approval shall be deemed approved by the Lenders after
the Agent has received the written approval of the required percentage of the
Lenders as specified in Sections 7.15 and 7.16 hereof. The Borrower shall be
promptly notified of the Decision, if such Decision was made in response to a
request by the Borrower.
Section 7.15 Unanimous Approvals by the Lenders. No written amendment,
supplement, modification or waiver which adds, deletes, changes or waives any
provisions of the Loan Documents shall (i) extend either the Maturity Date or
any installment or required prepayment of any Advances; (ii) reduce the rate or
extend the time of payment of interest on any Advances; (iii) reduce the
principal amount of any Advances; (iv) reduce the fees payable under this
Agreement and the other Loan Documents, or any other fee payable to the Lenders;
(v) change any Lender's portion of the Commitment or the amount of any Advance
of any Lender (except to the extent permitted by Sections 7.18 and 7.19 hereof);
(vii) change any provision of this Section 7.15 or the definition of Required
Lenders; (viii) modify any financial covenants, waive any Default or Event of
Default, or waive or release any lien on any of the Mortgaged Properties or
commence any judicial or nonjudicial foreclosure proceeding, in each case
without the written consent of all the Lenders; or (ix) amend, modify or waive
any provision of any Loan Document, if the effect thereof is to affect the
rights or duties of the Agent, without the written consent of the then the
Agent. Any such amendment, supplement, modification or waiver shall apply to
each of the Lenders equally and shall be binding upon the Borrower, the Lenders,
Agent and all future holders of the Promissory Notes. In the case of any waiver,
the Borrower, the Lenders and the Agent shall be restored to their former
position and rights hereunder and under the outstanding Promissory Notes, and
any Default or Event of Default waived shall be deemed to be cured and not
continuing, but no such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right consequent thereon.
Section 7.16 Approvals by the Required Lenders. (a) Upon the Agent's
receipt of a notice of default (as defined in Section 7.5(a) hereof) with
respect to an Event of Default, the Agent shall consult with the Lenders in
respect of any such Event of Default to determine a course of action which is
acceptable to the Required Lenders. Subject to Section 7.15 hereof, the Agent
shall pursue any such course of action approved by the Required Lenders in
respect of any such Event of Default, including, without limitation,
acceleration of the Advances. In the event that the Required Lenders cannot
decide which remedies, if any, are to be pursued, the Agent may commence
proceedings on behalf of the Lenders; provided, however, that if at any time
thereafter the Required Lenders shall direct that a different or additional
remedial action shall be taken, such different or additional remedial action
shall be taken in lieu of or in addition to such proceedings.
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(b) The Agent shall not without the prior approval of the
Required Lenders, (i) enter into written amendments, supplements, modifications
or waivers for the purpose of adding, deleting, changing or waiving any of the
provisions of Article V or Section 6.1, except to the extent such amendment,
supplement, modification or waiver requires the unanimous consent of the Lenders
pursuant to Section 7.15 hereof, or (ii) enter into written amendments,
supplements, modifications or waivers for the purpose of adding, deleting,
changing or waiving any provision of the Loan Documents, except to the extent
such amendment, supplement, modification or waiver requires the unanimous
consent of the Lenders (pursuant to Section 7.15 hereof), or (iii) consent to,
approve, or waive the requirement of receipt of, any documents, certificates or
other agreements or statements delivered or to be delivered by the Borrower or
any other Person pursuant to Article III hereof, or (iv) consent to or permit
(if not expressly permitted under the Loan Documents) the assignment or transfer
by the Borrower of any of its rights and obligations under any Loan Document, or
consent to any merger or consolidation or sale, lease or other disposal of all
or a substantial part of the Borrower's property or assets.
(c) All losses, costs, expenses, disbursements, liabilities, fees
(including reasonable attorneys' fees and disbursements), obligations, damages,
suits, actions and penalties of any kind or nature whatsoever (collectively, a
"Loss") incurred by the Agent in connection with the Advances or the enforcement
thereof shall be borne by the Lenders in accordance with each Lender's
Percentage.
(d) Each Lender shall, upon demand by the Agent, reimburse the
Agent (to the extent not otherwise reimbursed by the Borrower) for such Lender's
Percentage of (i) any out-of-pocket expenses incurred by the Agent in good faith
in connection with any Event of Default under the Loan Documents (including,
without limitation, reasonable fees and disbursements of outside counsel), and
(ii) any other expenses incurred in good faith to the extent not reimbursed by
the Borrower in connection with the enforcement of the Loan Documents.
(e) The Borrower hereby consents and agrees to the provisions of
Sections 7.14 through 7.16 and any modifications thereof entered into by the
Agent and the Lenders of such provisions and specifically acknowledges and
agrees that, notwithstanding any provisions in the Loan Documents requiring
action by the "Lenders" or similar provisions in connection with the declaration
of an Event of Default, the acceleration of the indebtedness evidenced by the
Loan Documents and/or the exercise of any remedies under the Loan Documents, the
Agent is hereby empowered to act on behalf of the Lenders in accordance with the
provisions hereof and the authority of the Agent with respect to any action
taken by the Agent pursuant to and in accordance with this Agreement shall not
be contested by the Borrower by reason of any different or conflicting provision
contained in any of the Loan Documents.
Section 7.17 Participation. Any Lender may at any time after the execution
and delivery of this Agreement, sell to one or more Persons (each a
"Participant") participating interests in any Advance owing to such Lender, any
Promissory Note held by such Lender and/or any other interest of such Lender
hereunder (in respect of any such Lender, its "Credit Exposure").
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Notwithstanding any such sale by a Lender of participating interests to a
Participant, unless the Agent shall have agreed otherwise, such Lender's rights
and obligations hereunder shall remain unchanged, such Lender shall remain
solely responsible for the performance thereof, such Lender shall remain the
holder of any such Promissory Note for all purposes hereunder (except as
expressly provided below), and the Agent shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations hereunder. The Borrower also agrees that each Participant shall be
entitled to the benefits of Sections 2.11, 2.13 and 2.15 hereof. Each Lender
agrees that any agreement between such Lender and any such Participant in
respect of such participating interest shall not restrict such Lender's right to
agree to any amendment, supplement, waiver or modification to any Loan Document,
except where the result of any of the foregoing would be to extend the final
maturity of any Advance or any regularly scheduled installment thereof or reduce
the rate or extend the time of payment of interest thereon or reduce the
principal amount thereof.
Section 7.18 Assignments. (a) Any Lender may, in the ordinary course of its
business and in accordance with applicable law, at any time after the execution
and delivery of this Agreement and from time to time assign to any Lender or any
affiliate thereof or to any other Person (each a "Purchasing Lender") all or any
part of its Credit Exposure in amounts not less than $10,000,000. The Borrower,
the Agent and the Lenders agree that to the extent of any assignment, the
Purchasing Lender shall be deemed to have the same rights and benefits under the
Loan Documents and the same obligation to share pursuant to Section 7.24 hereof
as it would have had if it had been a Lender which was one of the original
parties hereto. The consent of the Agent and, provided no Default or Event of
Default has occurred, the Borrower shall be required prior to an assignment
becoming effective, which consents will not be unreasonably withheld, delayed or
conditioned; provided that the Agent shall be entitled to continue to deal
solely and directly with the assignor Lender in connection with the interests so
assigned to the Purchasing Lender unless and until such Purchasing Lender
executes a supplement to this Agreement, substantially in the form of Exhibit M
hereto (a "Form of Assignment and Assumption Agreement").
(b) Upon (i) execution of a Form of Assignment and Assumption
Agreement, (ii) delivery of an executed copy thereof to the Borrower and the
Agent, (iii) payment by such Purchasing Lender to such transferor Lender of an
amount equal to the purchase price agreed between such transferor Lender and
such Purchasing Lender, and (iv) payment to Agent of an assignment fee of $2500
for each assignment by any Lender of all or any portion of its Credit Exposure,
such transferor Lender shall be released from its obligations hereunder to the
extent of such assignment and such Purchasing Lender shall for all purposes be a
Lender party to this Agreement and shall have all the rights and obligations of
a Lender under this Agreement to the same extent as if it were an original party
hereto, and no further consent or action by the Borrower, the Lenders or the
Agent shall be required. Such Form of Assignment and Assumption Agreement shall
be deemed to amend this Agreement to the extent, and only to the extent,
necessary to reflect the addition of such Purchasing Lender as a Lender.
Promptly after the consummation of any transfer to a Purchasing Lender pursuant
hereto, the transferor Lender, the Agent and the Borrower shall make appropriate
arrangements so that a replacement Promissory Note is issued to such transferor
Lender and a new Promissory Note is issued to such Purchasing Lender, in each
case in principal amounts reflecting such transfer. The Purchasing Lender shall
furnish to Borrower, at least 10 days prior to the date on which the first
payment to such Purchasing Lender is due, the documents described in Section
2.17(b) hereof.
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(c) Commerzbank AG, Los Angeles Branch, agrees that it will not
assign to a Purchasing Lender any part of its Credit Exposure such that, after
giving effect to such assignment, Commerzbank AG, Los Angeles Branch's
Percentage shall be less than 20%, unless the foregoing shall (or in Commerzbank
AG, Los Angeles Branch's reasonable judgment is likely to) constitute a
violation of any Requirement of Law. Notwithstanding the foregoing, nothing
herein shall restrict or limit Commerzbank AG, Los Angeles Branch, from selling
a participating interest in any portion, or all, of its Credit Exposure.
Section 7.19 Withholding. Notwithstanding anything to the contrary herein,
no Participant or other assignee of all or any part of the Credit Exposure of
any Lender (each, a "Non-Party Holder"), other than a Purchasing Lender, shall
be entitled to any of the benefits of Section 2.16 hereof.
Section 7.20 Amounts Received by the Lenders. Each Lender agrees that it
shall act as a trustee for the benefit of the other Lenders to the extent of the
respective interests of the other Lenders in the Advances with respect to all
sums of any kind paid to or received by such Lender in payment of all or a
portion of the Advances by or on behalf of the Borrower.
Section 7.21 No Joint Venture. Neither the execution of this Agreement nor
the selling of an interest in the Advances nor any agreement to share in profits
or losses as provided herein is intended to be, nor shall it be construed to be,
the formation of a partnership or joint venture among the parties to this
Agreement.
Section 7.22 Acknowledgment by Parties Hereto. The agreement to and
acceptance of this Agreement by the parties hereto, indicated by the execution
of this Agreement, shall evidence (a) each party's acceptance of all the terms
and conditions of this Agreement and the other Loan Documents and (b) each
party's consent to the Agent's acting as the Agent on behalf of the Lenders with
regard to all aspects of the administration, enforcement and collection of the
Advances and to all matters pertaining to the Loan Documents as provided for
herein.
Section 7.23 Right of the Lenders and the Agent to Transact Business. The
Lenders, the Agent and/or any of their respective affiliates may accept deposits
from, lend money to, act as trustee under indentures of, and generally engage in
any kind of business with, the Borrower or any other Person without any duty to
account therefor to the other Lenders and/or the Agent, as the case may be.
Section 7.24 Sharing of Payments. Each of the Lenders agrees that if it
should receive any amount under this Agreement or any of the other Loan
Documents (whether by voluntary payment, by realization upon security, by the
exercise of the right of banker's lien, by counterclaim or cross action, by the
enforcement of any right under the Loan Documents, or otherwise) which is
applicable to the payment of any Advance of a sum which with respect to the
related sum or sums received by the other Lenders is in a greater proportion
than the total of such Advance then owed and due to such Lender bears to the
total of such Advance then owed and due to all of the Lenders immediately prior
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to such receipt, then such Lender receiving such excess payment shall purchase
for cash without recourse or warranty from the other Lenders an interest in such
Advance owing to such Lenders in such amount as shall result in a proportional
participation by all of the Lenders in such amount; provided that if all or any
portion of such excess amount is thereafter recovered from such Lender, such
purchase shall be rescinded and the purchase price restored to the extent of
such recovery, but without interest.
Section 7.25 Limitation of Liability. No claim may be made by the Borrower
or any other Person against the Agent or any Lender or any of their affiliates,
directors, officers, employees, attorneys or agent of any of such Persons for
any special, indirect or consequential damages in respect of any claim for
breach of contract or any other theory of liability arising out of or under this
Article VII; and the Borrower hereby waives, releases and agrees not to sue upon
any such claim for any such damages, whether or not accrued and whether or not
known or suspected to exist in its favor.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Notices. All notices, requests, and other communications to any
party hereunder shall be in writing (including bank wire, telecopy, or similar
teletransmission or writing) and shall be given to such party at its address or
telecopy number set forth on Schedule 3 annexed hereto or such other address or
telecopier number as such party may hereafter specify by notice to the Agent and
the Borrower. No notices, requests, and other communications given to any Person
other than the Agent (including, without limitation, any Affiliate of the Agent)
shall be deemed to have been given to the Agent. Each such notice, request, or
other communication shall be effective (i) when delivered personally, (ii) if
given by telecopier, when such telecopy is transmitted to the telecopier number
specified in this Section 8.1, (iii) if given by certified or registered mail,
return receipt requested, 72 hours after such communication is deposited in the
mails with first-class postage prepaid, addressed as aforesaid, or (iv) by
Federal Express or other recognized overnight delivery service (provided that,
in either such case, such delivery is made with a request for receipt), on the
next Business Day after such communication is deposited with such delivery
service, or (v) if given by any other means when delivered at the address
specified in this Section 8.1.
Section 8.2 Amendments, Etc. No amendment or waiver of any provision of
this Agreement or the other Loan Documents, nor consent to any departure by
either party therefrom, shall in any event be effective unless the same shall be
in writing and signed by the party or its agent, if authorized to act on its
behalf, against whom enforcement of such waiver or amendment is sought, and then
such waiver or consent shall be effective only in the specific instance and for
the specified purpose for which given. None of the foregoing shall negate or
vitiate any of the provisions of Sections 7.14, 7.15 or 7.16.
Section 8.3 No Waiver; Remedies Cumulative. No failure or delay on the part
of the Lenders in exercising any right or remedy hereunder or under any other
Loan Document and no course of dealing between the Borrower and the Agent or the
Lenders shall operate as a waiver thereof, nor shall any single or partial
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exercise of any right or remedy hereunder or under any other Loan Document
preclude any other or further exercise thereof or the exercise of any other
right or remedy hereunder. The rights and remedies herein and in the other Loan
Documents expressly provided are cumulative and not exclusive of any rights or
remedies that the Lenders would otherwise have. No notice to or demand on the
Borrower not required hereunder or under the other Loan Documents in any case
shall entitle the Borrower to any other or further notice or demand in similar
or other circumstances or constitute a waiver of the rights of the Lenders to
any other or further action in any circumstances without notice or demand.
Section 8.4 Payment of Expenses, Etc. The Borrower shall: (a) whether or
not the transactions hereby contemplated are consummated, pay all reasonable
out-of-pocket costs and expenses of the Lenders in the administration (both
before and after the execution hereof and including advice of counsel as to the
rights and duties of the Agent or the Lenders) of, and in connection with the
preparation, execution, and delivery of, preservation of rights under,
enforcement of, and, after an Event of Default, refinancing, renegotiation, or
restructuring of, this Agreement and the other Loan Documents and the documents
and instruments referred to therein; any amendment, waiver, or consent relating
thereto (including, without limitation, the reasonable fees and disbursements of
counsel for the Agent and the Lenders);
(b) to the extent permitted by applicable law, pay and hold the
Agent and the Lenders harmless from and against any and all present and future
stamp, recording, and other similar taxes and fees with respect to the foregoing
matters and save the Lenders harmless from and against any and all liabilities
with respect to or resulting from any delay or omission to pay such taxes and
fees; and
(c) indemnify the Agent and the Lenders and each of their
officers, directors, employees, Affiliates, representatives, and agents from,
and hold each of them harmless against, any and all costs, losses, liabilities,
claims, damages and expenses incurred by any of them (whether or not any of them
is designated a party thereto) arising out of or by reason of any litigation, or
other proceeding related to any actual or proposed use by the Borrower of the
proceeds of any of the Advances or the Borrower entering into and performing of
this Agreement or the other Loan Documents or resulting from the ownership of
any Mortgaged Property, including, without limitation, the reasonable fees and
disbursements of counsel incurred in connection with any such investigation,
litigation, or other proceeding; provided that the Borrower shall not be
obligated to indemnify any such Person to the extent of any costs, losses,
liabilities, claims, damages, or expenses caused by the gross negligence or
willful misconduct of such Person.
If and to the extent that the obligations of the Borrower under this
Section 8.4 are unenforceable for any reason, the Borrower hereby agrees to make
the maximum contribution to the payment and satisfaction of such obligations
which is permissible under applicable law. The Borrower's obligations under this
Section 8.4 shall survive any termination of this Agreement and the payment of
the sums due hereunder and under the other Loan Documents.
Section 8.5 Right of Setoff. In addition to and not in limitation of all
rights of offset that the Lenders may have under applicable law, the Lenders
shall, upon the occurrence and during the continuance of any Event of Default
and whether or not the Lenders have made any demand or the Borrower's
obligations are matured, have the right to appropriate and apply to the payment
of the Borrower's obligations hereunder and under the other Loan Documents, all
deposits (general or special, time or demand, provisional or final) of the
Borrower then or thereafter held by, and other indebtedness or property then or
thereafter owing by, the Lenders.
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Section 8.6 Benefit of Agreement. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto, provided that the Borrower may not assign or
transfer any of its interest hereunder without the prior written consent of the
Lenders.
Section 8.7 Governing Law; Submission to Jurisdiction. (a) This Agreement
and the rights and obligations of the parties hereunder shall be construed in
accordance with and be governed by the law (without giving effect to the
conflict of law principles thereof) of the State of New York except as otherwise
specifically provided in the Loan Documents with respect to the perfection,
priority and enforcement of liens upon real property and fixtures not located in
the State of New York. (b) Any legal action or proceeding with respect to this
Agreement or the other Loan Documents or any document related thereto may be
brought in the courts of the State of New York or of the United States of
America for the Southern District of New York, and by execution and delivery of
this Agreement, the Borrower hereby accepts for itself and in respect of its
property generally and unconditionally, the jurisdiction of the aforesaid
courts. The Borrower hereby irrevocably waives any objection, including, without
limitation, any objection to the laying of venue or based on the grounds of
forum non conveniens, which it may now or hereafter have to the bringing of any
such action or proceeding in such respective jurisdictions. The Borrower agrees
that any process in any proceeding in any such court may be served on the
Borrower through the United States mails in accordance with Section 8.1.
(c) WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE
LAW, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR
THE PROMISSORY NOTE OR ANY OTHER LOAN DOCUMENTS AND FROM ANY COUNTERCLAIM
THEREIN.
(d) Nothing herein shall affect the right of the Lenders to serve
process in any other manner permitted by law or to commence legal proceedings or
otherwise proceed against the Borrower in any other jurisdiction.
Section 8.8 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
Section 8.9 Headings Descriptive. The headings contained in this Agreement
are for convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement.
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Section 8.10 Entire Agreement. This Agreement and the other Loan Documents
constitute the entire agreement of the parties with respect to the subject
matter hereof and thereof, and all prior discussions, negotiations, term sheets,
commitment letters, agreements, correspondence and document drafts with respect
to such matters are merged herein and therein. Neither the Lenders nor any
employee of the Lenders has been authorized to make any representation or
agreement upon which the Borrower or its Affiliates may rely unless such matter
is set forth in this Agreement or the other Loan Documents.
Section 8.11 Release of Certain Mortgaged Property. Agent agrees that, upon
Borrower's request (a "Release Request"), it will deliver to Borrower a form of
release, duly executed and acknowledged by the Agent, releasing from the lien of
the applicable Mortgage (a "Release"), any real property constituting a portion
of a Mortgaged Property (a "Release Parcel") but only if and on the condition
that:
(i) each Release Request shall be in writing, shall contain all
information necessary for the Agent to cause a Release in recordable form
to be prepared and shall be given at least five (5) Business Days prior to
the requested date of such Release;
(ii) each Release Request shall constitute Borrower's representation
and warranty that, and shall be accompanied by evidence demonstrating to
the Agent's satisfaction that (a) no portion of the extended stay facility
and such related ancillary facilities constructed (or to be constructed) on
the Mortgaged Property from which the Release Parcel is to be Released is
(or will be) located on such Release Parcel, (b) the requested Release
shall not cause or result in the remaining Mortgaged Property and the
existence and use of the extended stay facility and such related ancillary
facilities constructed (or to be constructed) thereon to fail to comply
with any Use Requirements or Requirements of Law, and (c) no portion of the
Total Costs allocated in a manner satisfactory to Agent to the Release
Parcel is included in the computation of the Maximum Availability Amount;
(iii) as of the date of such Release Request, and as of the effective
date of such Release (before as well as after giving effect to such
Release), no Default or Event of Default shall have occurred and be
continuing, and each Release Request shall constitute Borrower's
representation and warranty that the foregoing is true, complete and
accurate;
(iv) before as well as after giving effect to such Release, subject to
the provisions of Section 5.5 hereof, all representations and warranties
contained herein (except representations and warranties expressly provided
herein as being made only as of the Closing Date) shall be true and correct
in all material respects with the same effect as though such
representations and warranties had been made on and as of the date of such
Release;
(v) Borrower executes, acknowledges and delivers to Agent, at
Borrower's expense, any and all documents and instruments reasonably
required by Agent to preserve and maintain Agent's and Lenders' rights,
upon and following any such Release, under and with respect to the Loan
Documents; and
(vi) (1) The Agent shall have received payment of all costs and
expenses (other than the legal fees described in the following clause (2)
of this subparagraph) incurred by Agent in connection with such Release,
including, but not limited to, all title insurance premiums arising as a
result of endorsements required by Agent in connection with such Release,
and (2) receipt of a Release Request for each Release shall constitute
Borrower's agreement and covenant to pay to the Agent, promptly upon demand
(together with a
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reasonably detailed invoice(s) in respect thereof), all reasonable legal
fees and expenses arising in connection with the preparation, execution,
delivery and review of each Release, the documents and instruments
described in this Section, and all other documents relating to, and
rendering at the request of Agent all advice respecting, each Release.
In the event that all of the foregoing conditions to a Release have been
satisfied, then, at Borrower's request, the Agent shall furnish such Release for
recordation to the title company insuring the Agent's interest in the Mortgaged
Property affected by such Release or as otherwise designated by Borrower.
Section 8.12 Subordination of Certain Mortgaged Property. Agent agrees
that, upon Borrower's request (a "Subordination Request"), it will deliver to
Borrower a form of subordination, duly executed and acknowledged by the Agent,
subordinating the lien of the applicable Mortgage (a "Subordination"), to any
Development Encumbrances on a Mortgaged Property, but only if and on the
condition that:
(i) each Subordination Request shall be in writing, shall contain all
information necessary for the Agent to cause a Subordination in recordable
form to be prepared and shall be given at least five (5) Business Days
prior to the requested date of such Subordination;
(ii) Agent shall have received an endorsement to the title policy
referred to in Section 3.3(a)(iii) with respect to the applicable Mortgaged
Property indicating that since the date of the last endorsement to such
policy there has been no change in the state of title not theretofore
approved by Agent, providing with respect to such Development Encumbrances
a so-called "comprehensive endorsement" (or equivalent), to the extent
available in the jurisdiction in which such Mortgaged Property is located,
and such other affirmative insurance as Agent shall reasonably require,
which endorsement shall have the effect of redating the title policy to the
date of recordation of, and insuring the lien of the Mortgage as
subordinated pursuant to, the Subordination;
(iii) as of the date of such Subordination Request, and as of the
effective date of such Subordination (before as well as after giving effect
to such Subordination), no Default or Event of Default shall have occurred
and be continuing, and each Subordination Request shall constitute
Borrower's representation and warranty that the foregoing is true, complete
and accurate;
(iv) before as well as after giving effect to such Subordination,
subject to the provisions of Section 5.5 hereof, all representations and
warranties contained herein (except representations and warranties
expressly provided herein as being made only as of the Closing Date) shall
be true and correct in all material respects with the same effect as though
such representations and warranties had been made on and as of the date of
such Subordination;
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(v) Borrower executes, acknowledges and delivers to Agent, at
Borrower's expense, any and all documents and instruments reasonably
required by Agent to preserve and maintain Agent's and Lenders' rights,
upon and following any such Subordination, under and with respect to the
Loan Documents; and
(vi) (1) The Agent shall have received payment of all costs and
expenses (other than the legal fees described in the following clause (2)
of this subparagraph) incurred by Agent in connection with such
Subordination, including, but not limited to, all title insurance premiums
arising as a result of endorsements required by Agent in connection with
such Subordination, and (2) receipt of a Subordination Request for each
Subordination shall constitute Borrower's agreement and covenant to pay to
the Agent, promptly upon demand (together with a reasonably detailed
invoice(s) in respect thereof), all reasonable legal fees and expenses
arising in connection with the preparation, execution, delivery and review
of each Subordination, the documents and instruments described in this
Section, and all other documents relating to, and rendering at the request
of Agent all advice respecting, each Subordination.
Section 8.13 Confidentiality by the Agent and the Lenders. The Agent and
the Lenders agree that, unless otherwise agreed to in writing by us, except as
required by law or regulation or by legal process, to keep all Non-public
Information delivered by the Borrower to the Agent or the Lenders confidential
and not to disclose or reveal any Non-public Information to any person, other
than those employed or retained by the Agent or the Lenders (including, without
limitation, employees, counsel, accountants, engineers, advisers, experts and
consultants to the Agent or the Lenders). Except as provided for in the next
sentence, in the event that the Agent or any Lender is requested pursuant to, or
required by, applicable law or regulation or by legal process to disclose any
Non-public Information, the Agent or such Lender agrees that it shall provide
the Borrower with prompt notice of such request(s) and, unless required by law
or regulation to disclose sooner, shall wait at least forty-eight (48) hours
before disclosing such Non-public information. Notwithstanding the foregoing or
anything else to the contrary herein contained or contained in any of the other
Loan Documents, the provisions of this Section 8.13 shall not apply to (a) the
disclosure or sharing of any non-public information among the Agent and the
Lenders, (b) the disclosure by the Agent or any Lender of any non-public
information to federal, state and local bank regulators or other governmental
agencies to the extent required or requested to do so (such disclosure shall
not, however, in and of itself be deemed to render such information public), and
(c) the Agent or any Lender may, in connection with any assignment or
participation or proposed assignment or participation, disclose to the assignee
or participant or proposed assignee or participant under a requirement of
confidentiality, any non-public information relating to the Borrower, the
Collateral, the Borrower's assets, properties or financial condition or
information otherwise furnished to the Agent or the Lenders by the Borrower.
[Signature is on the Following Page]
-67-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Agreement as of the date first written
above.
HOMESTEAD VILLAGE INCORPORATED
By: _____________________________________
Name:
Title:
COMMERZBANK AG, New York Branch,
as Agent
By: _____________________________________
Name:
Title:
By: _____________________________________
Name:
Title:
COMMERZBANK AG, Los Angeles Branch,
as a lender
By: _____________________________________
Name:
Title:
By: _____________________________________
Name:
Title:
-68-
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS; CONSTRUCTION..............................................-1-
Section 1.1 Definitions...............................................-1-
Section 1.2 Accounting Terms and Determinations......................-14-
Section 1.3 Other Definitional Terms.................................-14-
ARTICLE II
AMOUNTS AND TERMS OF LOANS............................................-14-
Section 2.1 Commitment...............................................-14-
Section 2.2 Advances.................................................-14-
Section 2.3 Notices of Borrowing.....................................-15-
Section 2.4 Disbursement of Funds....................................-15-
Section 2.5 Promissory Notes; Collateral.............................-15-
Section 2.6 Interest on Advances.....................................-15-
Section 2.7 Interest Periods.........................................-16-
Section 2.8 Repayment of Advances....................................-17-
Section 2.9 Prepayments of Advances..................................-17-
Section 2.10 Fees.....................................................-18-
Section 2.11 Payments, Etc............................................-18-
Section 2.12 Interest Rate Not Ascertainable, Etc.....................-19-
Section 2.13 Illegality...............................................-19-
Section 2.14 Increased Costs..........................................-19-
Section 2.15 Change of Lending Office.................................-21-
Section 2.16 Funding Losses...........................................-21-
Section 2.17 Taxes....................................................-21-
Section 2.18 Extension of Maturity Date...............................-22-
ARTICLE III
CONDITIONS TO BORROWINGS..............................................-23-
Section 3.1 Conditions Precedent to Closing..........................-23-
Section 3.2 Conditions Precedent to Each Advance.....................-24-
Section 3.3 Additional Conditions Precedent to an Advance in
Respect of New Mortgaged Property......................-27-
Section 3.4 Additional Conditions Relating to Unsecured Advances.....-30-
-i-
<PAGE>
Page
ARTICLE IV
REPRESENTATIONS AND WARRANTIES.........................................-31-
Section 4.1 Corporate Existence.......................................-31-
Section 4.2 Authorization of Agreement; No Violation..................-31-
Section 4.3 Governmental Approvals....................................-31-
Section 4.4 Binding Effect............................................-31-
Section 4.5 Financial Information and No Material Adverse Change......-32-
Section 4.6 Litigation................................................-32-
Section 4.7 Compliance with Law.......................................-32-
Section 4.8 Labor Matters.............................................-32-
Section 4.9 ERISA.....................................................-33-
Section 4.10 No Default................................................-33-
Section 4.11 Improvements..............................................-33-
Section 4.12 Intellectual Property.....................................-34-
Section 4.13 Unrecorded Mortgages......................................-34-
Section 4.14 Taxes.....................................................-34-
Section 4.15 Investment Company Act; Other Regulations.................-34-
Section 4.16 Intentionally omitted.....................................-35-
Section 4.17 Insurance.................................................-35-
Section 4.18 Properties................................................-36-
Section 4.19 Full and Accurate Disclosure..............................-37-
Section 4.20 Solvency..................................................-38-
Section 4.21 Not Foreign Person........................................-38-
Section 4.22 Assessments...............................................-38-
Section 4.23 Flood Zone................................................-38-
Section 4.24 Physical Condition........................................-38-
Section 4.25 Operation of Premises.....................................-38-
Section 4.26 Margin Regulations........................................-38-
Section 4.27 Hazardous Materials.......................................-39-
Section 4.28 Representations and Warranties in the Loan Documents......-39-
Section 4.29 Loan Documents............................................-39-
Section 4.30 Balloon Payments..........................................-39-
Section 4.31 Subsidiary Mortgagors.....................................-39-
Section 4.32 Nature of Business........................................-39-
ARTICLE V
COVENANTS..............................................................-40-
Section 5.1 Certain Affirmative Covenants.............................-40-
Section 5.2 Reporting Covenants.......................................-42-
-ii-
<PAGE>
Page
Section 5.3 Certain Negative Covenants................................-45-
Section 5.4 Material Casualties.......................................-48-
Section 5.5 Effect of Certain Representations or Covenants
Being Inaccurate........................................-48-
ARTICLE VI
EVENTS OF DEFAULT......................................................-50-
Section 6.1 Events of Default.........................................-50-
Section 6.2 Global Remedies...........................................-52-
Section 6.3 Marshalling; Waiver of Certain Rights; Recapture..........-52-
Section 6.4 Application of Proceeds...................................-53-
Section 6.5 Attorneys-in-Fact.........................................-53-
ARTICLE VII
AGENCY AND INTERCREDITOR RELATIONSHIPS.................................-54-
Section 7.1 Appointment...............................................-54-
Section 7.2 Delegation of Duties......................................-54-
Section 7.3 Exculpatory Provisions....................................-54-
Section 7.4 Reliance by the Agent.....................................-55-
Section 7.5 Notice of Default.........................................-55-
Section 7.6 Non-Reliance on the Agent and the Other Lenders...........-55-
Section 7.7 Indemnification...........................................-56-
Section 7.8 The Agent in Its Individual Capacity......................-56-
Section 7.9 Agent's Resignation.......................................-56-
Section 7.10 Appointment of a Substitute Agent.........................-57-
Section 7.11 Loans.....................................................-57-
Section 7.12 Priority of Loans.........................................-57-
Section 7.13 Books and Records.........................................-58-
Section 7.14 Decisions of the Lenders..................................-58-
Section 7.15 Unanimous Approvals by the Lenders........................-59-
Section 7.16 Approvals by the Required Lenders.........................-59-
Section 7.17 Participation.............................................-60-
Section 7.18 Assignments...............................................-60-
Section 7.19 Withholding...............................................-61-
Section 7.20 Amounts Received by the Lenders...........................-61-
Section 7.21 No Joint Venture..........................................-62-
Section 7.22 Acknowledgment by Parties Hereto..........................-62-
Section 7.23 Right of the Lenders and the Agent to Transact Business...-62-
Section 7.24 Sharing of Payments.......................................-62-
Section 7.25 Limitation of Liability...................................-62-
-iii-
<PAGE>
Page
ARTICLE VIII
MISCELLANEOUS..........................................................-63-
Section 8.1 Notices...................................................-63-
Section 8.2 Amendments, Etc...........................................-63-
Section 8.3 No Waiver; Remedies Cumulative............................-63-
Section 8.4 Payment of Expenses, Etc..................................-63-
Section 8.5 Right of Setoff...........................................-64-
Section 8.6 Benefit of Agreement......................................-64-
Section 8.7 Governing Law; Submission to Jurisdiction.................-64-
Section 8.8 Counterparts..............................................-65-
Section 8.9 Headings Descriptive......................................-65-
Section 8.10 Entire Agreement..........................................-65-
Section 8.11 Release of Certain Mortgaged Property.....................-65-
Section 8.12 Subordination of Certain Mortgaged Property...............-66-
Section 8.13 Confidentiality by the Agent and the Lenders..............-67-
-iv-
[EXECUTION COPY]
$200,000,000
CREDIT AGREEMENT
among
HOMESTEAD VILLAGE INCORPORATED,
THE LENDERS IDENTIFIED HEREIN,
and
COMMERZBANK AG, NEW YORK BRANCH,
as AGENT
----------------------------------
Dated as of June 15, 1998
----------------------------------
Arranged By
COMMERZBANK AG, NEW YORK BRANCH
<PAGE>
CREDIT AGREEMENT, dated as of June 15, 1998, among HOMESTEAD VILLAGE
INCORPORATED, a corporation organized and existing under the laws of Maryland
(the "Borrower"), the lenders listed in Schedule I (together with their
successors and permitted assigns, each a "Bank" and, collectively, the "Banks")
and COMMERZBANK AG, acting through its New York Branch in the manner and to the
extent described in Section 10 (together with its successors in such capacity,
the "Agent").
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and conditions herein set forth, the
Banks are willing to make available to the Borrower the bridge loans provided
for herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION.
1.1 Defined Terms. As used in this Agreement, the following terms shall
have the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"Adjusted Eurodollar Rate" means, with respect to each Interest Period, the
rate obtained by dividing (a) the Eurodollar Rate for such Interest Period by
(b) a percentage equal to one minus the actual rate (stated as a decimal) of all
reserves then actually required to be maintained by any Bank (provided that
reasonable evidence of the imposition of such requirement is furnished to the
Borrower) against "eurocurrency liabilities" as specified in Regulation D (or
against any other category of liabilities that includes deposits by reference to
which the interest rate on Eurodollar Loans is determined or any category of
extensions of credit or other assets that includes loans by a non-United States
office of any Bank to United States residents) or by any other Requirement of
Law relating to reserve or capital adequacy requirements.
"Affiliate" shall mean, with respect to any Person, any other Person (other
than an individual) directly or indirectly controlling, controlled by, or under
direct or indirect common control with, such Person; provided, however, that for
purposes of Section 8.6, an Affiliate of the Borrower shall include any Person
that directly or indirectly owns more than 5% of the Borrower and any officer or
director of the Borrower or any such Person. A Person shall be deemed to control
another Person if such Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of such other
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Agent" shall have the meaning provided in the first paragraph of this
Agreement.
"Agreement" shall mean this Credit Agreement, as modified, supplemented or
amended from time to time.
<PAGE>
"Applicable Lending Office" shall mean, with respect to each Bank, (a) such
Bank's Base Rate Lending Office in the case of a Base Rate Loan, and (b) such
Bank's Eurodollar Lending Office in the case of a Eurodollar Rate Loan.
"Applicable Margin" shall mean, in respect of each Loan, for the period (a) from
the date such Loan is made until the six month anniversary thereof, so long as
such Loan is a (i) Base Rate Loan, 0.00% and (ii) Eurodollar Rate Loan, 1.00%
and (b) from the date that is six months and one day following the date such
Loan is made until the Expiry Date, so long as such Loan is a (i) Base Rate
Loan, 0.25% and (ii) Eurodollar Rate Loan, 1.25%.
"Arranger" shall mean Commerzbank AG acting through its New York Branch.
"Bank" shall have the meaning provided in the first paragraph of this
Agreement.
"Bankruptcy Code" shall have the meaning provided in Section 9.5.
"Base Rate" shall mean, as of any date of determination, a per annum rate
equal to the higher on such date of (a) the rate which is 1/2 of 1% in excess of
the Federal Funds Rate and (b) the Prime Lending Rate.
"Base Rate Lending Office" shall mean, with respect to each Bank, the
office of such Bank specified as its "Base Rate Lending Office" opposite its
name on Schedule II or such other office, Subsidiary or Affiliate of such Bank
as such Bank may from time to time specify as such to the Borrower and the
Agent.
"Base Rate Loan" shall mean any Loan designated or deemed designated as
such by the Borrower at the time of the incurrence thereof or conversion
thereto.
"Borrower" shall have the meaning provided in the first paragraph of this
Agreement.
"Borrowing" shall mean the borrowing of Loans of one Type from all the
Banks on a given date (or the conversion of a Loan or Loans of a Bank or Banks
on a given date).
"Business Day" shall mean (a) for all purposes other than as covered by
clause (b) below, any day except Saturday, Sunday and any day which shall be in
New York City a legal holiday or a day on which banking institutions are
authorized or required by law or other government action to close and (b) with
respect to all notices and determinations in connection with, and payments of
principal and interest on, Eurodollar Rate Loans, any day which is a Business
Day described in clause (a) above and which is also a day for trading by and
between banks in the London interbank Eurodollar market.
"Capital Contribution" shall have the meaning given to such term in the
Subscription Agreement.
"Cash Equivalents" shall mean, as to any Person, (a) securities issued or
directly and fully guaranteed or insured by the United States or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities of not more than six
2
<PAGE>
months from the date ofacquisition thereof, (b) time deposits and certificates
of deposit of any commercial bank incorporated in the United States of
recognized standing having capital and surplus in excess of $500,000,000 with
maturities of not more than six months from the date of acquisition by such
Person, (c) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (a) above entered into
with any bank meeting the qualifications specified in clause (b) above, (d)
commercial paper issued by the parent corporation of any commercial bank
(provided that the parent corporation and the bank are both incorporated in the
United States) of recognized standing having capital and surplus in excess of
$500,000,000 and commercial paper issued by any Person incorporated in the
United States, which commercial paper is rated at least A-1 or the equivalent
thereof by Standard & Poor's Ratings Service or at least P-1 or the equivalent
thereof by Moody's Investors Service and in each case maturing not more than six
months after the date of acquisition thereof by such Person and (e) investments
in money market funds substantially all the assets of which are comprised of
securities of the types described in clauses (a) through (d) above.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and the regulations promulgated and rulings issued thereunder. Section
references to the Code are to the Code, as in effect at the date of this
Agreement and any subsequent provisions of the Code, amendatory thereof,
supplemental thereto or substituted therefor.
"Collateral" shall mean all "Collateral" as defined in Section 1.1(a) of
the Security Agreement.
"Collateral Agent" shall mean the Agent acting as collateral agent for the
Banks pursuant to the Security Documents.
"Commitment" shall mean for each Bank, at any time, the amount set forth
opposite such Bank's name in Schedule I under the heading "Commitment" as the
same may be reduced or terminated from time to time pursuant to Sections 3.2,
3.3 and 9.
"Commitment Commission" shall have the meaning provided in Section 3.1(a).
"Consolidated EBIT" shall mean, as to any Person and for any period, the
consolidated net income of such Person and its Subsidiaries for such period,
before interest expense and provision for taxes and without giving effect to any
extraordinary gains and gains from sales of assets (other than sales of
inventory in the ordinary course of business).
"Consolidated EBITDA" shall mean, as to any Person and for any
period, the Consolidated EBIT of such Person and its Subsidiaries for such
period, adjusted by (a) adding thereto the amount of all amortization of
intangibles and depreciation that were deducted in arriving at such Consolidated
EBIT for such period and (b) subtracting therefrom the amount of all non-cash
gains that were added in arriving at such Consolidated EBIT for such period.
3
<PAGE>
"Consolidated Net Worth" shall mean, as to any Person, the Net Worth of
such Person and its Subsidiaries determined on a consolidated basis after
appropriate deduction for any minority interests in Subsidiaries. "Consolidated
Subsidiaries" shall mean, as to any Person, all Subsidiaries of such Person
which are consolidated with such Person for financial reporting purposes in
accordance with generally accepted accounting principles in the United States.
"Contingent Obligation" shall mean, as to any Person, any obligation of such
Person guaranteeing or intended to guarantee any Indebtedness, leases, dividends
or other obligations ("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of such Person, whether or not contingent, (a) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (b) to advance or supply funds (i) for the purchase
or payment of any such primary obligation or (ii) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (c) to purchase property, securities or
services primarily for the purpose of assuring the holder of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation or (d) otherwise to assure or hold harmless the holder of such
primary obligation against loss in respect thereof; provided, however, that the
term Contingent Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
"Contractual Obligation" means, as applied to any Person, any provision of
any Stock issued by that Person or any indenture, mortgage, deed of trust,
security agreement, pledge agreement, guaranty, contract, undertaking, document
or other agreement or instrument to which such Person is a party or by which it
or any of its properties is bound, or to which it or any of its properties is
subject.
"Credit Documents" shall mean this Agreement, each Note, the Subscription
Agreement, the Equity Sponsor's Acknowledgment and Estoppel, the Side Letter and
the Security Agreement.
"Credit Event" shall mean the making of any Loan.
"Debt Service" shall mean for any Person and for any period the sum of (a)
all cash interest obligations required to be paid in respect of any Indebtedness
of such Person and its Subsidiaries during such period, (b) all payments of
principal required to be made with respect to any Indebtedness of any Person and
for its Subsidiaries during such period, other than balloon payments or
scheduled amortizing payments on senior Indebtedness, and (c) all other payments
required to be made in respect of any Indebtedness of such Person and its
Subsidiaries.
4
<PAGE>
"Default" shall mean any event, act or condition which with notice or lapse
of time, or both, would constitute an Event of Default.
"Dollars" and the sign "$" shall each mean freely transferable lawful money
of the United States.
"Effective Date" shall have the meaning provided in Section 11.13.
"Equity Sponsor" shall mean Security Capital Group Incorporated, a
corporation organized and existing under the laws of Maryland.
"Equity Sponsor's Acknowledgment and Estoppel" shall have the meaning
provided in Section 5.6.
"Equity Sponsor's Commitment" shall mean as of any date of determination
the maximum amount which the Borrower can demand of the Equity Sponsor under the
Subscription Agreement on such date.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to ERISA are to ERISA, as in effect at the date
of this Agreement, and to any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section 3(9) of
ERISA) which together with the Borrower or a Subsidiary of the Borrower would be
deemed to be a "single employer" within the meaning of Section 414(b) or (c) of
the Code (or for purposes of Section 412 or 4971 of the Code and Section 302 of
ERISA, Section 414(b), (c), (m) or (o) of the Code).
"Eurodollar Lending Office" shall mean, with respect to each Bank, the
office of such Bank specified as its "Eurodollar Lending Office" opposite its
name on Schedule II or such other office, Subsidiary or Affiliate of such Bank
as such Bank may from time to time specify as such to the Borrower and the
Agent.
"Eurodollar Rate" shall mean: (a) the rate per annum appearing on the
Telerate page 3750 (the "Telerate Screen") at or about 11:00 a.m. (New York
time), subject to corrections (if any) made on the Telerate service, two
Business Days prior to the commencement of the Interest Period for which such
Eurodollar Rate will apply (the "Rate Fixing Day") for the offering of deposits
in Dollars for a period comparable to the Interest Period for which such
Eurodollar Rate will apply; or (b) if (i) no relevant rate appears on the
Telerate Screen for the purposes of the foregoing subparagraph (a), or (ii) the
Agent determines that no rate for a period of comparable duration to that
Interest Period appears on the Telerate Screen at the relevant time, the
arithmetic mean (rounded upwards, if necessary, to two decimal places) of the
respective rates quoted by the Agent to leading banks in the London interbank
Eurodollar market at or about 11:00 a.m. (New York time) on the Rate Fixing Day
for the offering of deposits in Dollars for a period comparable to the Interest
Period for which such Eurodollar Rate will apply.
5
<PAGE>
"Eurodollar Rate Loan" shall mean any Loan designated or deemed designated
as such by the Borrower at the time of the incurrence thereof or conversion
thereto.
"Event of Default" shall have the meaning provided in Section 9.
"Expiry Date" shall mean February 23, 1999.
"Federal Funds Rate" shall mean for any period, a fluctuating interest rate
equal for each day during such period to the weighted average of the rates on
overnight Federal Funds transactions with members of the Federal Reserve System
arranged by Federal Funds brokers, as published for such day (or, if such day is
not a Business Day, for the next preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such transactions
received by the Agent from three Federal Funds brokers of recognized standing
selected by the Agent.
"Fees" shall mean all amounts payable pursuant to or referred to in Section
3.1.
"GAAP" shall mean generally accepted accounting principles set forth from
time to time in the opinions and pronouncements of the Accounting Principles
Board and the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the accounting
profession), or in such other statements by such other entity as may be in
general use by significant segments of the U.S. accounting profession, which are
applicable to the circumstances as of the date of determination.
"Governmental Authority" shall mean any nation and any state or other
political subdivision thereof, and any entity exercising executive, legislative,
judicial, regulatory, or administrative functions of or pertaining to
government, including, but not limited to, the Federal Reserve Board, any
Federal Reserve Bank, any other central banking authority, or any agency or
subdivision thereof.
"Gross Asset Value" shall mean, as of any date of determination, the value
of all cash, Cash Equivalents and the value of all real property assets owned by
the Borrower on such date valued at one hundred percent (100%) of cost.
"Indebtedness" shall mean, as to any Person, without duplication, (a) all
indebtedness (including principal, interest, fees and charges) of such Person
for borrowed money or for the deferred purchase price of property or services,
(b) the face amount of all letters of credit issued for the account of such
Person and all drafts drawn thereunder, provided that, to the extent any such
letters of credit have been cash collateralized, the amount of such cash
collateral shall be subtracted from the amount of Indebtedness calculated
pursuant to this clause (b), (c) all liabilities secured by any Lien on any
property owned by such Person, whether or not such liabilities have been assumed
by such Person, (d) the aggregate amount required to be capitalized under leases
under which such Person is the lessee and (e) all Contingent Obligations of such
Person.
6
<PAGE>
"Initial Borrowing Date" shall mean the date on which the initial Borrowing
occurs or, for purposes of Section 5, such earlier date as the Borrower, the
Agent and the Banks may agree.
"Interest Period" shall mean a one month period, provided that: (a) all
Eurodollar Rate Loans comprising a Borrowing shall at all times have the same
Interest Period except as otherwise required by Section 2.10(b); (b) the initial
Interest Period for any Eurodollar Rate Loan shall commence on the date of
Borrowing of such Loan (including the date of any conversion thereof into a Loan
of a different Type) and each Interest Period occurring thereafter in respect of
such Loan shall commence on the day on which the next preceding Interest Period
applicable thereto expires; (c) if any Interest Period relating to a Eurodollar
Rate Loan begins on a day for which there is no numerically corresponding day in
the calendar month at the end of such Interest Period, such Interest Period
shall end on the last Business Day of such calendar month; (d) if any Interest
Period would otherwise expire on a day which is not a Business Day, such
Interest Period shall expire on the next succeeding Business Day, provided that
if any Interest Period for a Eurodollar Rate Loan would otherwise expire on a
day which is not a Business Day but is a day of the month after which no further
Business Day occurs in such month, such Interest Period shall expire on the next
preceding Business Day; and (e) no Interest Period shall extend beyond the
Expiry Date.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), preference, priority or
other security agreement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement, any
financing or similar statement or notice filed under the UCC or any other
similar recording or notice statute, and any lease having substantially the same
effect as any of the foregoing).
"Loan" shall have the meaning provided in Section 2.1.
"Margin Stock" shall have the meaning provided in Regulation U of the Board
of Governors of the Federal Reserve System.
"Material Adverse Effect" shall mean a material adverse change in, or a
material adverse effect upon, any of (a) the operations, business, properties or
financial condition of the Borrower or the Equity Sponsor or their respective
Subsidiaries that is likely to impair the ability of the Borrower or the Equity
Sponsor, as the case may be, to (i) perform its obligations under the Credit
Documents to which it is a party and (ii) avoid a Default or an Event of
Default; (b) the rights or remedies of the Agent and the Banks under this
Agreement and the other Credit Documents; or (c) the legality, validity, binding
effect or enforceability of any Credit Document against the Borrower or the
Equity Sponsor, as the case may be.
"Mortgaged Properties" shall have the meaning given to such term in the
Working Capital Facilities.
"Multiemployer Plan" shall mean any multiemployer plan as defined in
Section 4001(a)(3) of ERISA which is contributed to by (or to which there is an
obligation to contribute of) the Borrower or any of its Subsidiaries or an ERISA
Affiliate and each such plan for the five year period immediately following the
latest date on which the Borrower, any such Subsidiary or ERISA Affiliate
contributed to or had an obligation to contribute to such plan.
7
<PAGE>
"Net Worth" shall mean, as to any Person, the sum of its capital stock,
capital in excess of par or stated value of shares of its capital stock,
retained earnings and any other account which, in accordance with generally
accepted principles in the United States, constitutes stockholders equity,
excluding any treasury stock.
"1997 Suburban Working Capital Facility" shall mean the Credit Agreement,
dated as of May 6, 1997, among the Borrower, the lenders named therein and
Commerzbank AG, acting though its New York Branch, as agent for the lenders
named therein, together with all amendments, restatements, modifications and
waivers thereof.
"1998 Urban Working Capital Facility" shall mean the Credit Agreement,
dated as of April 24, 1998, among the Borrower, the lenders named therein and
Commerzbank AG, acting though its New York Branch, as agent for the lenders
named therein, together with all amendments, restatements, modifications and
waivers thereof.
"Note" shall have the meaning provided in Section 2.5.
"Notice of Borrowing" shall have the meaning provided in Section 2.3.
"Notice of Conversion" shall have the meaning provided in Section 2.6.
"Notice Office" shall mean the office of the Agent located at 2 World
Financial Center, New York, New York 10281-1050, attention: David Schwarz,
telephone: (212) 266- 7632, facsimile: (212) 266-7530 and attention: Christine
Finkel, telephone: (212) 266-7375, facsimile: (212) 266-7530 or such other
office as the Agent may hereafter designate in writing as such to the other
parties hereto.
"Obligations" shall mean all amounts owing to the Agent or any Bank
pursuant to the terms of this Agreement or any other Credit Document.
"Payment Office" shall mean the office of the Agent located at 2 World
Financial Center, New York, NY 10281-1050, or such other office as the Agent may
hereafter designate in writing as such to the other parties hereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA or any successor thereto.
"Person" shall mean any individual, partnership, limited liability company,
joint venture, firm, corporation, association, trust or other enterprise or any
government or political subdivision or any agency, department or instrumentality
thereof.
"Plan" shall mean any pension plan as defined in Section 3(2) of ERISA
which is subject to Title IV of ERISA (other than a Multiemployer Plan), which
is maintained or contributed to by (or to which there is an obligation to
contribute of) the Borrower or a Subsidiary of the Borrower or an ERISA
Affiliate, and each such plan for the five year period immediately following the
latest date on which the Borrower, or a Subsidiary of the Borrower or an ERISA
Affiliate maintained, contributed to or had an obligation to contribute to such
plan.
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"Prime Lending Rate" shall mean the rate which Commerzbank AG announces
from time to time at is New York Branch as its prime lending rate, the Prime
Lending Rate to change when and as such prime lending rate changes. The Prime
Lending Rate is a reference rate and does not necessarily represent the lowest
or best rate actually charged to any customer. Commerzbank AG may make
commercial loans or other loans at rates of interest at, above or below the
Prime Lending Rate.
"Rate Fixing Day" shall have the meaning provided in the defined term
"Eurodollar Rate."
"Register" shall have the meaning provided in Section 11.5.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing reserve requirements.
"Remaining Property" shall have the meaning provided in Section 8.1.
"Reportable Event" shall mean an event described in Section 4043(c) of
ERISA with respect to a Plan other than those events as to which the 30-day
notice period is waived under subsection .22, .23, .25 or .28 of PBGC Regulation
Section 4043.
"Required Banks" shall mean, at any time, Banks holding more than 50% of
the then aggregate unpaid principal amount of the Notes or, if no such principal
amount is then outstanding, Banks holding more than 50% of the Total Commitment.
"Requirement of Law" shall mean, as to any Person, the certificate or
articles of incorporation and by-laws, certificate of partnership and
partnership agreement or other organizational or governing documents of such
Person, and any law, treaty, rule, or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"SEC" shall have the meaning provided in Section 7.1(a).
"Section 4.4(b)(ii) Certificate" shall have the meaning provided in Section
4.4(b).
"Securities Offering" shall mean any sale, transfer or other disposition by
the Borrower of a security of the Borrower for consideration, whether registered
under the Securities Act of 1933, as amended, or unregistered, and shall include
the making by the Equity Sponsor of a Capital Contribution.
"Side Letter" shall have the meaning provided in Section 5.8.
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"Security Agreement" shall have the meaning provided in Section 5.7.
"Security Documents" shall mean the Security Agreement, the Subscription
Agreement and the Equity Sponsor's Acknowledgment and Estoppel.
"Subscription Agreement" shall have the meaning provided in Section 5.6.
"Subsidiary" shall mean, as to any Person, (a) any corporation more than
50% of whose stock of any class or classes having by the terms thereof ordinary
voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person and/or one or
more Subsidiaries of such Person and (b) any partnership, limited liability
company, association, joint venture or other entity in which such Person and/or
one or more Subsidiaries of such Person has more than a 50% equity interest at
the time.
"Taxes" shall have the meaning provided in Section 4.4(a).
"Total Commitment" shall mean, at any time, the sum of the Commitments of
each of the Banks.
"Total Costs" shall have the meaning given to such term in the 1998 Working
Capital Facility.
"Type" shall mean any type of Loan determined with respect to the interest
option applicable thereto, i.e., a Base Rate Loan or a Eurodollar Rate Loan.
"UCC" shall mean the Uniform Commercial Code as from time to time in effect
in the relevant jurisdiction.
"Unfunded Current Liability" of any Plan means the amount, if any, by which
the actuarial present value of the accumulated plan benefits under the Plan as
of the close of its most recent plan year exceeds the fair market value of the
assets allocable thereto, each determined in accordance with Statement of
Financial Accounting Standards No. 87, based upon the actuarial assumptions used
by the Plan's actuary in the most recent annual valuation of the Plan.
"United States" and "U.S." shall each mean the United States of America.
"Unutilized Commitment" shall mean, for any Bank, at any time, the
Commitment of such Bank at such time less the aggregate principal amount of all
Loans made by such Bank and then outstanding.
"Unutilized Total Commitment" shall mean the sum of the Unutilized
Commitments of each of the Banks.
"Wholly-Owned Subsidiary" shall mean, as to any Person, (a) any corporation
100% of whose capital stock is at the time owned by such Person and/or one or
more Wholly-Owned Subsidiaries of such Person and (b) any partnership, limited
liability company, association, joint venture or other entity in which such
Person and/or one or more Wholly-Owned Subsidiaries of such Person has a 100%
equity interest at such time.
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"Working Capital Facility" shall mean the 1997 Suburban Working Capital
Facility, the 1998 Urban Working Capital Facility or the 1997 Suburban Working
Capital Facility and the 1998 Urban Working Capital Facility, as the context may
require or allow.
1.2 Principles of Construction. The following rules shall apply to the
construction of this Agreement unless the context requires otherwise: (a) the
singular includes the plural, and the plural the singular; (b) words importing
any gender include all other genders; (c) references to statutes are to be
construed as including all statutory provisions consolidating and amending, and
all regulations promulgated pursuant to, such statutes; (d) references to
"writing" include printing, photocopy, typing, lithography and other means of
reproducing words in a tangible visible form; (e) the words "including",
"includes" and "include" shall be deemed to be followed by the words "without
limitation"; (f) references to the introductory paragraph, recitals, sections
(or clauses or subdivisions of sections), exhibits, appendices, annexes or
schedules are to those of this Agreement unless otherwise indicated; (g)
references to agreements and other contractual instruments shall be deemed to
include all subsequent amendments and other modifications to such instruments,
but only to the extent that such amendments and other modifications are
permitted or not prohibited by the terms of this Agreement; (h) section headings
in this Agreement are included herein for convenience of reference only and
shall not constitute a part of this Agreement for any other purpose; (i)
references to Persons include their respective permitted successors and assigns;
and (j) in the computation of a period of time from a specified date to a later
specified date, the word "from" means "from and including" and the words "to"
and "until" each means "to but excluding". Although this Agreement and the other
Credit Documents may use several different limitations, tests or measurements to
regulate the same or similar matters, all such limitations, tests and
measurements are cumulative and shall each be performed in accordance with their
terms. This Agreement and the other Credit Documents are the result of
negotiations among and have been reviewed by counsel to the Agent, the Borrower
and the other parties, and are the products of all parties. Accordingly, they
shall not be construed against the Agent or any Bank merely because of the
Agent's or any Bank's involvement in their preparation. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP.
SECTION 2. AMOUNT AND TERMS OF CREDIT.
2.1 The Loans. Subject to and upon the terms and conditions set forth
herein, each Bank severally agrees, at any time and from time to time prior to
the Expiry Date, to make loans (any loan made by any Bank a "Loan" and Loans
made by any Bank or by all the Banks, as the context requires, the "Loans") to
the Borrower, which Loans (a) shall, at the option of the Borrower, be Base Rate
Loans or Eurodollar Rate Loans, provided that, except as otherwise specifically
provided in Section 2.10(b), all Loans comprising the same Borrowing shall at
all times be of the same Type and (b) may be prepaid in accordance with the
provisions hereof; provided, however, that the aggregate principal amount of
Loans (i) outstanding from any Bank shall at no time exceed the Commitment of
such Bank at such time and (ii) comprising a Borrowing shall not, when added to
the aggregate principal amount of Loans then outstanding, exceed the Equity
Sponsor's Commitment in effect on the date such Borrowing. More than one
Borrowing may occur on the same date, but Eurodollar Rate Loans comprising more
than ten Borrowings shall not be outstanding under this Agreement at any time,
provided that Eurodollar Rate Loans resulting from a conversion pursuant to
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Section conversion pursuant to Section 2.10(b) shall not be deemed to be a
Borrowing for this purpose. Loans once repaid or prepaid may not be reborrowed.
On the Expiry Date the Unutilized Commitment of each Bank shall terminate and no
Bank shall have any further obligation to lend hereunder.
2.2 Minimum Amount of Each Borrowing. The aggregate principal amount of
each Borrowing hereunder shall be not less than $5,000,000 and integral
multiples of $1,000,000 in excess thereof, except as required by Section
2.10(b).
2.3 Notice of Borrowing. Whenever the Borrower desires to make a Borrowing
hereunder, it shall give the Agent at its Notice Office at least one Business
Day's prior notice of each Base Rate Loan and at least three Business Days'
prior notice of each Eurodollar Rate Loan to be made hereunder, provided that
any such notice shall be deemed to have been given on a certain day only if
given before 12:00 Noon (New York time) on such day. Each such notice (each a
"Notice of Borrowing") shall be in the form of Exhibit A, appropriately
completed to specify the aggregate principal amount of the Loans to be made
pursuant to such Borrowing, the date of such Borrowing (which shall be a
Business Day), whether the Loans being made pursuant to such Borrowing are to be
maintained initially as Base Rate Loans or Eurodollar Rate Loans and, if
Eurodollar Rate Loans, the initial Interest Period to be applicable thereto. The
Agent shall promptly give each Bank notice of such proposed Borrowing, of such
Bank's proportionate share thereof and of the other matters required by the
immediately preceding sentence to be specified in the Notice of Borrowing.
2.4 Disbursement of Funds. No later than 12:00 Noon (New York time) on the
date specified in each Notice of Borrowing, each Bank will make available,
through such Bank's Applicable Lending Office, its pro rata portion of each
Borrowing requested to be made on such date, in Dollars and in immediately
available funds at the Payment Office of the Agent, and the Agent will make
available to the Borrower at its Payment Office the aggregate of the amounts so
made available by the Banks. Unless the Agent shall have been notified by any
Bank prior to the date of Borrowing that such Bank does not intend to make
available to the Agent such Bank's portion of any Borrowing to be made on such
date, the Agent may assume that such Bank has made such amount available to the
Agent on such date of Borrowing and the Agent may, in reliance upon such
assumption, make available to the Borrower a corresponding amount. If such
corresponding amount is not in fact made available to the Agent by such Bank,
the Agent shall be entitled to recover such corresponding amount from such Bank
on demand. If such Bank does not pay such corresponding amount forthwith upon
the Agent's demand therefor, the Agent shall promptly notify the Borrower and
the Borrower shall immediately pay such corresponding amount to the Agent. The
Agent shall also be entitled to recover on demand from such Bank or the
Borrower, as the case may be, interest on such corresponding amount in respect
of each day from the date such corresponding amount was made available by the
Agent to the Borrower until the date such corresponding amount is recovered by
the Agent, at a rate per annum equal to (a) if recovered from such Bank, the
Federal Funds Rate and (b) if recovered from the Borrower, the then applicable
rate for Base Rate Loans or Eurodollar Rate Loans, as the case may be. Nothing
in this Section 2.4 shall be deemed to relieve any Bank from its obligation to
make Loans hereunder or to prejudice any rights which the Borrower may have
against any Bank as a result of any failure by such Bank to make Loans
hereunder.
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2.5 Notes. The Borrower's obligation to pay the principal of, and interest
on, all the Loans made by each Bank shall be evidenced by a promissory note duly
executed and delivered by the Borrower substantially in the form of Exhibit B
with blanks appropriately completed in conformity herewith (each a "Note" and,
collectively, the "Notes"). The Note issued to each Bank shall (a) be payable to
the order of such Bank and be dated the Initial Borrowing Date, (b) be in a
stated principal amount equal to the Commitment of such Bank and be payable in
the principal amount of the Loans evidenced thereby, (c) mature, with respect to
each Loan evidenced thereby, on the Expiry Date, (d) bear interest as provided
in the appropriate clause of Section 2.8 in respect of the Base Rate Loans and
Eurodollar Rate Loans, as the case may be, evidenced thereby and (e) be entitled
to the benefits of this Agreement and the other Credit Documents. Each Bank will
note on its internal records the amount of each Loan made by it and each payment
in respect thereof and will prior to any transfer of its Note endorse on the
reverse side thereof the outstanding principal amount of Loans evidenced
thereby. Failure to make any such notation shall not affect the Borrower's
obligations in respect of such Loans.
2.6 Conversions. The Borrower shall have the option to convert on any
Business Day all or a portion equal to $5,000,000 and integral multiples of
$1,000,000 in excess thereof of the outstanding principal amount of the Loans
made pursuant to one or more Borrowings of one or more Types of Loan into a
Borrowing of another Type of Loan, provided that (a) except as otherwise
provided in Section 2.10(b), Eurodollar Rate Loans may be converted into Base
Rate Loans only on the last day of the Interest Period applicable to the
Eurodollar Rate Loans being converted and no such partial conversion of
Eurodollar Rate Loans shall reduce the outstanding principal amount of
Eurodollar Rate Loans made pursuant to a single Borrowing to less than
$5,000,000, (b) Base Rate Loans may only be converted into Eurodollar Rate Loans
if no Default or Event of Default is in existence on the date of the conversion
and (c) no conversion pursuant to this Section 2.6 shall result in a greater
number of Borrowings than is permitted under Section 2.1. Each such conversion
shall be effected by the Borrower by giving the Agent at its Notice Office prior
to 12:00 Noon (New York time) at least three Business Days' prior notice (each a
"Notice of Conversion") specifying the Loans to be so converted and, if to be
converted into Eurodollar Rate Loans, the Interest Period to be initially
applicable thereto. The Agent shall give each Bank prompt notice of any such
proposed conversion affecting any of its Loans. Upon any such conversion the
proceeds thereof will be applied directly on the day of such conversion to
prepay the outstanding principal amount of the Loans being converted.
2.7 Pro Rata Borrowings. All Borrowings of Loans under this Agreement shall
be incurred from the Banks pro rata on the basis of their Commitments. It is
understood that no Bank shall be responsible for any default by any other Bank
of its obligation to make Loans hereunder and that each Bank shall be obligated
to make the Loans provided to be made by it hereunder regardless of the failure
of any other Bank to make its Loans hereunder.
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2.8 Interest.
(a) The Borrower agrees to pay interest in respect of the unpaid principal
amount of each Base Rate Loan from the date the proceeds thereof are made
available to the Borrower until the maturity thereof (whether by acceleration or
otherwise) at a rate per annum equal to the Base Rate in effect from time to
time plus the Applicable Margin.
(b) The Borrower agrees to pay interest in respect of the unpaid principal
amount of each Eurodollar Rate Loan from the date the proceeds thereof are made
available to the Borrower until the maturity thereof (whether by acceleration or
otherwise) at a rate per annum which shall, during each Interest Period
applicable thereto, be equal to the Adjusted Eurodollar Rate for such Interest
Period plus the Applicable Margin.
(c) Overdue principal and, to the extent permitted by law, overdue interest
in respect of each Loan and any other overdue amount payable by the Borrower
hereunder shall bear interest at a rate per annum equal to 2% per annum in
excess of the Base Rate in effect from time to time; provided, however, that no
Loan shall bear interest after maturity at a rate per annum less than 2% in
excess of the rate of interest applicable thereto at maturity.
(d) Accrued (and theretofore unpaid) interest shall be payable (i) in
respect of each Base Rate Loan, monthly in arrears on the first Business Day of
each calendar month, (ii) in respect of each Eurodollar Rate Loan, on the last
day of each Interest Period applicable thereto and (iii) in respect of each
Loan, on any prepayment (on the amount prepaid), at maturity (whether by
acceleration or otherwise) and, after such maturity, on demand.
(e) On each Rate Fixing Day, the Agent shall determine the interest rate
for the Eurodollar Rate Loans for which such determination is being made and
shall promptly notify the Borrower and the Banks thereof. Each such
determination shall, absent manifest error, be final and conclusive and binding
on all parties hereto.
2.9 Interest Periods. On the third Business Day prior to the expiration of
an Interest Period applicable to a Eurodollar Rate Loan, the Borrower shall have
the right to elect, by giving the Agent notice thereof, to continue such
Eurodollar Rate Loan as a Eurodollar Rate Loan. If upon the expiration of any
Interest Period applicable to a Eurodollar Rate Loan, the Borrower has failed to
elect to continue such Loan as a Eurodollar Rate Loan as provided above, the
Borrower shall be deemed to have elected to convert such Loan into a Base Rate
Loan effective as of the expiration date of such current Interest Period.
2.10 Increased Costs, Illegality, etc.
(a) In the event that any Bank shall have determined (which determination
shall, absent manifest error, be final and conclusive and binding upon all
parties hereto but, with respect to clause (i) below, may be made only by the
Agent):
(i) on any Rate Fixing Day that, by reason of any changes arising
after the date of this Agreement affecting the interbank Eurodollar market
adequate and fair means
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do not exist for ascertaining the applicable interest rate on the basis
provided for in the definition of Eurodollar Rate; or
(ii) at any time, that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect to
any Eurodollar Rate Loan because of (x) any change since the date of this
Agreement in any applicable law or governmental rule, regulation, order or
request (whether or not having the force of law) (or in the interpretation
or administration thereof and including the introduction of any new law or
governmental rule, regulation, order or request), such as, for example, but
not limited to, (A) a change in the basis of taxation of payments to any
Bank or its Applicable Lending Office of the principal of or interest on
the Notes or any other amounts payable hereunder (except for changes in the
rate of tax on, or determined by reference to, the net income or profits of
such Bank or its Applicable Lending Office imposed by the jurisdiction in
which its principal office or Applicable Lending Office is located) or (B)
a change in official reserve requirements, but, in all events, excluding
reserves required under Regulation D to the extent included in the
computation of the Eurodollar Rate, and/or (y) other circumstances
affecting such Bank or the interbank Eurodollar market or the position of
such Bank in such market; or
(iii) at any time, that the making or continuance of any Eurodollar
Rate Loan has been made (x) unlawful by any law or governmental rule,
regulation or order, (y) impossible by compliance by such Bank with any
governmental request (whether or not having force of law) or (z)
impracticable as a result of a contingency occurring after the date of this
Agreement which materially and adversely affects the interbank Eurodollar
market;
then, and in any such event, such Bank (or the Agent, in the case of clause (i)
above) shall promptly give notice (by telephone confirmed in writing) to the
Borrower and, except in the case of clause (i) above, to the Agent of such
determination (which notice the Agent shall promptly transmit to each of the
other Banks). Thereafter (x) in the case of clause (i) above, Eurodollar Rate
Loans shall no longer be available until such time as the Agent notifies the
Borrower and the Banks that the circumstances giving rise to such notice by the
Agent no longer exist, and any Notice of Borrowing or Notice of Conversion given
by the Borrower with respect to Eurodollar Rate Loans which have not yet been
incurred (including by way of conversion) shall be deemed rescinded by the
Borrower, (y) in the case of clause (ii) above, the Borrower shall pay to such
Bank, upon written demand therefor, such additional amounts (in the form of an
increased rate of, or a different method of calculating, interest or otherwise
as such Bank in its sole discretion shall determine) as shall be required to
compensate such Bank for such increased costs or reductions in amounts received
or receivable hereunder (a written notice as to the additional amounts owed to
such Bank, showing the basis for the calculation thereof, submitted to the
Borrower by such Bank shall, absent manifest error, be final and conclusive and
binding on all the parties hereto) and (z) in the case of clause (iii) above,
take one of the actions specified in Section 2.10(b) as promptly as possible
and, in any event, within the time period required by law.
(b) At any time that any Eurodollar Rate Loan is affected by the
circumstances described in Section 2.10(a)(ii) or (iii), the Borrower may (and
in the case of a Eurodollar Rate Loan affected by the circumstances described in
Section 2.10(a)(iii) shall) either (i) if the affected Eurodollar Rate Loan is
then being made initially or pursuant to a conversion, cancel said Borrowing by
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giving the Agent notice by telephone (confirmed in writing) of the cancellation
on the same date that the Borrower was notified by the Bank or the Agent
pursuant to Section 2.10(a)(ii) or (iii) or (ii) if the affected Eurodollar Rate
Loan is then outstanding, upon at least three Business Days' written notice to
the Agent, require the affected Bank to convert such Eurodollar Rate Loan into a
Base Rate Loan or Loans, provided that, if more than one Bank is affected at any
time, then all affected Banks must be treated the same pursuant to this Section
2.10(b).
(c) If any Bank determines at any time that any applicable law or
governmental rule, regulation, order or request (whether or not having the force
of law) concerning capital adequacy, or any change in interpretation or
administration thereof by any governmental authority, central bank or comparable
agency, will have the effect of increasing the amount of capital required or
expected to be maintained by such Bank based on the existence of such Bank's
Commitment hereunder or its obligations hereunder, then the Borrower shall pay
to such Bank, upon its written demand therefor, such additional amounts as shall
be required to compensate such Bank for the increased cost to such Bank as a
result of such increase of capital. In determining such additional amounts, each
Bank will act reasonably and in good faith and will use averaging and
attribution methods which are reasonable, provided that such Bank's
determination of compensation owing under this Section 2.10(c) shall, absent
manifest error, be final and conclusive and binding on all the parties hereto.
Each Bank, upon determining that any additional amounts will be payable pursuant
to this Section 2.10(c), will give prompt written notice thereof to the
Borrower, which notice shall show the basis for calculation of such additional
amounts, although the failure to give any such notice shall not release or
diminish any of the Borrower's obligations to pay additional amounts pursuant to
this Section 2.10(c).
2.11 Compensation. The Borrower shall compensate each Bank, upon its
written request (which request shall set forth the basis for requesting such
compensation and shall, absent manifest error, be final and conclusive and
binding on all the parties hereto), for all reasonable losses, expenses and
liabilities (including, without limitation, any loss, expense or liability
incurred by reason of the liquidation or reemployment of deposits or other funds
required by such Bank to fund its Eurodollar Rate Loans) which such Bank may
sustain: (a) if for any reason (other than a default by such Bank or the Agent)
a Borrowing of, or conversion from or into, Eurodollar Rate Loans does not occur
on a date specified therefor in a Notice of Borrowing or Notice of Conversion
(whether or not withdrawn by the Borrower or deemed rescinded pursuant to
Section 2.10(a)); (b) if any repayment (including any prepayment made pursuant
to Section 4) or conversion of any of its Eurodollar Rate Loans occurs on a date
which is not the last day of an Interest Period with respect thereto; (c) if any
prepayment of any of its Eurodollar Rate Loans is not made on any date specified
in a notice of prepayment given by the Borrower; or (d) as a consequence of (i)
any other default by the Borrower to repay its Loans when required by the terms
of this Agreement or the Note of such Bank or (ii) any action taken pursuant to
Section 2.10(b).
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SECTION 3. COMMITMENT COMMISSION, FEES; REDUCTIONS OF COMMITMENT.
3.1 Fees.
(a) The Borrower agrees to pay to the Agent for distribution to each Bank a
commitment commission (the "Commitment Commission") for the period from the
Effective Date until the Expiry Date (or such earlier date as the Total
Commitment shall have been terminated) computed at a rate equal to 0.25 of 1%
per annum on the daily average Unutilized Commitment of such Bank. Accrued
Commitment Commission shall be due and payable quarterly in arrears on the last
Business Day of each June 30, September 30, December 31 and March 31 of each
year and on the Expiry Date or upon such earlier date as the Total Commitment
shall be terminated.
(b) The Borrower shall pay to the Agent and the Arranger, for their own
account, the fees set forth in that certain letter agreement, dated June 15,
1998, among the Borrower, the Agent and the Arranger.
3.2 Voluntary Termination of Unutilized Total Commitment. Upon at least
five Business Days' prior notice to the Agent at its Notice Office (which notice
the Agent shall promptly transmit to each of the Banks), the Borrower shall have
the right, without premium or penalty, to terminate the Unutilized Total
Commitment in whole or in part, in integral multiples of $5,000,000, provided
that any such termination shall apply proportionately to reduce the Commitment
of each Bank.
3.3 Mandatory Reduction of Total Commitment. The Commitment of a Bank shall
be reduced automatically at the time of, and by the principal amount of, each
Loan made by such Bank. The Total Commitment shall be reduced automatically upon
each date on which the Borrower receives, and by the amount by which, the net
proceeds of any Securities Offering made after the Effective Date exceeds the
unpaid principal balance of all outstanding Loans.
SECTION 4. PREPAYMENTS: PAYMENTS.
4.1 Voluntary Prepayments. The Borrower shall have the right to prepay the
Loans, without premium or penalty, in whole or in part from time to time on the
following terms and conditions: (a) the Borrower shall give the Agent at its
Notice Office at least three Business Days' prior notice of its intent to prepay
the Loans, the amount of such prepayment and the Types of Loans to be prepaid
and, in the case of Eurodollar Rate Loans, the specific Borrowing or Borrowings
pursuant to which made, which notice the Agent shall promptly transmit to each
of the Banks; (b) each prepayment shall be in an aggregate principal amount of
at least $5,000,000, provided that no partial prepayment of Eurodollar Rate
Loans made pursuant to any Borrowing shall reduce the outstanding Loans made
pursuant to such Borrowing to an amount less than $5,000,000; (c) prepayments of
Eurodollar Rate Loans made pursuant to this Section 4.1 may only be made on the
last day of an Interest Period applicable thereto; and (d) each prepayment in
respect of any Loans made pursuant to a Borrowing shall be applied pro rata
among such Loans.
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4.2 Mandatory Prepayments.
(a) On any day on which the aggregate outstanding principal amount of the
Loans exceeds the Total Commitment as then in effect, the Borrower shall prepay
the principal of the Loans in an amount equal to such excess.
(b) Within five Business Days of its receipt of the proceeds of any
Securities Offering, the Borrower shall apply 100% of the net cash proceeds of
such Securities Offering first to prepay outstanding Loans and second, (i) if no
Loans are then outstanding and such proceeds are derived from a Securities
Offering other than the issuance of subordinated debentures pursuant to the
Subscription Agreement, first, to prepay credit extensions under the Working
Capital Facilities, pro rata based upon the aggregate outstanding amount of all
credit extensions thereunder and, second, to complete the acquisition,
construction and development of the Mortgaged Properties or (ii) if no Loans are
then outstanding and such proceeds are derived from the issuance of subordinated
debentures pursuant to the Subscription Agreement, to complete the acquisition,
construction and development of the Mortgaged Properties. The provisions of this
clause (b) shall survive the termination of this Agreement and the lenders under
the Working Capital Facilities are hereby declared to be third party
beneficiaries of this clause (b).
(c) With respect to each prepayment of Loans required by this Section 4.2,
the Borrower may designate the Types of Loans which are to be prepaid and, in
the case of Eurodollar Rate Loans, the specific Borrowing or Borrowings pursuant
to which such Eurodollar Rate Loans were made, provided that: (i) if any
prepayment of Eurodollar Rate Loans made pursuant to a single Borrowing shall
reduce the outstanding Loans made pursuant to such Borrowing to an amount less
than $5,000,000, such outstanding Loans shall immediately be converted into Base
Rate Loans; and (ii) each prepayment of any Loans made pursuant to a Borrowing
shall be applied pro rata among such Loans. In the absence of a designation by
the Borrower as described in the preceding sentence, the Agent shall, subject to
the above, make such designation in its sole discretion.
4.3 Method and Place of Payment. Except as otherwise specifically provided
herein, all payments under this Agreement or any Note shall be made to the Agent
for the account of the Bank or Banks entitled thereto not later than 12:00 Noon
(New York time) on the date when due and shall be made in Dollars in immediately
available funds at the Payment Office of the Agent. Whenever any payment to be
made hereunder or under any Note shall be stated to be due on a day which is not
a Business Day, the due date thereof shall be extended to the next succeeding
Business Day and, with respect to payments of principal, interest shall be
payable at the applicable rate during such extension.
4.4 Net Payments.
(a) All payments made by the Borrower hereunder or under any Note will be
made without setoff, counterclaim or other defense. All such payments will be
made free and clear of, and without deduction or withholding for, any present or
future taxes, levies, imposts, duties, fees, assessments or other charges of
whatever nature now or hereafter imposed by any jurisdiction or by any political
subdivision or taxing authority thereof or therein (but excluding, except as
provided below, any tax imposed on or measured by the net income of a Bank
pursuant to the laws of the jurisdiction (or any political subdivision or taxing
00001WWP.WP5
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authority thereof or therein) in which the principal office or Applicable
Lending Office of such Bank is located) and all interest, penalties or similar
liabilities with respect thereto (collectively, "Taxes"). The Borrower shall
also reimburse each Bank, upon the written request of such Bank, for taxes
imposed on or measured by the net income of such Bank pursuant to the laws of
the jurisdiction (or any political subdivision or taxing authority thereof or
therein) in which the principal office or Applicable Lending Office of such Bank
is located as such Bank shall determine are payable by such Bank in respect of
amounts paid to or on behalf of such Bank pursuant to the preceding sentence. If
any Taxes are so levied or imposed, the Borrower agrees to pay the full amount
of such Taxes and such additional amounts as may be necessary so that every
payment of all amounts due hereunder or under any Note, after withholding or
deduction for or on account of any Taxes, will not be less than the amount
provided for herein or in such Note. The Borrower will furnish to the Agent
within 45 days after the date the payment of any Taxes is due pursuant to
applicable law certified copies of tax receipts evidencing such payment by the
Borrower. The Borrower will indemnify and hold harmless each Bank, and reimburse
such Bank upon its written request, for the amount of any Taxes so levied or
imposed and paid by such Bank.
(b) Each Bank that is not a United States person (as such term is defined
in Section 7701(a)(30) of the Code) agrees to deliver to the Borrower and the
Agent on or prior to the Effective Date, or in the case of a Bank that is an
assignee or transferee of an interest under this Agreement pursuant to Section
11.4 (unless the respective Bank was already a Bank hereunder immediately prior
to such assignment or transfer), on the date of such assignment or transfer to
such Bank, (i) two accurate and complete original signed copies of Internal
Revenue Service Form 4224 or 1001 (or successor forms) certifying to such Bank's
entitlement to a complete exemption from United States withholding tax with
respect to payments to be made under this Agreement and under any Note, or (ii)
if the Bank is not a "bank" within the meaning of Section 881(c)(3)(A) of the
Code and cannot deliver either Internal Revenue Service Form 1001 or 4224
pursuant to clause (i) above, (x) a certificate substantially in the form of
Exhibit C (any such certificate, a "Section 4.4(b)(ii) Certificate") and (y) two
accurate and complete original signed copies of Internal Revenue Service Form
W-8 (or successor form) certifying to such Bank's entitlement to a complete
exemption from United States withholding tax with respect to payments of
interest to be made under this Agreement and under any Note. In addition, each
Bank agrees that from time to time after the Effective Date, when a lapse in
time or change in circumstances renders the previous certification obsolete or
inaccurate in any material respect, it will deliver to the Borrower and the
Agent two new accurate and complete original signed copies of Internal Revenue
Service Form 4224 or 1001, or Form W-8 and a Section 4.4(b)(ii) Certificate, as
the case may be, and such other forms as may be required in order to confirm or
establish the entitlement of such Bank to a continued exemption from or
reduction in United States withholding tax with respect to payments under this
Agreement and any Note, or it shall immediately notify the Borrower and the
Agent of its inability to deliver any such Form or Certificate. Notwithstanding
anything to the contrary contained in Section 4.4(a), but subject to Section
11.4(b) and the immediately succeeding sentence, (A) the Borrower shall be
entitled, to the extent it is required to do so by law, to deduct or withhold
income or similar taxes imposed by the United States (or any political
subdivision or taxing authority thereof or therein) from interest, fees or other
amounts payable hereunder for the account of any Bank which is not a United
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Statesperson (as such term is defined in Section 7701(a)(30) of the Code) for
U.S. Federal income tax purposes to the extent that such Bank has not provided
to the Borrower U.S. Internal Revenue Service Forms that establish a complete
exemption from such deduction or withholding and (B) the Borrower shall not be
obligated pursuant to Section 4.4(a) hereof to gross-up payments to be made to a
Bank in respect of income or similar taxes imposed by the United States if (I)
such Bank has not provided to the Borrower the Internal Revenue Service Forms
required to be provided to the Borrower pursuant to this Section 4.4(b) or (II)
in the case of a payment, other than interest, to a Bank described in clause
(ii) above, to the extent that such Forms do not establish a complete exemption
from withholding of such taxes. Notwithstanding anything to the contrary
contained in the preceding sentence or elsewhere in this Section 4.4 and except
as set forth in Section 11.4(b), the Borrower agrees to pay additional amounts
and to indemnify each Bank in the manner set forth in Section 4.4(a) (without
regard to the identity of the jurisdiction requiring the deduction or
withholding) in respect of any amounts deducted or withheld by it as described
in the immediately preceding sentence as a result of any changes after the
Effective Date in any applicable law, treaty, governmental rule, regulation,
guideline or order, or in the interpretation thereof, relating to the deducting
or withholding of income or similar Taxes.
SECTION 5. CONDITIONS PRECEDENT.
The obligation of each Bank to make any Loan is subject, at the time of
each Credit Event (except as hereinafter indicated), to the satisfaction of the
following conditions:
5.1 Execution of Agreement; Notes. On the Initial Borrowing Date (i) the
Effective Date shall have occurred and (ii) there shall have been delivered to
the Agent for the account of each of the Banks the appropriate Note executed by
the Borrower in the amount, maturity and as otherwise provided herein.
5.2 No Default; Representations and Warranties; Absence of Material Adverse
Effect. At the time of each Credit Event and also after giving effect thereto
(i) there shall exist no Default or Event of Default; (ii) all representations
and warranties contained herein and in the other Credit Documents shall be true
and correct in all material respects with the same effect as though such
representations and warranties had been made on and as of the date of such
Credit Event; and (iii) no Material Adverse Effect shall exist.
5.3 Notice of Borrowing. Prior to each Credit Event, the Agent shall have
received a Notice of Borrowing with respect thereto meeting the requirements of
Section 2.3.
5.4 Opinions of Counsel. On the Initial Borrowing Date, the Agent shall
have received from Mayer, Brown & Platt, counsel to the Borrower and the Equity
Sponsor, an opinion addressed to the Agent on behalf of the Banks and dated the
Initial Borrowing Date covering the matters set forth in Exhibit D and such
other matters incident to the transactions contemplated herein as any Bank may
reasonably request.
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5.5 Corporate Documents; Proceedings.
(a) On the Initial Borrowing Date, the Agent shall have received a
certificate, dated the Initial Borrowing Date, signed by the President, any
Senior Vice President, any Vice President or the Controller of the Borrower, and
attested to by the Secretary or any Assistant Secretary of the Borrower, in the
form of Exhibit E-1 with appropriate insertions, together with copies of the
certificate of incorporation and by-laws of the Borrower and the resolutions of
the Borrower referred to in such certificate.
(b) On the Initial Borrowing Date, the Agent shall have received a
certificate, dated the Initial Borrowing Date, signed by the President, any
Senior Vice President, any Vice President or the Controller of the Equity
Sponsor, and attested to by the Secretary or any Assistant Secretary of the
Equity Sponsor, in the form of Exhibit E-2 with appropriate insertions, together
with copies of the certificate of incorporation and by-laws of the Equity
Sponsor and the resolutions of the Equity Sponsor referred to in such
certificate.
(c) All corporate and legal proceedings and all instruments and agreements
in connection with the transactions contemplated in this Agreement and the other
Credit Documents shall be satisfactory in form and substance to the Banks, and
the Agent shall have received all information and copies of all documents and
papers, including records of corporate proceedings and governmental approvals,
if any, which any Bank reasonably may have requested in connection therewith,
such documents and papers where appropriate to be certified by proper corporate
or governmental authorities.
5.6 Subscription Agreement and Equity Sponsor's Acknowledgment and
Estoppel. On the Initial Borrowing Date, the Equity Sponsor shall have duly
authorized, executed and delivered (a) a subscription agreement in the form of
Exhibit F (as executed, modified, supplemented or amended from time to time, the
"Subscription Agreement") and (b) an acknowledgment and estoppel in the form of
Exhibit G (as executed, modified, supplemented or amended from time to time, the
"Equity Sponsor's Acknowledgment and Estoppel").
5.7 Security Agreement. The Borrower shall have duly authorized, executed
and delivered a security agreement in the form of Exhibit H (as executed,
modified, supplemented or amended from time to time, the "Security Agreement"),
together with:
(a) an acknowledgment copy of a UCC-1 financing statement duly filed under
the UCC of the State of Georgia and each other jurisdiction as may be necessary
or, in the opinion of the Collateral Agent, desirable to perfect the security
interests purported to be created by the Security Agreement;
(b) evidence of the completion of all other recordings and filings of, or
with respect to, the Security Agreement as may be necessary or, in the opinion
of the Collateral Agent, desirable to perfect the security interests purported
to be created by the Security Agreement; and
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(c) evidence that all other actions necessary or, in the opinion of the
Collateral Agent, desirable to perfect and protect the security interests
purported to be created by the Security Agreement have been taken.
5.8 Payment of Fees. The Agent and the Arranger shall have received all
amounts required to paid to them by the Borrower on or before the Initial
Borrowing Date pursuant to Section 3.1(b).
5.9 Amendments to Working Capital Facilities. On the Initial Borrowing
Date, the Borrower shall have delivered to the Banks a fully executed amendment
to each Working Capital Facility, which amendments shall permit the transactions
contemplated by the Credit Documents to be performed and consummated by the
Borrower without resulting in a breach of covenant and/or default under the
terms of either Working Capital Facility and shall be in form satisfactory to
the Banks.
5.10 Equity Sponsor Side Letter. On the Initial Borrowing Date, the
Borrower shall have delivered to the Banks a fully executed side letter between
the Borrower and the Equity Sponsor regarding actions to be taken to avoid
defaults under the Working Capital Facilities (the "Side Letter"), which side
letter shall be in form and substance satisfactory to the Bank.
The acceptance of the benefits of each Credit Event shall constitute a
representation and warranty by the Borrower to each of the Banks that all the
conditions specified in Section 5.2 exist as of that time. All the Notes,
certificates, legal opinions and other documents and papers referred to in this
Section 5, unless otherwise specified, shall be delivered to the Agent at the
Agent's Notice Office for the account of each of the Banks and, except for the
Notes, in sufficient counterparts for each of the Banks and shall be
satisfactory in form and substance to the Banks.
SECTION 6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
In order to induce the Banks to enter into this Agreement and to make the
Loans, the Borrower makes the following representations, warranties and
agreements as of the Effective Date, which shall survive the execution and
delivery of this Agreement and the Notes and the making of the Loans:
6.1 Corporate Existence and Power. The Borrower (a) is a duly formed and
validly existing corporation in good standing under the laws of the State of
Maryland, (b) has all requisite power and authority to execute, deliver and
perform its obligations under this Agreement and the other Credit Documents to
which it is a party, (c) is duly qualified and is authorized to do business and
is in good standing in each other jurisdiction in which the conduct of its
business requires it to be so qualified or be authorized except where the
failure to be so qualified or authorized would not have a Material Adverse
Effect and (d) has all requisite power and authority to own its properties and
to carry on its business as now conducted.
6.2 Corporate Authorization; No Contravention. The execution, delivery and
performance by the Borrower of this Agreement and the other Credit Documents to
which it is a party are within the Borrower's corporate powers, have been duly
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authorized by all necessary corporate action, and do not and will not (a)
contravene the terms of the certificate of incorporation or by-laws of the
Borrower, (b) conflict with or result in any breach or contravention of, or
constitute a default under, or result in the creation of any Lien upon any of
the property or assets of the Borrower under, any document evidencing any
Contractual Obligation to which the Borrower is a party or any order,
injunction, writ or decree of any Governmental Authority to which the Borrower
or its property is subject; or (c) violate any material Requirement of Law.
6.3 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with (a) the
execution, delivery or performance by, or enforcement against, the Borrower of
this Agreement or the other Credit Documents to which it is a party or (b) the
legality, validity, binding effect or enforceability of this Agreement or the
other Credit Documents to which it is a party.
6.4 Binding Effect. The Borrower has duly executed and delivered this
Agreement, and this Agreement constitutes, and other Credit Documents to which
it is a party when executed and delivered by the Borrower will each constitute,
the legal, valid and binding obligation of the Borrower, enforceable against the
Borrower in accordance with their terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, or similar laws affecting the enforcement
of creditors' rights generally or by equitable principles relating to
enforceability.
6.5 Financial Statements; Financial Condition; Undisclosed Liabilities;
etc.
(a) The consolidated balance sheets of the Borrower and its Consolidated
Subsidiaries at December 31, 1997 and March 31, 1998, and the related
consolidated statements of income, retained earnings and cash flows of the
Borrower and its Consolidated Subsidiaries for the fiscal year or three-month
period, as the case may be, ended on such date and heretofore furnished to the
Agent and Banks present fairly the consolidated financial condition of the
Borrower and its Consolidated Subsidiaries at the date of such balance sheets
and the consolidated results of the operations of the Borrower and its
Consolidated Subsidiaries for such fiscal year or three-month period, as the
case may be. All such financial statements have been prepared in accordance with
GAAP except for, with respect to the financial statements for the three-month
period ended on March 31, 1998, the omission of footnotes and normal year-end
audit adjustments. Since December 31, 1997, there has been no Material Adverse
Effect.
(b) Except (i) as fully reflected in the financial statements delivered
pursuant to Section 6.5(a), (ii) for the execution and delivery of the 1998
Urban Working Capital Facility, (iii) for the increase in the commitments under
the 1997 Suburban Working Capital Facility and (iv) for liabilities or
obligations with respect to the Borrower or any of its Subsidiaries that have
been incurred in the ordinary course of business, there are as of the Effective
Date no liabilities or obligations with respect to the Borrower or any of its
Subsidiaries of any nature whatsoever (whether absolute, accrued, contingent or
otherwise and whether or not due) which, either individually or in aggregate,
would be material to the Borrower or to the Borrower and its Subsidiaries taken
as a whole. As of the Effective Date the Borrower does not know of any basis
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for the assertion against the Borrower or any of its Subsidiaries of any
liability or obligation of any nature whatsoever that is not fully reflected in
the financial statements delivered pursuant to Section 6.5(a) which, either
individually or in the aggregate, could be material to the Borrower or to the
Borrower and its Subsidiaries taken as a whole.
6.6 Litigation. There are no actions, suits, proceedings, claims or
disputes pending, or to the best knowledge of the Borrower, threatened or
contemplated, at law, in equity, in arbitration or before any Governmental
Authority, against the Borrower which (a) purport to affect or pertain to this
Agreement, the other Credit Documents to which it is a party or any of the
transactions contemplated hereby or thereby or (b) would reasonably be expected
to have a Material Adverse Effect. No injunction, writ, temporary restraining
order or any order of any nature has been issued by any court or other
Governmental Authority purporting to enjoin or restrain the execution, delivery
and performance of this Agreement or the other Credit Documents to which it is a
party, or directing that the transactions provided for herein or therein not be
consummated as herein or therein provided.
6.7 Tax Returns and Payments. Each of the Borrower and its Subsidiaries has
filed all tax returns required to be filed by it and has paid all income taxes
payable by it which have become due pursuant to such tax returns and all other
taxes and assessments payable by it which have become due, other than those not
yet delinquent and except for those contested in good faith and for which
adequate reserves have been established in accordance with GAAP. Each of the
Borrower and its Subsidiaries has paid, or has provided adequate reserves in
accordance with GAAP (in the good faith judgment of the management of the
Borrower) for the payment of, all federal and state income taxes applicable for
all prior fiscal years and for the current fiscal year to the date hereof.
6.8 Compliance with ERISA. Each Plan is in substantial compliance with its
terms and with all applicable laws, including without limitation ERISA and the
Code; each Plan which is intended to be qualified under Section 401(a) of the
Code has received a determination letter from the Internal Revenue Service to
the effect that it meets the requirements of Section 401(a) of the Code; no
Reportable Event has occurred; the Borrower has not received notice that any
Multiemployer Plan is insolvent or in reorganization; no Plan has an Unfunded
Current Liability which, when added to the aggregate amount of Unfunded Current
Liabilities with respect to all other Plans, exceeds $2,000,000; no Plan which
is subject to Section 412 of the Code or Section 302 of ERISA has an accumulated
funding deficiency, within the meaning of such sections of the Code or ERISA, or
has applied for or received a waiver of an accumulated funding deficiency or an
extension of any amortization period, within the meaning of Section 412 of the
Code or Section 303 or 304 of ERISA; all contributions required to be made with
respect to a Plan or Multiemployer Plan have been timely made; neither the
Borrower nor any Subsidiary of the Borrower nor any ERISA Affiliate has incurred
any material liability (including any indirect, contingent or secondary
liability) to or on account of a Plan pursuant to Sections 409, 502(i), 502(l),
4062, 4063, 4064 or 4069 of ERISA or Section 401(a)(29), 4971 or 4975 of the
Code or to or on account of a Multiemployer Plan pursuant to Sections 515, 4201,
4204 or 4212 of ERISA or expects to incur any such liability under any of the
foregoing sections with respect to any Plan or Multiemployer Plan, as
applicable; no condition exists which presents a material risk to the Borrower
or any Subsidiary of the Borrower or any ERISA Affiliate of incurring a
liability to or on account of a Plan or Multiemployer Plan, as applicable,
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pursuant to the foregoing provisions of ERISA and the Code; no proceedings have
been instituted to terminate or appoint a trustee to administer any Plan; no
action, suit, proceeding, hearing, audit or investigation with respect to the
administration, operation or the investment of assets of or payments under any
Plan (other than routine claims for benefits) is pending, expected or, to the
Borrower's knowledge, threatened; using actuarial assumptions and computation
methods consistent with Part 1 of subtitle E of Title IV of ERISA, the aggregate
liabilities of the Borrower and its Subsidiaries and its ERISA Affiliates to all
Multiemployer Plans in the event of a complete withdrawal therefrom, as of the
close of the most recent fiscal year of each such Plan ended prior to the date
of the most recent Credit Event, would not exceed $2,000,000; each group health
plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code)
which covers or has covered employees or former employees of the Borrower, any
Subsidiary of the Borrower, or any ERISA Affiliate has at all times been
operated in compliance with the provisions of Part 6 of subtitle B of Title I of
ERISA and Section 4980B of the Code other than any noncompliance that would not
reasonably be expected to result in a material liability of the Borrower, its
Subsidiaries or any ERISA Affiliate; no lien imposed under the Code or ERISA on
the assets of the Borrower or any Subsidiary of the Borrower or any ERISA
Affiliate exists or is likely to arise on account of any Plan or Multiemployer
Plan; and the Borrower and its Subsidiaries do not maintain or contribute to any
employee welfare benefit plan (as defined in Section 3(1) of ERISA) which
provides benefits to retired or other former employees (other than as required
by Section 601 of ERISA) or any pension plan other than any Plan the obligations
with respect to which would reasonably be expected to have a Material Adverse
Effect.
6.9 No Default. No Default or Event of Default exists or would result from
the incurring of any Obligations by the Borrower.
6.10 True and Complete Disclosure. All factual information (taken as a
whole) heretofore or contemporaneously furnished by or on behalf of Borrower or
the Equity Sponsor in writing to the Agent or any Bank for purposes of or in
connection with this Agreement or any transaction contemplated herein is, and
all other such factual information (taken as a whole) hereafter furnished by or
on behalf of any such Persons in writing to the Agent or any Bank will be, true
and accurate in all material respects on the date as of which such information
is dated or certified and not incomplete by omitting to state any material fact
necessary to make such information (taken as a whole) not misleading at such
time in light of the circumstances under which such information was provided.
6.11 Compliance. The Borrower is in compliance with all Requirements of Law
and Contractual Obligations, except such non-compliance as would not,
individually or in the aggregate, have a Material Adverse Effect.
6.12 Margin Regulations. Neither the making of any Loan hereunder, nor the
use of the proceeds thereof, will violate the provisions of Regulation T, U or X
of the Board of Governors of the Federal Reserve System.
6.13 Investment Company. The Borrower is not an "investment company," or an
"affiliated person" of, or a "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act of
1940, as amended.
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6.14 Labor Relations. Neither the Borrower nor any of its Subsidiaries is
engaged in any unfair labor practice that would have a Material Adverse Effect.
There is (a) no significant unfair labor practice complaint pending against the
Borrower or any of its Subsidiaries or, to the best knowledge of the Borrower,
threatened against any of them, before the National Labor Relations Board, and
no significant grievance or significant arbitration proceeding arising out of or
under any collective bargaining agreement is so pending against the Borrower or
any of its Subsidiaries or, to the best knowledge of the Borrower, threatened
against any of them, (b) no significant strike, labor dispute, slowdown or
stoppage pending against the Borrower or any of its Subsidiaries or, to the best
knowledge of the Borrower, threatened against the Borrower or any of its
Subsidiaries and (c) to the best knowledge of the Borrower, no union
representation question existing with respect to the employees of the Borrower
or any of its Subsidiaries and, to the best knowledge of the Borrower, no union
organizing activities are taking place, except (with respect to any matter
specified in clause (a), (b) or (c) above, either individually or in the
aggregate) such as would not have a Material Adverse Effect.
6.15 Patents, Licenses, Franchises and Formulas. Each of the Borrower and
its Subsidiaries owns all the patents, trademarks, permits, service marks, trade
names, copyrights, licenses, franchises and formulas, or rights with respect to
the foregoing, and has obtained assignments of all leases and other rights of
whatever nature, necessary for the present conduct of its business, without any
known conflict with the rights of others which, or the failure to obtain which,
as the case may be, would result in a Material Adverse Effect.
6.16 Nature of Business. Neither the Borrower nor any of its Subsidiaries
is engaged in any business other than the ownership, construction, development,
operation and management of extended stay facilities (other than businesses
incidental to the development, operation and management of extended stay
facilities).
6.17 Solvency. Within the meaning of Section 548 of the Bankruptcy Code,
the Uniform Fraudulent Transfer Act and the Uniform Fraudulent Conveyance Act as
in effect in any relevant jurisdiction, and any similar laws or statutes, and
after giving effect to the transactions contemplated hereby: (a) the fair
saleable value of the Borrower's assets exceeds and will, immediately following
the making of each Loan, exceed the Borrower's total liabilities including,
without limitation, subordinated, unliquidated, disputed and contingent
liabilities; (b) the fair saleable value of the Borrower's assets is and will,
immediately following the making of each Loan, be greater than the Borrower's
probable liabilities, including the maximum amount of its contingent liabilities
on its debts as such debts become absolute and matured; (c) the Borrower's
assets do not and, immediately following the making of each Loan, will not,
constitute unreasonably small capital to carry out its business as conducted or
as proposed to be conducted; and (d) the Borrower does not intend to, and does
not believe that it will, incur debts and liabilities (including without
limitation contingent liabilities and other commitments) beyond its ability to
pay such debts as they mature (taking into account the timing and amounts of
cash to be received by the Borrower and the amounts to be payable on or in
respect of obligations of the Borrower).
6.18 Drawing Under Subscription Agreement. Unless the Borrower shall have
received proceeds of Securities Offerings sufficient to repay all Loans that
will become due and payable on the Expiry Date, the Borrower shall, on or before
the eighth day preceding the Expiry Date, demand payment under the Subscription
Agreement from the Equity Sponsor of the amount needed to repay such Loans in
full on the Expiry Date.
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SECTION 7. AFFIRMATIVE COVENANTS.
The Borrower covenants and agrees that on and after the Effective Date and
until the Total Commitment has terminated and the Loans and the Notes, together
with interest, Fees and all other obligations incurred hereunder and thereunder,
are paid in full:
7.1 Information Covenants. The Borrower will furnish to each Bank:
(a) Quarterly Financial Statements. As soon as available and in any event
within 45 days after the close of each quarterly accounting period (other than
the last fiscal quarter of a fiscal year) in each fiscal year of the Borrower
(unless the filing requirements have been extended by the Securities and
Exchange Commission (together with any successor to the functions thereof, the
"SEC"), in which case the 45-day reference shall be changed to such extended
date granted by the SEC), the consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as at the end of such quarterly period and the related
consolidated statements of income, retained earnings and cash flow for such
quarterly period and for the elapsed portion of the fiscal year ended with the
last day of such quarterly period, in each case setting forth comparative
figures for the related periods in the prior fiscal year, all of which shall be
certified by the chief financial officer or controller of the Borrower as being
true and correct and that fairly present the consolidated financial condition as
at the end of such fiscal quarter, and the consolidated results of operations
and changes in cash flow for such fiscal quarter, of the Borrower and its
Consolidated Subsidiaries in accordance with GAAP, subject to the omission of
footnotes and normal year-end audit adjustments.
(b) Annual Financial Statements. As soon as available and in any event
within 90 days after the close of each fiscal year of the Borrower (unless the
filing requirements have been extended by the SEC, in which case the 90-day
reference shall be changed to such extended date granted by the SEC), the
consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as
at the end of such fiscal year and the related consolidated statements of
income, retained earnings and cash flow for such fiscal year, in each case
setting forth comparative figures for the preceding fiscal year, all in
reasonable detail and accompanied by a report thereon of Arthur Andersen LLP or
other independent certified public accountants of recognized national standing
reasonably acceptable to the Required Banks, which report shall be unqualified
as to scope of audit and shall state that such consolidated financial statements
present fairly the consolidated financial condition as at the end of such fiscal
year, and the consolidated results of operations and changes in cash flow for
such fiscal year, of the Borrower and its Consolidated Subsidiaries in
accordance with GAAP.
(c) Officer's Certificates. At the time of the delivery of the financial
statements provided for in Section 7.1(a) and (b), a certificate of the chief
financial officer or controller of the Borrower to the effect that, to the best
of his or her knowledge, no Default or Event of Default has occurred and is
continuing or, if any Default or Event of Default has occurred and is
continuing, specifying the nature and extent thereof, which certificate shall
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set forth the calculations required to establish whether the Borrower was in
compliance with the provisions of Sections 8.7 through 8.9, inclusive, at the
end of such fiscal quarter or year, as the case may be. At the time of the
delivery of the financial statements provided for in Section 7.1(a), a
certificate of the chief financial officer or controller of the Borrower
demonstrating the Borrower's compliance with Section 8.16 for the fiscal quarter
to which such certificate relates.
(d) Notice of Default or Litigation. Promptly, and in any event within
three Business Days after an officer of the Borrower obtains knowledge thereof,
notice of (i) the occurrence of any event which constitutes a Default or Event
of Default, (ii) any litigation or governmental proceeding pending (x) against
the Borrower or any of its Subsidiaries which could reasonably be expected to
result in a Material Adverse Effect or (y) with respect to any Credit Document
and (iii) any other event (including, without limitation, threat of suit,
proceeding or investigation) which could reasonably be expected to result in a
Material Adverse Effect.
(e) Other Reports and Filings. Promptly, copies of all financial
information, proxy materials and other information and reports, if any, which
the Borrower shall file with the SEC or any national securities exchange upon
which any security of the Borrower is listed or quoted, or provide to its
security holders or other lenders.
(f) Other Information. From time to time, such other information or
documents (financial or otherwise) as any Bank may reasonably request.
7.2 Books, Records and Inspections. The Borrower will, and will cause each
of its Subsidiaries to, keep proper books of record and account in which full,
true and correct entries in conformity with GAAP and all Requirements of Law
shall be made of all dealings and transactions in relation to its business and
activities. The Borrower will, and will cause each of its Subsidiaries to,
permit officers and designated representatives of the Agent or any Bank to visit
and inspect, under guidance of officers of the Borrower or such Subsidiary, any
of the properties of the Borrower or such Subsidiary, and to examine and make
abstracts of the books of record and account of the Borrower or such Subsidiary
and to discuss during regular business hours the affairs, finances and accounts
of the Borrower or such Subsidiary with, and be advised as to the same by, its
and their officers and independent certified public accounts, all at such
reasonable times and intervals and to such reasonable extent as the Agent or
such Bank may request, provided that, in the case of any discussions with any
independent certified public accountants, the Borrower shall, so long as no
Event of Default has occurred and is continuing, have the right to be present
during any such discussions.
7.3 Maintenance of Property, Insurance. The Borrower will, and will cause
each of its Subsidiaries to, (i) keep all property useful and necessary in its
business in good working order and condition, normal wear and tear accepted,
(ii) maintain with financially sound and reputable insurance companies insurance
on all its property in at least such amounts and against at least such risks as
are currently insured against and (iii) furnish to each Bank, upon written
request, full information as to the insurance carried.
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7.4 Corporate Franchises. The Borrower will, and will cause each of its
Subsidiaries to, do or cause to be done, all things necessary to preserve and
keep in full force and effect its existence and its material rights, franchises,
licenses and patents; provided, however, that nothing in this Section 7.4 shall
prevent the withdrawal by the Borrower or any of its Subsidiaries of its
qualification as a foreign corporation in any jurisdiction where such withdrawal
would not have a Material Adverse Effect.
7.5 Compliance with Statutes, etc. The Borrower will, and will cause each
of its Subsidiaries to, comply with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, all Governmental
Authorities in respect of the conduct of its business and the ownership of its
property (including applicable statutes, regulations, orders and restrictions
relating to environmental standards and controls), except such noncompliances as
would not, individually or in the aggregate, have a Material Adverse Effect.
7.6 ERISA. As soon as possible and, in any event, within ten (10) days
after the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate knows
or has reason to know of the occurrence of any of the following, the Borrower
will deliver to each of the Banks a certificate of the chief financial officer
of the Borrower setting forth the full details as to such occurrence and the
action, if any, that the Borrower, such Subsidiary or such ERISA Affiliate is
required or proposes to take, together with any notices required or proposed to
be given to or filed with or by the Borrower, the Subsidiary, the ERISA
Affiliate, the PBGC, a Plan or Plan participant or the Plan administrator with
respect thereto: that a Reportable Event has occurred; that a contributing
sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan is subject to the
advance reporting requirements of PBGC Regulation Section 4043.61 (without
regard to subparagraph (b)(1) thereof), and an event described in subsection
.62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 is
reasonably expected to occur with respect to such Plan within the following 30
days; that an accumulated funding deficiency, within the meaning of Section 412
of the Code or Section 302 of ERISA, has been incurred or an application may be
or has been made for a waiver or modification of the minimum funding standard
(including any required installment payments) or an extension of any
amortization period under Section 412 of the Code or Section 303 or 304 of ERISA
with respect to a Plan; that any contribution required to be made with respect
to a Plan or Multiemployer Plan has not been timely made; that a Plan or
Multiemployer Plan has been or may reasonably be expected to be terminated,
reorganized, partitioned or declared insolvent under Title IV of ERISA; that a
Plan has an Unfunded Current Liability which, when added to the aggregate amount
of Unfunded Current Liabilities with respect to all other Plans exceeds the
aggregate amount of such Unfunded Current Liabilities that existed on the
Initial Borrowing Date by $2,000,000; that proceedings may be or have been
instituted under Section 4042 of ERISA to terminate or appoint a trustee to
administer a Plan; that a proceeding has been instituted pursuant to Section 515
of ERISA to collect a delinquent contribution to a Plan or Multiemployer Plan;
that the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate will or
may incur any liability (including any indirect, contingent, or secondary
liability) to or on account of the termination of or withdrawal from a Plan
under Section 4062, 4063, 4064 or 4069 of ERISA or with respect to a
Multiemployer Plan under Section 4201, 4204 or 4212 of ERISA or with respect to
a Plan under Section 401(a)(29), 4971, 4975 or 4980 of the Code or Section 409
or 502(i) or 502(l) of ERISA or with respect to a group health plan (as defined
in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) or material
excise tax under Section 4980B of the Code; or that the Borrower or any
Subsidiary of the Borrower may incur any material liability pursuant to any
employee welfare benefit plan (as defined in Section 3(1) of ERISA) that
provides benefits to retired employees or other former employees (other than as
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required by Section 601 of ERISA) or any Plan that would reasonably be expected
to interfere with the Borrower's obligations under this Agreement or the other
Credit Documents. Upon request by any Bank, the Borrower will also deliver to
such Bank a complete copy of the annual report (on Internal Revenue Service Form
5500-series) of each Plan (including, to the extent required, the related
financial and actuarial statements and opinions and other supporting statements,
certifications, schedules and information) required to be filed with the
Internal Revenue Service. In addition to any certificates or notices delivered
to the Banks pursuant to the first sentence hereof, copies of any records,
documents or other information required to be furnished to the PBGC (other than
with respect to timely routine premium payments), and any material notices
received by the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate
with respect to any Plan or Multiemployer Plan shall be delivered to the Banks
no later than ten (10) days after the date such records, documents and/or
information has been furnished to the PBGC or such notice has been received by
the Borrower, the Subsidiary or the ERISA Affiliate as applicable.
7.7 End of Fiscal Years; Fiscal Quarters. The Borrower shall cause (a) each
of its, and each of its Subsidiary's, fiscal years to end on December 31 and (b)
each of its, and each of its Subsidiary's, fiscal quarters to end on March 31,
June 30, September 30 and December 31.
7.8 Performance of Obligations. The Borrower shall comply with and perform
all of its obligations under the Working Capital Facilities. The Borrower shall,
and shall cause each of its Subsidiaries to, perform all its Contractual
Obligations (other than those covered by the preceding sentence), except such
non-performances as would not in the aggregate have a Material Adverse Effect.
7.9 Payment of Taxes and Claims, Etc. The Borrower shall, and shall cause
each of its Subsidiaries to, pay (a) all taxes, assessments and governmental
charges imposed upon it or upon its property, unless the failure to so pay would
not reasonably be expected to constitute or result in a Material Adverse Effect
and (b) all taxes, assessments and governmental charges imposed upon any
property, and all claims (including, without limitation, claims for labor,
materials, supplies, or services) which might, if unpaid, become a Lien thereon
unless, in each case, the validity or amount thereof is being contested in good
faith by appropriate proceedings and the Borrower or the applicable Subsidiary
has, if required to do so under GAAP, maintained adequate reserves with respect
thereto.
SECTION 8. NEGATIVE COVENANTS.
The Borrower covenants and agrees that on and after the Effective Date and
until the Total Commitment has terminated and the Loans and the Notes, together
with interest, Fees and all other obligations incurred hereunder and thereunder,
are paid in full:
8.1 Liens. Except for the Lien created by the Security Agreement and Liens
for taxes not yet due, the Borrower will not create, incur, assume or suffer to
exist any Lien upon or with respect to the Collateral or any portion thereof.
Except for Liens permitted under the Working Capital Facilities, the Borrower
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will not, and will not permit any of its Subsidiaries to, create, incur, assume
or suffer to exist any Lien upon or with respect to any Mortgaged Property. The
Borrower will not, and will not permit any of its Subsidiaries to, create,
incur, assume or suffer to exist any Lien upon or with respect to any property
or assets (real or personal, tangible or intangible) of the Borrower or any of
its Subsidiaries other than the Collateral and the Mortgaged Properties, whether
now owned or hereafter acquired (collectively, "Remaining Property"), provided
that such restrictions shall not prevent the creation, incurrence, assumption or
existence of:
(a) Liens for taxes not yet due, or Liens for taxes being contested in good
faith and by appropriate proceedings for which adequate reserves have been
established;
(b) Liens in respect of Remaining Property imposed by law, which were
incurred in the ordinary course of business, such as carriers', warehousemen's
and mechanics' liens and other similar Liens arising in the ordinary course of
business and (i) which do not in the aggregate materially detract from the value
of such Remaining Property or materially impair the use thereof in the operation
of the business of the Borrower or any of its Subsidiaries or (ii) which are
being contested in good faith by appropriate proceedings, which proceedings have
the effect of preventing the forfeiture or sale of the Remaining Property
subject to any such Lien; and
(c) pledges or deposits in connection with worker's compensation,
unemployment insurance and other social security legislation.
8.2 Consolidation, Merger, Sale of Assets, etc. The Borrower will not (a)
merge into or consolidate with any other Person; (b) sell, assign, lease,
transfer, convey or otherwise dispose of (in one transaction or a series of
transactions) all or substantially all of the Borrower's assets to any Person or
group (as such term is used in Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended); or (c) liquidate or dissolve or permit the adoption of a
plan by the stockholders of the Borrower relating to the dissolution or
liquidation of the Borrower.
8.3 Dividends.
(a) The Borrower will not declare or pay any dividends, or return any
capital, to its stockholders or authorize or make any other distribution,
payment or delivery of property or cash to its stockholders as such, or redeem,
retire, purchase or otherwise acquire, directly or indirectly, for a
consideration, any shares of any class of its capital stock now or hereafter
outstanding (or any options or warrants issued by the Borrower with respect to
its capital stock), or set aside any funds for any of the foregoing purposes, or
permit any of its Subsidiaries to purchase or otherwise acquire for a
consideration any shares of any class of the capital stock of the Borrower now
or hereafter outstanding (or any options or warrants issued by the Borrower with
respect to its capital stock).
(b) The Borrower will not permit any of its Subsidiaries to declare or pay
any dividends, or return any capital, to its stockholders or authorize or make
any other distribution, payment or delivery of property or cash to its
stockholders as such, or redeem, retire, purchase or otherwise acquire, directly
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or indirectly, for a consideration, any shares of any class of its capital stock
now or hereafter outstanding (or any options or warrants issued by such
Subsidiary with respect to its capital stock), or set aside any funds for any of
the foregoing purposes, or permit any of its Subsidiaries to purchase or
otherwise acquire for a consideration any shares of any class of the capital
stock of such Subsidiary now or hereafter outstanding (or any options or
warrants issued by such Subsidiary with respect to its capital stock), except
that any Subsidiary may pay dividends to the Borrower or any Wholly-Owned
Subsidiary of the Borrower.
8.4 Indebtedness. The Borrower will not, and will not permit any of its
Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness, except (a) Indebtedness of the Borrower incurred under the Credit
Documents, (b) Indebtedness permitted (whether by waiver or otherwise) under the
Working Capital Facilities and (c) Indebtedness comprised of letters of credit
which are fully cash collateralized.
8.5 Advances, Investments and Loans. The Borrower will not, and will not
permit any of its Subsidiaries to, lend money or credit or make advances to any
Person, or purchase or acquire any stock, obligations or securities of, or any
other interest in, or make any capital contribution to, any other Person, except
that the following shall be permitted:
(a) the Borrower and its Subsidiaries may acquire and hold receivables
owing to it, if created or acquired in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms;
(b) the Borrower and its Subsidiaries may acquire and hold Cash
Equivalents;
(c) the Borrower may make equity contributions to the capital of its
Wholly-Owned Subsidiaries and the Wholly-Owned Subsidiaries of the Borrower may
make equity contributions to the capital of their respective Wholly-Owned
Subsidiaries; and
(d) the Borrower may make loans and advances to its Wholly-Owned
Subsidiaries.
8.6 Transactions with Affiliates. The Borrower will not purchase, acquire,
lease any property from, or sell, transfer, or lease any property to, or lend or
advance any money to, or borrow any money from, or guarantee any obligation of,
or acquire any stock, obligations or securities of, or enter into any merger or
consolidation agreement, or any management or similar agreement with, any
Affiliate, or enter into any other transaction or arrangement or make any
payments to (including, without limitation, on account of any management fees,
service fees, office charges, consulting fees, technical service charges, or tax
sharing charges) or otherwise deal with, in the ordinary course of business or
otherwise, any Affiliate on terms other than arm's-length commercially
reasonable terms (other than (a) those transactions in effect on the Effective
Date and previously disclosed in writing to the Banks, (b) any such transactions
between the Borrower and any of its Subsidiaries and between Subsidiaries of
Borrower and (c) the Subscription Agreement).
8.7 Debt Service Coverage Ratio. The Borrower will not permit the ratio of
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its Consolidated EBITDA to its Debt Service for any fiscal quarter set forth
below to be less than the ratio set forth below opposite such fiscal quarter:
Fiscal Quarter Ended Ratio
September 30, 1998 1.4:1.0
December 31, 1998 1.4:1.0
March 31, 1999 1.5:1.0.
8.8 Total Debt. The Borrower will not permit the aggregate amount of its
Indebtedness at any time to exceed an amount equal to fifty-five percent (55%)
of Gross Asset Value at such time, or permit the aggregate amount of its
Indebtedness secured by a Lien at any time to exceed an amount equal to fifty
percent (50%) of Gross Asset Value at such time.
8.9 Consolidated Net Worth. The Borrower will not permit its Consolidated
Net Worth at any time to be less than $325,000,000.
8.10 Limitation on Modification of Certificate of Incorporation and
By-Laws. The Borrower will not, and will not permit any of its Subsidiaries to,
amend, modify or change its certificate of incorporation (including, without
limitation, by the filing or modification of any certificate of designation) or
by-laws if such amendment, modification or change would (a) create a new class
of securities or (b) would have a Material Adverse Effect or (c) would otherwise
result in a Default hereunder.
8.11 Limitation on Modification of Subscription Agreement and Side Letter.
The Borrower shall not consent to the amendment, modification, waiver, release,
cancellation or termination of any provision of the Subscription Agreement or
the Side Letter and will not take any action, or omit to take any action
necessary, if such failure or omission could reasonably be expected to impair in
any manner (a) the Borrower's right to demand payment under the Subscription
Agreement from the Equity Sponsor or (b) the rights and remedies of the
Collateral Agent and the Banks in respect of the Subscription Agreement or the
Side Letter.
8.12 Limitation on Restrictions on Subsidiary Dividends and Other
Distributions. The Borrower will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
such Subsidiary to (a) pay dividends or make any other distributions on its
capital stock or any other interest or participation in its profits owned by the
Borrower or any Subsidiary of the Borrower, or pay any Indebtedness owed to the
Borrower or a Subsidiary of the Borrower, (b) make loans or advances to the
Borrower or (c) transfer any of its properties or assets to the Borrower, except
for such encumbrances or restrictions existing under or by reason of (i)
applicable law, (ii) this Agreement and (z) customary provisions restricting
subletting or assignment of any lease governing a leasehold interest of the
Borrower or a Subsidiary of the Borrower.
8.13 Limitation on Issuance of Capital Stock by Subsidiaries. The Borrower
shall not permit any of its Subsidiaries to issue any capital stock (including
by way of sales of treasury stock) or any options or warrants to purchase, or
securities convertible into, capital stock, except for (a) transfers and
replacements of then outstanding shares of capital stock, (b) stock splits,
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stock dividends and similar issuances which do not decrease the percentage
ownership of the Borrower or any of its Subsidiaries in any class of the capital
stock of such Subsidiary and (c) stock issuances (1) to the Borrower from any of
its Wholly-Owned Subsidiaries or (2) to any Wholly-Owned Subsidiary of the
Borrower from any of its respective Wholly-Owned Subsidiaries, in each case in
consideration of an equity contribution permitted under Section 8.5(c).
8.14 Business. The Borrower will not, and will not permit any of its
Subsidiaries to, engage (directly or indirectly) in any business other than the
business in which it is engaged on the Effective Date and any business
reasonably ancillary thereto.
8.15 Use of Proceeds. The Borrower will not use any part of the proceeds of
any Loan to purchase or carry any Margin Stock or to extend credit for the
purpose of purchasing or carrying any Margin Stock. The Borrower will use the
proceeds of each Loan to fund the acquisition of land, to construct and develop
extended stay facilities on such land and, so long as no Default of Event of
Default has occurred and is continuing, for other general corporate purposes.
8.16 Total Costs. The Borrower has not and will not undertake any activity
that will create a funding need in excess of the sum of (a) the aggregate amount
available from internally generated excess cash, (b) the maximum amount
available to be borrowed under the Working Capital Facilities and (c) the
maximum amount available to be borrowed under this Agreement, including any need
for any and all of the costs of the development and/or operation of the Borrower
and its business.
SECTION 9. EVENTS OF DEFAULT.
Upon the occurrence of any of the following specified events (each an
"Event of Default"):
9.1 Payments. The Borrower shall (i) default in the payment when due of any
principal of any Loan or any Note or (ii) default, and such default shall
continue unremedied for three or more days, in the payment when due of any
interest on any Loan or any Note or any Fees or any other amounts owing
hereunder or under any Note; or
9.2 Representations, etc. Any representation, warranty or statement made by
or on behalf of the Borrower or the Equity Sponsor herein or in any other Credit
Document or in any certificate delivered pursuant hereto or thereto shall prove
to be untrue in any material respect on the date as of which made or deemed
made; or
9.3 Covenants. The Borrower shall (i) default in the due performance or
observance by it of any term, covenant or agreement contained in Section
7.1(d)(i), 7.7 or 8 or (ii) default in the due performance or observance by it
of any term, covenant or agreement (other than those referred to in Sections 9.1
and 9.2 and clause (i) of this Section 9.3) contained in this Agreement and such
default shall continue unremedied for a period of 15 days after written notice
to the Borrower by either the Agent or any Bank; or
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9.4 Default Under Other Agreements.
(a) The Borrower shall (i) default in any payment of any Indebtedness under
the Working Capital Facilities beyond the period of grace, if any, provided in
the Working Capital Facilities or (ii) default in the observance or performance
of any agreement or condition relating to any Indebtedness under the Working
Capital Facilities or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or to
permit the holder or holders of Indebtedness under the Working Capital
Facilities to cause (determined without regard to whether any notice is
required), any such Indebtedness to become due prior to its stated maturity;
(b) the Equity Sponsor shall (i) default in any payment of any Indebtedness
(other than non-recourse Indebtedness) in an aggregate principal amount of
$25,000,000 or more beyond the period of grace, if any, provided in the
instrument or agreement under which such Indebtedness was created or (ii)
default in the observance or performance of any agreement or condition relating
to any Indebtedness (other than non-recourse Indebtedness) in an aggregate
principal amount of $25,000,000 or more or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of Indebtedness (or a
trustee or agent on behalf of such holder or holders) to cause (determined
without regard to whether any notice is required), any such Indebtedness to
become due prior to its stated maturity;
(c) the Borrower shall (i) default in any payment of any Indebtedness
(other than the Notes or Indebtedness incurred under the Working Capital
Facilities) in an aggregate principal amount of $5,000,000 or more beyond the
period of grace, if any, provided in the instrument or agreement under which
such Indebtedness was created or (ii) default in the observance or performance
of any agreement or condition relating to any Indebtedness (other than the Notes
or Indebtedness incurred under the Working Capital Facilities) in an aggregate
principal amount of $5,000,000 or more or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such Indebtedness
(or a trustee or agent on behalf of such holder or holders) to cause (determined
without regard to whether any notice is required), any such Indebtedness to
become due prior to its stated maturity; or
(d) any Indebtedness of the Borrower or the Equity Sponsor of the type
described in paragraphs (a), (b) or (c) above shall be declared to be due and
payable, or required to be prepaid other than by a regularly scheduled required
prepayment, prior to the stated maturity thereof; or
9.5 Bankruptcy, etc. The Borrower or the Equity Sponsor shall commence a
voluntary case concerning itself under Title 11 of the United States Code
entitled "Bankruptcy," as now or hereafter in effect, or any successor thereto
(the "Bankruptcy Code"); or an involuntary case is commenced against the
Borrower or the Equity Sponsor and the petition is not controverted within 10
days, or is not dismissed within 90 days, after commencement of the case; or a
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custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge
of, all or substantially all of the property of the Borrower or the Equity
Sponsor, or the Borrower or the Equity Sponsor commences any other proceeding
under any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Borrower or the Equity
Sponsor, or there is commenced against the Borrower or the Equity Sponsor any
such proceeding which remains undismissed for a period of 90 days, or the
Borrower or the Equity Sponsor is adjudicated insolvent or bankrupt; or any
order of relief or other order approving any such case or proceeding is entered;
or the Borrower or the Equity Sponsor suffers any appointment of any custodian
or the like for it or any substantial part of its property to continue
undischarged or unstayed for a period of 90 days; or the Borrower or the Equity
Sponsor makes a general assignment for the benefit of creditors; or any
corporate action is taken by the Borrower or the Equity Sponsor for the purpose
of effecting any of the foregoing; or
9.6 ERISA. (a) Any Plan shall fail to satisfy the minimum funding standard
required for any plan year or part thereof under Section 412 of the Code or
Section 302 of ERISA or a waiver of such standard or extension of any
amortization period is sought or granted under Section 412 of the Code or
Section 303 or 304 of ERISA, a Reportable Event shall have occurred, a
contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan
shall be subject to the advance reporting requirements of PBGC Regulation
Section 4043.61 (without regard to subparagraph (b)(1) thereof) and an event
described in subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation
Section 4043 shall be reasonably expected to occur with respect to such Plan
within the following 30 days, any Plan or Multiemployer Plan shall have had or
is likely to have a trustee appointed to administer such plan, or is, shall have
been or is likely to be terminated or to be the subject of termination
proceedings under Section 4042 of ERISA, any Plan shall have an Unfunded Current
Liability, a contribution required to be made with respect to a Plan or a
Multiemployer Plan has not been timely made, the Borrower or any Subsidiary of
the Borrower or any ERISA Affiliate has incurred or is likely to incur any
liability to or on account of a Plan under Section 409, 502(i), 502(l), 4062,
4063, 4064 or 4069 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or
to or on account of a Multiemployer Plan under Sections 515, 4201, 4204 or 4212
of ERISA or on account of a group health plan (as defined in Section 607(1) of
ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of the Code, or
the Borrower or any Subsidiary of the Borrower has incurred or is likely to
incur liabilities pursuant to one or more employee welfare benefit plans (as
defined in Section 3(1) of ERISA) that provide benefits to retired employees or
other former employees (other than as required by Section 601 of ERISA) or any
pension plan other than a Plan; (b) there shall result from any such event or
events the imposition of a lien, the granting of a security interest, or a
liability or a material risk of incurring a liability; and (c) such lien,
security interest or liability, individually, and/or in the aggregate, in the
opinion of the Required Banks, has had, or could reasonably be expected to have,
a Material Adverse Effect; or
9.7 Security Agreement. The Security Agreement or any material provision
thereof shall cease to be in full force and effect, or shall cease to give the
Collateral Agent the Liens, rights, powers and privileges purported to be
created thereby, or the Borrower shall default in the due performance or
observance of any material term, covenant or agreement on its part to be
performed or observed pursuant to the Security Agreement; or
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9.8 Subscription Agreement. The Subscription Agreement, the Equity
Sponsor's Acknowledgment and Estoppel or any material provision thereof shall
cease to be in full force or effect (whether as a result of a change in law
after the date of this Agreement or otherwise), or the Equity Sponsor or any
Person acting by or on behalf of the Equity Sponsor shall deny or disaffirm the
Equity Sponsor's obligations under the Subscription Agreement or the Equity
Sponsor's Acknowledgment and Estoppel, or the Equity Sponsor shall default in
the due performance or observance of any material term, covenant or agreement on
its part to be performed or observed pursuant to the Subscription Agreement or
the Equity Sponsor's Acknowledgment and Estoppel; or
9.9 Change of Control. (a) The acquisition by any Person or group (as such
term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended), except for the Equity Sponsor or Affiliates thereof, of a direct or
indirect majority interest (more than 50%) of the voting power of the capital
stock of the Borrower by way of purchase, merger or consolidation or otherwise;
or (b) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of the Borrower
(which includes any new directors whose election by such Board of Directors or
whose nomination for election by the stockholders of the Borrower was approved
by a vote of at least two-thirds (2/3) of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Borrower; or
9.10 Judgments.
(a) One or more judgments or decrees shall be entered against the Borrower
involving in the aggregate a liability (not paid or fully covered by insurance)
of $5,000,000 or more, and all such judgments or decrees shall not have been
vacated, discharged or stayed or bonded pending appeal within 60 days after the
entry thereof; or
(b) One or more judgments or decrees shall be entered against the Equity
Sponsor involving in the aggregate a liability (not paid or fully covered by
insurance) in an amount equal to or greater than 10% of the Equity Sponsor's
Consolidated Net Worth (determined by reference to the most recent balance sheet
of the Equity Sponsor delivered to the Banks), and all such judgments or decrees
shall not have been vacated, discharged or stayed or bonded pending appeal by
the tenth day preceding the date on which assets of the Equity Sponsor can first
be sold to satisfy such judgment or decree;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Agent may and, upon the written request of the
Required Banks, shall by written notice to the Borrower, take any or all of the
following actions, without prejudice to the rights of the Agent, any Bank or the
holder of any Note to enforce its claims against the Borrower (provided, that,
if an Event of Default specified in Section 9.5 shall occur with respect to the
Borrower, the result which would occur upon the giving of written notice by the
Agent to the Borrower as specified in clauses (i) and (ii) below shall occur
automatically without the giving of any such notice): (i) declare the Total
Commitment terminated, whereupon the Commitment of each Bank shall forthwith
terminate immediately and any Commitment Commission shall forthwith become due
and payable without any other notice of any kind; (ii) declare the principal
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of and any accrued interest in respect of all Loans and the Notes and all
obligations owing hereunder and thereunder to be, whereupon the same shall
become, forthwith due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower; (iii) demand
payment in full from the Equity Sponsor under the terms of the Subscription
Agreement or (iv) exercise all remedies available to the Collateral Agent under
the Security Documents.
SECTION 10. THE AGENT.
The provisions of this Section 10 are solely for the benefit of the Agent
and the Banks, and neither the Borrower nor the Equity Sponsor shall have any
rights as a third party beneficiary or otherwise under the provisions of this
Section 10, except that the Borrower shall have the right to approve a successor
Agent as provided in Section 10.10.
10.1 Appointment. Each Bank hereby irrevocably designates and appoints
Commerzbank AG as Agent of such Bank (such term to include for purposes of this
Section 10, Commerzbank AG acting as Collateral Agent) to act as specified
herein and in the other Credit Documents, and each such Bank hereby irrevocably
authorizes Commerzbank AG as the Agent to take such action on its behalf under
the provisions of this Agreement and the other Credit Documents and to exercise
such powers and perform such duties as are expressly delegated to the Agent by
the terms of this Agreement and the other Credit Documents, together with such
other powers as are reasonably incidental thereto. The Agent agrees to act as
such upon the express conditions contained in this Section 10. Notwithstanding
any provision to the contrary elsewhere in this Agreement or in any other Credit
Document, the Agent shall not have any duties or responsibilities, except those
expressly set forth herein or in the other Credit Documents, or any fiduciary
relationship with any Bank or the holder of any Note, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or otherwise exist against the Agent. In performing its
functions and duties under this Agreement, the Agent shall act solely as agent
of the Banks and the Agent does not assume and shall not be deemed to have
assumed any obligation or relationship of agency or trust with or for the
Borrower, the Equity Sponsor or any of their Subsidiaries.
10.2 Delegation of Duties. The Agent may execute any of its duties under
this Agreement or any other Credit Document by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care except to the extent otherwise required by Section 10.3.
10.3 Exculpatory Provisions. Neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates shall be (a)
liable for any action lawfully taken or omitted to be taken by it or such Person
under or in connection with this Agreement or the other Credit Documents (except
for its or such Person's own gross negligence or willful misconduct) or (b)
responsible in any manner to any of the Banks for any recitals, statements,
representations or warranties made by the Borrower or the Equity Sponsor or any
of their respective officers contained in this Agreement or the other Credit
Documents or in any certificate, report, statement or other document referred to
or provided for in, or received by the Agent under or in connection with, this
Agreement or any other Credit Document or for any failure of the Borrower, the
Equity Sponsor or any of their Subsidiaries or any of their respective officers
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to perform its obligations hereunder or thereunder. The Agent shall not be under
any obligation to any Bank to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or the other Credit Documents, or to inspect the properties, books or
records of the Borrower, the Equity Sponsor or any of their Subsidiaries. The
Agent shall not be responsible to any Bank for the effectiveness, genuineness,
validity, enforceability, collectability or sufficiency of this Agreement or any
other Credit Document or for any representations, warranties, recitals or
statements made herein or therein or made in any written or oral statement or in
any financial or other statements, instruments, reports, certificates or any
other documents in connection herewith or therewith furnished or made by the
Agent to the Banks or by or on behalf of the Borrower or the Equity Sponsor or
any of their Subsidiaries to the Agent or any Bank or be required to ascertain
or inquire as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreements contained herein or therein or as to the use
of the proceeds of the Loans or of the existence or possible existence of any
Default or Event of Default.
10.4 Reliance by Agent. The Agent shall be entitled to rely, and shall be
fully protected in relying, upon any note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, facsimile, telex or
teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Borrower, the Equity Sponsor or any of their
Subsidiaries), independent accountants and other experts selected by the Agent.
The Agent shall be fully justified in failing or refusing to take any action
under this Agreement or any other Credit Document unless it shall first receive
such advice or concurrence of the Required Banks as it deems appropriate or it
shall first be indemnified to its satisfaction by the Banks against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and the
other Credit Documents in accordance with a request of the Required Banks, and
such request and any action taken or failure to act pursuant thereto shall be
binding upon all the Banks.
10.5 Notice of Default. The Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder unless the
Agent has actually received notice from a Bank, the Borrower or the Equity
Sponsor referring to this Agreement, describing such Default or Event of Default
and stating that such notice is a "notice of default." In the event that the
Agent receives such a notice, the Agent shall give prompt notice thereof to the
Banks. The Agent shall take such action with respect to such Default or Event of
Default as shall be reasonably directed by the Required Banks; provided, that,
unless and until the Agent shall have received such directions, the Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable in the best interests of the Banks.
10.6 Non-Reliance on Agent, and Other Banks. Each Bank expressly
acknowledges that neither the Agent nor any of its respective officers,
directors, employees, agents, attorneys-in-fact or affiliates have made any
representations or warranties to it and that no act by the Agent hereinafter
taken, including any review of the affairs of the Borrower, the Equity Sponsor
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or any of their Subsidiaries, shall be deemed to constitute any representation
or warranty by the Agent to any Bank. Each Bank represents to the Agent that it
has, independently and without reliance upon the Agent or any other Bank, and
based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, assets, operations,
property, financial and other condition, prospects and creditworthiness of the
Borrower, the Equity Sponsor and their Subsidiaries and made its own decision to
make its Loans hereunder and enter into this Agreement. Each Bank also
represents that it will, independently and without reliance upon the Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement, and to make
such investigation as it deems necessary to inform itself as to the business,
assets, operations, property, financial and other condition, prospects and
creditworthiness of the Borrower, the Equity Sponsor and their Subsidiaries. The
Agent shall not have any duty or responsibility to provide any Bank with any
credit or other information concerning the business, operations, assets,
property, financial and other condition, prospects or creditworthiness of the
Borrower, the Equity Sponsor or any of their Subsidiaries which may come into
the possession of the Agent or any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates.
10.7 Indemnification. The Banks agree to indemnify the Agent in its
capacity as such ratably according to their respective "percentages" as used in
determining the Required Banks at such time, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, reasonable expenses or disbursements of any kind whatsoever which may at
any time (including, without limitation, at any time following the payment of
the Obligations) be imposed on, incurred by or asserted against the Agent in its
capacity as such in any way relating to or arising out of this Agreement or any
other Credit Document, or any documents contemplated by or referred to herein or
the transactions contemplated hereby or any action taken or omitted to be taken
by the Agent under or in connection with any of the foregoing, but only to the
extent that any of the foregoing is not paid by the Borrower or the Equity
Sponsor; provided, that no Bank shall be liable to the Agent for the payment of
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting primarily
from the gross negligence or willful misconduct of the Agent. If any indemnity
furnished to the Agent for any purpose shall, in the opinion of the Agent be
insufficient or become impaired, the Agent may call for additional indemnity and
cease, or not commence, to do the acts indemnified against until such additional
indemnity is furnished. The agreements in this Section 10.7 shall survive the
payment of all Obligations.
10.8 Agent in its Individual Capacity. The Agent and its affiliates may
make loans to, accept deposits from and generally engage in any kind of business
with the Borrower, the Equity Sponsor and their Subsidiaries as though the Agent
were not the Agent hereunder. With respect to the Loans made by it and all
Obligations owing to it, the Agent shall have the same rights and powers under
this Agreement as any Bank and may exercise the same as though it were not the
Agent and the terms "Bank" and "Banks" shall include the Agent in its individual
capacity.
10.9 Holders. The Agent may deem and treat the payee of any Note as the
owner thereof for all purposes hereof unless and until a written notice of the
assignment, transfer or endorsement thereof, as the case may be, shall have been
filed with the Agent. Any request, authority or consent of any Person or entity
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who, at the time of making such request or giving such authority or consent, is
the holder of any Note shall be conclusive and binding on any subsequent holder,
transferee, assignee or indorsee, as the case may be, of such Note or of any
Note or Notes issued in exchange therefor.
10.10 Resignation of the Agent; Successor Agent. The Agent may resign as
the Agent upon 20 days' notice to the Banks. Upon the resignation of the Agent,
the Required Banks shall appoint from among the Banks a successor Agent which is
a bank or a trust company for the Banks subject, to the extent that no payment
Default or Event of Default has occurred and is then continuing, to prior
approval by the Borrower (such approval not to be unreasonably withheld or
delayed), whereupon such successor agent shall succeed to the rights, powers and
duties of the Agent, and the term "Agent" shall include such successor agent
effective upon its appointment, and the resigning Agent's rights, powers and
duties as the Agent shall be terminated, without any other or further act or
deed on the part of such former Agent or any of the parties to this Agreement.
If a successor Agent shall not have been so appointed within such 20 day period
after the date such notice of resignation was given by the Agent, the Agent's
resignation shall become effective and the Banks shall thereafter perform all
duties of the Agent hereunder and/or under any other Credit Documents until such
time, if any, as the Required Banks appoint a successor Agent as provided above.
After the resignation of the Agent hereunder, the provisions of this Section 10
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement.
10.11 Arranger. As Arranger, Commerzbank AG shall have no right, power,
obligation, liability, responsibility or duty under this Agreement. Without
limiting the foregoing, the Arranger shall not have or be deemed to have any
fiduciary relationship with any Bank. Each Bank acknowledges that it has not
relied, and will not rely, on the Arranger in deciding to enter into this
Agreement or in taking or not taking action hereunder.
SECTION 11. MISCELLANEOUS.
11.1 Payment of Expenses, etc. The Borrower shall: (a) whether or not the
transactions herein contemplated are consummated, pay all reasonable
out-of-pocket costs and expenses (i) of the Agent (including, without
limitation, the reasonable fees and disbursements of White & Case LLP) in
connection with the preparation, execution and delivery of this Agreement and
the other Credit Documents and the documents and instruments referred to herein
and therein and any amendment, waiver or consent relating hereto or thereto and
in connection with the Agent's syndication efforts with respect to this
Agreement and (ii) of the Agent and each of the Banks in connection with the
enforcement of this Agreement and the other Credit Documents and the documents
and instruments referred to herein and therein and, after an Event of Default
shall have occurred and be continuing, the protection of the rights of the Agent
and each of the Banks thereunder (including, without limitation, the reasonable
fees and disburse- ments of counsel (including in-house counsel) for the Agent
and for each of the Banks); (b) pay and hold each of the Banks harmless from and
against any and all present and future stamp and other similar taxes with
respect to the foregoing matters and save each of the Banks harmless from and
against any and all liabilities with respect to or resulting from any delay or
omission (other than to the extent attributable to such Bank) to pay such taxes;
and (c) indemnify the Agent, the Collateral Agent and each Bank, its officers,
directors, employees, representatives and agents from and hold each of them
harmless against any and all liabilities, obligations, losses, damages,
penalties, claims, actions, judgments, suits, costs, expenses and disbursements
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incurred by any of them as a result of, or arising out of, or in any way related
to, or by reason of, any investigation, litigation or other proceeding (whether
or not the Agent or any Bank is a party thereto) related to the entering into
and/or performance of this Agreement or any other Credit Document or the use of
the proceeds of any Loans hereunder or the consummation of any transactions
contemplated herein or in any other Credit Document, including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation, litigation or other proceeding (but
excluding any such liabilities, obligations, losses, etc., to the extent
incurred by reason of the gross negligence or willful misconduct of the Person
to be indemnified).
11.2 Right of Setoff. In addition to any rights now or hereafter granted
under applicable law or otherwise, and not by way of limitation of any such
rights, upon the occurrence of an Event of Default, each Bank is hereby
authorized at any time or from time to time, without presentment, demand,
protest or other notice of any kind to the Borrower or to any other Person, any
such notice being hereby expressly waived, to set off and to appropriate and
apply any and all deposits (general or special) and any other Indebtedness at
any time held or owing by such Bank (including without limitation by branches
and agencies of such Bank wherever located) to or for the credit or the account
of the Borrower against and on account of the Obligations and liabilities of the
Borrower to such Bank under this Agreement or under any of the other Credit
Documents, including, without limitation, all interests in Obligations purchased
by such Bank pursuant to Section 11.6(b), and all other claims of any nature or
description arising out of or connected with this Agreement or any other Credit
Document, irrespective of whether or not such Bank shall have made any demand
hereunder and although said Obligations, liabilities or claims, or any of them,
shall be contingent or unmatured.
11.3 Notices. Except as otherwise expressly provided herein, all notices
and other communications provided for hereunder shall be in writing (including
telegraphic, telex, facsimile or cable communication) and mailed, telegraphed,
telexed, telecopied, cabled or delivered: if to the Borrower, to:
Homestead Village Incorporated
2100 RiverEdge Parkway, 9th Floor
Atlanta, Georgia 30328
Attention: Robert C. Aldworth
Senior Vice President and Chief Financial Officer
Telephone: (770) 303-2218
Facsimile: (770) 859-1674;
with a copy to:
Security Capital Group Incorporated
125 Lincoln Avenue
Santa Fe, New Mexico 87501
Attention: Jeffrey A. Klopf
Telephone: (505) 820-8223
Facsimile: (505) 988-8920
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and a copy to: Security Capital Group Incorporated
7777 Market Center Avenue
El Paso, Texas 79910-8412
Attention: Paul Szurek
Telephone: (915) 877-6390
Facsimile: (915) 877-3301
if to any Bank, at its Base Rate Lending Office specified opposite its name on
Schedule I; and if to the Agent, at its Notice Office; or, as to the Borrower or
the Agent, at such other address as shall be designated by such party in a
written notice to the other parties hereto and, as to each other party, at such
other address as shall be designated by such party in a written notice to the
Borrower and the Agent. All such notices and communications shall be mailed,
telegraphed, telexed, telecopied, or cabled or sent by overnight courier and
shall be effective when received.
11.4 Benefit of Agreement.
(a) This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the respective successors and assigns of the parties hereto;
provided, however, the Borrower may not assign or transfer any of its rights,
obligations or interest hereunder or under any other Credit Document without the
prior written consent of all of the Banks and, provided further, that, although
any Bank may transfer, assign or grant participations in its rights hereunder,
such Bank shall remain a "Bank" for all purposes hereunder (and may not transfer
or assign all or any portion of its Commitments hereunder except as provided in
Section 11.4(b)) and the transferee, assignee or participant, as the case may
be, shall not constitute a "Bank" hereunder and, provided further, that no Bank
shall transfer or grant any participation under which the participant shall have
rights to approve any amendment to or waiver of this Agreement or any other
Credit Document except to the extent such amendment or waiver would (i) extend
the final scheduled maturity of any Loan or Note in which such participant is
participating, or reduce the rate or extend the time of payment of interest or
Fees thereon (except in connection with a waiver of applicability of any
post-default increase in interest rates) or reduce the principal amount thereof,
or increase the amount of the participant's participation over the amount
thereof then in effect (it being understood that a waiver of any Default or
Event of Default or of a mandatory reduction in the Total Commitment shall not
constitute a change in the terms of such participation, and that an increase in
any Commitment or Loan shall be permitted without the consent of any participant
if the participant's participation is not increased as a result thereof), (ii)
consent to the assignment or transfer by the Borrower of any of its rights and
obligations under this Agreement or (iii) release all or substantially all of
the Collateral under all of the Security Documents (except as expressly provided
in the Credit Documents) supporting the Loans hereunder in which such
participant is participating. In the case of any such participation, the
participant shall not have any rights under this Agreement or any of the other
Credit Documents (the participant's rights against such Bank in respect of such
participation to be those set forth in the agreement executed by such Bank in
favor of the participant relating thereto) and all amounts payable by the
Borrower hereunder shall be determined as if such Bank had not sold such
participation, except that the participant shall be entitled to the benefits of
Sections 2.10, 2.11 and 4.4 of this Agreement to the extent that such Bank would
be entitled to such benefits if the participation had not been transferred,
granted or assigned.
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(b) Notwithstanding the foregoing, any Bank (or any Bank together with one
or more other Banks) may (i) assign all or a portion of its Commitment (and
related outstanding Obligations hereunder) to its parent company and/or any
Affiliate of such Bank which is at least 50% owned by such Bank or its parent
company or to one or more Banks or (ii) assign all, or if less than all, a
portion equal to at least $10,000,000 in the aggregate for the assigning Bank or
assigning Banks, of such Commitment to one or more commercial banks, financial
institutions or "accredited investors" (as such term is defined in Regulation D
of the Securities Act of 1933, as amended), each of which assignees shall become
a party to this Agreement as a Bank by execution of an Assignment and Assumption
Agreement in the form of Exhibit I (with blanks appropriately completed),
provided that (A) at such time Schedule I shall be deemed modified to reflect
the Commitment of such new Bank and of the existing Banks, (B) upon surrender of
the old Notes, new Notes will be issued, at the Borrower's expense, to such new
Bank and to the assigning Bank, such new Notes to be in conformity with the
requirements of Section 2.5 (with appropriate modifications) to the extent
needed to reflect the revised Commitments, (C) the consent of the Agent and, so
long as no Event of Default has occurred and is continuing, the Borrower shall
be required in connection with any such assignment pursuant to clause (ii) of
this Section 11.4(b) (which consent shall not be unreasonably withheld or
delayed) and (D) the Agent shall receive at the time of each such assignment,
from the assigning or assignee Bank, the payment of a non-refundable assignment
fee of $2,500 and, provided further, that such transfer or assignment will not
be effective until recorded by the Agent on the Register pursuant to Section
11.5 hereof. To the extent of any assignment pursuant to this Section 11.4(b),
the assigning Bank shall be relieved of its obligations hereunder with respect
to its assigned Commitments. At the time of each assignment pursuant to this
Section 11.4(b) to a Person which is not already a Bank hereunder and which is
not a United States person (as such term is defined in Section 7701(a)(30) of
the Code) for Federal income tax purposes, the respective assignee Bank shall
provide to the Borrower and the Agent the appropriate Internal Revenue Service
Forms (and, if applicable a Section 4.4(b)(ii) Certificate) described in Section
4.4(b).
(c) Nothing in this Agreement shall prevent or prohibit any Bank from
pledging its Loans and Notes hereunder to a Federal Reserve Bank in support of
borrowings made by such Bank from such Federal Reserve Bank.
11.5 Register. The Borrower hereby designates the Agent to serve as the
Borrower's agent, solely for purposes of this Section 11.5, to maintain a
register (the "Register") on which it will record the Commitment from time to
time of each of the Banks, the Loans made by each of the Banks and each
repayment in respect of the principal amount of the Loans of each Bank. Failure
to make any such recordation, or any error in such recordation shall not affect
the Borrower's obligations in respect of such Loans. With respect to any Bank,
the transfer of the Commitment of such Bank and the rights to the principal of,
and interest on, any Loan made pursuant to such Commitments shall not be
effective until such transfer is recorded on the Register maintained by the
Agent with respect to ownership of such Commitment and Loans and prior to such
recordation all amounts owing to the transferor with respect to such Commitment
and Loans shall remain owing to the transferor. The registration of assignment
or transfer of all or part of any Commitment and Loans shall be recorded by the
Agent on the Register only upon the acceptance by the Agent of a properly
executed and delivered Assignment and Assumption Agreement pursuant to Section
11.4(b). Coincident with the delivery of such an Assignment and Assumption
Agreement to the Agent for acceptance and registration of assignment or transfer
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of all or part of a Loan, or as soon thereafter as practicable, the assigning or
transferor Bank shall surrender the Note evidencing such Loan, and thereupon one
or more new Notes in the same aggregate principal amount shall be issued to the
assigning or transferor Bank and/or the new Bank. The Borrower agrees to
indemnify the Agent from and against any and all losses, claims, damages and
liabilities of whatsoever nature which may be imposed on, asserted against or
incurred by the Agent in performing its duties under this Section 11.5.
11.6 No Waiver; Remedies Cumulative. No failure or delay on the part of the
Agent or any Bank or the holder of any Note in exercising any right, power or
privilege hereunder or under any other Credit Document and no course of dealing
between the Borrower and the Agent or any Bank or the holder of any Note shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder or under any other Credit Document preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege hereunder or thereunder. The rights, powers and remedies herein or
in any other Credit Document expressly provided are cumulative and not exclusive
of any rights, powers or remedies which the Agent or any Bank or the holder of
any Note would otherwise have. No notice to or demand on the Borrower in any
case shall entitle the Borrower to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of the Agent
or any Bank or the holder of any Note to any other or further action in any
circumstances without notice or demand.
11.7 Payments Pro Rata.
(a) The Agent agrees that promptly after its receipt of each payment from
or on behalf of the Borrower in respect of any Obligations of the Borrower
hereunder, it shall distribute such payment to the Banks pro rata based upon
their respective shares, if any, of the Obligations with respect to which such
payment was received.
(b) Each of the Banks agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of set-off or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise), which is applicable to the payment of the principal of, or interest
on, the Loans or Commitment Commission, of a sum which with respect to the
related sum or sums received by other Banks is in a greater proportion than the
total amount of such Obligation then owed and due to such Bank bears to the
total amount of such Obligation then owed and due to all the Banks immediately
prior to such receipt, then such Bank receiving such excess payment shall
purchase for cash without recourse or warranty from the other Banks an interest
in the Obligations of the Borrower to such Banks in such amount as shall result
in a proportional participation by all the Banks in such amount; provided,
however, that if all or any portion of such excess amount is thereafter
recovered from such Bank, such purchase shall be rescinded and the purchase
price restored to the extent of such recovery, but without interest.
11.8 Computations. All computations of interest, Commitment Commissions and
Fees hereunder shall be made on the basis of a year of 360 days for the actual
number of days (including the first day but excluding the last day) occurring in
the period for which such interest, Commitment Commissions or Fees are payable.
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11.9 Governing Law; Submission to Jurisdiction; Venue.
(a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAW (WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PRINCIPLES THEREOF) OF THE STATE OF NEW YORK EXCEPT AS
OTHERWISE SPECIFICALLY PROVIDED IN THE CREDIT DOCUMENTS WITH RESPECT TO THE
PERFECTION, PRIORITY AND ENFORCEMENT OF LIENS UPON COLLATERAL NOT LOCATED IN THE
STATE OF NEW YORK.
(b) Any legal action or proceeding against the Borrower with respect to
this Agreement or any other Credit Document may be brought in the courts of the
State of New York or of the United States for the Southern District of New York,
and, by execution and delivery of this Agreement, the Borrower hereby
irrevocably accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts.
(c) The Borrower hereby irrevocably waives any objection which it may now
or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement or any other
Credit Document brought in the courts referred to in clause (a) above and hereby
further irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been brought in
an inconvenient forum.
11.10 Waiver of Jury Trial. TO THE EXTENT PERMITTED BY LAW, EACH OF THE
PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.
11.11 Obligation to Make Payments in Dollars. The obligation of the
Borrower to make payment in Dollars of the principal of and interest on the
Notes and any other amounts due hereunder or under any other Credit Document to
the Payment Office of the Agent as provided in Section 4.3 shall not be
discharged or satisfied by any tender, or any recovery pursuant to any judgment,
which is expressed in or converted into any currency other than Dollars, except
to the extent such tender or recovery shall result in the actual receipt by the
Agent at its Payment Office on behalf of the Banks or holders of the Notes of
the full amount of Dollars expressed to be payable in respect of the principal
of and interest on the Notes and all other amounts due hereunder or under any
other Credit Document. The obligation of the Borrower to make payments in
Dollars as aforesaid shall be enforceable as an alternative or additional cause
of action for the purpose of recovery in Dollars of the amount, if any, by which
such actual receipt shall fall short of the full amount of Dollars expressed to
be payable in respect of the principal of and interest on the Notes and any
other amounts due under any other Credit Document, and shall not be affected by
judgment being obtained for any other sums due under this Agreement or under any
other Credit Document.
46
<PAGE>
11.12 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Borrower and the
Agent.
11.13 Effectiveness. This Agreement shall become effective on the date (the
"Effective Date") on which the Borrower and each of the Banks shall have signed
a copy hereof (whether the same or different copies) and shall have delivered
the same to the Agent at its Notice Office or, in the case of the Banks, shall
have given to the Agent telephone (confirmed in writing), written or telex
notice (actually received) at such office that the same has been signed and
mailed to it. The Agent will give the Borrower and each Bank prompt written
notice of the occurrence of the Effective Date.
11.14 Amendment or Waiver. Neither this Agreement nor any other Credit
Document nor any terms hereof (other than the provisions of Section 10 other
than the second sentence of Section 10.10) or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the Borrower, the Required Banks and the Agent; provided,
however, that no such change, waiver, discharge or termination shall, without
the consent of each Bank, (a) extend the final maturity of any Loan or Note, or
reduce the rate or extend the time of payment of interest or Fees thereon, or
reduce the principal amount thereof, or increase the Commitment of any Bank over
the amount thereof then in effect (it being understood that a waiver of any
Default or Event of Default or of a mandatory reduction in the Total Commitment
shall not constitute a change in the terms of any Commitment of any Bank), (b)
release any Collateral under any Security Document except as shall be otherwise
provided in any Credit Document, (c) release the Equity Sponsor from its
obligations under the Subscription Agreement or Equity Sponsor's Acknowledgment
and Estoppel, (d) amend, modify or waive any provision of this Section 11.14 or
Section 10.6, 11.1, 11.2, 11.4, 11.7 or 11.8, (e) reduce the percentage
specified in the definition of Required Banks or (e) consent to the assignment
or transfer by the Borrower of any of its rights and obligations under this
Agreement. The terms of Section 10 hereof may be changed, waived, discharged or
terminated so long as such change, waiver, discharge or termination is in
writing signed by the Required Banks and the Agent.
11.15 Confidentiality.
(a) Each of the Banks agrees that it will use its best efforts not to
disclose without the prior consent of the Borrower (other than to its employees,
auditors, counsel or other professional advisors, to Affiliates or to another
Bank if the Bank or such Bank's holding or parent company in its sole discretion
determines that any such party should have access to such information) any
information with respect to the Borrower, the Equity Sponsor or any of their
Subsidiaries which is furnished pursuant to this Agreement; provided, that any
Bank may disclose any such information (a) as has become generally available to
the public or has become available to such Bank on a non-confidential basis, (b)
as may be required or appropriate in any report, statement or testimony
submitted to any municipal, state or Federal regulatory body having or claiming
to have jurisdiction over such Bank or to the Federal Reserve Board or the
Federal Deposit Insurance Corporation or similar organizations (whether in the
United States or elsewhere) or their successors, (c) as may be required or
appropriate in response to any summons or subpoena or in connection with any
litigation, (d) in order to comply with any law, order, regulation or ruling
47
<PAGE>
applicable to such Bank, and (e) to any prospective transferee in connection
with any contemplated transfer of any of the Notes or any interest therein by
such Bank; provided, that such prospective transferee executes an agreement with
such Bank containing provisions substantially identical to those contained in
this Section.
(b) The Borrower hereby acknowledges and agrees that each Bank may share
with any of its Affiliates any information related to the Borrower, the Equity
Sponsor or any of their Subsidiaries (including, without limitation, any
nonpublic customer information regarding the creditworthiness of the Borrower,
the Equity Sponsor and their Subsidiaries, provided that such Persons shall be
subject to the provisions of this Section 11.15 to the same extent as such
Bank).
11.16 Survival. All indemnities set forth herein including, without
limitation, in Sections 2.10, 2.11, 4.4, 10.6, 11.1 and 11.5 shall survive the
execution and delivery of this Agreement and the Notes and the making and
repayment of the Loans.
11.17 Domicile of Loans. Each Bank may transfer and carry its
Loans at, to or for the account of any office, Subsidiary or Affiliate of such
Bank.
[Signatures Pages Follow]
48
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Agreement as of the date first above
written.
HOMESTEAD VILLAGE INCORPORATED
By____________________________
Title:
COMMERZBANK AG, NEW YORK BRANCH,
as Agent
By____________________________
Title:
By____________________________
Title:
COMMERZBANK AG, LOS ANGELES BRANCH,
as a Bank
By____________________________
Title:
By____________________________
Title:
49
June 16, 1998
Homestead Village Incorporated
Robert Aldworth
Senior Vice President and Chief Financial Officer
2100 RiverEdge Parkway
Atlanta, Georgia 30328
Dear Mr. Aldworth:
This will confirm our understanding whereby Security Capital Group
Incorporated ("Subscriber") will agree to subscribe for up to $200 million
principal amount of Homestead Village Incorporated ("Homestead") convertible
subordinated debentures ("Subordinated Debentures"), convertible into shares of
Homestead Common Stock, $.01 par value per share (the "Shares"). This
Subscription Agreement is entered into in connection with Homestead entering
into a Credit Agreement dated June 15, 1998 ("Credit Agreement"), for up to $200
million with certain banks ("Banks") and Commerzbank AG, acting through its New
York Branch as agent for the Banks (the "Agent").
1. Documents. Subscriber has received and read (i) the Homestead Form
10-K for 1997, (ii) the Homestead Form 10-Q for the quarter ended March 31,
1998, (iii) the Homestead Proxy Statement for the 1998 Annual Meeting of
Shareholders, (iv) this Subscription Agreement, (v) the Form of Subordinated
Debenture attached hereto as Exhibit A, (vi) the Credit Agreement, and (vii)
Homestead's Articles of Incorporation, as amended (the "Articles of
Incorporation"), and By-laws, as amended (the "By-laws"). The Form 10-K, Form
10-Q, Proxy Statement, Form of Subordinated Debenture, this Subscription
Agreement, Credit Agreement and the Articles of Incorporation and the By-laws of
Homestead are referred to collectively herein as the "Documents."
2. Subscription. On the terms set forth herein, Subscriber hereby
subscribes for up to $200 million principal amount (the "Subscription Amount")
of Subordinated Debentures substantially in the form attached as Exhibit A, at a
price of $1,000 per $1,000 principal amount of Subordinated Debentures at the
time the subscription is called in whole or in part ("Subscription Price"). The
parties acknowledge and agree that the Subscription Amount will be used first,
to repay Homestead's obligations under the Credit Agreement and second, to the
extent necessary, to fund projects under development which are Mortgaged
Properties (as defined in the Credit Agreement). Subscriber hereby agrees that
this subscription is and shall be irrevocable and shall survive and shall not be
affected by the subsequent dissolution, bankruptcy or insolvency of Homestead,
or any defenses, counterclaims or setoffs which Subscriber may at any time have
against Homestead, but that the obligations hereunder will terminate if (a)
Homestead or the Agent does not call the subscription or any part of it for any
reason by June 30, 1999 or (b) 14 days after the Credit Agreement is terminated.
Subscriber acknowledges that Homestead is not obligated to call all or any part
of the Subscription Amount. In addition, Subscriber's obligation to fund the
Subscription Amount will be reduced or terminated to the extent Homestead (i)
issues equity securities, including Shares, to any third party (or to Subscriber
pursuant to a separate offering) before June 30, 1999, as provided in Section 9,
and (ii) uses the proceeds thereof to pay down its obligations under the Credit
Agreement by the amount of net proceeds received by Homestead from the sale of
equity securities and any remaining net proceeds to fund projects under
development which are Mortgaged Properties (as defined in the Credit Agreement).
Subscriber acknowledges and agrees that any issuance of convertible subordinated
debentures in a private offering managed by Merrill Lynch, the proceeds of which
will be used to purchase convertible mortgages of Homestead, shall not reduce or
terminate Subscriber's subscription obligation hereunder. As of the date of this
Subscription Agreement, Subscriber has no knowledge of any claims or offsets
against Homestead.
3. Repayment of Subordinated Debentures. Homestead shall have 90 days
after the date of the initial issuance of Subordinated Debentures under this
Agreement to complete an equity offering to repay Subordinated Debentures issued
to Subscriber. If at the end of such 90 day period Homestead has not completed
an equity offering, then the Subordinated Debentures shall, subject to the
following sentence, automatically be converted into Shares at a conversion price
equal to the lower of the Fair Market Value of the Shares when the Subscription
Agreement is executed by Homestead or the Fair Market Value of the Shares on the
90th day after issuance of the Subordinated Debentures. The Shares issuable upon
conversion of the Subordinated Debentures shall be registered under the
Securities Act of 1933, as amended (the "Securities Act"). If Homestead becomes
in default under the Credit Agreement after the issuance of the Subordinated
Debentures and before the 90th day after issuance, then the Subordinated
Debentures shall become non-convertible and interest shall accrue at 15% per
annum.
For purposes hereof, "Fair Market Value" shall be:
(a) If the Shares are listed on a national securities exchange
or reported on the NASDAQ National Market System, the average daily
per-Share closing sales price during the 20 trading-day period
immediately prior to any determination date.
(b) If the Shares are not listed or reported but published bid
and asked prices are available with respect to the Shares, the mean
between the average per-Share closing bid and asked prices during the
20 trading day period immediately prior to any determination date.
4. Purchase of Non-Convertible Subordinated Debt.
(a) If Homestead is in default under the Credit Agreement when
it or the Agent calls for payment of any of the Subscription Amount due
under this Subscription Agreement, Subscriber shall purchase
non-convertible subordinated debt of Homestead in satisfaction of its
funding obligations under this Subscription Agreement, which
non-convertible subordinated debt shall have the same terms as the
Subordinated Debentures except they shall bear interest at the rate of
15% per annum and shall not be convertible into Shares.
(b) If the Agent calls for payment of any of the Subscription
Amount due under the Subscription Agreement within eight days of the
termination of the Credit Agreement, Subscriber shall purchase
non-convertible subordinated debt of Homestead in satisfaction of its
funding obligations under this Subscription Agreement, which
non-convertible subordinated debt shall have the same terms as the
Subordinated Debentures except such debt shall bear interest at the
rate of 15% per annum and shall not be convertible into Shares. Within
5 days of issuing such non-convertible subordinated debt, Homestead may
at its option exchange Subordinated Debentures (which shall be
convertible at a price which is 20% less than the Subordinated
Debentures) for the entire principal amount of the non-convertible
subordinated debt issued to Subscriber.
5. Payment of Subscription Amount; Pledge of Subscription.
(a) Subscriber agrees to pay up to the full Subscription
Amount in the manner and on the dates set forth below:
(i) On the date (the "Initial Funding Date")
specified by Homestead or the Agent upon not less than seven
days' prior written notice to Subscriber (the "Initial Funding
Notice"), Subscriber shall pay the amount specified by
Homestead or the Agent, as the case may be, in the Initial
Funding Notice, for the account of Homestead, as indicated
below. Payment shall be made by wire transfer of immediately
available funds to the collateral account maintained by the
Agent specified by Homestead and the Agent (the "Collateral
Account") under the terms of the Security Agreement (as
defined in the Credit Agreement).
(ii) On any subsequent date (any such date as well as
the Initial Funding Date being referred to as a "Funding
Date") specified by Homestead or the Agent upon not less than
seven days' prior written notice (any such notice as well as
the Initial Funding Notice being referred to as a "Funding
Notice") to Subscriber, Subscriber shall pay an amount
specified by Homestead or the Agent, as the case may be (a
"Subsequent Installment") (up to a maximum of $200 million,
less any amounts previously funded by Subscriber under this
Subscription Agreement), by wire transfer of immediately
available funds to the Collateral Account.
(iii) Upon payment by Subscriber pursuant to any
Funding Notice, Homestead shall issue that principal amount of
Subordinated Debentures so purchased.
(iv) Homestead shall not make more than two requests
for funding under this Subscription Agreement.
(b) Subscriber agrees and acknowledges that Homestead may
directly or indirectly borrow against unfunded portions of the
Subscription Amount under the Credit Agreement, which borrowings under
the Credit Agreement may be repaid by calling such subscription.
Subscriber agrees and acknowledges that such borrowings under the
Credit Agreement will constitute binding commitments of Homestead and
that Homestead may pledge its rights under this Subscription Agreement,
including without limitation, the payment obligations of Subscriber
hereunder as security for any such borrowings under the Credit
Agreement; Subscriber further agrees that, if so notified or instructed
by Homestead or the Agent, it will make payments directly to the
Collateral Account. Subscriber agrees, upon the reasonable request of
Homestead, to execute and deliver such further instruments or do or
cause to be done such further acts as may be necessary to be done to
effectuate and confirm the pledge of this subscription as security for
any such borrowing under the Credit Agreement.
(c) A default ("Default") shall occur hereunder if, for any
reason, Subscriber fails to pay the full amount due on any Funding Date
and such failure shall continue unremedied for a period of 5 business
days immediately following written notice of such failure. Subscriber
agrees that if a Default occurs hereunder, Homestead or the Agent, as
the case may be, may exercise any remedy available at law or equity,
provided that Homestead's damages for a Default shall be limited to
receiving the full amount due on such Funding Date plus interest at the
rate equal to the default rate in the Credit Agreement from the Funding
Date. In no event shall Homestead be entitled to consequential damages
for any Default.
6. Representations and Warranties of Subscriber. Subscriber hereby
represents and warrants as follows:
(a) Homestead shall rely upon the representations, warranties,
and agreements of Subscriber contained in this Subscription Agreement
in determining the applicability of certain laws and regulations to the
transactions contemplated hereby and accordingly such representations
and warranties shall survive the closing hereunder.
(b) Subscriber acknowledges that no Federal or state agency
has passed upon the Subordinated Debentures or made any finding or
determination as to the fairness of this investment, the terms of the
offer and the sale of the Subordinated Debentures or Shares issuable
upon conversion of the Subordinated Debentures or the adequacy of the
disclosure made in the Documents.
(c) Subscriber must bear the economic risk of its investment
in the Subordinated Debentures for an indefinite period of time because
(1) the Subordinated Debentures have not been registered under the
Securities Act and, therefore, cannot be sold or transferred unless
either they are subsequently registered under the Securities Act or an
exemption from such registration is available; and (2) the Subordinated
Debentures cannot be sold or transferred unless they are registered
under applicable state securities laws or an exemption from such
registration is available.
(d) The Subordinated Debentures for which Subscriber hereby
subscribes are being acquired for its own account, and not with any
view toward the resale or distribution thereof, or with any present
intention of selling or distributing any of the Subordinated
Debentures, but subject nevertheless to the disposition of the
Subordinated Debentures being at all times within Subscriber's control,
subject to the instruments constituting and governing such Subordinated
Debentures.
(e) Subscriber has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and
risks of an investment in the Subordinated Debentures.
(f) Subscriber has carefully reviewed the Documents and any
other written materials delivered to Subscriber by Homestead, has been
furnished with all materials that it considers relevant to an
investment in the Subordinated Debentures and has had a full
opportunity to ask questions of and receive answers from Homestead or
any person or persons acting on behalf of Homestead concerning the
terms and conditions of an investment in the Subordinated Debentures.
No statement or printed material which is contrary to the Documents has
been made or given by or on behalf of Homestead.
(g) Subscriber is an accredited investor by virtue of the fact
that it is a corporation not formed for the specific purpose of
acquiring the Subordinated Debentures, with total assets in excess of
$5,000,000.
(h) Subscriber is a corporation duly organized, validly
existing and in good standing under the laws of Maryland; (i) has all
requisite power and authority to invest in the Subordinated Debentures
as provided herein; (ii) such investment will not result in any
violation of or conflict with any term of the charter or by-laws of
Subscriber or any other organizational document or instrument by which
it is bound or any law or regulation applicable to it; (iii) such
investment has been duly authorized by all necessary action on behalf
of Subscriber; and (iv) this Subscription Agreement has been duly
executed and delivered on behalf of Subscriber and constitutes a legal,
valid and binding agreement of Subscriber and is enforceable against
Subscriber in accordance with its terms.
7. Representations, Warranties and Covenants of Homestead. Homestead
hereby represents, warrants and covenants as follows:
(a) (i) It is duly organized, validly existing and in good
standing under the laws of the State of Maryland; (ii) it has all
requisite power and authority to sell the Subordinated Debentures and
the Shares issuable upon conversion of the Subordinated Debentures as
provided herein; (iii) such sale will not result in any violation of or
conflict with any term of its Articles of Incorporation or By-Laws or
any other organizational document or instrument by which it is bound or
any law or regulation applicable to it; (iv) such sale has been duly
authorized by all necessary action on its behalf (subject to such
stockholder approval of their issuance as may be required by the New
York Stock Exchange); and (v) this Subscription Agreement has been duly
executed and delivered on its behalf and constitutes its legal, valid
and binding agreement.
(b) All written information which it has provided to
Subscriber concerning itself, including all information contained
herein and in the Documents, is correct and complete in all material
respects as of the date of this Subscription Agreement and may be
relied upon, and if there should be any material change in such
information prior to this subscription being accepted, it will
immediately provide Subscriber with notice of such change.
(c) It will call the subscription (i) first, to repay amounts
outstanding under the Credit Agreement and will borrow funds under the
Credit Agreement using this subscription as collateral only when
required in connection with its normal business operations and for no
other purpose, and (ii) second, and only after all amounts under the
Credit Agreement have been repaid, to fund projects under development
which are Mortgaged Properties (as defined in the Credit Agreement).
(d) All Subordinated Debentures issued pursuant hereto, when
paid for as contemplated hereby, shall be valid and binding obligations
of Homestead enforceable in accordance with their terms except as (i)
the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited
by equitable principles of general applicability.
(e) All Shares issued upon conversion of the Subordinated
Debentures shall be duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights or any other claim of
Homestead or any third party except as may have been created by
Subscriber.
(f) It will use the proceeds of any equity offering completed
while the Subscription Agreement is in effect to repay its obligations
under the Credit Agreement.
(g) It will redeem any Subordinated Debentures solely from the
proceeds of an equity offering.
(h) It will promptly deliver to Subscriber copies of all
filings made by it under the Securities Exchange Act of 1934, as
amended (the"Exchange Act"), and the Securities Act prior to the
expiration of this Subscription Agreement.
(i) It will use its best efforts to register the Shares under
the Securities Act prior to the Subordinated Debentures being
converted.
8. Other Issuances of Equity Securities. Except as otherwise provided
in Section 2, Subscribers' obligations to make fundings under this Subscription
Agreement shall be reduced by an amount equal to the net amount received by
Homestead from any equity financing from Subscriber or any third party,
including, but not limited to, any rights offering, underwritten public offering
or private placement of equity securities, including Shares, made prior to June
30, 1999, to the extent that such net amounts are applied to reduce Homestead's
obligations under the Credit Agreement and any remaining net amounts are used to
fund projects under development which are Mortgaged Properties (as defined in
the Credit Agreement).
9. Other Equity Offerings. Nothing contained in this Subscription
Agreement shall prohibit Homestead from conducting any other equity offering,
including a rights offering to all holders of Shares, in which Subscriber will
have an option to participate on a pro rata basis consistent with its existing
shareholder's agreement.
10. Reimbursement Amount. In consideration of Subscriber entering into
this Subscription Agreement and agreeing to provide funding hereunder, Homestead
shall pay Subscriber a reimbursement amount of 30 basis points on the total
Subscription Amount and shall pay all reasonable legal and other expenses
incurred by Subscriber in connection with the preparation and performance of
this Subscription Agreement. The reimbursement amount shall be for reimbursement
of Subscriber's costs in arranging back-up financing for its subscription
obligation. The reimbursement amount shall be paid in three equal installments
beginning on the date of Homestead's execution of this Subscription Agreement
and 30 days and 60 days thereafter.
11. Comfort Letter. Upon execution and delivery of this Subscription
Agreement by Subscriber and acceptance by Homestead, the Comfort Letter dated
April 24, 1998, from Subscriber to Commerzbank AG shall terminate and be of no
further force and effect.
12. Governing Law. This Subscription Agreement shall be construed in
accordance with and governed by the internal laws of the State of Maryland.
13. Entire Agreement; Amendments. This Subscription Agreement
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof and may be amended only in a writing which is executed by
Subscriber and Homestead, and agreed to in writing by all Banks to which this
Subscription Agreement will be pledged.
14. Severability. Insofar as possible, each provision of this
Subscription Agreement shall be interpreted so as to render it valid and
enforceable under applicable law and severable from the remainder of this
Subscription 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.
15. Execution in Counterparts. This Subscription Agreement may be
executed in any number of counterparts, each of which when so executed and
delivered shall be deemed an original. It shall not be necessary in making proof
of this Subscription Agreement to produce or account for more than one
counterpart.
16. Headings. The headings in this Subscription Agreement are for
convenience of reference only and shall not be deemed to alter or affect the
meaning or interpretation of any provision hereof.
17. Interpretation. Wherever from the context it appears appropriate,
each term stated in either the singular or the plural shall include the singular
and the plural, and pronouns stated in either the masculine, the feminine or the
neuter gender shall include the masculine, feminine and neuter.
18. Further Assurances. Subscriber, by executing this Subscription
Agreement, agrees that it will take such actions and execute such further
documents as Homestead may reasonably request from time to time in order to
carry out the purposes of this Subscription Agreement.
<PAGE>
The foregoing Subscription Agreement is made as of the date stated
below by Subscriber.
Dated: June ___, 1998
SECURITY CAPITAL GROUP INCORPORATED
By: ______________________________
Name: ______________________________
Title: ______________________________
125 Lincoln Avenue
Santa Fe, New Mexico 87501
Homestead hereby accepts the subscription set forth in this
Subscription Agreement.
Dated: June ____, 1998
HOMESTEAD VILLAGE
INCORPORATED
By: ______________________________
Name: Robert C. Aldworth
Title: Senior Vice President and
Chief Financial Officer
EXHIBIT A
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY
NOT BE SOLD OR TRANSFERRED ABSENT
REGISTRATION THEREUNDER OR
EXEMPTION THEREFROM
HOMESTEAD VILLAGE INCORPORATED
CONVERTIBLE SUBORDINATED DEBENTURE
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE ONE DEFINITIONS
SECTION 1.01. Definitions............................................ 2
SECTION 1.02. Rules of Construction.................................. 6
ARTICLE TWO THE DEBENTURES
SECTION 2.01. Debentures Part of Series............................... 7
SECTION 2.02. Interest; Payment of Interest........................... 7
SECTION 2.03. The Register............................................ 8
SECTION 2.04. Registered Holders...................................... 8
SECTION 2.05. Transfers and Exchanges of Debentures................... 8
SECTION 2.06. New Debentures.......................................... 10
SECTION 2.07. Cancellation of Debentures.............................. 10
ARTICLE THREE REDEMPTION OF DEBENTURES
SECTION 3.01. Redemption at the Option of the
Company............................................... 11
SECTION 3.02. Redemption in Part...................................... 11
SECTION 3.03. Notice of Redemption.................................... 11
SECTION 3.04. Effect of Notice of Redemption.......................... 12
ARTICLE FOUR COVENANTS
SECTION 4.01. Payment of Debenture.................................... 12
SECTION 4.02. Corporate Existence, Etc................................ 12
SECTION 4.03. Insurance............................................... 12
SECTION 4.04. Taxes, Claims for Labor and Materials,
Compliance with Laws.................................. 13
SECTION 4.05. Limitation on Dividends and Purchases
of Capital Stock...................................... 13
SECTION 4.06. Reporting............................................... 13
(i)
<PAGE>
ARTICLE FIVE CONVERSION
SECTION 5.01. Mandatory Conversion ................................... 14
SECTION 5.02. Conversion of Debenture................................. 15
SECTION 5.03. Adjustments of Conversion Price;
Certain Other Adjustments............................. 16
SECTION 5.04. Notice of Adjustments of Conversion
Price................................................. 22
SECTION 5.05. Notice of Certain Corporate Action...................... 23
SECTION 5.06. Company to Reserve Common Stock......................... 24
SECTION 5.07. Taxes on Conversion..................................... 24
SECTION 5.08. Covenant as to Common Stock............................. 24
SECTION 5.09. Registration and Listing of Common
Stock................................................. 24
SECTION 5.10 Notice of Default....................................... 24
ARTICLE SIX DEFAULT AND REMEDIES
SECTION 6.01. Events of Default....................................... 25
SECTION 6.02. Acceleration............................................ 26
SECTION 6.03. Other Remedies.......................................... 28
SECTION 6.04. Waiver of Past Defaults................................. 28
SECTION 6.05. Undertaking for Costs................................... 28
ARTICLE SEVEN SUBORDINATION
SECTION 7.01. Subordination of Debentures to
Senior Indebtedness................................... 28
SECTION 7.02. No Payment on Debenture in Certain
Circumstances......................................... 29
SECTION 7.03. Debenture Subordinated to Prior Payment
of All Senior Indebtedness on Dissolution,
Liquidation or Reorganization of Company.............. 31
SECTION 7.04. Holder of Debenture to Be Subrogated
to Rights of Holders of Senior
Indebtedness.......................................... 33
SECTION 7.05. Obligations of the Company
Unconditional........................................ 33
SECTION 7.06. Subordination Rights Not Impaired by
Acts or Omissions of Company or
Holders of Senior Indebtedness....................... 33
(ii)
<PAGE>
SECTION 7.07. Article Seven Not to Prevent Events
of Default........................................... 34
ARTICLE EIGHT AMENDMENTS AND WAIVERS
SECTION 8.01. With Consent of Holders................................. 34
SECTION 8.02. Revocation and Effect of Consents....................... 35
SECTION 8.03. Notation on or Exchange of Debentures................... 35
SECTION 8.04. Effect of Amendment..................................... 36
ARTICLE NINE MISCELLANEOUS
SECTION 9.01. Notices................................................. 36
SECTION 9.02. Consents................................................ 37
SECTION 9.03. Governing Law........................................... 37
SECTION 9.04. No Adverse Interpretation of
Other Agreements..................................... 37
SECTION 9.05. No Recourse Against Others.............................. 37
SECTION 9.06. Successors.............................................. 37
SECTION 9.07. Severability............................................ 37
(iii)
<PAGE>
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY
NOT BE SOLD OR TRANSFERRED ABSENT
REGISTRATION THEREUNDER OR
EXEMPTION THEREFROM
CONVERTIBLE SUBORDINATED DEBENTURE
DUE
$_______________ December 31, 1999 No. __-__________
Homestead Village Incorporated, a Maryland corporation (the "Company"),
for value received, hereby promises to pay to the order of Security Capital
Group Incorporated, or its registered assigns, the principal sum of
______________________________ DOLLARS ($_______________) in U.S. Legal Tender
(as defined herein) on December 31, 1999 (the "Maturity Date"), and to pay
Interest (as defined herein) on this Debenture (as defined herein) in accordance
with the provisions of this Debenture in U.S. Legal Tender to the Registered
Holder (as defined herein) hereof, beginning to accrue on the Issue Date (as
defined herein) and semi-annually thereafter on the last Business Day (as
defined herein) of June and December in each calendar year (each such date, an
"Interest Payment Date") or, in the case of principal and Interest due on the
Maturity Date, on such Maturity Date. The principal and Interest payable on any
Interest Payment Date will be paid to the Person (as defined herein) in whose
name this Debenture is registered at the close of business on the immediately
preceding December 15 or June 15 (each such December 15 or June 15, a "Record
Date"). Payment of the principal of and Interest on this Debenture will be
mailed to the address of the Person entitled thereto as such Person's name and
address shall appear in the Register (as defined herein).
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ARTICLE ONE
DEFINITIONS
SECTION 1.01. Definitions. The following terms (except as otherwise
expressly provided or unless the context otherwise clearly requires) for all
purposes of this Debenture and of any amendment hereto shall have the respective
meanings specified in this Section 1.01.
"Acceleration Date" shall have the meaning assigned to such term in
Section 6.02.
"Affiliate" of any specified Person shall mean any other Person,
directly or indirectly, controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"affiliated," "controlling" and "controlled" have meanings correlative to the
foregoing.
"Bank Senior Indebtedness" shall mean any Senior Indebtedness of the
Company owed to any banks under agreements existing as of the date of this
Debenture and any deferral, renewal, extension, refunding, amendment,
modification or supplements thereof.
"Bankruptcy Law" shall have the meaning assigned to such term in
Section 6.01.
"Business Day" shall mean any day of the year (other than any Saturday
or Sunday) on which the Federal Reserve Bank is open for business in New York,
New York.
"Capital Stock" shall mean, collectively, the Company's equity
securities of every class, including, without limitation, the Company's Common
Stock.
"Capitalized Lease Obligation" shall mean obligations under a lease
that is required to be capitalized for financial reporting purposes in
accordance with GAAP, and the amount of Indebtedness represented by such
obligations shall be the capitalized amount of such obligations determined in
accordance with such principles.
"Closing Price" shall mean the reported last sale price of a unit of a
security regular way on a given day or, in case no such sale takes place on such
day, the average of the reported closing bid and asked prices regular way, in
each case on the New York Stock Exchange Composite Tape, or, if the security is
not listed or admitted to trading on such exchange, on the American Stock
Exchange Composite Tape, or, if the security is not listed or admitted to
trading on such exchange, the principal national securities exchange on which
the security is listed or admitted to trading, or, if the security is not listed
or admitted to trading on any national securities exchange, the closing sales
price, or, if there is no closing sales price, the average of the closing bid
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<PAGE>
and asked prices, in the over-the-counter market as reported by the NASDAQ, or,
if not so reported, as reported by the National Quotation Bureau, Incorporated,
or any successor thereof, or, if not so reported, the average of the closing bid
and asked prices as furnished by any member of the National Association of
Securities Dealers, Inc. selected from time to time by the Company for that
purpose, or, if no such prices are furnished, the fair market value of the
security as estimated by the Company using an identical valuation formula to
that used in determining the pricing for the Company's then most-recent sale of
more than $35 million of similar securities to unaffiliated third parties, or if
no such sale has occurred, as determined in good faith by the Company, which
estimate shall be prepared at the expense of the Company; provided that any
determination of the "Closing Price" of any security hereunder shall be based on
the assumption that such security is freely transferable without registration
under the Securities Act.
"Commission" shall mean the Securities and Exchange Commission or any
other applicable Federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Company's common stock, $.01 par value
per share.
"Company" shall mean Homestead Village Incorporated and its successors
and assigns.
"Conversion Price" shall have the meaning assigned to such term in
Section 5.01(b).
"Convertible Securities" shall have the meaning assigned to such term
in Section 5.03(b).
"Credit Agreement" shall mean the Credit Agreement dated June 15, 1998
for up to $200 million with certain banks and Commerzbank AG, acting through its
New York branch as agent for the banks.
"Custodian" shall have the meaning assigned to such term in Section
6.01.
"Debenture" shall have the meaning assigned to such term in Section
2.01.
"Debentureholder" shall mean the Registered Holder of a Debenture.
"Default" shall mean any event which is, or after notice or passage of
time or both would be, an Event of Default.
"Default Notice" shall have the meaning assigned to such term in
Section 7.02(b).
"Deferral Period" shall have the meaning assigned to such term in
Section 7.02(a).
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<PAGE>
"Event of Default" shall have the meaning assigned to such term in
Section 6.01.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Fair Market Value" shall mean (a)if the Common Stock is listed on a
national securities exchange or reported on the NASDAQ National Market System,
the average daily per share closing sales price during the 20 trading day period
immediately prior to the date of any determination date hereunder; or (b) if the
Common Stock is not listed or reported but published bid and asked prices are
available with respect to the Common Stock, the mean between the average per
share closing bid and asked prices during the 20 trading day period immediately
prior to the date of any determination date hereunder.
"GAAP" shall mean generally accepted accounting principles as in effect
in the United States of America on the date of this Debenture.
"Holder," "Holder of Debentures," "Debentureholder" or other similar
terms shall mean the Registered Holder of a Debenture.
"Indebtedness" shall mean, with respect to any Person, (i) any
liability, contingent or otherwise, of such Person (A) for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), (B) evidenced by a note, debenture or
similar instrument (including a purchase money obligation) or (C) for the
payment of money relating to a Capitalized Lease Obligation; (ii) any liability
of others of the kind described in the preceding clause (i) which the Person has
guaranteed or which is otherwise its legal liability; (iii) any obligation
secured by a Lien to which the property or assets of such Person are subject,
whether or not the obligations secured thereby shall have been assumed by or
shall otherwise be such Person's legal liability; and (iv) any and all
deferrals, renewals, extensions and refundings of, or amendments, modifications
or supplements to, any liability of the kind described in any of the preceding
clauses (i), (ii) or (iii).
"Interest" shall mean all interest accruing hereunder, as provided in
Section 2.02.
"Interest Payment Date" shall mean the last Business Day of December
and June of each calendar year following the Issue Date.
"Issue Date" shall mean the date of issuance of this Debenture as set
forth above the Company's signature on the last page hereof.
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<PAGE>
"Lien" shall mean any mortgage, pledge, lien (statutory or otherwise),
security interest, encumbrance, charge or adverse claim upon or with respect to
any property of any kind, real or personal, movable or immovable, now owned or
hereafter acquired.
"Mandatory Conversion Date" shall have the meaning assigned to such
term in Section 5.01.
"Material Subsidiary" shall mean any Subsidiary in which the aggregate
amount directly or indirectly invested by the Company, whether by way of debt,
equity, guaranty or otherwise, and which remains at risk exceeds $10,000,000.
"Maturity Date" or "Maturity" shall mean December 31, 1999.
"NASDAQ" shall mean the National Association of Securities Dealers
Automated Quotation System.
"New Debenture" shall have the meaning assigned to such term in Section
2.06.
"Notice of Default" shall have the meaning assigned to such term in
Section 6.01.
"Old Debenture" shall have the meaning assigned to such term in Section
2.06.
"Person" shall mean any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization or other private legal entity or government or other
agency or political subdivision thereof.
"Record Date" shall mean December 15 and June 15 of each year.
"Redemption Date" shall mean the date fixed for redemption pursuant to
this Debenture.
"Redemption Price" shall have the meaning assigned to such term in
Section 3.04.
"Reference Date" shall have the meaning assigned to such term in
Section 5.03(b)(4).
"Register" shall have the meaning assigned to such term in Section
2.03.
"Registered Holder" shall mean the Holder of a Debenture as set forth
in the Register.
"Registry Office" shall have the meaning assigned to such term in
Section 2.03.
"Restricted Payment" shall have the meaning assigned to such term in
Section 4.05.
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<PAGE>
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Senior Indebtedness" shall mean the principal of, premium, if any, and
interest (including interest accruing after the filing of a petition initiating
any proceeding under any Bankruptcy Law whether or not allowed in such
proceeding) on any Indebtedness of the Company, whether outstanding on the date
of this Debenture or hereafter created, incurred, assumed, guaranteed or in
effect guaranteed by the Company (including all deferrals, renewals, extensions
or refundings of, or amendments, modifications or supplements to, Indebtedness
of the kind described in this clause), unless, in the case of any particular
Indebtedness, deferral, renewal, extension, refunding, amendment, modification
or supplement, the instrument creating or evidencing the same or the assumption
or guarantee thereof expressly provides that such Indebtedness, deferral,
renewal, extension, refunding, amendment, modification or supplement is pari
passu with, or subordinate in right of payment to, the Debentures.
Notwithstanding anything to the contrary in the foregoing, however, Senior
Indebtedness shall not include (a) Indebtedness or amounts owed (except to banks
and other financing institutions) for goods or materials purchased in the
ordinary course of business, for compensation to employees, or for services, or
(b) in the case of each Debenture, the other Debentures.
"Subordinated Indebtedness" shall mean all unsecured Indebtedness that
by its terms is subordinate in right of payment to the Debentures.
"Subscription Agreement" shall mean the Subscription Agreement, dated
June 15, 1998, between the Company and Security Capital Group Incorporated.
"Subsidiary" shall mean a corporation all of whose capital stock with
voting power, under ordinary circumstances, to elect directors is at the time,
directly or indirectly, owned by the Company, by a Subsidiary of the Company or
by the Company and a Subsidiary of the Company.
"Trading Day" shall mean each Monday, Tuesday, Wednesday, Thursday and
Friday, other than a day on which securities are not traded on the applicable
securities exchange or in the applicable securities market.
"Transfer" shall have the meaning assigned to such term in Section
2.05(b).
"U.S. Legal Tender" shall mean such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts in the United States.
SECTION 1.02. Rules of Construction. Unless the context otherwise
requires:
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<PAGE>
(1) a term has the meaning expressly assigned to it hereby;
(2) a technical accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) provisions apply to successive events and transactions;
(6) "herein," "hereof" and other words of similar import refer to
this Debenture as a whole and not to any particular Article, Section
or other subdivision;
(7) references to statutes, regulations and rules include
subsequent amendments and successors thereto unless the context
otherwise requires;
(8) the various headings of this Debenture are provided herein
for convenience only and shall not affect the meaning or
interpretation of this Debenture or any provision hereof; and
(9) if any payment hereunder shall become due on any day which is
not a Business Day, such payment shall be made on the next succeeding
Business Day.
ARTICLE TWO
THE DEBENTURES
SECTION 2.01. Debentures Part of Series. This Debenture is one of the
duly authorized issues of Debentures of the Company designated as its
Convertible Subordinated Debentures Due December 31, 1999 (together with any
amendments thereto and substitutions therefor, individually a "Debenture" and
collectively the "Debentures"). The Debentures are unsecured debt obligations of
the Company that are subordinated to its Senior Indebtedness. All Debentures
will be treated equally and all payments (whether for principal, Interest or
otherwise) will be made pro rata among Registered Holders based upon the
aggregate amount which the Company is obligated to pay at such time to such
Registered Holders. If any Registered Holder of any Debenture obtains any
payment (whether voluntary, involuntary, by application of offset or otherwise)
of principal of or Interest on any Debenture in excess of such Registered
Holder's pro rata share of payments obtained by all Registered Holders of the
Debentures, such Registered Holder will return such excess payment to the
Company and the
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Company shall pay such excess to the other Registered Holders of the Debentures
as is necessary to cause such Registered Holders to share the excess payment
ratably among each of them as provided in this Section 2.01.
SECTION 2.02. Interest; Payment of Interest. This Debenture shall bear
Interest for the period from the Issue Date to the Maturity Date (or in the case
of redemption in accordance with Article Three, to the Redemption Date, or in
the case of conversion in accordance with Article Five, to the date of such
conversion) at a rate equal to 25 basis points above the rate on the Company's
unsecured line of credit dated April 24, 1998, between the Company and
Commerzbank ("Unsecured Line of Credit"), per annum, as such may change from
time to time, on the outstanding principal amount hereunder calculated on the
basis of a 360 day year consisting of twelve 30 day months. If the Unsecured
Line of Credit is terminated prior to or while this Debenture is outstanding,
Interest on this Debenture shall be calculated based on the Eurodollar Rate, as
defined in the Unsecured Line of Credit, plus 275 basis points, as such may
change from time to time. If the Company is in default under the Unsecured Line
of Credit at any time while this Debenture is outstanding, the Interest shall
increase to the default rate on the Unsecured Line of Credit plus 50 basis
points. Unless otherwise provided in Section 5.01, all Interest must be paid in
U.S. Legal Tender. Payments of Interest on this Debenture will be made on the
Interest Payment Dates of each calendar year (except in the case of a special
Record Date) prior to the Maturity Date or redemption or conversion and on the
Maturity Date and Redemption Date and the date of conversion to the Holder of
record at the close of business on the immediately preceding Record Date as
follows:
(a) Payment Upon Maturity Date. At the Maturity Date, the
Holder of this Debenture will be entitled, subject to Article Seven, to
receive (i) payment of the outstanding principal amount hereunder plus
(ii) any accrued and unpaid Interest.
(b) Payment Upon Redemption Date. At the Redemption Date, the
Holder of this Debenture will be entitled, subject to Article Seven, to
receive (i) payment of the outstanding principal amount hereunder to be
redeemed in accordance with Article Three plus (ii) any accrued and
unpaid Interest thereon to and including the Redemption Date.
(c) Payment Upon Conversion. Upon conversion of this Debenture
into Capital Stock pursuant to Section 5.02, accrued and unpaid
Interest shall, subject to Article Seven, be paid as provided in
Section 5.01(a).
Except as otherwise provided in this Debenture, the Company will not pay any
additional amount to the Holder in respect of any deduction or other
governmental charges of any taxing authority imposed upon or as a result of any
payment of the principal of, or Interest on or any other payment under this
Debenture.
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<PAGE>
SECTION 2.03. The Register. The Company will keep at its principal
office (the "Registry Office") one or more books (the "Register") for the
registration of the Debentures (including all transfers) and the names and
addresses of the Registered Holders of the Debentures. All transfers of the
Debentures and the names and addresses of the transferees of the Debentures
shall be registered in the Register under such reasonable regulations as the
Company may prescribe.
SECTION 2.04. Registered Holders. The Company will deem and treat the
Registered Holder of this Debenture as the absolute owner hereof and will not be
affected by any notice to the contrary. Payment of the principal of and Interest
on this Debenture shall be made only to the Registered Holder hereof. All such
payments so made shall be valid and effectual to satisfy and discharge the
liability of the Company upon this Debenture to the extent of the sum or sums so
paid. For the purpose of any request, direction or consent hereunder, the
Company may deem and treat the Registered Holder of this Debenture as the Holder
without production of such Debenture.
SECTION 2.05. Transfers and Exchanges of Debentures.
(a) Subject to Section 2.05(b), the Registered Holder hereof may from
time to time assign or transfer in the manner provided in this Section 2.05 to
one or more Persons all or any part of this Debenture, and to the extent of any
such assignment or transfer (unless otherwise stated therein), the transferee of
such assignment or transfer (unless otherwise stated therein), shall become a
Registered Holder of this Debenture. Each transferee so becoming a Registered
Holder shall be vested with all rights and powers under this Debenture of a
Registered Holder hereunder and shall take and hold its Debenture subject to the
provisions of this Debenture and to any request made, waiver or consent given or
other action taken hereunder by each previous Registered Holder of this
Debenture.
(b) No Holder may sell, assign, transfer, or otherwise dispose of this
Debenture (collectively "Transfer"), if the Transfer, taken alone or together
with all other Transfers of Debentures, would (i) violate, or result in a
violation of, any provision of the Securities Act, applicable state securities
or "blue sky" laws or any other applicable provision of law; or (ii) subject the
Company or an Affiliate of the Company to regulation as an investment company
under the Investment Company Act of 1940, as amended.
(c) The Registered Holder may Transfer this Debenture upon the
surrender of this Debenture at the Registry Office, and no such Transfer shall
be effective until such surrender to the Company of the Debenture to be
transferred has been made. Upon such surrender the Company shall execute in the
name of the transferee(s) a new Debenture or Debentures in denominations not
less than $1,000 each and in aggregate principal amount equal to the original
principal amount of the Debenture so surrendered.
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(d) If this Debenture is presented or surrendered for exchange or
Transfer, it shall be accompanied by a written instrument or instruments of
assignment or transfer, duly executed by the Registered Holder and the
transferee or by their respective attorneys duly authorized in writing (which
instrument shall contain appropriate warranties of the transferee), and an
opinion of counsel addressed to the Company, each in form and substance and
furnished by counsel reasonably satisfactory to the Company, and which opinion
shall state that such Transfer or assignment does not violate, or result in the
violation of, any provision of the Securities Act, applicable state securities
or "blue sky" laws or any other applicable provision of law, and as to such
other matters as the Company reasonably may request. The Company shall not be
required to make a transfer or an exchange of this Debenture for a period of ten
Business Days preceding any Interest Payment Date.
(e) No notarial act shall be necessary for the Transfer or exchange of
this Debenture pursuant to this Section 2.05, and the Holder of any Debenture
issued as provided in this Section 2.05 shall be entitled to any and all rights
and privileges granted under this Debenture to a Registered Holder.
SECTION 2.06. New Debentures.
(a) Each new Debenture ("New Debenture") issued pursuant to Section
2.05 in exchange for, in substitution for or in lieu of a Debenture ("Old
Debenture") shall be dated the date of such Old Debenture. The Company shall
mark on each New Debenture (i) the date and the extent to which principal and
Interest has been paid on such Old Debenture and (ii) all payments and
prepayments of principal made on such Old Debenture which are allocable to such
New Debenture. Interest and principal shall be deemed to have been paid on such
New Debenture to the date and to the extent to which Interest and principal was
paid on such Old Debenture.
(b) Any New Debenture issued pursuant to Section 2.05 in exchange for
or in substitution for or in lieu of an Old Debenture shall be the valid
obligation of the Company evidencing the same debt as such Old Debenture and
shall be entitled to the benefits of this Debenture. No service charge shall be
made for any exchange or transfer of this Debenture, but the Company may require
payment of a sum sufficient to cover any tax or governmental charge imposed with
respect thereto.
SECTION 2.07. Cancellation of Debentures. If this Debenture is
surrendered to the Company for the purpose of payment, transfer or exchange, it
shall be canceled by the Company, and no Debentures shall be issued in lieu
hereof except as expressly required or permitted by this Debenture.
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ARTICLE THREE
REDEMPTION OF DEBENTURES
SECTION 3.01. Redemption at the Option of the Company. The Company may
redeem Debentures (including this Debenture), in whole or in part, at any time
after issuance, upon not less than 10 days' and not more than 30 days' prior
written notice to the Holders of the Debentures at a price, payable in U.S.
Legal Tender only, equal to 100% of the outstanding principal amount thereof,
plus the amount of any accrued and unpaid Interest on such principal and
Interest thereon to and including the Redemption Date. The Company may redeem
Debentures only from the proceeds of an offering of Common Stock. Any Debenture
called for redemption prior to the Mandatory Conversion Date shall not be
convertible into Common Stock.
SECTION 3.02. Redemption in Part. Debentures may be redeemed in part in
denominations of $1,000 or any integral multiple thereof. In case of a
redemption in part, the Debentures to be redeemed shall be selected pro rata and
there shall be redeemed from each Holder that portion of principal amount of all
Debentures being redeemed which the outstanding principal amount of Debentures
held by such Holder bears to the total principal amount of Debentures then
outstanding.
SECTION 3.03. Notice of Redemption. At least 10 days but not more than
30 days before a Redemption Date, the Company shall provide notice of redemption
to each Holder at such Holder's latest address set forth in the Register.
Failure to give notice by mail, or any defect in the notice to the Holder of any
Debenture shall not affect the validity of the proceedings for the redemption of
any other Debentures. The notice shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) that Debentures called for redemption must be surrendered
to the Company to collect the Redemption Price;
(4) that, unless the Company defaults in making the redemption
payment on the Redemption Date, Interest on Debentures called for
redemption shall cease to accrue on and after the Redemption Date and
the only remaining right of the Holder of such Debentures is to receive
payment of the Redemption Price upon surrender of the Debentures
redeemed to the Company;
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(5) if any Debenture is being redeemed in part, the portion of
the principal amount of such Debenture to be redeemed and that, after
the Redemption Date, and upon surrender of such Debenture, a new
Debenture or Debentures in aggregate principal amount equal to the
unredeemed portion thereof will be issued; and
(6) if less than the entire principal amount of Debentures is
to be redeemed, the aggregate principal amount of Debentures to be
redeemed and the aggregate principal amount of Debentures estimated to
be outstanding after such partial redemption.
SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption
is mailed, all Debentures called for redemption in whole or in part become due
and payable only to the extent of the principal amount being redeemed and unpaid
Interest accrued on such principal amount and Interest thereon through the
Redemption Date (such principal and Interest being referred to herein as the
"Redemption Price") on the Redemption Date and at the Redemption Price. Upon
surrender to the Company, such Debentures called for redemption shall be paid at
the Redemption Price.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Debenture. The Company shall, subject to
Article Seven, pay the principal of and Interest on this Debenture on the dates
and in the manner provided in Article Two, Article Three and Article Five.
SECTION 4.02. Corporate Existence, Etc. The Company will preserve and
keep in force and effect its corporate existence and all material licenses and
permits reasonably necessary to the proper conduct of its business; provided
that nothing contained in this Section 4.02 shall prevent the Company from
consolidating with, selling all or substantially all of its properties and
assets to, or being a party to a merger with any other Person if: (i) no Default
exists or would result therefrom and (ii) the surviving Person is organized
under the laws of the United States and expressly and unconditionally assumes in
writing the due and punctual performance of all obligations hereunder and under
the Debentures.
SECTION 4.03. Insurance.The Company will maintain insurance coverage by
financially sound and reputable insurers in such forms and amounts and against
such risks as are reasonable for corporations of established reputation engaged
in the same or similar business and owning and operating similar assets.
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SECTION 4.04. Taxes, Claims for Labor and Materials, Compliance with
Laws.
(a) The Company will promptly pay and discharge all lawful taxes,
assessments and governmental charges or levies imposed upon the Company, or upon
or in respect of all or any part of the property or business of the Company, all
trade accounts payable in accordance with usual and customary business terms,
and all claims for work, labor or materials, which if unpaid would become a lien
or charge upon any property of the Company, the nonpayment of any of which would
have a material adverse effect on the financial condition of the Company;
provided that the Company shall not be required to pay any such tax, assessment,
charge, levy, account payable or claim if (1) the validity, applicability or
amount thereof is being contested in good faith by appropriate actions or
proceedings and (2) the Company shall set aside on its books, reserves deemed by
it to be adequate with respect thereto.
(b) The Company will promptly comply with all applicable laws,
ordinances or governmental rules and regulations to which it is subject the
penalty for violation of which would materially and adversely affect the
properties, business, prospects, profits or condition of the Company.
SECTION 4.05. Limitation on Dividends and Purchases of Capital Stock.
The Company will not, directly or indirectly, declare or pay any dividend on, or
make any distribution to the holders of, Capital Stock of the Company with
respect to such Capital Stock (other than dividends in Capital Stock or rights
to acquire Capital Stock) and neither the Company nor any Subsidiary may
purchase, redeem, or otherwise acquire or retire for value any of the Capital
Stock of the Company (collectively, a "Restricted Payment") unless at the time
of such Restricted Payment, (a) no Default exists or would result therefrom, and
(b) immediately before and immediately after giving effect to such payment, its
consolidated shareholder's equity, determined in accordance with GAAP, exceeds
$475 million.
SECTION 4.06. Reporting.
(a) As soon as available, but in any event within 90 days after the end
of each fiscal year of the Company, the Company shall deliver to each Holder
copies of the audited consolidated balance sheet of the Company and its
Subsidiaries together with the related consolidated statements of income and
cash flows for such fiscal year prepared in accordance with GAAP consistently
followed throughout the period involved and presenting fairly the financial
condition of the Company and its Subsidiaries.
(b) As soon as available, but in any event within 45 days after the end
of each fiscal quarter of the Company, the Company shall deliver to each Holder
copies of the unaudited
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consolidated balance sheet of the Company and its Subsidiaries as at the end of
such fiscal quarter and the related unaudited consolidated statements of income
and cash flows for such fiscal quarter and the portion of the fiscal year
through such fiscal quarter.
ARTICLE FIVE
CONVERSION
SECTION 5.01. Mandatory Conversion.
(a) Subject to the last sentence of this subsection, if within 90 days
of issuance of this Debenture Homestead has not redeemed this Debenture in full
in accordance with Article Three, this Debenture shall automatically and
mandatorily be converted into Common Stock on the 90th day after issuance
("Mandatory Conversion Date"). Prior to the Mandatory Conversion Date, this
Debenture shall not be convertible into Common Stock. On conversion of the
entire outstanding principal amount of this Debenture, or any portion thereof,
(x) any Interest that is past due on the principal amount of such Debenture that
is being converted shall, subject to Article Seven, be paid in U.S. Legal Tender
and (y) that portion of accrued and unpaid Interest attributable to the period
from the most recent Interest Payment Date to the Mandatory Conversion Date with
respect to the principal amount of this Debenture that is being converted and
Interest thereon shall not be canceled, extinguished or forfeited, but rather
shall be deemed to be paid in full to the Holder thereof through the delivery of
the Common Stock in exchange for the Debenture being converted pursuant to the
terms hereof. If prior to the Mandatory Conversion Date the Company is in
default under the Unsecured Line of Credit or any other agreement for borrowed
money, this Debenture shall not be mandatorily convertible.
(b) The total number of shares of Common Stock issuable upon conversion
shall be determined by dividing the principal amount of this Debenture being
converted by the conversion price then in effect (the "Conversion Price"). The
Conversion Price shall be adjusted in certain instances as provided in Section
5.03.
(c) The Conversion Price shall be equal to the lower of $13.931 per
share of Common Stock (the Fair Market Value of the Common Stock upon the date
of the Subscription Agreement or the Fair Market Value of the Common Stock on
the Mandatory Conversion Date.
(d) Nothing in this Debenture shall grant, or shall be deemed to
constitute the incurrence, creation, assumption or sufferance by the Company of,
and the Holder of this Debenture shall not assert, any mortgage, pledge, lien,
charge or other encumbrance of any nature whatsoever on the Common Stock
deliverable upon conversion of this Debenture.
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(e) The Company covenants that if, at any time after the Debentures
become convertible, the Common Stock is required to be registered under Section
12(b) or Section 12(g) of the Exchange Act, the Company will file a registration
statement under the Securities Act for the Common Stock to be reserved for
issuance to the Holders upon conversion pursuant to this Article Five in
accordance with the requirements of such act as promptly as practicable and upon
usual and customary terms and conditions for selling securityholders.
SECTION 5.02. Conversion of Debenture
(a) Immediately after the Mandatory Conversion Date, the Holder of this
Debenture shall surrender this Debenture, duly endorsed or assigned to the
Company or in blank, at the Registry Office or any other office or agency
designated in writing by the Company to the Holder of this Debenture.
(b) This Debenture shall be deemed to have been converted immediately
prior to the close of business on the Mandatory Conversion Date, and at such
time the rights of the Holder of this Debenture as a Holder shall cease, and the
Person or Persons entitled to receive the Common Stock issuable upon conversion
shall be treated for all purposes as the record holder or holders of such Common
Stock at such time. As promptly as practicable on or after the Mandatory
Conversion Date, the Company shall issue and shall deliver at its principal
office or other office or agency which it may designate in writing to the Holder
of this Debenture or agency a certificate or certificates for the number of
shares of Common Stock issuable upon conversion (which may include fractional
shares, as applicable).
SECTION 5.03. Adjustments of Conversion Price; Certain Other
Adjustments.
(a) In case the Company shall issue or sell any shares of Capital Stock
or is deemed to have issued or sold such shares pursuant to Section 5.03(b)
(except as provided in Section 5.03(e)) for a consideration per share less than
94% (or 100% if a stand-by underwriter is used and charges the Company a
commission) of the Fair Market Value per share of such Capital Stock immediately
prior to such issuance or sale, then immediately after such issuance or sale the
Conversion Price shall be determined by multiplying (i) the Conversion Price in
effect immediately prior to such issuance or sale by (ii) a fraction, the
numerator of which shall be the sum of (A) the number of shares of Capital Stock
outstanding (and deemed to be outstanding pursuant to Section 5.03(b))
immediately prior to such issuance or sale and (B) the number of shares (rounded
up to the nearest share) that the Company could purchase with the aggregate
gross proceeds received from the issuance or sale of such shares at 94% (or 100%
in the case of a stand-by underwriting) of the Fair Market Value per share of
such Capital Stock immediately prior to such issuance or sale and the
denominator of which shall be the total number of shares of Capital Stock
outstanding (and deemed to be outstanding pursuant to Section 5.03(b))
immediately after such issuance or sale. For purposes of this Section 5.03, the
shares of Capital Stock into which the Debentures are convertible shall not be
deemed to
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be outstanding. Notwithstanding the foregoing, no adjustment of the Conversion
Price shall be required pursuant to this Section 5.03(a) unless such adjustment
would require a decrease of at least one percent in the Conversion Price but any
lesser adjustment shall be carried forward and shall be made at the time of and
together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall require a decrease of at least one percent
in the Conversion Price.
(b) For the purposes of Section 5.03(a), the following paragraphs (1)
to (6), inclusive, shall also be applicable:
(1) In case the Company shall grant (whether directly or by
assumption in a merger or otherwise), to holders of Capital Stock any
rights (including options and warrants) to subscribe for, or any
rights, options or warrants to purchase, Capital Stock or any stock or
other securities convertible into or exchangeable for Capital Stock
(such convertible or exchangeable stock or securities being herein
called "Convertible Securities"), whether or not such rights, options
or warrants or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price per share for
which Capital Stock is issuable upon the exercise of such rights or
options or upon conversion or exchange of such Convertible Securities
(determined by dividing (A) the total amount, if any, received or
receivable by the Company as consideration for the granting of such
rights, options or warrants, plus, in the case of any such rights,
options or warrants which relate to such Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable
upon the issue or sale of such Convertible Securities and upon the
conversion or exchange thereof, by (B) the total maximum number of
shares of Capital Stock issuable upon the exercise of such rights,
options or warrants or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such rights,
options or warrants) shall be less than 94% of the Fair Market Value
per share of such Capital Stock in effect immediately prior to the time
of the granting of such rights, options or warrants, then the total
maximum number of shares of Capital Stock issuable upon the exercise of
such rights, options or warrants or upon conversion or exchange of the
total maximum amount of such Convertible Securities issuable upon the
exercise of such rights, options or warrants shall (as of the date of
granting of such rights, options or warrants) be deemed to be
outstanding and to have been issued for such price per share. Except as
provided in Section 5.03(d), no further adjustments of the Conversion
Price shall be made upon the actual issue of such Capital Stock or of
such Convertible Securities upon exercise of such rights, options or
warrants or upon the actual issue of such Capital Stock upon conversion
or exchange of such Convertible Securities.
(2) In case at any time the Company shall issue (whether
directly or by assumption in a merger or otherwise, but not by way of a
dividend or other similar type of distribution) or sell any Convertible
Securities, whether or not the rights to exchange or convert thereunder
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are immediately exercisable, and the price per share for which Capital
Stock is issuable upon such conversion or exchange (determined by
dividing (A) the total amount received or receivable by the Company as
consideration for the issue or sale of such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange thereof, by (B)
the total maximum number of shares of Capital Stock issuable upon the
conversion or exchange of all such Convertible Securities) shall be
less than 94% of the Fair Market Value per share of such Capital Stock
in effect immediately prior to the time of such issuance or sale, then
the total maximum number of shares of Capital Stock issuable upon
conversion or exchange of all such Convertible Securities shall (as of
the date of the issue or sale of such Convertible Securities) be
deemed to be outstanding and to have been issued for such price per
share; provided that (i) except as provided in Section 5.03(d), no
further adjustments of the Conversion Price shall be made upon the
actual issue of such Capital Stock upon conversion or exchange of such
Convertible Securities and (ii) if any such issue or sale of such
Convertible Securities is made upon exercise of any rights to
subscribe for or to purchase or any option to purchase any such
Convertible Securities for which adjustments of the Conversion Price
have been or are to be made pursuant to other provisions of Section
5.03(b), no further adjustment of the Conversion Price shall be made
by reason of such issue or sale.
(3) In case at any time the Company shall declare a dividend
or make any other distribution upon any Capital Stock of the Company
payable in Capital Stock, any Capital Stock issuable in payment of such
dividend or distribution shall be deemed to have been issued or sold
with zero consideration.
(4) Subject to the last sentence of this paragraph (4), in
case the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock and/or any other class of Capital Stock,
evidences of its Indebtedness, shares of any class of Capital Stock,
cash or assets (including securities, but excluding (x) any rights,
options or warrants referred to in paragraph (1) of this Section
5.03(b), (y) any dividend or distribution paid exclusively in cash out
of the retained earnings of the Company and (z) any dividend or
distribution referred to in paragraph (3) of this Section 5.03(b)),
then, in lieu of the adjustments provided for in Section 5.03(a), the
Conversion Price shall be reduced so that the same shall equal the
price determined by multiplying the Conversion Price in effect
immediately prior to the effectiveness of the Conversion Price
reduction contemplated by this paragraph (4) by a fraction of which the
numerator shall be the Fair Market Value of the Common Stock on the
date of such effectiveness less the fair value (as determined by the
Company), on the date of such effectiveness, of the portion of the
evidences of indebtedness, shares of Capital Stock, cash and assets so
distributed applicable to one share of Common Stock and the denominator
shall be such current market price per share of the Common Stock on the
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date of such effectiveness, such reduction to become effective
immediately prior to the opening of business on the day following the
date fixed for the determination of stockholders entitled to receive
such distribution (the "Reference Date"). If the Company determines the
fair value of any distribution for purposes of this paragraph (4) by
reference to the actual or when issued trading market value for any
securities comprising such distribution, it must in doing so consider
the prices in such market over the same period used in computing the
current Fair Market Value per share. For purposes of this paragraph
(4), any dividend or distribution that includes shares of Capital
Stock, rights, options or warrants to subscribe for or purchase shares
of Capital Stock or other securities convertible into or exchangeable
for shares of Capital Stock shall be deemed instead to be (a) (i) a
dividend or distribution of the evidences of Indebtedness, cash, assets
or shares of Capital Stock other than such shares of Capital Stock,
such rights, options or warrants or such other convertible or
exchangeable securities (making any Conversion Price reduction required
by paragraph (4) of this Section 5.03(b)) immediately followed by (ii)
in the case of such shares of Capital Stock or such rights, options or
warrants, a dividend or distribution thereof (making any further
Conversion Price reduction required by paragraph (1) or (3) of this
Section 5.03(b), and any shares of Capital Stock included in such
dividend or distribution shall be deemed to be "outstanding" within the
meaning of Section 5.03(a)) or (b) in the case of such other
convertible or exchangeable securities, a dividend or distribution of
such number of shares of Capital Stock as would then be issuable upon
the conversion or exchange thereof, whether or not the conversion or
exchange of such securities is subject to any conditions (making any
further Conversion Price reduction required by paragraph (3) of this
Section 5.03(b), and any shares deemed to constitute such dividend or
distribution shall be deemed to be "outstanding" within the meaning of
Section 5.03(a)).
(5) In case at any time any shares of Capital Stock or
Convertible Securities or any rights, options or warrants to purchase
any such Capital Stock or Convertible Securities shall be issued or
sold for cash, the consideration received therefor shall be deemed to
be the amount paid by the purchaser therefor, without deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions or discounts paid or allowed by the Company in connection
therewith. In case at any time any shares of Capital Stock or
Convertible Securities or any rights, options or warrants to purchase
any such Capital Stock or Convertible Securities shall be issued or
sold for a consideration other than cash, the amount of the
consideration other than cash received by the Company shall be deemed
to be the fair value of such consideration as determined reasonably and
in good faith by the Company, without deduction therefrom of any
expenses incurred or any underwriting commissions or concessions or
discounts paid or allowed by the Company in connection therewith. In
case any shares of Capital Stock or Convertible Securities or any
rights, options or warrants to purchase any such Capital Stock or
Convertible Securities shall be issued in connection with any merger
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of another corporation into the Company, the amount of consideration
therefor shall be deemed to be the fair value of such consideration as
determined reasonably and in good faith by the Company. In case at any
time any rights, options or warrants to purchase any shares of Capital
Stock or Convertible Securities shall be issued in connection with the
issue and sale of other securities of the Company, together comprising
one integral transaction in which no consideration is allocated to such
rights, options or warrants by the parties thereto, such rights,
options or warrants shall be deemed to have been issued for an amount
of consideration equal to the fair value thereof as determined
reasonably and in good faith by the Company.
During the period beginning on the Issue Date and ending on
the Mandatory Conversion Date, in case the Company shall distribute to
all holders of its Common Stock any dividend or distribution paid
exclusively in cash out of the retained earnings of the Company in an
amount per calendar year (based on the declaration date) exceeding 5%
of the Fair Market Value of a share of Common Stock on the date on
which the last such dividend or distribution in such calendar year is
declared, then, in lieu of the adjustments provided for in Section
5.03(a), the Conversion Price shall be reduced so that the same shall
equal the price determined by multiplying the Conversion Price in
effect immediately prior to the effectiveness of the Conversion Price
reduction contemplated by this paragraph (5) by a fraction of which the
numerator shall be the current Fair Market Value per share of the
Common Stock on the date of such effectiveness less the value of the
portion of the cash so distributed applicable to one share of Common
Stock and the denominator shall be such current market price per share
of the Common Stock on the date of such effectiveness, such reduction
to become effective immediately prior to the opening of business on the
day following the date fixed for the determination of stockholders
entitled to receive such distribution.
(6) In case at any time the Company shall take a record of the
holders of Capital Stock for the purpose of entitling them (i) to
receive a dividend or other distribution payable in Capital Stock or in
Convertible Securities, or (ii) to subscribe for or purchase Capital
Stock or Convertible Securities, then such record date shall be deemed
to be the date of the issue or sale of the shares of Capital Stock
deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.
(c) In case at any time the Company shall subdivide its outstanding
shares of Capital Stock into a greater number of shares, the Conversion Price in
effect immediately prior to such subdivision shall be proportionately reduced
and conversely, in case the outstanding shares of Capital Stock of the Company
shall be combined into a smaller number of shares, the Conversion Price in
effect immediately prior to such combination shall be proportionately increased.
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(d) If the purchase price provided for in any right, option or warrant
referred to in paragraph (1) of Section 5.03(b), or the rate at which any
Convertible Securities referred to in paragraphs (1) or (2) of Section 5.03(b)
are convertible into or exchangeable for Capital Stock, shall change or a
different purchase price or rate shall become effective at any time or from time
to time (other than under or by reason of provisions designed to protect against
dilution), then, upon such change becoming effective, the Conversion Price then
in effect hereunder shall forthwith be increased or decreased to such Conversion
Price as would have obtained had the adjustments made upon the granting or
issuance of such right, option, warrant or Convertible Securities been made upon
the basis of (1) the issuance of the number of shares of Capital Stock
theretofore actually delivered upon the exercise of such right, option or
warrant or upon the conversion or exchange of such Convertible Securities, and
the total consideration received therefor, and (2) the granting or issuance at
the time of such change of any such right, option, warrant or Convertible
Securities then still outstanding for the consideration, if any, received by the
Company therefor and to be received on the basis of such changed price. On the
expiration of any right, option or warrant referred to in paragraph (1) of
Section 5.03(b), or on the termination of any right to convert or exchange any
Convertible Securities referred to in paragraphs (1) or (2) of Section 5.03(b),
the Conversion Price shall forthwith be readjusted to such amount as would have
obtained had the adjustment made upon the granting or issuance of such right,
option, warrant or Convertible Securities been made upon the basis of the
issuance or sale of only the number of shares of Capital Stock actually issued
upon the exercise of such right, option or warrant or upon the conversion or
exchange of such Convertible Securities. If the purchase price provided for in
any such right, option or warrant, or the rate at which any such Convertible
Securities are convertible into or exchangeable for Capital Stock, shall change
at any time under or by reason of provisions with respect thereto designed to
protect against dilution, then in case of the delivery of Capital Stock upon the
exercise of any such right, option or warrant or upon conversion or exchange of
any such Convertible Security, the Conversion Price then in effect hereunder
shall forthwith be decreased to such Conversion Price as would have obtained had
the adjustments made upon the issuance of such right, option, warrant or
Convertible Security been made upon the basis of the issuance of (and the total
consideration received for) the shares of Capital Stock delivered as aforesaid.
(e) The Company shall not be required to make any adjustment of the
Conversion Price in the case of:
(1) the issuance of any shares of Capital Stock in exchange
for, or on conversion of (in either case, on a one-for-one basis), any
shares of Capital Stock of another class or series; provided that the
only material differences between (i) the shares of Capital Stock
surrendered in exchange or converted, and (ii) the shares of
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another class or series of Capital Stock thereupon issued, with respect
to their relative powers, designations, preferences, and relative,
participating, optional or other rights, if any, or the qualifications,
limitations or restrictions of such powers, preferences or rights, are
differences in voting rights;
(2) the issuance of any shares of Capital Stock (or securities
convertible into Capital Stock) upon conversion of the Company's
Convertible Mortgage Notes due 2006 issued to Security Capital Pacific
Trust or Security Capital Atlantic incorporated.
(3) the issuance of Capital Stock pursuant to the exercise of
stock options currently outstanding or thereafter issued to directors,
officers, employees or service providers of the Company pursuant to any
employee benefit plan, agreement or arrangement approved by the Board
of Directors.
(f) In case of any consolidation or merger of the Company with or into
any other corporation or any merger of another Person into the Company (other
than a merger in which the Company is the surviving Person) or any statutory
exchange of securities with another Person or the sale or other disposition of
all or substantially all of the properties and assets of the Company to any
other Person, there shall be no adjustment of the Conversion Price pursuant to
Section 5.03, but the Holder of this Debenture shall have the right after such
consolidation, merger, statutory exchange, sale or conveyance to convert this
Debenture into the kind and amount of securities, cash or other property
receivable upon such consolidation, merger, statutory exchange, sale or
conveyance by a holder of the number of shares of Capital Stock into which this
Debenture might have been converted immediately prior to such consolidation,
merger, statutory exchange, sale or conveyance (assuming for the purpose of this
sentence only that this Debenture was convertible at such time under this
Article Five), assuming such holder of Capital Stock exercises his rights of
election, if any, as to the kind or amount of securities, cash or other property
receivable upon such consolidation, merger, statutory exchange, sale or
conveyance in the same manner as did the holders of a majority (or if there
shall be no majority, in the same manner as did the holders of a plurality) of
the shares of Common Stock in such transaction. The Company shall provide to the
Registered Holder at least 30 days' prior written notice of the scheduled
occurrence of an event described in this Section 5.03(f).
The above provisions of this Section 5.03(f) shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers, sales or
other dispositions.
SECTION 5.04. Notice of Adjustments of Conversion Price. Whenever
the Conversion Price is adjusted as herein provided:
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(a) the Company shall compute the adjusted Conversion Price in
accordance with Section 5.03 and shall prepare a certificate signed by the
Secretary of the Company setting forth the adjusted Conversion Price and showing
in reasonable detail the facts upon which such adjustment is based, and such
certificate shall forthwith be filed in the minute book of the Company;
(b) a notice stating that the Conversion Price has been adjusted and
setting forth the adjusted Conversion Price shall forthwith be prepared, and as
soon as practicable after it is prepared, such notice shall be mailed by the
Company to the Holder at the address appearing in the Register; and
(c) the certificate of the Secretary of the Company setting forth the
adjusted Conversion Price shall be conclusive evidence that the adjustment is
correct absent manifest error.
SECTION 5.05. Notice of Certain Corporate Action. In case:
(a) the Company shall declare a dividend (or any other distribution) on
its Capital Stock, other than cash dividends payable from current earnings; or
(b) the Company shall authorize the granting of all the holders of its
Capital Stock of (i) rights or warrants to subscribe for or purchase any shares
of Capital Stock of any class, or (ii) any other rights; or
(c) of any reclassification of the Capital Stock of the Company (other
than a subdivision or combination of its outstanding shares of Capital Stock),
or of any consolidation or merger to which the Company is a party and for which
approval of any stockholders of the Company is required, or of the sale or
transfer of all or substantially all of the assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
then the Company shall cause to be filed in the minute book of the Company and
shall cause to be mailed to the Holder of this Debenture at the Holder's last
address appearing in the Register, at least 30 days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution,
rights or warrants, or, if a record is not to be taken, the date as of which the
holders of Capital Stock of record to be entitled to such dividend,
distribution, rights or warrants are to be determined, or (y) the date on which
such reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up is expected to become effective, and the date as of
which it is expected that holders of Capital Stock of record shall be entitled
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to exchange their shares of Capital Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up.
SECTION 5.06. Company to Reserve Common Stock. The Company shall at all
times reserve and keep available, free from preemptive rights, out of its
authorized but unissued Common Stock, for the purpose of effecting the
conversion of the Debentures, the full number of shares of Common Stock then
issuable upon the conversion of all outstanding Debentures, and the Company will
maintain at all times all other rights and privileges sufficient to enable it to
fulfill all its obligations hereunder.
SECTION 5.07. Taxes on Conversion. The Company will pay any and all
stamp and transfer taxes that may be payable in respect of the issue or delivery
of shares of Common Stock on conversion of this Debenture pursuant to the terms
hereof. The Company shall not, however, be required to pay any tax which may be
payable in respect of any transfer involved in the issue and delivery of shares
of Common Stock in a name other than that of the Holder of this Debenture or
Debentures to be converted, and no such issue or delivery shall be made unless
and until the Person requesting such issue has paid to the Company the amount of
any such tax, or has established to the satisfaction of the Company that such
tax has been paid.
SECTION 5.08. Covenant as to Common Stock. The Company covenants that
all shares of Common Stock which may be issued upon conversion of this Debenture
will upon issue be duly authorized, validly issued, fully paid and
nonassessable.
SECTION 5.09. Registration and Listing of Common Stock. If any shares
of Common Stock required to be reserved for purposes of conversions of
Debentures hereunder require registration with or approval of any governmental
authority under any Federal or state law (other than the Securities Act) before
such shares may be issued upon conversion, the Company will, at its expense and
as expeditiously as possible, use commercially reasonable efforts to cause such
shares to be duly registered or approved, as the case may be. If and so long as
the Common Stock is listed on any national securities exchange, the Company
will, at its expense, obtain promptly and maintain the approval for listing on
each such exchange upon official notice of issuance, of shares of Common Stock
issuable upon conversion of the then outstanding Debentures and maintain the
listing of such shares after their issuance; and the Company will also list on
the national securities exchange, will register under the Exchange Act and will
maintain such listing of, any other securities that at any time are issuable
upon conversion of the Debentures, if and at the time that any securities of the
same class shall be listed on such national securities exchange by the Company
or shall require registration under the Exchange Act.
SECTION 5.10 Notice of Default. Within 90 days after the occurrence of
any default hereunder with respect to the Debentures, the Company shall send
notice of such
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default to the Debenture holders, unless such default shall have been cured or
waived. For the purpose of this Section 5.10, the term "default" means any event
which is, or after notice or lapse of time or both would become, an Event of
Default.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default. An "Event of Default" with respect
to this Debenture occurs if:
(a) the Company defaults in the payment of Interest on this Debenture
or any other Debenture when the same becomes due and payable and the default
continues for a period of 30 days after an Interest Payment Date.
(b) the Company defaults in the payment of the principal of this
Debenture or any other Debenture when the same becomes due and payable at
Maturity, upon redemption or otherwise;
(c) the Company fails to comply with any of its covenants or other
agreements contained in this Debenture and the default continues for the period
and after the notice specified below;
(d) there shall be a default under any bond, debenture, note or other
evidence of Indebtedness of the Company or any Material Subsidiary or under any
mortgage, debenture or other instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness of the Company or any
Material Subsidiary or under any guarantee of the payment by the Company or any
Material Subsidiary of Indebtedness, whether such Indebtedness or guarantee now
exists or shall hereafter be created, which default relates to (i) the
obligation to pay the principal of or interest on any such Indebtedness or
guarantee which default shall have resulted in such Indebtedness becoming or
being declared due and payable prior to its stated maturity or (ii) an
obligation other than the obligations to pay the principal of or interest on any
such Indebtedness and which default shall have resulted in such Indebtedness
becoming or being declared due and payable prior to its stated maturity;
provided that no default under this clause (d) shall exist if all such defaults
do not relate to such Indebtedness or such guarantees with an aggregate
principal amount of at least $25,000,000;
(e) the Company or any Material Subsidiary pursuant to or within the
meaning of any Bankruptcy Law (as defined below) (A) becomes insolvent, (B)
fails generally to pay its debts as they become due, (C) admits in writing its
inability to pay its debts as they become
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due, (D) commences a voluntary case or proceeding, (E) consents to the entry of
a judgment, decree or order for relief against it in an involuntary case or
proceeding, (F) consents to the appointment of a Custodian (as defined below) of
it or for any material part of its property, (G) consents to or acquiesces in
the institution of bankruptcy or insolvency proceedings to or against it, (H)
applies for, consents to or acquiesces in the appointment of or taking
possession by a Custodian of the Company or any such Material Subsidiary or for
any material part of the Company's or any such Material Subsidiary's property,
or (i) makes a general assignment for the benefit of its creditors;
(f) a court of competent jurisdiction enters a judgment, decree or
order for relief in respect of the Company or any Material Subsidiary in an
involuntary case or proceeding under any Bankruptcy Law which shall (A) approve
as properly filed a petition seeking reorganization, arrangement, adjustment or
composition in respect of the Company or any Material Subsidiary, (B) appoint a
Custodian of the Company or any Material Subsidiary or for any material part of
its property or (C) order the winding-up or liquidation of its affairs, and such
judgment, decree or order shall remain unstayed and in effect for a period of 90
consecutive days; or any warrant of attachment is issued against any portion of
the property of the Company or any Material Subsidiary which is not released
within 90 days of service; or
(g) uninsured final judgments for the payment of money which in the
aggregate at any one time exceed $25,000,000 shall be rendered against the
Company or any Material Subsidiary by a court of competent jurisdiction, and
shall remain undischarged for a period (during which execution shall not be
effectively stayed) of 30 days after such judgment becomes final and
nonappealable.
The term "Bankruptcy Law" means Title 11 of the United States Code or
any similar federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, sequestrator or similar
official under any Bankruptcy Law.
A Default under clause (c) is not an Event of Default until the Holders
of at least a majority in aggregate principal amount of the then outstanding
Debentures (excluding any Debentures held by the Company or any of its
Affiliates) notify the Company of the Default and the Company does not cure the
Default within 30 days after receipt of the notice. The notice must specify the
Default, demand that it be remedied and state that the notice is a "Notice of
Default." When a Default is cured, it ceases.
SECTION 6.02. Acceleration. If an Event of Default (other than an Event
of Default specified in Section 6.01(a), Section 6.01(b), Section 6.01(e) or
Section 6.01(f)) occurs and is continuing, the Holders of at least a majority in
aggregate principal amount of the Debentures then outstanding (excluding any
Debentures held by the Company or any of its Affiliates) may, by notice to the
Company, declare all unpaid principal and accrued Interest to the date of
acceleration on the Debentures then outstanding (if not then due and payable) to
be
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due and payable on the "Acceleration Date," which shall be the first to occur of
(x) an acceleration of any Senior Indebtedness in an aggregate amount in excess
of $500,000, or (y) the fifth Business Day after the receipt of notice of such
declaration by the Company; provided that, in the event the condition giving
rise to such Event of Default shall have ceased to exist or payment shall have
been made prior to the Acceleration Date, such declaration shall be
automatically rescinded and such amounts shall no longer become due and payable
pursuant hereto. If an Event of Default specified in Section 6.01(a) or Section
6.01(b) occurs and is continuing, (i) any Holder may, by notice to the Company,
declare all unpaid principal and accrued Interest to the date of acceleration on
its Debenture (if not then due and payable) to be due and payable on the
Acceleration Date; provided that, in the event the condition giving rise to such
Event of Default shall have ceased to exist or payment shall have been made
prior to the Acceleration Date, such declaration shall be automatically
rescinded and such amounts shall no longer become due and payable pursuant
hereto and (ii) the Holders of at least 25% in aggregate principal amount of the
Debentures then outstanding may, by notice to the Company, declare all unpaid
principal and accrued Interest to the date of acceleration on the Debentures
then outstanding (if not then due and payable) to be due and payable on the
Acceleration Date; provided that, in the event the condition giving rise to such
Event of Default shall have ceased to exist or payment shall have been made
prior to the Acceleration Date, such declaration shall automatically be
rescinded and such amounts shall no longer become due and payable pursuant
hereto. If an Event of Default specified in Section 6.01(e) or Section 6.01(f)
occurs, all unpaid principal and accrued Interest on this Debenture then
outstanding shall become immediately due and payable without any declaration or
other act on the part of any Person. Upon payment of such principal amount and
Interest, all of the Company's obligations under this Debenture shall terminate.
The Holders of a majority in aggregate principal amount of the then outstanding
Debentures (excluding any Debentures held by the Company or any of its
Affiliates) by notice to the Company may rescind an acceleration and its
consequences if (i) all existing Events of Default, other than the non-payment
of the principal of the Debentures which has become due solely by such
declaration of acceleration, have been cured or waived, (ii) to the extent the
payment of such interest is lawful, interest on overdue installments of interest
and overdue principal, which has become due otherwise than by such declaration
of acceleration, has been paid and (iii) the rescission would not conflict with
any judgment or decree of a court of competent jurisdiction. It is expressly
understood and agreed that the decision so to waive any Default and so to
rescind and annul any consequences thereof is within the sole judgment and
control of the Holders and such Holders shall be under no obligation to do so.
Notwithstanding the foregoing, if a declaration of acceleration shall
have occurred because of an Event of Default specified in Section 6.01(d), such
declaration shall be automatically rescinded if the Indebtedness that is the
subject of such Event of Default shall have been paid or discharged or such
Event of Default shall have been rescinded, cured or waived in accordance with
the terms of any agreement governing or evidencing such Indebtedness and written
notice of such payment, discharge, rescission, cure or waiver, as the
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case may be, shall have been given to the Holders of the Debentures by the
Company or by the requisite holders of such Indebtedness or the trustee, agent
or other representative of such holders within 60 days after such declaration
and no other Event of Default shall have occurred and be continuing on the date
of receipt of such notice.
SECTION 6.03. Other Remedies. If an Event of Default with respect to
this Debenture occurs and is continuing and, except in the case of Defaults
under Sections 6.01(e) and 6.01(f), the Indebtedness represented hereby has been
declared due and payable pursuant to Section 6.02, the Holder hereof may pursue
any available remedy by proceeding at law or in equity to collect the payment of
principal of or Interest on this Debenture or to enforce the performance of any
provision of this Debenture.
A delay or omission by the Holder of this Debenture in exercising any
right or remedy accruing upon Event of Default shall not impair the right or
remedy or constitute a waiver of or acquiescence in the Event of Default. No
remedy is exclusive of any other remedy. All available remedies are cumulative
to the extent permitted by law.
SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in
aggregate principal amount of the then outstanding Debentures (excluding any
Debentures held by the Company or any of its Affiliates) on behalf of the
Holders of all the Debentures, including this Debenture, by notice to the
Company, may waive an existing Default or Event of Default and its consequences;
except a Default or an Event of Default in the payment of the principal of or
Interest on any Debenture, or in respect of a covenant or provision hereof which
under Article Eight cannot be modified or amended without the consent of the
Holder of each outstanding Debenture affected. When a Default or Event of
Default is waived, it is cured and ceases; but no such waiver shall extend to
any subsequent default or impair any right consequent thereon.
SECTION 6.05. Undertaking for Costs. In any suit for the enforcement of
any right or remedy under this Debenture, a court in its discretion may require
the filing by any party litigant in the suit of an undertaking to pay the costs
of the suit, and the court in its discretion may assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in the suit,
having due regard to the merits and good faith of the claims or defenses made by
the party litigant. This Section 6.05 does not apply to a suit by a Holder or
Holders of more than 10% in aggregate principal amount of the then outstanding
Debentures.
ARTICLE SEVEN
SUBORDINATION
SECTION 7.01. Subordination of Debentures to Senior Indebtedness.
The Company, for itself and its successors, and the Holder, by acceptance of
this Debenture agree that the payment of the principal and Interest on this
Debenture is subordinated, to the extent and in the manner provided in this
Article Seven, to the prior payment in full of all Senior Indebtedness.
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This Article Seven shall constitute a continuing offer to all Persons
who, in reliance upon such provisions, become holders of, or continue to hold,
Senior Indebtedness, and such provisions are made for the benefit of the holders
of Senior Indebtedness, and such holders are made obligees hereunder and they or
any of them may enforce such provisions.
The expressions "prior payment in full," "payment in full" and "paid in
full" and any other similar term or phrase when used in this Article Seven with
respect to Senior Indebtedness shall mean the payment in full in cash or cash
equivalents of the principal of and premium, if any, and interest (including
post-petition interest on such Senior Indebtedness to the extent and only to the
extent, that such post-petition interest is an allowed claim against the Company
which is enforceable against the Company in a bankruptcy case under Title 11 of
the United States Code) on such Senior Indebtedness.
SECTION 7.02. No Payment on Debenture in Certain Circumstances.
(a) No payment shall be made on account of principal of or Interest on
this Debenture or any of the Debentures, or to acquire this Debenture or any of
the Debentures for cash or property other than Capital Stock of the Company, or
on account of the redemption provisions contained in this Debenture or any of
the Debentures (I) upon the maturity of any Senior Indebtedness in an aggregate
amount in excess of $500,000 by lapse of time, acceleration or otherwise, unless
and until all principal thereof and interest thereon shall first be paid in full
in cash or cash equivalents, or such payment is duly provided for in a manner
satisfactory to the holders of a majority in aggregate principal amount of the
then outstanding Senior Indebtedness or (ii) in the event that the Company shall
default in the payment of any principal of, premium, if any, or interest on any
Senior Indebtedness in an aggregate amount in excess of $500,000 when the same
becomes due and payable, whether at maturity or at a date fixed for prepayment
or by declaration or otherwise, unless and until such default shall have been
cured or waived or shall have ceased to exist or payment has been made; provided
that clause (ii) of this paragraph (a) shall not prevent the making of any
payment for more than 179 days after the Default Notice (as defined in Section
7.02(b)) ("Deferral Period") shall have been given unless the Senior
Indebtedness in respect of which such event of default exists has been declared
due and payable in its entirety, in which case no such payment may be made until
such acceleration has been rescinded or annulled (by cure of the default giving
rise thereto or otherwise) or such Senior Indebtedness has been paid in full. In
the event that such payments in respect of principal of or Interest on this
Debenture or any other Debenture are or were suspended pursuant to clause (ii)
of this paragraph (a), such payments may not be suspended again under this
paragraph (a) until 360 days after the date of the Default Notice which caused
the next preceding Deferral Period unless the Senior Indebtedness in respect of
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which such event of default exists has been declared due and payable in its
entirety, in which case no payment on account of principal of or interest on
this Debenture or any other Debenture may be made until such acceleration has
been rescinded or annulled (by cure of the default giving rise thereto or
otherwise) or such Senior Indebtedness has been paid in full. Notwithstanding
the foregoing, no event of default which existed or was continuing on the date
of any Default Notice shall be made the basis for the giving of a second Default
Notice.
(b) Upon the happening of an event of default (or if an event of
default would result upon any payment with respect to this Debenture or any of
the Debentures) with respect to any Senior Indebtedness in an aggregate amount
in excess of $500,000, as such event of default is defined therein or in the
instrument under which it is outstanding, permitting the holders to accelerate
the maturity thereof upon written notice thereof given to the Company by any
holders of such Senior Indebtedness or their authorized representative ("Default
Notice"), then, unless and until such event of default shall have been cured or
waived by the holders of such Senior Indebtedness or their authorized
representative or shall have ceased to exist, no direct or indirect payment
shall be made by the Company with respect to the principal of or Interest on
this Debenture or any of the Debentures or to acquire or redeem this Debenture
or any of the Debentures on account of the redemption provisions contained in
this Debenture or any of the Debentures; provided that this paragraph (b) shall
not prevent the making of any payment for more than 179 days after the Default
Notice shall have been given unless the Senior Indebtedness in respect of which
such event of default exists has been declared due and payable in its entirety,
in which case no such payment may be made until such acceleration has been
rescinded or annulled (by cure of the default giving rise thereto or otherwise)
or such Senior Indebtedness has been paid in full. In the event that payments in
respect of principal of or Interest on this Debenture or any other Debenture are
or were suspended pursuant to this paragraph (b), such payments may not be
suspended again under this paragraph (b) until 360 days after the date of the
Default Notice which caused the next preceding Deferral Period unless the Senior
Indebtedness in respect of which such event of default exists has been declared
due and payable in its entirety, in which case no payment on account of
principal of or Interest on this Debenture or any other Debenture may be made
until such acceleration has been rescinded or annulled (by cure of the default
giving rise thereto or otherwise) or such Senior Indebtedness has been paid in
full. Notwithstanding the foregoing, no event of default which existed or was
continuing on the date of any Default Notice shall be made the basis of the
giving of a second Default Notice.
(c) So long as any Bank Senior Indebtedness is committed or
outstanding, payment on account of the Debentures may not be accelerated, and
the Holders of the Debentures shall not exercise or enforce any remedy in
respect of any Default as to the Debentures or any insolvency of the Company
(including, without limitation, commencing, or joining with another to commence,
any insolvency or liquidation proceeding), during any Deferral Period unless (1)
payment of any Indebtedness in an aggregate principal amount exceeding $500,000
has been accelerated and remains unpaid and (2) the provisions of Section
7.02(b) are applicable. So long
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as any Bank Senior Indebtedness is committed or outstanding, the Holders of the
Securities shall give the agent under the Credit Agreement thirty (30) days'
prior notice of any proposed acceleration with respect to the notice of any
proposed acceleration with respect to the Debentures (which notice may be given
during a Deferral Period provided that the proposed acceleration is not to be
effective until the expiration of such Deferral Period).
(d) In furtherance of the provisions of Section 7.01, in the event
that, notwithstanding the foregoing provisions of this Section 7.02, any payment
on account of principal of or Interest on this Debenture or any of the
Debentures or on account of redemption of this Debenture or any of the
Debentures shall be made by or on behalf of the Company and received by the
Holder of this Debenture or any of the Debentures or money for any such payment
shall be segregated and held in trust, at a time when such payment was
prohibited by the provisions of this Section 7.02, then, unless and until such
payment is no longer prohibited by this Section 7.02, such payment shall be held
in trust for the benefit of and shall upon demand be immediately paid over to,
the holders of Senior Indebtedness or their authorized representative, ratably
according to the aggregate amount remaining unpaid on account of the principal
of and interest on the Senior Indebtedness held or represented by each, for
application to the payment of all Senior Indebtedness remaining unpaid to the
extent necessary to pay all Senior Indebtedness in full in accordance with its
terms in cash or cash equivalents or such payment is duly provided for in a
manner satisfactory to the holders of such Senior Indebtedness, after giving
effect to any concurrent payment or distribution or provision therefor to or for
the holders of Senior Indebtedness. The Company shall give prompt written notice
to the Holder of this Debenture and the Holders of all other Debentures of any
default or failure to make payments of principal or interest on such Senior
Indebtedness or a default which results in the acceleration of such Senior
Indebtedness, under any Senior Indebtedness or under any agreement pursuant to
which Senior Indebtedness may have been issued. Failure to give such notice
shall not affect the subordination of this Debenture or any of the Debentures to
the Senior Indebtedness as provided in this Article Seven.
SECTION 7.03. Debenture Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation or Reorganization of Company. Upon any
payment or distribution of assets of the Company upon any dissolution, winding
up, liquidation or reorganization of the Company (whether in bankruptcy,
insolvency or receivership proceedings or upon any assignment for the benefit of
the creditors or otherwise):
(a) the holders of all Senior Indebtedness shall first be entitled to
receive payment in full (or to have such payment duly provided for) in cash or
cash equivalents of the principal and interest due thereon before the Holder of
this Debenture or the Holder of any other Debenture is entitled to receive any
payment on account of the principal of or Interest on this Debenture or any of
the Debentures (for such purpose, Senior Indebtedness shall be deemed paid in
full if all amounts due thereon have been recovered (x) in cash, or (y) in cash
equivalents;
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(b) any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to which the Holder of this
Debenture or the Holders of any of the Debentures would be entitled except for
the provisions of this Article Seven (except similarly subordinated securities)
shall be paid by the liquidating trustee or agent or other Person making such a
payment or distribution, directly to the holders of Senior Indebtedness or their
authorized representative, to the extent necessary to make payment in full of
all Senior Indebtedness remaining unpaid determined in accordance with Section
7.03(a), after giving effect to any concurrent payment or distribution or
provision thereof to the holders of such Senior Indebtedness; provided that, in
the event that a determination in accordance herewith is made that the Senior
Indebtedness has been paid in full based on the receipt by the holders of the
Senior Indebtedness of any property (other than cash), stock or obligations or
any combination thereof with or without cash, then any payment or delivery of
cash by the Company to the Holder of this Debenture or to the Holders of any
other Debentures shall be paid to the holders of the Senior Indebtedness until
such time as the holders of the Senior Indebtedness shall have received payment
in full solely in cash and, in exchange therefor, the holders of the Senior
Indebtedness shall pay over to the Holders of the Debentures an equivalent
value, as determined by the independent third party selected by mutual agreement
of the holders of a majority in aggregate principal amount of the then
outstanding Senior Indebtedness and the Holders of a majority in aggregate
principal amount of the then outstanding Debentures, of such property, stock or
obligations as the holders of the Senior Indebtedness shall have received from
the Company such payment of equivalent value to be allocated among the Holders
of the Debentures pro rata according to their share of aggregate principal
outstanding under the then outstanding Debentures; and provided, further, that,
(i) in the event that payment or delivery by the Company of
such property, cash, stock or obligations to the Holders of the
Debentures is authorized by an order or decree giving effect, and
stating in such order or decree that effect is given, to the
subordination of the Debentures to Senior Indebtedness, and made by a
court of competent jurisdiction in a reorganization proceeding under
any applicable bankruptcy or reorganization law, no payment or delivery
by the Company of such property (other than cash), stock or obligations
payable or deliverable with respect to such Debentures shall be made to
the holders of Senior Indebtedness; and
(ii) no such delivery shall be made to holders of Senior
Indebtedness of stock or obligations which are issued in respect of the
Debentures pursuant to reorganization proceedings, or upon any merger,
consolidation, sale, lease transfer or other disposal not prohibited by
the provisions of this Debenture by the Company, as reorganized, or by
the corporation succeeding to the Company or acquiring its property and
assets, if such stock or obligations are subordinate and junior at
least to the extent provided in this Section 7.03 to the payment of any
stock or obligations which are issued in exchange or substitution for
any Senior Indebtedness then outstanding;
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(c) in the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities shall be received by the Holder of this Debenture or any
such payment or distribution shall be segregated or held in trust on account of
principal of or Interest on this Debenture before all Senior Indebtedness is
paid in full, or provision made for its payment, such payment or distribution
shall be received and held in trust for and shall be paid over to the holders of
the Senior Indebtedness remaining unpaid or provided for (pro rata as to each of
such holders on the basis of the respective amount of Senior Indebtedness held
by them) or their authorized representative, for application to the payment of
such Senior Indebtedness until all such Senior Indebtedness shall have been paid
in full, after giving effect to any concurrent payment or distribution or
provision therefor to the holders of such Senior Indebtedness.
The Company shall give prompt written notice to the Holder of this
Debenture and all other Holders of the Debentures of any dissolution, winding
up, liquidation or reorganization of the Company or assignment for the benefit
of creditors. Failure to give such notice shall not affect the subordination of
this Debenture or any other Debenture to the Senior Indebtedness as provided in
this Article Seven.
SECTION 7.04. Holder of Debenture to Be Subrogated to Rights of Holders
of Senior Indebtedness. Subject to the indefeasible payment in full of all
Senior Indebtedness, the Holder of this Debenture and all other Holders of the
Debentures shall be subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions of assets of the Company
applicable to the Senior Indebtedness until all amounts owing on this Debenture
and all other Debentures shall be paid in full, and for the purpose of such
subrogation no such payments or distributions to the holders of Senior
Indebtedness by or on behalf of the Company or by or on behalf of the Holder of
this Debenture and the Holders of all other Debentures by virtue of this Article
Seven which otherwise would have been made to the Holder of this Debenture
shall, as between the Company and the Holder of this Debenture, be deemed to be
payment by the Company to or on account of the Senior Indebtedness, it being
understood that the provisions of this Article Seven are and are intended solely
for the purpose of defining the relative rights of the Holder of this Debenture
and the Holders of all other Debentures, on the one hand, and the holders of
Senior Indebtedness, on the other hand.
SECTION 7.05. Obligations of the Company Unconditional. Nothing
contained in this Article Seven or elsewhere in this Debenture or any other
Debenture is intended to or shall impair, as between the Company and the Holder
of this Debenture, the obligation of the Company which is absolute and
unconditional, to pay to the Holder of this Debenture the principal of and
Interest on this Debenture as and when the same shall become due and payable in
accordance with the terms hereof, or is intended to or shall affect the relative
rights of the Holder of this Debenture and creditors of the Company other than
the holders of the Senior Indebtedness, nor shall anything herein or therein
prevent the Holder of this Debenture from exercising all remedies otherwise
permitted by applicable law upon default under this Debenture,
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subject to the rights, if any, under this Article Seven of the holders of Senior
Indebtedness in respect of cash, property or securities of the Company received
or receivable upon the exercise of any such remedy. Upon any distribution of
assets of the Company referred to in this Article Seven, the Company and the
Holder of this Debenture shall be entitled to rely upon any order or decree made
by any court of competent jurisdiction in which such dissolution, winding up,
liquidation or reorganization proceedings are pending, or a certificate of the
liquidating trustee or agent or other Person making any distribution to the
Holder of this Debenture for the purpose of ascertaining the Persons entitled to
participate in such distribution, the holders of the Senior Indebtedness and
other indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article Seven.
SECTION 7.06. Subordination Rights Not Impaired by Acts or Omissions of
Company or Holders of Senior Indebtedness. No right of any present or future
holders of any Senior Indebtedness to enforce subordination as provided herein
shall at any time in any way be prejudiced or impaired by an act or failure to
act on the part of the Company or by any act or failure to act, in good faith,
by any such holder, or by any noncompliance by the Company with the terms of
this Debenture, regardless of any knowledge thereof which any such holder may
have or with which such holder otherwise may be charged. The holders of Senior
Indebtedness may extend, renew, modify or amend the terms of the Senior
Indebtedness or any security therefor and release, sell or exchange such
security and otherwise deal freely with the Company, all without affecting the
liabilities and obligations of the parties to this Debenture.
SECTION 7.07. Article Seven Not to Prevent Events of Default. The
failure to make a payment on account of principal of or Interest on this
Debenture or any of the other Debentures by reason of any provision of this
Article Seven shall not be construed as preventing the occurrence of an Event of
Default under Article Six.
ARTICLE EIGHT
AMENDMENTS AND WAIVERS
SECTION 8.01. With Consent of Holders. The Company, when having
provided at least 15 days' prior written notice to all Holders, with the written
consent of the Holder or Holders of at least a majority in aggregate principal
amount of the then outstanding Debentures (excluding any Debentures held by the
Company or any of its Affiliates) may amend or supplement such Debentures
(including this Debenture). The Holder or Holders of a majority in aggregate
principal amount of the then outstanding Debentures may waive compliance by the
Company with any provision of such Debentures as it relates to such Holder or
Holders; provided that such Holder or Holders provide written notice to each
other Debentureholder.
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However, without the consent of each Debentureholder, no amendment, supplement
or waiver, including a waiver pursuant to Section 8.04 may:
(1) reduce the principal amount of such Debentures whose
Holders must consent to an amendment, supplement or waiver of any
provision of any Debenture;
(2) reduce the rate of Interest on any Debenture;
(3) reduce the principal amount due on any Debenture;
(4) change the Maturity Date of Debentures or alter the
redemption provisions with respect thereto in a manner adverse to such
Holder;
(5) make any changes in Section 6.04 or this Section 8.01,
except to increase any such percentage or to provide that certain other
provisions of this Debenture cannot be modified or waived without the
consent of the Holder of each Debenture affected thereby;
(6) make the principal of any Debenture payable with anything
other than U.S. Legal Tender and the Interest payable in anything other
than U.S. Legal Tender or, in the case of conversion, Common Stock; or
(7) modify the provisions of Article Five or Article Seven in
a manner adverse to any Holder of any Debenture.
It shall not be necessary for the consent of the Holders of Debentures
under this Section 8.01 to approve the particular form of any proposed
amendment, supplement or waiver, but it shall be sufficient if such consent
approves the substance thereof.
After an amendment, supplement or waiver under this Section 8.01
becomes effective, the Company shall provide notice, pursuant to Section 9.01 to
the Holders affected thereby setting forth the amendment, supplement or waiver.
Any failure of the Company to give such notice, or any defect therein, shall
not, however, in any way impair or affect the validity of any amendment.
Notwithstanding the foregoing, an amendment under this Section 8.01 may
not make any change that adversely affects the holder of any Senior Indebtness
unless such holder shall have consented to such change.
SECTION 8.02. Revocation and Effect of Consents. Until an amendment or
waiver becomes effective, a consent to it by a Holder of a Debenture is a
continuing consent by such Holder and every subsequent Holder of such Debenture
or portion of such Debenture that evidences the same debt as the consenting
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Holder's Debenture, even if notation of the consent is not made on any
Debenture. However, any such Holder or subsequent Holder may revoke the consent
as to his Debenture or portion of a Debenture. Such revocation shall be
effective only if the Company receives the notice of such revocation before the
date on which the Company receives the consent of Holders of the requisite
principal amount of the then outstanding Debentures to such amendment,
supplement or waiver.
The Company may, but shall not be obligated to, fix a Record Date for
the purpose of determining the Holders of the Debentures entitled to consent to
any amendment, supplement or waiver. If a Record Date is fixed, then
notwithstanding the last two sentences of the immediately preceding paragraph,
those Persons who were Holders of the Debentures at such Record Date (or their
duly designated proxies), and only those Persons, shall be entitled to revoke
any consent previously given, whether or not such Persons continue to be Holders
after such Record Date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder of the Debentures, unless it makes a change described in any
of clauses (1) through (7) of Section 8.01, in which case the amendment,
supplement or waiver shall bind only each Holder of a Debenture who has
consented to it and every subsequent Holder of a Debenture or portion of a
Debenture that evidences the same debt as the consenting Holder's Debenture.
SECTION 8.03. Notation on or Exchange of Debentures. If an amendment,
supplement or waiver changes the terms of a Debenture, the Company may require
the Holder of this Debenture to deliver it to the Company. The Company may place
an appropriate notation on the Debenture about the changed terms and return it
to the Holder. Alternatively, if the Company has so determined, the Company in
exchange for this Debenture may issue a new Debenture that reflects the changed
terms.
SECTION 8.04. Effect of Amendment. Upon the execution of any amendment
pursuant to the provisions hereof, this Debenture shall be and be deemed to be
modified and amended in accordance therewith and the respective rights,
limitations of rights, obligations and duties under this Debenture of the
Company and the Holders of this Debenture shall thereafter be determined,
exercised and enforced hereunder subject in all respects to such modifications
and amendments, and all the terms and conditions of any such amendment shall be
and be deemed to be part of the terms and conditions of this Debenture for any
and all purposes.
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<PAGE>
ARTICLE NINE
MISCELLANEOUS
SECTION 9.01. Notices. Any notices or other communications required or
permitted hereunder shall be in writing, and shall be sufficiently given if made
by hand delivery, by telecopier by a nationally recognized express courier or
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
if to the Company: Homestead Village Incorporated
2100 RiverEdge Parkway
Atlanta, Georgia 30328
Attn.: Robert C. Aldworth, Senior Vice President
& Chief Financial Officer
if to the initial Holder Security Capital Group Incorporated]
of this Debenture: 125 Lincoln Avenue
Santa Fe, New Mexico 87501
Attn: Jeffrey A. Klopf, Senior Vice President
& Secretary]
Any notice or communication to the Company or the Holder of this
Debenture shall be deemed to have been given or made as of the date so delivered
if personally delivered; when receipt is acknowledged, if telecopied; one day
(three days in the case of international deliveries) after dispatch if sent by a
nationally recognized express courier for overnight delivery; and five calendar
days (seven days in the case of international deliveries) after mailing if sent
by registered or certified mail (except that a notice of change of address shall
not be deemed to have been given until actually received by the addressee).
Where this Debenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed by first-class mail, postage prepaid to such Registered
Holders as their names and addresses appear in the Register. Where this
Debenture provides for notice in any manner, such notice may be waived in
writing by the person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Company, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver. In any case where notice to Holders is given by mail, neither the
failure to mail such notices nor any defect in any notice so mailed to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders, and any notice which is mailed in the manner herein provided
shall be conclusively presumed to have been duly given.
SECTION 9.02. Consents. Failure to respond to any notice given pursuant
to the terms of this Debenture shall not be deemed consent to any proposed
action described in such notice.
- 36 -
<PAGE>
SECTION 9.03. Governing Law. This Debenture and the Debentures of any
series shall be governed and construed in accordance with the laws of the State
of Maryland without regard to principles of conflicts of law.
SECTION 9.04. No Adverse Interpretation of Other Agreements. This
Debenture may not be used to interpret any debenture, loan or debt agreement of
the Company or any of its Subsidiaries. Any such debenture, loan or debt
agreement may not be used to interpret this Debenture.
SECTION 9.05. No Recourse Against Others. A director, officer,
employee, stockholder or incorporator, as such, of the Company shall not have
any liability for any obligations of the Company under this Debenture or under
any other Debenture or for any claim based on, in respect of or by reason of
such obligations. The Holder of this Debenture, by accepting this Debenture,
waives and releases all such liability. Such waiver and release are part of the
consideration for the issuance of the Debentures.
SECTION 9.06. Successors. All agreements of the Company in this Deben-
ture shall bind its successor.
SECTION 9.07. Severability. In case any provision in this Debenture
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby, and a Holder shall have no claim therefor against any party
hereto. This Debenture shall be construed to give economic effect to the intent
of the parties hereto. Without limiting the foregoing, in the event and to the
extent that payment of any portion of Interest shall at any time be unlawful or
unenforceable, such portion of such Interest (including, without limitation, any
Interest as to which interest thereon is payable hereunder) as may be necessary
to give economic effect to the intent of the parties hereto, shall be deemed to
be principal.
- 37 -
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed, and its corporate seal to be hereunto affixed and attested, all as of
the date first written above.
The principal amount of this Debenture is $_______________.
Dated as of __________ ___, 199__
HOMESTEAD VILLAGE INCORPORATED
(SEAL) By: __________________________
Robert C. Aldworth
Senior Vice President &
Chief Financial Officer
ATTEST:
__________________________
Assistant Secretary
- 38 -
Exhibit 15
To Homestead Village Incorporated:
We are aware that Homestead Village Incorporated and subsidiaries has
incorporated by reference in its previously filed Registration Statement File
No. 333-37803, Registration Statement File No. 333-17243, Registration Statement
File No. 333-17245, and Registration Statement File No. 333-48163, its Form 10-Q
for the quarter ended June 30, 1998, which includes our report dated August 7,
1998 covering the unaudited interim financial information contained therein.
Pursuant to Regulation C of the Securities Act of 1933 (the "Act"), that report
is not considered a part of the Registration Statement prepared or certified by
our firm or a report prepared or certified by our firm within the meaning of
Sections 7 and 11 of the Act.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
August 7, 1998
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
Exhibit 27
<ARTICLE>5
<MULTIPLIER>1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 14312000
<SECURITIES> 0
<RECEIVABLES> 4287000
<ALLOWANCES> 65000
<INVENTORY> 0
<CURRENT-ASSETS> 18991000
<PP&E> 998182000
<DEPRECIATION> 30148000
<TOTAL-ASSETS> 1053671000
<CURRENT-LIABILITIES> 234178000
<BONDS> 0
0
0
<COMMON> 383000
<OTHER-SE> 491680000
<TOTAL-LIABILITY-AND-EQUITY> 492063000
<SALES> 0
<TOTAL-REVENUES> 61855000
<CGS> 0
<TOTAL-COSTS> 50178000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7119000
<INCOME-PRETAX> 5062000
<INCOME-TAX> 0
<INCOME-CONTINUING> 5062000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5062000
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
