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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 March 31, 1999
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 May 14,
1999 was 38,244,546.
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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 (unaudited) - March 31, 1999 and December 31, 1998............... 3
Condensed Statements of Operations (unaudited) - Three-month Periods Ended March 31, 1999
and 1998.................................................................................. 4
Condensed Statements of Cash Flows (unaudited) - Three-month Periods Ended March 31, 1999
and 1998.................................................................................. 5
Notes to Condensed Financial Statements (unaudited)....................................... 6
Report of Independent Public Accountants.................................................. 13
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..... 14
Item 3. Quantitative and Qualitative Disclosures About Market Risk................................ 21
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K......................................................... 23
</TABLE>
<PAGE>
HOMESTEAD VILLAGE INCORPORATED
CONDENSED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
<TABLE>
<CAPTION>
ASSETS MARCH 31, DECEMBER 31,
1999 1998
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<S> <C> <C>
Current assets:
Cash and cash equivalents (including restricted cash of $167 in 1999 and 1998)......... $ 16,943 $ 12,144
Accounts receivable, net of allowance of $319 in 1999 and $269 in 1998................. 6,717 5,910
Funds held in escrow................................................................... -- 1,701
Other current assets................................................................... 1,375 1,132
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Total current assets.............................................................. 25,035 20,887
-------------- -------------
Property and equipment...................................................................... 1,198,039 1,186,652
Less accumulated depreciation............................................................... (42,444) (48,783)
-------------- -------------
Net investment in property and equipment.................................................... 1,155,595 1,137,869
-------------- -------------
Deposits and pursuit costs, including $1,985 of funds with title companies for property
acquisitions in 1999 and $3,399 in 1998.................................................. 7,142 7,830
Deferred loan costs, net of accumulated amortization of $34,996 in 1999 and $34,002 in
1998 2,446 1,063
Trademark and intangibles, net of accumulated amortization of $4,811 in 1999 and $4,190
in 1998 43,658 44,279
Other assets ............................................................................... 23,456 6,463
-------------- --------------
Total assets............................................................................. $ 1,257,332 $ 1,218,391
============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Lines of credit........................................................................ $ 200,000 $ 357,080
Capital lease obligation, current...................................................... 3,331 --
Mortgage note payable.................................................................. -- 122,028
Development costs payable, including retainage of $8,516 in 1999 and $16,558 in
1998 15,095 24,330
Due to affiliate....................................................................... 714 335
Accrued interest payable to affiliates................................................. 6,861 1,882
Accrued real estate taxes.............................................................. 5,331 5,681
Accrued payroll and related accrued expenses........................................... 6,399 7,969
Accounts payable and other accrued expenses............................................ 12,349 11,663
-------------- -------------
Total current liabilities......................................................... 250,080 530,968
Lines of credit............................................................................. 199,000 --
Capital lease obligation, noncurrent........................................................ 139,929 --
Convertible mortgage notes payable to affiliates............................................ 221,334 221,334
Other long-term liabilities................................................................. 7,910 8,064
-------------- -------------
Total liabilities................................................................. 818,253 760,366
-------------- -------------
Commitments and contingencies (Note 7)
Shareholders' equity:
Common stock, $.01 par value, 249,823 shares authorized, 38,245 shares
issued and outstanding in 1999 and 38,255 shares issued and outstanding
in
1998 382 383
Preferred stock, 177 shares authorized, none issued.................................... -- --
Additional paid-in capital............................................................. 474,245 474,337
Retained earnings (accumulated deficit)................................................ (35,095) (16,135)
Less deferred compensation............................................................. (453) (560)
-------------- -------------
Total shareholders' equity........................................................ 439,079 458,025
-------------- -------------
Total liabilities and shareholders' equity........................................ $ 1,257,332 $ 1,218,391
============== =============
The accompanying notes are an integral part
of these condensed financial statements.
3
</TABLE>
<PAGE>
HOMESTEAD VILLAGE INCORPORATED
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE-MONTHS ENDED
MARCH 31,
--------------------------------------
1999 1998
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<S> <C> <C>
Revenues:
Room revenue............................................................ $ 48,119 $ 26,427
Other revenue........................................................... 903 1,101
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Total revenues..................................................... 49,022 27,528
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------------------- ------------------
Operating expenses:
Property operating expenses............................................. 23,107 11,873
Corporate operating expenses............................................ 9,487 4,899
Depreciation and amortization........................................... 9,997 6,387
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Total operating expenses........................................... 42,591 23,159
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Operating income............................................................. 6,431 4,369
Interest income.............................................................. 154 289
Interest expense, net of capitalized interest................................ (11,316) (2,970)
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(Loss) earnings before income taxes and cumulative effect of accounting change (4,731) 1,688
Provision for income taxes................................................... -- --
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(Loss) earnings before cumulative effect of accounting change................ (4,731) 1,688
Cumulative effect of accounting change for organizational, pre-opening and
start-up activities....................................................... (14,230) --
------------------- ------------------
Net (loss) earnings.......................................................... $ (18,961) $ 1,688
=================== ==================
Basic weighted average shares outstanding.................................... 38,245 35,736
=================== ==================
Diluted weighted average shares outstanding.................................. 38,245 35,736
=================== ==================
(Loss) earnings per share:
Basic earnings (loss) before cumulative effect of accounting change.......... $ (0.12) $ 0.05
Cumulative effect of accounting change....................................... (0.37) --
------------------- ------------------
Basic (loss) earnings........................................................ $ (0.49) $ 0.05
=================== ==================
Diluted (loss) earnings before cumulative effect of accompanying change...... $ (0.12) $ 0.05
Cumulative effect of accounting change....................................... (0.37) --
------------------- ------------------
Diluted (loss) earnings...................................................... $ (0.49) $ 0.05
=================== ==================
</TABLE>
The accompanying notes are an integral part of
these condensed financial statements.
4
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HOMESTEAD VILLAGE INCORPORATED
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-------------------------------
1999 1998
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<S> <C> <C>
Operating activities:
Net (loss) earnings........................................................... $ (18,961) $ 1,688
Adjustments to reconcile net (loss) earnings to net cash provided by operating
activities:
Cumulative effect of accounting change.................................... 14,230 --
Depreciation and amortization............................................. 9,997 6,387
Deferred compensation..................................................... 107 139
Amortization of deferred loan costs....................................... 994 163
Change in assets and liabilities:
Increase in accounts receivable, net of change in allowance............... (807) (850)
Decrease in funds held in escrow.......................................... 1,701 --
(Increase) decrease in other current assets............................... (243) 296
Decrease in accrued real estate taxes..................................... (350) (618)
Increase in accrued interest on convertible mortgage notes................ 4,979 6,871
(Decrease) increase in accrued payroll and related accrued expenses....... (1,570) 745
Increase in accounts payable and other accrued expenses................... 686 112
Increase in due to affiliate.............................................. 379 372
-------------- --------------
Net cash provided by operating activities............................. 11,142 15,305
-------------- --------------
Investing activities:
Investment in properties.................................................. (48,782) (125,571)
Decrease (increase) in deposits and pursuit costs......................... 688 (4,476)
Increase in other assets.................................................. (1,190) (614)
-------------- --------------
Net cash used in investing activities................................. (49,284) (130,661)
-------------- --------------
Financing activities:
Proceeds from lines of credit............................................. 41,920 74,392
Payments on lines of credit............................................... -- (100,000)
Deferred loan costs for line of credit.................................... (2,377) (46)
Proceeds from convertible mortgage notes payable.......................... -- 4,000
Payments on mortgage notes payable........................................ (122,028) --
Sale of property and equipment, net....................................... 127,262 --
Proceeds from sale of shares, net of expenses............................. -- 154,241
Payments on capital lease................................................. (1,740) --
Payments on other long-term liabilities................................... (3) --
Repurchase of stock....................................................... (107) --
Proceeds from principal payments on notes from officers.................. 14 --
-------------- --------------
Net cash provided by financing activities............................. 42,941 132,587
-------------- --------------
Net increase in cash and cash equivalents......................................... 4,799 17,231
Cash and cash equivalents, beginning of period.................................... 12,144 2,974
-------------- --------------
Cash and cash equivalents, end of period.......................................... $ 16,943 $ 20,205
============== ==============
Non-cash investing and financing transactions:
Increase in property and equipment, and development cost payable.......... $ -- $ 1,241
============== ==============
Increase in property and equipment, from capital lease.................... $ 145,000 $ --
============== ==============
Increase in property and equipment from capitalization of loan costs...... $ -- $ 798
============== ==============
Loan costs resulting from issuance of convertible mortgage debt........... $ -- $ 314
============== ==============
</TABLE>
The accompanying notes are an integral part
of these condensed financial statements.
5
<PAGE>
HOMESTEAD VILLAGE INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1999
(UNAUDITED)
NOTE 1--GENERAL
Principles of Financial Presentation
The financial statements of Homestead Village Incorporated ("Homestead") as
of March 31, 1999 and for the three-month periods ended March 31, 1999 and 1998
are unaudited, and pursuant to the rules of the Securities and Exchange
Commission, 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 1998 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-month periods ended March 31, 1999 and 1998 are not necessarily indicative
of the results to be expected for the entire 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.
Reclassifications
Certain 1998 amounts have been reclassified to conform to the 1999
presentation.
New Accounting Rules
In April 1998 Statement of Position 98-5 "Reporting on the Costs of
Start-Up Activities" ("SOP 98-5") was issued which requires that costs
associated with organizational, pre-opening, and start-up activities be expensed
as incurred. SOP 98-5 is effective for fiscal years beginning after December 15,
1998. Through the end of 1998, Homestead capitalized costs associated with
pre-opening and start-up activities and amortized such costs over a two-year
period. Homestead has adopted SOP 98-5 beginning with its 1999 fiscal year and
wrote off unamortized organizational, pre-opening and start-up costs of $14.2
million as a cumulative effect of adoption of an accounting standard in the
first quarter 1999. No financial statement amounts were restated upon adoption
of the new standard. Pre-opening and start-up activities costs which would have
been expensed in the three-month period ended March 31, 1998 if SOP 98-5 were
applied on a pro forma basis total $3,641,000. Amortization expense for
organizational, pre-opening and start-up costs recorded in the three-month
period ended March 31, 1998 was approximately $1,150,000.
In June 1998, Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" was issued,
establishing standards for the accounting and reporting for derivative
instruments. The new rules, which become effective January 1, 2000, are not
expected to have an impact on Homestead's financial position or results of
operations. Homestead has not entered into any derivative financial instrument
transactions.
6
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NOTE 2--PROPERTY AND EQUIPMENT
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
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(UNAUDITED)
<S> <C> <C>
Operating properties:
Owned properties:
Land $ 176,489 $ 191,694
Buildings and improvements........................... 563,765 645,235
Furniture, fixtures and equipment.................... 84,156 108,446
Properties under a capital lease.......................... 145,000 --
---------------- -----------------
969,410 945,375
Properties under construction................................ 89,330 110,891
Properties in planning (land owned for development).......... 134,936 126,054
Land held for sale........................................... 4,363 4,332
---------------- -----------------
Total.............................................. $ 1,198,039 $ 1,186,652
================ =================
</TABLE>
NOTE 3--DEBT
Credit Facilities
On March 18, 1999 Homestead entered into amended and restated credit
agreements to, among other things, extend the $150 million revolving line of
credit facility secured by suburban properties and the $50 million line of
credit facility secured by urban properties (together the "Working Capital
Facilities") to December 31, 2000. The $150 million line was increased to $170
million total borrowing capacity, subject to collateral requirements, and the
interest terms adjusted to be a margin of 2.0% to 3.0% over LIBOR or
alternatively 1.0% to 2.0% over prime or 1.5% to 2.5% over the federal funds
rate, with the margin dependent on the percentage leverage of borrowings
outstanding versus qualifying collateral. Future additional collateral under the
$170 million line will be limited to suburban properties that are stabilized.
The $50 million facility was adjusted to $30 million total borrowing capacity,
subject to collateral, and the interest terms adjusted to 3.0% over LIBOR or
alternatively 2.0% over prime or 2.5% over the federal funds rate.
The amended and restated Working Capital Facilities require maintenance of
the following financial covenants effective with first quarter 1999:
* limiting total liabilities of no more than 55% of gross asset value, as
defined;
* limiting total indebtedness of no more than 50% of gross asset value, as
defined;
* maintaining a ratio of earnings before interest, taxes, depreciation and
amortization, as defined, to interest expense ranging from 1.25 to 1.0 for
first quarter 1999 up to 1.90 to 1.0 by fourth quarter 2000;
* maintaining a ratio of earnings before interest, taxes, depreciation and
amortization, as defined, to debt service and preferred stock dividends
ranging from 1.0 to 1.0 for first quarter 1999 to 1.25 to 1.0 by fourth
quarter 2000;
* maintaining a ratio of net property operating income to implied debt
service, as defined, ranging from 1.4 to 1.0 for first quarter 1999 to 2.25
to 1.0 by fourth quarter 2000;
* maintaining minimum tangible net worth, as defined, of no less than 85% of
the year end 1998 amount, as defined, adjusted for net proceeds of equity
offerings; and maintaining positive net sources and uses of funds.
7
<PAGE>
In addition, under the renewed Working Capital Facilities distributions or
dividends on equity are prohibited; total cost, as defined, of projects in
development cannot exceed 25% of gross asset value, as defined, in 1999 or 15%
in 2000; and Homestead's business activities will be limited to development,
ownership and operation of extended stay hotels.
As of March 31, 1999, Homestead has an outstanding balance of $199 million
under the Working Capital Facilities, the full amount available under collateral
requirements.
Homestead has an additional $200 million bank line of credit facility (the
"Bridge Facility") which bears interest at the Eurodollar rate plus 1.25% or at
a base rate of prime plus 0.25%. Borrowings outstanding at March 31, 1999
totaled $200 million. Homestead has a subscription agreement from Security
Capital Incorporated ("Security Capital") for $200 million of Homestead
subordinated debentures which secures this obligation. Proceeds from closing of
the rights offering, or any other issuance of equity securities, are required to
be used to repay the Bridge Facility.
On April 22, 1999, Homestead, the lenders under the Working Capital
Facilities and Bridge Facility, and Security Capital executed a letter
agreement: (i) extending the maturity of the Bridge Facility to the earliest of
October 31, 1999, the date of any business combination or sale of substantially
all of Homestead's assets, or 45 days after the termination of negotiations with
third parties regarding business combinations; (ii) allowing Homestead to incur
up to $25 million of unsecured, subordinated debt to Security Capital; and (iii)
prohibiting incurrence of any indebtedness other than the note to Security
Capital, the lines of credit, the capital lease obligation, and the convertible
mortgage notes. Homestead paid a fee to the banks of $494,070 in connection with
this extension and amendment.
Homestead was in compliance with all covenants under its credit facilities
as of March 31, 1999.
Convertible Mortgage Notes Payable
At March 31, 1999 Homestead owed convertible mortgage notes to Archstone
Communities Trust ("Archstone"), an affiliate, of $221,333,620. The notes are
collateralized by Homestead properties (54 Homestead properties at $358.4
million of historical cost mortgaged to Archstone at March 31, 1999). 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 of each year. 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 discount on the
respective fundings have been fully amortized. No further funding commitment is
available under the mortgage notes.
Capital Lease Obligation
On February 23, 1999, Homestead completed a sale and leaseback of 18 of the
26 Homestead properties collaterizing the $122 million mortgage note due June
1999. Hospitality Properties Trust (NYSE: HPT) purchased the properties for $145
million. Homestead will continue to operate the properties under a long-term
lease through December 2015 and pay a minimum rent of approximately $16 million
per year. Homestead posted a security deposit equal to one year's rent. The
majority of the proceeds from the sale were used to repay the $122 million
mortgage note and post the $16 million security deposit.
The approximate $350,000 gain on sale will be deferred and will be
recognized over the term of the lease. The lease is considered a capital lease
for financial reporting purposes and thus the present value of the minimum lease
payments discounted at approximately 9.8% has been recorded as an asset of
$145,000,000, to be amortized over the lease term, and an obligation, which will
be reduced over the term of the lease by allocating rent payments between
interest expense and reduction of the lease obligation. The balance of the
obligation at March 31, 1999 was $143,260,000.
The lease also provides for two extension periods of 15 years each at the
option of Homestead, requires payment of percentage rents beginning July 2000
based on increases in revenues over a base period, and requires a percentage of
revenues be paid to a furniture, fixtures and equipment reserve to be used for
capital expenditures.
8
<PAGE>
Promissory Note to Security Capital
On May 3, 1999, Homestead issued an unsecured, subordinated promissory note
to Security Capital in the maximum principal amount of $25,000,000. The note
matures the earlier of (i) October 31, 1999 or such later date to which
repayment of the outstanding principal amount and other amounts owing under the
Bridge Facility is extended, (ii) the consummation of a change in control or
(iii) the consummation of the rights offering in the aggregate amount of
$200,000,000 or more. Under the terms of the note, Homestead may borrow up to
$25,000,000 from Security Capital to provide for funding of construction costs
of properties under development, maintenance and repair costs of properties,
personnel expenses and other working capital and general corporate expenses
specifically approved by Security Capital.
Borrowings under the note will bear interest at LIBOR plus 3.25%. Homestead
paid an arrangement fee of $31,944 to enter into the agreement. Through May 14,
1999 no amounts had been borrowed under the line.
Interest
The following summarizes Homestead's interest expense (in thousands):
<TABLE>
<CAPTION>
THREE-MONTH PERIODS ENDED
MARCH 31,
-------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
Lines of credit facilities..................................................... $ 7,622 $ 1,458
Convertible mortgage notes.................................................... 4,980 7,637
Mortgage note payable.......................................................... 1,282 --
Capital lease obligation...................................................... 1,407 --
Other......................................................................... 193 197
-------------- --------------
Total interest cost....................................................... 15,484 9,292
Capitalized interest.......................................................... (4,168) (6,322)
-------------- --------------
Net interest expense...................................................... $ 11,316 $ 2,970
============== ==============
Amortization of deferred financing costs included in interest cost............ $ 994 $ 477
============== ==============
</TABLE>
The total interest paid in cash for the three-month periods ended March 31,
1999 and 1998 was $9,571,000 and $899,000, respectively.
NOTE 4--SHAREHOLDERS' EQUITY
Common Stock Rights Offering
In April 1999, Homestead initiated a common stock rights offering for the
sale of 76,489,092 shares for $210.3 million ($2.75 per share) or $225 million
if all oversubscription shares are sold. (An additional 5,329,089 shares were
authorized for issuance pursuant to oversubscriptions and for sales to third
parties.) Security Capital has agreed to purchase enough shares to ensure that
gross proceeds of the offering are not less than $225 million. The rights
offering was scheduled to expire on April 23, 1999, but has been extended to May
21, 1999. As a result, the offering will not close until May 28, 1999.
Shareholders of record on April 5, 1999 received a dividend of two rights for
each share of common stock they owned. One right is required to purchase one
share of common stock in the rights offering. Proceeds from the rights offering
will be used first, to repay the $200 million Bridge Facility and, second, to
provide funding for working capital and general corporate purposes, which may
include repayment of amounts owed under the Working Capital Facilities and the
note issued to Security Capital. Security Capital's obligations under the
subscription agreement will be reduced to the extent the proceeds of the rights
offering are used to repay amounts owed under the Bridge Facility.
In connection with Security Capital's agreement to purchase enough shares
in the rights offering to ensure that gross proceeds of the offering are not
less than $225 million, Homestead and Security Capital amended the investor
agreement between the two companies providing Security Capital with a variety of
rights regarding the management of Homestead.
9
<PAGE>
Per Share Data
Basic earnings per share is calculated by dividing net earnings available
to common shareholders by weighted average common shares outstanding. Diluted
earnings per share is 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 debt. Adjusted weighted average
shares outstanding includes the dilutive effect of options using the treasury
stock method and the dilutive effect of convertible debt.
A reconciliation of the numerators and denominators used to calculate basic
and diluted earnings (loss) per share for the periods indicated follows (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------------------
1999 1998
---- ----
<S> <C> <C>
Net (loss) earnings attributable to common shares
before cumulative effect of accounting change..... $ (4,731) $ 1,688
=================== ===================
Weighted average shares outstanding - basic......... 38,245 35,736
=================== ===================
Net (loss) earnings per share before cumulative
effect of accounting
change:
Basic............................................... $ (0.12) $ 0.05
=================== ===================
Diluted............................................. $ (0.12) $ 0.05
=================== ===================
</TABLE>
For the three month periods ended March 31, 1999 and 1998 convertible debt
is not assumed to be converted and exercise of options is not assumed as the
effects are anti-dilutive in a period of loss in 1999 and the effects were not
dilutive in 1998.
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.
At March 31, 1999, Homestead had, for federal income tax reporting
purposes, estimated net operating loss carryforwards of approximately $87
million, which expire $4.2 million in the year 2011, $24.8 million in the year
2017, $57 million in the year 2018, and $1 million in the year 2019.
If, as a result of Security Capital's participation in Homestead's 1999
rights offering, Security Capital's ownership in Homestead exceeds 80%, then
Security Capital would be required to include Homestead's results in its federal
income tax return. If this occurs, Security Capital may utilize the net
operating loss carryforwards generated by Homestead, subject to applicable
federal income tax provisions. To the extent Security Capital uses Homestead's
net operating loss carryforwards, such loss carryforwards will not be available
to Homestead in the future.
10
<PAGE>
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, facilities management, and payroll administration. 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.
The Administrative Services Agreement, which expires December 31, 1999, is
renewable for a one-year term, subject to approval by a majority of the
independent members of the Homestead Board. Total administrative services fees
for the three-month periods ended March 31, 1999 and 1998 were $1,457,000 and
$899,000, respectively.
Homestead believes its relationship with Security Capital under this
agreement provides it with certain advantages, including access to greater
quality and depth of resources, in such areas as information systems, insurance,
cash management and legal support provided at substantial economies of scale.
NOTE 7--COMMITMENTS AND CONTINGENCIES
Legal Proceedings
Homestead is not a party to any litigation or claims, other than routine
matters arising out of the ordinary course of business that are incidental to
the development process and operation of the business of Homestead. Homestead
does not believe that the results of all claims and litigation, individually or
in the aggregate, will have a material adverse effect on its business, financial
position or results of operation.
Unfunded Development Commitments
At March 31, 1999, Homestead had approximately $42 million of unfunded
commitments for developments under construction. Homestead anticipates
completing development of properties under construction utilizing cash on hand,
any cash available from net proceeds of the rights offering after repayment of
the Bridge Facility, proceeds from future sales, if any, of unencumbered land,
and cash flow from operations.
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 (exclusive of the four properties referred to in (i)
above and reduced by the 2 properties sold in February 1999 as described below);
(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. The sale and leaseback
of properties described in Note 3 included 2 properties subject to the terms
described in (iv) above, resulting in a payment of approximately $68,000 to the
Finder. Total payments under these agreements for amounts due under (i) and (ii)
described above for the three-month periods ended March 31, 1999 and 1998 were
$180,600 and $184,400, respectively.
11
<PAGE>
NOTE 8-- SUBSEQUENT EVENT - SPECIAL CHARGE
Homestead has made substantial investments in ownership of land held for
development and in costs of pursuit of additional development sites. In the
second quarter of 1999, Homestead determined, based on its inability to obtain
financing for development of sites beyond those already in construction, to
further curtail its development program. All land previously held for
development will be held for sale, all pursuits for acquisition of additional
sites for development will be abandoned, and Homestead will reduce overhead
costs and personnel to reflect a company with stabilized operations of 136
properties. Homestead will record a special charge in second quarter 1999 for
write-down of the carrying cost of land held for sale to its estimated fair
value less estimated costs to dispose, write-offs of costs of pursuits and loss
of non-refundable earnest money deposits, and for the costs of severance of
personnel. The special charge to earnings is expected to approximate $65
million.
The majority of costs of curtailment of the development program are due to
the expected write-downs on land to be held for sale. Substantial effort and
costs have been incurred in the planning stage for design, engineering, and
architectural work and capitalization of carrying costs, all of which the
company expects to be lost upon sale of the sites.
Carrying costs on the land sites, such as interest and property taxes, will
be expensed until the sites are disposed of and will materially adversely affect
earnings until disposal. The majority of the land sites are encumbered by the
Working Capital Facilities and upon sale will require use of the proceeds to
repay the Working Capital Facilities.
12
<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 March 31, 1999 and the related condensed consolidated
statements of operations for the three-month periods ended March 31, 1999 and
the related condensed consolidated statement of cash flows for the three-month
period ended March 31, 1999. 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, 1998, and in our report dated February 4, 1999,
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, 1998 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
April 23, 1999
13
<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
1998 Annual Report on Form 10-K (the "1998 Form 10-K") as well as the financial
statements and the notes thereto in Item 1 of this report. In addition to
historical information, this discussion contains forward-looking statements
under the federal securities laws. These statements are based on current
expectations, estimates and projections about the industry and markets in which
Homestead operates, management's beliefs and assumptions made by management.
Words such as "expects", "anticipates", "intends", "plans", "believes", "seeks",
"estimates", variations of such words and similar expressions are intended to
identify such forward-looking statements. These statements are not guarantees of
future performance and involve risks, uncertainties and assumptions which are
difficult to predict. Therefore, actual outcomes and results may differ
materially from what is expressed or forecasted in such forward-looking
statements. Among the important factors that could cause Homestead's actual
results to differ materially from those expressed in the forward-looking
statements are (i) changes in general economic conditions in its target markets
that could adversely affect demand for Homestead's properties, (ii) the effects
of increased or unexpected competition with respect to one or more properties,
(iii) Homestead's ability to open new properties on schedule which may be
affected by factors outside the control of Homestead, (iv) availability to
Homestead of debt or equity financing, (v) the matters described under
"Management's Discussion and Analysis of Financial Condition and Results of
Operation-Risk Factors" in Item 7 of the 1998 Form 10-K and (vi) changes in
financial markets and interest rates that could adversely affect Homestead's
cost of capital and its ability to meet its financing needs and obligations.
OVERVIEW
Homestead's overall results of operations and financial position are
significantly influenced by its development activity. The development program
and the financing activities required to support it have had a significant
impact on Homestead's operations and financial position. Homestead has made
substantial investments in ownership of land held for development as well as in
pursuit costs for additional development sites. The tightening of capital
markets for real estate operating companies and lodging companies which began in
1998 and continues in 1999 has had an adverse effect on Homestead's ability to
continue its high growth program of acquisition of land sites and construction
of properties.
In October 1998, Homestead reorganized its development effort and recorded
$7.24 million of special charges in the fourth quarter of 1998. Such charges
primarily related to the severance of development personnel and abandonment of
certain pursuits of development sites due to the limited availability of
additional funds for development. In the second quarter of 1999, Homestead
determined, based on its inability to obtain financing for development beyond
those properties already in construction, to further curtail its development
program. All land previously held for development will be held for sale, all
pursuits for acquisition of additional sites for development will be abandoned,
and Homestead will reduce overhead costs and personnel to reflect a company with
stabilized operations of 136 properties. A special charge will be recorded in
second quarter 1999 which is expected to approximate $65 million for write-downs
of land to be held for sale, write-offs of costs of pursuits, and the costs of
severance of personnel. This is expected to have a material adverse effect on
Homestead's reported earnings for the second quarter 1999.
The majority of the special charge relates to the expected write-downs on
land to be held for sale. Substantial effort and costs have been incurred in the
planning stage for design, engineering, and architectural work and
capitalization of carrying costs, all of which the company expects to be lost
upon sale of the sites. The estimate of the write-down on land held for sale is
summarized in the following table using the most recently available carrying
cost data (amounts in thousands):
14
<PAGE>
<TABLE>
<CAPTION>
THIRD PARTY
EXPENSES AND
CAPITALIZED OVERHEAD NEW
LAND TYPE COST INTEREST ALLOCATION TOTAL COST WRITE-OFF BASIS
--------- ----------- --------------- ----------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Suburban....... $25,067 $2,125 $12,211 $39,403 ($16,024) $23,379
Urban.......... 73,760 8,908 13,209 95,877 (26,693) 69,184
Excess......... 4,208 - 139 4,347 (344) 4,003
----------- --------------- ----------------- ------------- ------------- -----------
Total........ $103,035 $11,033 $25,559 $139,627 ($43,061) $96,566
=========== =============== ================= ============= ============= ===========
</TABLE>
Carrying costs on the land sites, such as interest and property taxes, will
be expensed until the sites are disposed of and will materially adversely affect
earnings until disposal. The majority of the land sites are encumbered by the
Working Capital Facilities and upon sale will require use of the proceeds to
repay the Working Capital Facilities.
Write-offs of pursuit costs and non-refundable earnest money deposits are
expected to approximate $7 million, severance costs are expected of at least $8
million and other costs such as closings of offices and overhead reductions is
expected to approximate $7 million.
As of March 31, 1999, Homestead had 125 Homestead Village properties in
operation representing in the aggregate 16,852 rooms in 37 cities. Homestead had
11 Homestead Village properties under construction totaling 1,375 rooms within 6
of these cities as well as one additional city, of which one property opened in
April 1999, and the remaining properties are scheduled to open by the end of the
third quarter 1999.
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
complete the development of the remaining properties under construction. Capital
and credit market conditions which affect Homestead's access to credit markets
and cost of capital will influence future operating results.
As of March 31, 1999, Homestead had approximately $771.5 million of
indebtedness outstanding, consisting of $200 million due on its short-term bank
lines of credit, $199 million due on its long-term bank lines of credit, $221.3
million due on a convertible mortgage note, $143.3 million due under a capital
lease agreement and $7.9 million due on other long-term obligations. During the
three months ended March 31, 1999, Homestead reduced its short-term debt from
$479.1 million at December 31, 1998 to $203.3 at March 31, 1999. Homestead
refinanced its short-term debt as follows:
* On February 23, 1999, Homestead completed a sale and lease-back of 18 of
the 26 Homestead properties collaterizing a $122 million mortgage note.
Hospitality Properties Trust purchased the properties for $145 million.
Proceeds of the sale were used to repay the $122 million debt which was due
June 1999. Additionally, as a result of payment of the $122 million
mortgage note, eight properties which were used as collateral for the
mortgage note were subsequently pledged as collateral for its Working
Capital Facilities to draw approximately $21 million in additional
borrowings under the line.
* On March 18, 1999, Homestead renewed its Working Capital Facilities with an
extension of the maturity date to December 31, 2000.
In April 1999, Homestead initiated a common stock rights offering for the
sale of 76,489,092 shares for $210.3 million ($2.75 per share) or up to $225
million if all oversubscription shares are sold. (An additional 5,329,089 shares
were authorized for issuance pursuant to oversubscriptions and for sales to
third parties.) Security Capital agreed to purchase enough shares to ensure that
gross proceeds of the offering are not less than $225 million. The rights
offering was scheduled to expire on April 23, 1999, but has been extended to May
21, 1999. Shareholders of record on April 5, 1999 received a dividend of two
rights for each share of common stock they owned. One right is required to
purchase one share in the rights offering. Proceeds from the rights offering
will be used first, to repay the $200 million Bridge Facility and, second, to
provide funding for working capital and general corporate purposes, which may
include repayment of amounts owed under the Working Capital Facilities and the
note issued to Security Capital.
With the accomplishment of these reductions of short-term debt and the
decision to cease additional development efforts, Homestead intends to focus on
generation of cash from sales of land to be used to retire debt and to focus on
reduction of overhead costs and personnel to reflect a company with stabilized
operations of 136 properties.
15
<PAGE>
RESULTS OF OPERATIONS
Three-Months Ended March 31, 1999 and 1998
Net (loss) earnings, for the three months ended March 31, 1999 and 1998
were ($18.96) million and $1.7 million, respectively. The net loss for the
three-month period ended March 31, 1999 includes a cumulative effect of an
accounting change of $14.2 million relating to Homestead's adoption of Statement
of Position 98-5 "Reporting on the Costs of Start-Up Activities" ("SOP 98-5")
beginning with its 1999 fiscal year. Net loss before the cumulative effect was
$(4.7) million for the three months ended March 31, 1999, a decrease of $6.4
million from the $1.7 million net earnings for the three months ended March 31,
1998. The decrease is primarily attributable to an increase in interest expense
of $8.3 million offset by $2.1 million increase in operating income. A
discussion of the major components of net (loss) earnings follows.
Property Operations
For analysis purposes Homestead categorizes its operating properties as
"comparable," "noncomparable," or "new opening." "Comparable" means a property
open throughout both periods of comparison, "noncomparable" means a property
open for only a portion of the prior period of comparison, and "new opening"
means a property opened in the most recent period. For additional analysis
purposes Homestead also categorizes its operating properties as either
"stabilized" or "pre-stabilized." For purposes of this report, the term
"stabilized" means those properties which obtained 80% occupancy for a one-week
period or have been opened for 24 weeks and "pre-stabilized" means all other
operating properties.
Whether considering the entire operating property portfolio or its
categories, Homestead's first quarter 1999 property-level performance compared
to the same period of 1998 is characterized by higher weekly rates offset by
lower occupancy levels. The occupancy decreases are attributable to (i)
competition in markets characterized by an oversupply of extended stay hotels
(predominantly in the Southwest), (ii) the effect on occupancy due to rate
increases at Homestead versus competitor rate levels (experienced in the
portfolio generally), and (iii) the effect of the seasonal downturn as Homestead
has increased its number of properties located in Northeastern and Midwestern
markets as compared to prior years (affecting noncomparable properties and
pre-stabilized properties).
The following table sets forth certain information for Homestead's total
operating property portfolio for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------------------
1999 1998 CHANGE
---- ---- ------
<S> <C> <C> <C>
Weekly RevPAR(1).................................... $221 $201 10.0%
Average Weekly Rate(2).............................. $352 $282 24.8%
Occupancy........................................... 62.8% 71.1% (8.3)
Number of Operating Properties at Period End........ 125 82 52.4%
Property Operating Income Margin.................... 52.8% 55.9% (3.1)
- ----------
16
<PAGE>
<FN>
(1) Weekly revenue per available room ("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 43 property openings from the end of the first quarter of 1998
through the end of the first quarter of 1999 were the predominant reason for the
room revenue increase of $21.7 million (82.1%) for the three months ended March
31, 1999 as compared to the same period in 1998. Total property operating
expenses increased from $11.9 million to $23.1 million, an increase of $11.2
million for the three months ended March 31, 1999 over 1998. The increase is due
primarily to the increase in the number of operating properties as noted above.
Same-Store Properties
Homestead had 49 properties which were stabilized and operating throughout
both three-month periods ended March 31, 1999 and 1998 ("same-store"
properties). Thirty-four such properties are located in the Southwest with 23 of
these located in Texas markets. RevPAR for the three months ended March 31, 1999
for these 49 same store properties decreased to $209 from $218 for the same
period in 1998. The RevPAR decrease was due to a decrease in occupancy to 68.0%
for the three month period ended March 31, 1999 from 79.1% for the same period
in 1998, offset in part by an increase in the average weekly rate of $31 (11.2%)
for the three months ended March 31, 1999 as compared to the same period in
1998. The decrease in occupancy is a result of competition in the Southwestern
markets as discussed above and to some extent the increased Homestead rates
versus the rate levels of competitors. The decrease in RevPAR, and increases in
property expenses primarily for payroll, housekeeping, security, and property
administrative costs, resulted in the same-store property operating income
margin decreasing to 52.3% in 1999 from 57.8% in 1998.
Stabilized Properties Operations
RevPAR for the 100 stabilized properties for the three months ended March
31, 1999 increased to $219 from $218 for the 49 stabilized properties for the
same period in 1998. Average weekly rates for stabilized properties increased to
$337 in 1999 from $276 in 1998 (an increase of 22.1%) but was offset by the
decline of occupancy to 65.1% for 1999 from 79.1% for 1998. Property operating
income margin for stabilized properties decreased to 53.5% in 1999 from 57.8% in
1998 due to increased property expenses as described above for the same-store
properties.
Corporate Operating Expenses
Corporate operating expenses increased $4.6 million for the three month
period ended March 31, 1999 as compared to the same period in 1998. The increase
is primarily attributed to increases of approximately $2.3 million in sales
expense and $1.5 million in incremental development overhead expense which were
not capitalized due to declining development activity in the three months ended
March 31, 1999.
Depreciation and Amortization
Depreciation and amortization increased $3.6 million for the three months
ended March 31, 1999 as compared to the same period in 1998 due to the increased
number of properties operating for the three month period ended March 31, 1999
as compared to the same period in 1998. Depreciation of the cost of properties
and improvements is provided using the straight-line method over the estimated
useful lives of the assets. Amortization of the trademark and other intangibles
is calculated on a straight-line basis over a period of 20 years.
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<PAGE>
Interest Income
Interest income of $154,000 for the three months ended March 31, 1999 was a
result of interest earned from investment of excess cash on hand.
Interest Expense
The following summarizes Homestead's interest expense (in thousands):
<TABLE>
<CAPTION>
THREE-MONTH PERIODS ENDED
MARCH 31,
-------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
Lines of credit facilities.................................................... $ 7,622 $ 1,458
Convertible mortgage notes.................................................... 4,980 7,637
Mortgage note payable......................................................... 1,282 --
Capital lease obligation...................................................... 1,407 --
Other......................................................................... 193 197
-------------- --------------
Total interest cost....................................................... 15,484 9,292
Capitalized interest.......................................................... (4,168) (6,322)
-------------- --------------
Net interest expense...................................................... $ 11,316 $ 2,970
============== ==============
Amortization of deferred financing costs included in interest cost............ $ 994 $ 477
============== ==============
</TABLE>
Interest expense on line of credit borrowings increased $6.2 million for
the three months ended March 31, 1999 as compared to the same period in 1998 due
primarily to a higher average outstanding balance ($376.5 million in 1999
compared to $35.5 million in 1998).
Interest expense on the convertible mortgages decreased $2.7 million for
the three months ended March 31, 1999 as compared to the same period in 1998 as
a result of the early extinguishment of $98 million of Homestead convertible
mortgage notes in the third quarter 1998. Homestead incurred $1.3 million in
interest expense for the three months ended March 31, 1999 relating to the
mortgage note which funded the extinguishment. On February 23, 1999, this
mortgage note was repaid with proceeds from the sale of properties discussed in
Note 3 to the financial statements. Homestead incurred $1.4 million in interest
expense in the three months ended March 31, 1999 as a result of the leaseback of
such properties under a capital lease.
Interest expense recognized on borrowings is offset by interest capitalized
with respect to Homestead's development activities. Capitalized interest levels
are reflective of Homestead's cost of funds and the level of development
activity. Capitalized interest decreased by $2.2 million for the three months
ended March 31, 1999 as compared to the same period in 1998 due to less
development activity during the first three months of 1999 as compared to 1998.
LIQUIDITY AND CAPITAL RESOURCES
Investing and Financing Activities
During the three month periods ended March 31, 1999 and 1998, Homestead
invested $48.8 million and $125.6 million, respectively in properties. The
amounts invested in the three months ended March 31, 1999 were financed
primarily from proceeds from borrowings under the lines of credit. The amounts
invested in the three months ended March 31, 1998 were financed primarily from
borrowings under the line of credit and proceeds from the January 1998 rights
offering.
During the first three months of 1999, Homestead reduced its short-term
debt from $479.1 million at December 31, 1998 to $203.3 million at March 31,
1999. Homestead reduced its short-term debt by (i) paying off the $122.0 million
mortgage note due June 1999 with proceeds received from the sale and leaseback
and (ii) amending its Working Capital Facilities to, among other things, extend
the maturity date to December 31, 2000.
18
<PAGE>
With the decision to cease development of all land sites owned, other than
those already in construction, and to cease pursuit of acquisition of additional
sites for development, Homestead's needs for financing are drastically reduced.
The immediate need to repay the Bridge Facility is expected to be accomplished
with the proceeds of the rights offering which is scheduled to close funding by
May 28, 1999. Other funding needs are primarily for the completion of the
properties in construction, funding of the severance of personnel, and debt
service.
Homestead had at March 31, 1999 unfunded commitments for properties in
construction of approximately $42 million.
Based upon the commitment of Security Capital to participate in the rights
offering to assure gross proceeds of $225 million, Homestead expects to have
approximately $21 million net cash proceeds available from closing of the rights
offering after use of proceeds to repay the $200 million Bridge Facility.
Homestead believes it will have adequate cash resources from cash on hand, net
proceeds from the rights offering after repayment of the Bridge Facility, and
cash flow from operations to fund its needs for debt service, payment of
severances, and completion of properties in construction. In addition Homestead
may generate cash inflows by the sale of unencumbered land sites, but no
assurance can be given that such sales will occur or provide significant net
proceeds.
While Homestead believes it will continue to generate positive cash flow
from operation of its properties, there can be no assurance of generation of
cash from future operations due to the risks of operation of lodging properties
including competitive pressures, rates, occupancies, and costs of operation.
Additionally, Homestead's ability to meet its obligations could be adversely
affected by incurrence of unexpected construction costs for those properties not
yet open and by increases in interest rates.
Operating Activities
Net cash flow provided by operating activities decreased by $4.2 million
for the three months ended March 31, 1999 as compared to 1998. The decrease is
due primarily to an increase in cash used for new corporate expenses and
interest paid during the three months ended March 31, 1999 as compared to the
same period in 1998 and changes in the timing of the payment of accrued payroll
and related accrued expenses offset in part by additional cash resources
provided from the growth in the number of operating properties as described
under "Results of Operations."
AMENDMENT TO INVESTOR AGREEMENT WITH SECURITY CAPITAL
In connection with Security Capital's agreement to purchase enough shares
in the rights offering to ensure that gross proceeds of the offering are not
less than $225 million, Homestead and Security Capital amended the investor
agreement ("Investor Agreement") between the two companies providing Security
Capital with a variety of rights regarding the management of Homestead. Under
the Investor Agreement, as amended, for so long as Security Capital beneficially
owns at least 50.1% of Homestead's outstanding shares ("Shares"), Security
Capital has the right to approve, among other things: (i) Homestead's annual
budget; (ii) the incurrence of expenses in any year exceeding (A) any line item
in the annual budget by $500,000 or 10% and (B) the total expenses set forth in
the annual budget by 5%; (iii) the offer or sale of any Shares or any securities
convertible into or exchangeable for Shares other than pursuant to (A) an
employee benefit plan approved by Homestead's shareholders, (B) previously
issued warrants, options or rights, (C) a dividend reinvestment plan or share
purchase plan approved by Homestead's Board of Directors (the Board") or (D) an
issuance of rights, options, or warrants for shares issued to all shareholders;
(iv) the issuance or sale of securities that are subject to mandatory redemption
or redemption at the option of the holder; (v) the adoption of any employee
benefit plan pursuant to which Shares may be issued and any action with respect
to senior officers' compensation; (vi) the incurrence, restructuring,
renegotiation or repayment of indebtedness in which the aggregate amount
involved exceeds $1,000,000; (vii) the declaration or payment of any dividend or
other distribution; (viii) the acquisition or disposition in a single
transaction or group of related transactions where the purchase price exceeds $1
million; (ix) the entering into of service contracts (A) for property
19
<PAGE>
management, investment management or leasing services, or (B) that contemplate
annual payments in excess of $500,000; (x) the entering into of any new
contract, including for construction, development, other capital expenditure,
for which the total cost is reasonably expected to exceed $1,000,000 for any
contract or $5,000,000 in the aggregate; (xi) the entering into of any joint
venture for the development of any properties owned by Homestead in which the
book value of any property to be contributed by Homestead exceeds $1,000,000
individually or $5,000,000 in the aggregate; (xii) the entering into of any
franchising or licensing agreements; (xiii) the amendment of the articles of
incorporation or bylaws of Homestead; and (xiv) the waiver of anti-takeover
provisions of Maryland law or Homestead's Charter.
In addition, so long as Security Capital owns at least 50% of the Shares,
Homestead will maintain an operating committee consisting of the two senior
Homestead officers and two nominees of Security Capital that will meet weekly to
review all operations of Homestead.
The Investor Agreement also provides that, so long as Security Capital owns
at least 10% of the outstanding Shares, homestead may not increase the number of
directors on the Board to more than seven without the approval of Security
Capital. Security Capital also is entitled to designate one or more persons as
directors of Homestead, as follows: so long as Security Capital owns at least
10% but less than 25% of the outstanding Shares, it is entitled to nominate one
person; and (ii) so long as Security Capital owns at least 25% of the
outstanding shares, it is entitled to nominate that number of persons as shall
bear approximately the same ratio to the total number of members of the Board as
the number of Shares beneficially owned by Security Capital bears to the total
number of outstanding Shares, provided that Security Capital shall be entitled
to designate no more than two persons so long as the Homestead Board consists of
no more than seven members. C. Ronald Blankenship is Security Capital's only
current designee on the Board.
YEAR 2000
The Year 2000 issue has arisen as many existing computer programs and
chip-based embedded technology systems use only the last two digits to refer to
a year, and therefore do not properly recognize a year that begins with "20"
instead of the familiar "19." If not corrected, many computer applications could
fail or create erroneous results. Homestead has adopted a Year 2000 compliance
program in an attempt to minimize or prevent the number and seriousness of any
disruptions that may occur as a result of the Year 2000 issue. Homestead's
compliance program includes an assessment of its hardware and software computer
systems ("information technology" systems) and embedded systems
("non-information technology" systems such as lighting, security, fire, card
keys, phones, irrigation, elevators, and heating, ventilation, and air
conditioning systems), as well as an assessment of the Year 2000 issues relating
to third parties with which Homestead has a material relationship or whose
systems are material to the operations of Homestead's properties.
Homestead's computer hardware, operating systems, general accounting,
property management systems and principal desktop software applications are Year
2000 compliant as certified by the various vendors. Homestead has tested these
information technology systems, and based on this testing, management does not
anticipate any Year 2000 issues that will materially impact operations or
operating results.
Homestead's critical non-information technology systems are being
inventoried and are being assessed for Year 2000 compliance by contacting the
vendors of the systems. All non-information technology systems are expected to
be in compliance by the end of the second quarter 1999.
Homestead has surveyed its financial institutions and major vendors to
determine the extent to which Homestead is vulnerable to third parties' failure
to resolve their Year 2000 issues. Homestead will be able to more adequately
assess its third party risk when responses are received from the majority of the
entities contacted.
Management believes its planning efforts are adequate to address the Year
2000 issue and that its risks are primarily those that it cannot directly
control, including the readiness of its major vendors and financial
institutions. Homestead's most reasonably likely worst case scenario is the
failure on the part of these entities to become Year 2000 compliant which could
result in disruption in the Homestead's cash receipt and disbursement functions,
utilities and the failure of the reservation systems. There can be no guarantee,
however, that the systems of unrelated entities upon which the Homestead's
operations rely will be corrected on a timely basis and will not have a material
adverse effect on the company.
Homestead does not have a formal contingency plan or a timetable for
implementing one. Contingency plans will be established, if they are deemed
necessary, after Homestead has adequately assessed the impact on operations
should third parties fail to properly respond to their Year 2000 issues.
20
<PAGE>
Homestead's historical costs for addressing the Year 2000 issue are not
material and management does not anticipate that its future costs associated
with the Year 2000 issue will be material. Third-party costs and software
upgrades or replacements for Year 2000 issues are not expected to exceed
$500,000. Homestead does not separately track the internal costs incurred for
Year 2000 compliance issues. Such costs are principally the related payroll
costs of its information technology group. Although the cost of recently
replacing Homestead's key information technology systems was substantial, the
replacements were made to improve operational efficiency and were not
accelerated due to the Year 2000 issue. Homestead has not delayed any material
projects as a result of the Year 2000 issue. Funds expended to address Year 2000
issues have been made from operating cash flow.
There can be no assurances that Year 2000 remediation by Homestead or third
parties will be properly and timely completed, and failure to do so could have a
material adverse effect on Homestead, its business and its financial condition.
Homestead cannot predict the actual effects to it of the Year 2000 problem,
which depends on numerous uncertainties such as: (i) whether significant third
parties properly and timely address the Year 2000 issue; and (ii) whether
broad-based or systemic economic failures may occur. Failures could include
disruptions in passenger transportation or transportation systems generally,
loss of utility and/or telecommunications services, the loss or disruption of
hotel reservations made on centralized reservation systems and errors or
failures in financial transactions or payment processing systems such as credit
cards. Due to the general uncertainty inherent in the Year 2000 problem and the
company's dependence on third parties, Homestead is unable to determine at this
time whether the consequences of Year 2000 failures will have a material impact
on the company. Homestead's Year 2000 compliance program is expected to
significantly reduce the level of uncertainty about the Year 2000 issue and
management believes that the possibility of significant interruptions of normal
operations should be reduced.
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
Homestead's exposure to market risk for changes in interest rates relates
primarily to its lines of credit facilities. Homestead has no involvement with
derivative financial instruments.
The table below provides information about Homestead's financial
instruments that are sensitive to changes in interest rates, including estimated
fair values for Homestead's interest rate sensitive liabilities as of March 31,
1999. As the table incorporates only those exposures that exist as of March 31,
1999, it does not consider exposures which could arise after that date.
Moreover, because there were no firm commitments to actually sell the
obligations at fair value as of March 31, 1999, the information presented has
limited predictive value. As a result, Homestead's ultimate realized gain or
loss with respect to interest rate fluctuations will depend on the exposures
that arise during a future period and prevailing interest rates. Dollar amounts
in the following table are in thousands.
21
<PAGE>
<TABLE>
<CAPTION>
EXPECTED MATURITY/PRINCIPAL REPAYMENT DECEMBER 31,
--------------------------------------------------
Nominal
Interest Total Fair
Rate 1999 (2) 2000 2001 2002 2003 Thereafter Balance Value(2)
---- -------- ---- ---- ---- ---- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-Sensitive Liabilities:
Lines of Credit Facilities -
variable rate (1)................. 8.10% $200,000 $199,000 $ -- $ -- $ -- $ -- $399,000 $399,000
Convertible Mortgage Notes - fixed
rate................................. 9.00% $ -- $ -- $ -- $ -- $ -- $221,334 $221,334 $218,363
Capital Lease Obligation - fixed
rate ................................ 9.8% $ 2,630 $ 3,821 $4,213 $4,647 $5,124 $122,825 $143,260 $143,260
Other Long-Term Obligation - fixed
rate................................. 9.74% $ 9 $ 13 $ 14 $ 16 $ 17 $ 7,853 $ 7,922 $ 7,910
<FN>
(1) On March 18, 1999, Homestead obtained an extension and amendment of
its Working Capital Facilities ($199 million outstanding in the above
amounts) to a December 31, 2000 due date. The Working Capital
Facilities interest terms were amended resulting in the borrowings
under the lines, based on the present borrowings to collateral
leverage ratio, bearing interest at 3% over LIBOR.
The $200 million of borrowings outstanding under the Bridge Facility
presently bear interest at 1.25% over LIBOR. In April 1999, Homestead
initiated a common stock rights offering, the proceeds of which will
be used to repay the Bridge Facility.
(2) Amounts represent expected maturities and principal repayment for the
nine months remaining for 1999.
(3) The estimated fair value of obligations extending beyond a one-year
maturity as of March 31, 1999 were calculated by discounting the
stream of cash payments of each obligation using a rate which, in
management's judgement, represents an interest rate obtainable by
Homestead as of March 31, 1999 on a similar instrument.
</FN>
</TABLE>
22
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1 $30,000,000 Amended and Restated Credit Agreement dated March 18, 1999
among Homestead Village Incorporated and Commerzbank AG, New York
Branch, as agent for the Lenders
10.2 $170,000,000 Amended and Restated Credit Agreement dated March 18,
1999 among Homestead Village Incorporated, Commerzbank AG, New York
Branch and Wells Fargo Bank, National Association, as Administrative
Agent for the Lenders
10.3 $25,000,000 Promissory Note dated May 3, 1999 between Homestead
Village Incorporated and Security Capital Group Incorporated
10.4 Letter Agreement, dated April 22, 1999, among Homestead, Commerzbank
AG, New York Branch, Commerzbank AG, Los Angeles Branch, Wells Fargo
Bank, National Association, Chase Bank of Texas, N.A. and BankBoston
N.A.
10.5 Letter Agreement, dated March 18, 1999, among Homestead, Commerzbank
AG, New York Branch, Commerzbank AG, Los Angeles Branch, Wells Fargo
Bank, National Association, Chase Bank of Texas, N.A. and BankBoston
N.A.
10.6 Amendment No.1, dated as of April 5, 1999 to Investor Agreement by and
between Homestead Village Incorporated and Security Capital
Incorporated (Incorporated by reference to Homestead's current report
on Form 8-K dated April 5, 1999)
15 Letter regarding unaudited interim financial information
27 Financial Data Schedules
(b) Reports on Form 8-K.
Date Items Reported Financial Statements
---------------- --------------- --------------------
February 23, 1999 Item 2, Item 7 No
April 5, 1999 Item 5, Item 7 No
May 3, 1999 Item 2, Item 7 No
May 4, 1999 Item 5, Item 7 No
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/ BRYAN J. FLANAGAN
Bryan J. Flanagan, Senior Vice President
And Chief Accounting Officer
(Principal Financial Officer and
Principal Accounting Officer)
Date: May 14, 1999
23
<PAGE>
$30,000,000
AMENDED AND RESTATED CREDIT AGREEMENT
AMONG
HOMESTEAD VILLAGE INCORPORATED,
THE LENDERS NAMED HEREIN,
AND
COMMERZBANK AG,
NEW YORK BRANCH, AS AGENT FOR THE LENDERS
DATED AS OF MARCH 18, 1999
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement"), dated as of March
18, 1999, 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 arranged a revolving credit facility in the original
principal amount of $50,000,000 on behalf of the Borrower pursuant to a Credit
Agreement dated as of April 24, 1998 among Borrower, Agent and certain lenders
named therein (said Agreement, as amended to, but not including, this date, the
"Original Agreement"); and
WHEREAS, the parties hereto have agreed to amend and restate the Original
Agreement in its entirety, including all of the letters modifying, amending or
waiving the terms thereof.
NOW, THEREFORE, in consideration of the fees, representations, warranties,
covenants and agreements of the Borrower set forth herein and in the Loan
Documents, 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:
"Accounting Period" means each accounting period of Borrower, the first
two such periods in any fiscal quarter consisting of four weeks each and the
last such period in any fiscal quarter consisting of five weeks.
"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
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, 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.
<PAGE>
"Adjusted LIBO Rate" means, with respect to each Interest Period, the
rate obtained by dividing (i) the LIBO 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 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 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.
"Adjusted Property Net Operating Income" or "Adjusted Property NOI"
means, with respect to any period, NOI adjusted for a capital expenditure
reserve equal to 4% of gross revenue and a management fee equal to 4% of gross
revenue.
"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" means 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, restated 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 the Prime Rate
Applicable Margin, and (b) the Federal Funds Rate plus the Federal Funds
Applicable Margin.
"Bankruptcy Code" has the meaning provided in Section 6.1(g).
"Borrower" has the meaning set forth in the introductory 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.
<PAGE>
"Bridge Facility" means the credit facility governed by the Credit
Agreement dated as of June 15, 1998, among Borrower, certain lenders and Agent,
as modified and amended, from time to time.
"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.
"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.
"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.
"Closing Date" means April 24, 1998.
"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.
"Commitment" means Thirty Million Dollars ($30,000,000), as reduced by
any repayments.
"Construction Complete" means, with respect to any Mortgaged Property,
that (a) construction of such Mortgaged Property is complete, in accordance with
the Plans and Specifications of such Mortgaged Property, (b) final, permanent
and unconditional certificates of occupancy permitting occupancy of all portions
of such Mortgaged Property as an extended stay facility have been issued and are
in full force and effect, (c) all portions of such Mortgaged Property are, or
may become at any time, without the consent or approval of any Person, open for
business to the general public as an extended stay hotel, and (d) the Agent
shall have received evidence satisfactory to it that the conditions set forth in
(a), (b) and (c) have been satisfied.
"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.
<PAGE>
"Debt Service" means, with respect to any period, Interest Expense for
such period, excluding financing costs and fees related to:
(i) Indebtedness which has been incurred before the Effective Date,
(ii)the Sale Leaseback Facility, or
(iii) the Loan,
plus scheduled amortization of all Indebtedness of Borrower and its Subsidiaries
(excluding balloon payments and bullet maturities on loans).
"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:
(a) all non-monetary easements, restrictions and encumbrances
customary and appropriate for the development of property as an extended stay
facility, including ancillary facilities related thereto, which do not and will
not materially impair the use of the Mortgaged Property affected thereby as an
extended stay facility or the ancillary facilities related thereto or the
expected value of the Mortgaged Property affected thereby and
(b) all other easements, restrictions and encumbrances customary
and appropriate for the development of property as an extended stay facility,
including ancillary facilities related thereto, which (i) are approved by the
Agent and or (ii) do not and will not materially impair the use of the Mortgaged
Property affected thereby as an extended stay facility or the 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 an extended stay facility,
including ancillary facilities related thereto, on such Mortgaged Property to be
Construction Complete in accordance with the Plans and Specifications, as
evidenced by the documentation and certificate of Borrower furnished to Agent.
"Dollar" and the sign "$" each mean lawful currency of the United
States of America.
"Effective Date" means March 18, 1999.
<PAGE>
"Eligible 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).
"Environment" means 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 the Environmental Indemnity to be
executed by the Borrower in favor of the Agent, substantially in the form
attached hereto as Exhibit E.
"Estimated Operating Property Value" or "EOPV" means, as of any date of
determination, the sum of:
(1) for each Mortgaged Property that is Construction Complete and
open for business as an extended stay facility but has been so open less than
ten (10) full calendar months as of the end of the calendar quarter ending on or
prior to the date of determination, the lower of the undepreciated GAAP cost
value or the Stabilized Appraised Value;
(2) for each Property that is Construction Complete and has been
open for business as an extended stay facility at least ten (10) full calendar
months as of the end of the calendar quarter ending on or prior to the date of
determination, the lower of (a) the estimated asset value derived by
capitalizing the appropriate annualized Adjusted Property NOI (as determined
pursuant to the directions set forth below) at 11%, (b) the undepreciated GAAP
cost value and (c) only if the property is a Mortgaged Property, the Stabilized
Appraised Value, plus
(3) for each Property that is not a Mortgaged Property and has
been open for business as an extended stay facility but has been so open less
than ten (10) full calendar months as of the end of the calendar quarter ending
on or prior to the date of determination, the undepreciated GAAP cost value for
such Property.
<PAGE>
In order to determine annualized Adjusted Property NOI, for a Property that has
been open as an extended stay facility for at least ten (10) but less than
thirteen (13) full calendar months, the trailing quarter Adjusted Property NOI
will be annualized. For a Property that has been open as an extended stay
facility for at least thirteen (13) but less than sixteen (16) full calendar
months, the trailing two quarter Adjusted Property NOI will be annualized. For a
Property that has been open as an extended stay facility for sixteen (16) months
but less than nineteen (19) months, the prior three quarter Adjusted Property
NOI will be annualized. Once a Property has been open as an extended stay
facility for nineteen(19) full calendar months and thereafter, trailing 12-month
Adjusted Property NOI will be utilized.
"Estimated Operating Property Value of the Mortgaged Properties" means, as of
any date of determination, for all Mortgaged Properties, the sum calculated
pursuant to the foregoing formula, but only with respect to the Mortgaged
Properties.
"Event of Default" has the meaning provided in Article VI.
"Federal Funds Applicable Margin" means two hundred fifty (250) basis
points.
"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 or a Subsidiary Mortgagor, as debtor, in favor of the Agent, as secured
party, covering all fixtures, equipment and personal property of the Borrower or
such Subsidiary Mortgagor 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 one
hundred ten percent (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 thirty (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.
<PAGE>
"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 -- Cost" or "GAV -- Cost" means the value of all
cash, cash equivalents and the value of all Properties owned by Borrower or its
Subsidiaries valued at one hundred percent (100%) of cost.
"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" means 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
<PAGE>
(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.
"HPT" means HPT HSD Properties Trust, the purchaser-lessor under the
Sale Leaseback Facility.
"Implied Debt Service" means, as of any determination date, the annual
debt service of a self-liquidating loan with an original principal amount equal
to the Maximum Availability Amount, as of such date, and amortized over 240
months (20 years) (pursuant to regular and equal monthly installments of
principal and interest) at an annual interest rate equal to the lesser of (a)
ten percent (10%) and (b) the greater of (i) eight and one half percent (8.50%)
and (ii) the 10 year Treasury Rate (as hereinafter defined) at such time plus
three and one quarter percent (3.25%). "Treasury Rate" means the annual yield on
the Treasury Constant Maturity Series with maturity equal to ten (10) years, for
the week prior to the determination date, as reported in Federal Reserve
Statistical Release H.15 - Selected Interest Rates, conclusively determined by
the Agent. In the event Release H.15 is no longer published, Agent shall select
a comparable publication to determine the Treasury Rate.
"Indebtedness" of any Person means as of the date of any determination
thereof, without duplication:
(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
<PAGE>
(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, 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.
"Intellectual Property" has the meaning set forth in Section 4.12.
"Interest Expense" means (without redundancy) the sum of all accrued,
paid or capitalized interest costs of Borrower and its consolidated affiliates
(excluding capitalized interest funded from an interest reserve) plus Borrower's
pro rata share (based on the higher of its nominal ownership interest or the
ownership percentage used in the calculation of Gross Asset Value -- Cost) of
interest expense in its Unconsolidated Affiliates, plus 100% of any accrued,
paid, or capitalized interest incurred (without redundancy) on any obligation
for which Borrower is wholly or partially liable under repayment, interest
carry, or performance guarantees, or other relevant liabilities; minus, to the
extent included in the foregoing, financing costs and fees related to (i)
Indebtedness which has been incurred before the Effective Date, (ii) the Sale
Leaseback Facility, and (iii) the Loan.
"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.
"Lender" or "Lenders" has the meaning set forth in the introductory
paragraph of this Agreement, and any successors and assigns.
"Lending Office" means, 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.
<PAGE>
"Leverage Percentage" means the quotient of the outstanding principal
amount of the Loan, divided by the aggregate Eligible Costs for all Mortgaged
Properties, expressed as a percentage. In no event shall such Leverage
Percentage be permitted to exceed forty five percent (45%).
"LIBOR Applicable Margin" means three hundred (300) basis points.
"LIBO Rate" means, with respect to any Interest Period, the average
rate of interest per annum (rounded upwards, if necessary, to the next highest
1/16th of 1%) at which deposits in immediately available funds in dollars are
offered to Agent (at approximately 12:00 noon (New York time), two Business Days
prior to the first day of such Interest Period) by first class banks in the
interbank Eurodollar market, for delivery on the first day of such Interest
Period, such deposits being for a period of time equal or comparable to such
Interest period and in an amount equal to or comparable to the principal amount
of the Advance to which such Interest Period relates. Each determination of the
LIBO Rate by the Agent shall, in absence of demonstrable error, be conclusive
and binding.
"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).
"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.
<PAGE>
"Maturity Date" means the earlier of December 31, 2000 or the date
that the Suburban Facility is satisfied. "Maximum Availability Amount" means, as
of any date of determination, the least of:
(a) the Commitment,
(b) forty five percent (45%) of the Eligible Costs of all of the
Mortgaged Properties.
"Mortgaged Properties" means, collectively, the Property of the
Borrower or any Subsidiary Mortgagor which is located in a Central Business
District and which 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 leases, rents, operating
agreements and management agreements 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" or "NOI" means, with respect to any appropriate
period and any Properties, the gross revenues from such Properties for such
period less all direct operating expenses of such Properties, including, without
limitation, expenses for the following to the extent same relate to such
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).
"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" means the written notice given by Borrower that
it desired to receive an Advance hereunder.
"Notifying Lender" has the meaning provided in Section 2.13.
"Participant" has the meaning provided in Section 7.17.
<PAGE>
"Payment Office" means the office of the Agent located at 2 World
Financial Center, New York, New York 10281-1050.
"Percentage" means 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 thirty (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" means reimbursement to the Borrower of a portion of
the Total Costs with respect to each Mortgaged Property, and general working
capital purposes (other than the purchase of Capital Stock.)
"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.
"Plans and Specifications" means, with respect to any Mortgaged
Property, the final plans and specifications for the construction of an extended
stay facility, including ancillary facilities related thereto, on such Mortgaged
Property.
"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 by the Agent or any Lender.
The Agent and each Lender may make commercial loans or other loans at rates of
interest at, above or below the Prime Lending Rate.
<PAGE>
"Prime Rate Applicable Margin" means two hundred (200) basis points.
"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.
"Properties" means all land owned or leased by the Borrower and its
Subsidiaries, all buildings, structures, improvements, fixtures and equipment,
and parking areas located thereon and therein, and all easements, rights,
interests, privileges and other appurtenances thereto, of any nature whatsoever.
An individual "Property" is a portion of land owned or leased by the Borrower
and/or its Subsidiaries which is bound by a perimeter that does not containing
any land not owned by Borrower and/or its Subsidiaries, together with all
buildings, structures, improvements and parking areas fixtures and equipment
located thereon, and all easements, rights, interests, privileges and other
appurtenances thereto, of any nature whatsoever.
"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.
"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.
<PAGE>
"Required Lenders" means the Lenders holding at least sixty six and two
thirds percent (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.
"Sale-Leaseback Facility" means the lease dated February 23, 1999
between HPT, as lessor, and HVI (2) Incorporated, a Delaware corporation, as
lessee.
"Stabilized Appraised Value" means appraised value reasonably
acceptable to the Agent.
"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, partnership, limited
liability, trust or other entity 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 wholly-owned Subsidiary of Borrower,
any wholly-owned Subsidiary of a wholly-owned Subsidiary of Borrower, or, with
Lenders' consent, any other Person which owns any portion of or interest in any
Mortgaged Property.
"Subsidiary Mortgagor Guaranty" means a guaranty of the Indebtedness
hereunder from a Subsidiary Mortgagor.
"Suburban Credit Agreement" means the Amended and Restated Credit
Agreement of even date herewith among Borrower, Commerzbank AG, Los Angeles
Branch and other lenders as set forth therein, and Agent, as agent, governing a
certain credit facility secured by mortgage liens on properties lying outside
major metropolitan cities.
"Taxes" has the meaning provided in Section 2.17.
"Total Costs" means, with respect to any Property, the sum of (i) the
Acquisition Costs with respect to such Property, (ii) the Direct Costs with
respect to such Property, and (iii) the Indirect Costs with respect to such
Property.
<PAGE>
"Total Liabilities" includes all GAAP liabilities and certain non-GAAP
(off balance sheet) liabilities with no redundancy. Included are the following:
non-recourse mortgage debt; letters of credit; binding purchase obligations;
repurchase obligations; forward commitments; unsecured debt; accounts payable;
accrued expenses, capitalized lease obligations, and to the extent required
under GAAP to be reported as a liability, any other lease obligations (including
ground leases); guarantees of indebtedness; subordinated debt; unfunded
obligations of Borrower and its Subsidiaries; forward equity commitments (but
excluding forward equity subscriptions for which stock is issued within thirty
(30) days of receipt of equity proceeds); Derivative Exposure (as hereinafter
defined); and any other non-GAAP liability that the Security and Exchange
Commission has determined, either currently or in the future, should be treated
as debt. Total Liabilities will include (without redundancy): (a) one hundred
percent (100%) of the recourse liability of Borrower and its Subsidiaries under
(i) guarantees of indebtedness or (ii) loans where Borrower or a Subsidiary of
Borrower is liable for debt as a general partner and (b) Borrower's and its
Subsidiaries' share of non-recourse debt in their Unconsolidated Affiliates
based on the greater of its nominal ownership interest or the percentage of
ownership interest used to calculate Gross Asset Value -- Cost. As used herein,
"Derivative Exposure" means the maximum liability (including costs, fees and
expenses), based upon a liquidation or termination as of the date of the
applicable covenant compliance test, of any Person under any interest rate swap,
collar, cap or other interest rate protection agreements, treasury locks,
foreign currency exchange agreements, commodity purchase or option agreements or
other interest or exchange rate or commodity price hedging agreements.
For purposes of purchase obligations, repurchase obligations and forward
commitments, the amount of Total Liabilities of a Person at any given time in
respect of a contract to purchase real property shall be determined as follows:
(x) if, at such time, the seller of such real property would be entitled to
specific enforcement of the contract against such Person, then the amount of
Total Liabilities shall equal the total purchase price payable by such Person
under the contract, otherwise, (y) the amount of Total Liabilities shall equal
the aggregate amount of due diligence deposits, earnest money payments and other
similar payments made by such Person under the contract which, at such time,
would be subject to forfeiture upon termination of such contract.
For purposes of purchase obligations, repurchase obligations and forward
commitments, the amount of Total Liabilities of a Person at any given time in
respect of a contract to purchase a property being renovated or developed by a
third party shall equal the maximum amount reasonably estimated to be payable
under such contract during the remaining term of such contract.
"UCC" means the Uniform Commercial Code as from time to time in effect
in the relevant jurisdiction.
"Unconsolidated Affiliate" means, with respect to any Person, an
unconsolidated affiliate of such Person (determined in accordance with GAAP).
<PAGE>
"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
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) Each Lender, severally and not jointly, has made loans (each an
"Advance" and collectively, the "Advances") pro rata in accordance with such
Lender's Percentage to the Borrower from time to time before the Effective Date.
b) No new Advance shall be made under this Agreement. Borrower may not
reborrow any Advance once it has been repaid.
c) The aggregate principal amount outstanding of all Advances made pursuant
hereto by the Lenders, at any time, shall not exceed the lesser of the then
Commitment or the then Maximum Availability Amount.
Section 2.2 Deliberately omitted.
Section 2.3 Deliberately omitted.
Section 2.4 Deliberately omitted.
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 is
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.
<PAGE>
b) Each borrowing and repayment 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 shall 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 LIBOR Applicable Margin plus the relevant
Adjusted LIBO 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, in arrears, with respect to each Advance, on the last day of
each calendar month and on the last day of the Interest Period applicable to
such Advance, (i) at maturity (whether by acceleration or otherwise), and (ii)
after maturity, on demand. Notwithstanding 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, (i) at maturity (whether by acceleration or otherwise),
and (ii) 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 (3%) 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 LIBO 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 judicially
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, then 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,
<PAGE>
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:
(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
<PAGE>
(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." 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 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.
Section 2.10 "Deliberately omitted"
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 LIBO 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.
<PAGE>
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 LIBO 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 LIBO 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 implementation 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 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
<PAGE>
(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 circumstances 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 LIBO 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.
<PAGE>
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 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)); (ii) if, for any reason, the Borrower defaults in its obligation to
repay any Advances when required by the terms of this Agreement; or (iii) 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". 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
received by the Borrower showing payment thereof. If the 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.
<PAGE>
b) Agent and each Lender shall furnish Borrower, at least thirty (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.
ARTICLE III
CONDITIONS TO BORROWINGS AND CLOSING
Section 3.1 "Conditions Precedent to Closing." On or prior to the Effective
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 Effective 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 Agent shall have received or waived in writing the following, each dated as
of or prior to the Effective Date, in form and substance satisfactory to the
Agent:
(i) an officer's certificate, dated the Effective 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 Affirmation of Environmental Indemnity;
(iv) an opinion of counsel to the Borrower addressed to the Agent and the
Lenders in form reasonably acceptable to the Agent;
(v) financial statements in the forms prescribed by Sections 5.2(a)-(d) for
the fiscal year 1997, the fiscal quarter ended September 30, 1998 and the most
recent Accounting Period;
(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;
<PAGE>
(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) title policy endorsements which have the effect of redating the title
policies insuring the Liens of the Mortgages.
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 Effective Date.
Section 3.2 "Deliberately omitted."
Section 3.3 "Deliberately omitted."
Section 3.4 "Unrecorded Mortgages of Subsidiary Mortgagor." Unrecorded
Mortgages of Subsidiary Mortgagor. The Mortgage with respect to any Mortgaged
Property may remain unrecorded provided that all of the following conditions
are, and continue to be, 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 one percent (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 , and (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. 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
<PAGE>
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.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants the following as of the date hereof:
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).
<PAGE>
Section 4.5 "Financial Information and No Material Adverse Change."
a) Each of the financial statements delivered pursuant to Sections
3.1(a)(vi) and 3.1(a)(vii) 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.
b) Since December 31, 1997, there has been no Material Adverse Change,
except as otherwise disclosed in writing to the Agent in the press releases
dated February 4, 1999 and March 15, 1999 and the reports on Forms 10-Q and 8-K
filed by the Borrower with the Securities and Exchange Commission.
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 Certificate 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.
<PAGE>
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.
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 "Deliberately omitted."
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 any 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.
<PAGE>
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.
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).
<PAGE>
Section 4.15 "Deliberately omitted."
Section 4.16 "Deliberately 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 one hundred
percent (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.
<PAGE>
(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 each Subsidiary Mortgagor, as the case may be, 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.
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 or a Subsidiary Mortgagor, as the case may be, and said
Collateral, including the proceeds resulting from the sale or other disposition
(other than as permitted by Section 5.3(k)) 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.
<PAGE>
e) Except for portions of any Mortgaged Property which are to be demolished
in the course of construction of an extended stay facility, 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 easements or 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.
<PAGE>
Section 4.20 "Deliberately omitted."
Section 4.21 "Deliberately omitted."
Section 4.22 "Assessments." Subject to the provisions of Section 5.5
hereof, except as disclosed to Lenders in writing 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 "Flood Zone." 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 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
related ancillary facilities thereon, each Mortgaged Property is being operated
and maintained in accordance with the Borrower's usual and customary business
practices.
Section 4.26 "Deliberately omitted."
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.
<PAGE>
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
Effective 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 or a
Subsidiary Mortgagor, as the case may be, 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 "Deliberately omitted."
Section 4.31 "Subsidiary Mortgagors." Each Subsidiary Mortgagor is a
Subsidiary of Borrower.
Section 4.32 "Deliberately omitted."
Section 4.33 "Deliberately omitted."
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).
<PAGE>
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 ten (10) days after Borrower's notice of such Lien (unless the
taxes, 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, including ancillary facilities
related thereto, and otherwise consistent with prudent business practices.
<PAGE>
h) Management of Properties. Subject to the provisions of Section 5.5 hereof,
Borrower or a Subsidiary of 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,
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) Deliberately omitted.
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 ninety (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 Arthur Andersen 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
<PAGE>
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, and a statement of sources and uses of
funds in the form of Exhibit Q, indicating to Agent's satisfaction, that (A) the
sources and uses of funds are in balance with respect to Borrower's business in
general and (B) the Borrower has adequate sources to satisfy the Borrower's cash
requirements..
b) Quarterly Financial Statements With Respect to the Borrower. As soon as
available and in any event within sixty (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), and a statement of sources and
uses of funds in the form of Exhibit Q, indicating to Agent's satisfaction, that
(A) the sources and uses of funds are in balance with respect to Borrower's
business in general and (B) the Borrower has adequate sources to satisfy the
Borrower's cash requirements.
c) Annual Financial Statements With Respect to Operating Mortgaged Properties.
As soon as available and in any event within ninety (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) Monthly Financial Statements With Respect to the Operating Mortgaged
Properties. As soon as available and in any event within thirty (30) days after
the end of each Accounting Period, a statement with respect to each of the
operating Mortgaged Properties as at the end of such Accounting Period, 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 Accounting
Period, 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.
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 Borrower 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) Deliberately 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." Neither Borrower nor, with
respect to subsections (k) through (r), any Subsidiary of Borrower will:
a) Deliberately omitted
b) Deliberately omitted
c) Deliberately omitted
d) Deliberately omitted
e) Deliberately omitted
f) Deliberately omitted
g) Deliberately omitted
h) 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.
i) Deliberately omitted
j) Deliberately omitted
k) Sales, Transfers. Sell, transfer or enter into any agreement for the sale or
transfer of any of the Mortgaged Properties without the consent of the Agent,
which consent may be withheld in the Agent's sole discretion.
l) 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.
m) Deliberately omitted
n) Changes in Property or Business. Except in connection with the development of
an extended stay facility and 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.
o) Deliberately omitted
p) Use of Proceeds. Use the proceeds of the Advances for other than any
Permitted Purpose.
q) Change of Business. Make or allow any material change in the nature or scope
of the business of the Borrower or any Subsidiary, except as permitted under
Section 4.32.
r) 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, 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):
<PAGE>
(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, thirty (30) days after
such notice is given plus, if such circumstances cannot reasonably be remediated
within thirty (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) 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
<PAGE>
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 15 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.
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.
<PAGE>
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 15 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
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.
<PAGE>
h) Money Judgment. 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) Cessation. Borrower ceases, or threatens to cease, to carry on all or a
substantial part of its business.
(j) Suburban Credit Agreement. An Event of Default, as defined in the Suburban
Credit Agreement.
(k) Sale-Leaseback Facility. A default shall have occurred under the
Sale-Leaseback Facility.
(l) Appraisals. Agent shall have failed to receive an "as is" land
valuation, acceptable to Agent, for each of the Mortgaged Properties by May 18,
1999.
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
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
<PAGE>
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." 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
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
<PAGE>
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.
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.
<PAGE>
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." 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.
<PAGE>
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,
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.
<PAGE>
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 "Agents 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." 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.
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.
<PAGE>
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." 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 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
<PAGE>
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." 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.
<PAGE>
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.
<PAGE>
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").
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." 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.
<PAGE>
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 "Rights of the Lenders and the Agent to Transact Busines." 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
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.
<PAGE>
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 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.
<PAGE>
Section 8.4 "Payment of Expenses, Etc." The Borrower shall: 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 to 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.
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
<PAGE>
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." 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.
Section 8.10 "Entire Agreement"
(a) (a) The provisions:
(i) the letter agreements among the Borrower, Wells Fargo Bank,
National Association and Agent dated as of March 18, 1999, March 15, 1999,
February 4, 1999, January 25, 1999, and September 3, 1998, and
(ii) the letter agreement dated as of August 25, 1997 among the
Borrower, Commerzbank AG, Los Angeles Branch and Agent,
each of which letter agreement is attached hereto as Exhibit R shall survive the
execution of this Agreement and shall be deemed incorporated herein.
(b) Except as set forth in subsection (a) above, 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, waiver letters, agreements,
letter 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 "Deliberately omitted"
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 ten (10) 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 Effective 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;
<PAGE>
(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.
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.
[Signatures on following page]
HOMESTEAD VILLAGE INCORPORATED
By
Name:
Title:
COMMERZBANK AG, New York Branch, as Agent
By
Name:
Title:
And by
Name:
Title:
COMMERZBANK AG, Los Angeles Branch, as a lender
By
Name:
Title:
And by
Name:
Title:
<PAGE>
$170,000,000
AMENDED AND RESTATED CREDIT AGREEMENT
AMONG
HOMESTEAD VILLAGE INCORPORATED,
THE LENDERS NAMED HEREIN,
COMMERZBANK AG, NEW YORK BRANCH,
AND
WELLS FARGO BANK, NATIONAL ASSOCIATION,
AS ADMINISTRATIVE AGENT FOR THE LENDERS
DATED AS OF MARCH 18, 1999
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement"), dated as of
March 18, 1999, 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"), COMMERZBANK AG, NEW YORK BRANCH (the
"Arranger") and WELLS FARGO BANK, NATIONAL ASSOCIATION, as contractual
representative for the Lenders on the terms provided herein (the "Administrative
Agent").
W I T N E S S E T H:
WHEREAS, the Arranger arranged a revolving credit facility in the
original principal amount of $50,000,000 on behalf of the Borrower pursuant to a
Credit Agreement dated as of May 6, 1997 among Borrower, Arranger and certain
lenders named therein (said Agreement, as amended to, but not including, this
date, the "Original Agreement"); and
WHEREAS, the parties hereto have agreed to amend and restate the
Original Agreement in its entirety, including the letters modifying, amending or
waiving the terms thereof.
NOW, THEREFORE, in consideration of the fees, representations,
warranties, covenants and agreements of the Borrower set forth herein and in the
Loan Documents, the parties hereto agree as follows:
ARTICLE . DEFINITIONS; CONSTRUCTION
. As used herein, the following terms shall have the following meanings:
"Accounting Period" means each accounting period of Borrower,
the first two such periods in any fiscal quarter consisting of four weeks each
and the last such period in any fiscal quarter consisting of five weeks.
"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 Administrative Agent) upon which it shall construct an
extended stay facility and 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 the Administrative 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
Administrative Agent approves.
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"Adjusted EBITDA" means, with respect to any quarter, EBITDA
for such quarter plus non-cash charges minus a reserve for replacements
equivalent to the greater of (a) actual historical recurring property capital
expenditures for the prior quarter or (b) four percent (4.0%) of the prior
quarter's gross revenues from the Properties.
"Adjusted LIBO Rate" means, with respect to each Interest
Period, the rate obtained by dividing (i) the LIBO 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 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 Advances is determined or any category of extensions
of credit or other assets that includes loans by a non-United States office of
the Administrative Agent to United States residents) or by any other Requirement
of Law relating to reserve or capital adequacy requirements.
"Adjusted Property Net Operating Income" or "Adjusted Property
NOI" means, with respect to any period, NOI adjusted for a capital expenditure
reserve equal to 4% of gross revenue and a management fee equal to 4% of gross
revenue.
"Administrative Agent" means Wells Fargo Bank National
Association., in its capacity as contractual representative for the Lenders
hereunder, or such successor Administrative Agent as may be appointed pursuant
to Section 7.9 of this Agreement.
"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 fifty
percent (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.
"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 the Prime Rate
Applicable Margin, and (b) the Federal Funds Rate plus the Federal Funds
Applicable Margin.
"Applicable Margin Adjustment Date" means the date on which
any Applicable Margin Adjustment Event occurs.
"Applicable Margin Adjustment Event" means each of (a) the
making of any Advance, and (b) the receipt and collection by the Administrative
Agent, on behalf of the Lenders, of any portion of the unpaid principal balance
of the Loan.
"Arranger" means Commerzbank AG, New York Branch.
"Average Undrawn Balance" means 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 introductory
paragraph to this Agreement.
"Borrower's Authorized Representative" means any duly elected
officer designated by the Borrower in a written notice to the Arranger and the
Administrative Agent, as such officer may be changed from time to time by
written notice to the Arranger and the Administrative Agent.
"Bridge Facility" means the credit facility governed by the
Credit Agreement dated as of June 15, 1998, among Borrower, certain lenders and
Arranger, as modified and amended, from time to time.
"Budget" means, for any Mortgaged Property (i) until the Final
Budget for such Mortgaged Property is received by the Administrative 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 the Administrative
Agent, the Final Budget for such Mortgaged Property.
"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 San Francisco, California 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 May 6, 1997.
"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 Arranger.
"Commitment" means One Hundred Seventy Million Dollars
($170,000,000).
"Construction Budget" means, with respect to any Project under
Development, the total budgeted costs (including soft and hard costs), as
indicated in the Budget for such Project under Development, to cause such
Project under Development to become Construction Complete, including the
acquisition cost of land. If the Project under Development is a multi-phase
development, the total budgeted costs shall include the acquisition cost of land
for all phases and the development budget for any phases for which improvements
have commenced.
"Construction Complete" means, with respect to any Mortgaged
Property, that (a) construction of such Mortgaged Property is complete, in
accordance with the Plans and Specifications of such Mortgaged Property, (b)
final, permanent and unconditional certificates of occupancy permitting
occupancy of all portions of such Mortgaged Property as an extended stay
facility have been issued and are in full force and effect, (c) all portions of
such Mortgaged Property are, or may become at any time, without the consent or
approval of any Person, open for business to the general public as an extended
stay hotel, and (d) the Administrative Agent shall have received evidence
satisfactory to it that the conditions set forth in (a), (b) and (c) have been
satisfied.
"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.
"Convertible Preferred Securities" means the convertible
preferred securities to be issued by Borrower prior to July 22, 1999.
"Credit Exposure" has the meaning provided in Section 7.17.
"Debt Service" means, with respect to any period, Interest
Expense for such period, excluding financing costs and fees related to:
(i) Indebtedness which has been incurred before
the Effective Date,
(ii) the Sale Leaseback Facility, or
(iii) the Loan,
plus scheduled amortization of all Indebtedness of Borrower and its Subsidiaries
(excluding balloon payments and bullet maturities on loans).
"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:
(a) all non-monetary easements, restrictions
and encumbrances customary and appropriate for the development of property as an
extended stay facility, including ancillary facilities related thereto, which do
not and will not materially impair the use of the Mortgaged Property affected
thereby as an extended stay facility or the ancillary facilities related thereto
or the expected value of the Mortgaged Property affected thereby and
(b) all other easements, restrictions and
encumbrances customary and appropriate for the development of
property as an extended stay facility, including ancillary facilities related
thereto, which (i) are approved by the Arranger and the Administrative Agent or
(ii) do not and will not materially impair the use of the Mortgaged Property
affected thereby as an extended stay facility or the 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 an extended stay
facility, including ancillary facilities related thereto, on such Mortgaged
Property to be Construction Complete in accordance with the Plans and
Specifications, as evidenced by the documentation and certificate of Borrower
furnished to the Administrative 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, with respect to any period and any Person, the
net income of such Person (excluding equity in net earnings or non-cash losses
of its Unconsolidated Affiliates), plus, to the extent included in the
calculation of earnings, any losses on the sale of a Property, interest expense
(per GAAP), income taxes, depreciation and amortization expense, other losses
relating to restructurings or extraordinary or unusual events of a non-recurring
nature, accounting changes, or write-downs, reclassifications, or revaluation
(provided that for the purposes of this definition any severance related cash
expenses, charges or losses shall be spread in equal portions over the quarter
in which such expenses, charges or losses are incurred and the next three
succeeding quarters), and the distributed earnings of its Unconsolidated
Affiliates minus, to the extent excluded in the calculation of earnings, any
gains on the sale of a Property, or extraordinary or unusual events, in all
cases as determined on a consolidated basis in accordance with GAAP for such
Person for such period.
"Effective Date" means March 18, 1999.
"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 Assignee" means a Person who, at the time of
determination is (a) a Lender; (b) a commercial bank, trust company, savings and
loan association, savings bank, insurance company, investment bank or pension
fund organized under the laws of the United States of America or any state
thereof, and having total assets in excess of $5,000,000,000; or (c) a
commercial bank organized under the laws of any other country which is a member
of the Organization for Economic Cooperation and Development or a political
subdivision of any such country, and having total assets in excess of
$5,000,000,000, provided such bank is acting through a branch or agency located
in the United States of America. If such a Person is not currently a Lender,
such Person's senior unsecured long term indebtedness must be rated BBB or
higher by Standard & Poor's, Baa2 or higher by Moody's Investor's Services, or
the equivalent or higher of either such rating by another rating agency
acceptable to the Administrative Agent.
"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 for such Mortgaged Property (including any contingency for Indirect
Costs shown on such Budget).
"Environment" means 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 the Environmental Indemnity to
be executed by the Borrower in favor of the Arranger, substantially in the form
attached hereto as Exhibit B.
"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.
"Estimated Operating Property Value" or "EOPV" means, as of
any date of determination, the sum of:
(1) for each Mortgaged Property that is Construction
Complete and open for business as an extended stay facility but has been so open
less than ten (10) full calendar months as of the end of the calendar quarter
ending on or prior to the date of determination, the lower of the undepreciated
GAAP cost value or the Stabilized Appraised Value;
(2) for each Property that is Construction Complete
and has been open for business as an extended stay facility at least ten (10)
full calendar months as of the end of the calendar quarter ending on or prior to
the date of determination, the lower of (a) the estimated asset value derived by
capitalizing the appropriate annualized Adjusted Property NOI (as determined
pursuant to the directions set forth below) at 11%, (b) the undepreciated GAAP
cost value and (c) only if the property is a Mortgaged Property, the Stabilized
Appraised Value, plus
(3) for each Property that is not a Mortgaged Property
and has been open for business as an extended stay facility but has been so open
less than ten (10) full calendar months as of the end of the calendar quarter
ending on or prior to the date of determination, the undepreciated GAAP cost
value for such Property.
In order to determine annualized Adjusted Property NOI, for a Property that has
been open as an extended stay facility for at least ten (10) but less than
thirteen (13) full calendar months, the trailing quarter Adjusted Property NOI
will be annualized. For a Property that has been open as an extended stay
facility for at least thirteen (13) but less than sixteen (16) full calendar
months, the trailing two quarter Adjusted Property NOI will be annualized. For a
Property that has been open as an extended stay facility for sixteen (16) months
but less than nineteen (19) months, the prior three quarter Adjusted Property
NOI will be annualized. Once a Property has been open as an extended stay
facility for nineteen(19) full calendar months and thereafter, trailing 12-month
Adjusted Property NOI will be utilized.
"Estimated Operating Property Value of the Mortgaged Properties" means, as of
any date of determination, for all Mortgaged Properties, the sum calculated
pursuant to the foregoing formula, but only with respect to the Mortgaged
Properties.
"Event of Default" has the meaning provided in Article VI.
"Exchange Act" means the Securities and Exchange Act of 1934,
as amended.
"Federal Funds Applicable Margin" means, 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.
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"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 Administrative Agent on such day on such transactions
as determined by the Administrative Agent.
"Financing Statements" means UCC-1 Financing Statements made
by the Borrower or a Subsidiary Mortgagor, as debtor, in favor of the Arranger,
as secured party, covering all fixtures, equipment and personal property of the
Borrower or such Subsidiary Mortgagor 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 the
Administrative 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 one hundred ten percent (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 Arranger determines to be
adverse, and if either such party notifies the other of such determination, then
both Borrower and Arranger 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 Required Lenders within thirty (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 -- Cost" or "GAV -- Cost" means the value
of all cash, cash equivalents and the value of all Properties owned by Borrower
and its Subsidiaries valued at one hundred percent (100%) of cost.
"Gross Asset Value -- Market" or "GAV -- Market" means the sum
of:
(a) EOPV,
(b) cash and equivalents (not including any form
of restricted cash),
(c) the GAAP value of construction in process and
land held for development or sale (subject to a
value cap set forth in Sections 5.3(s) and (t)) plus
(d) the contractual purchase price of properties
subject to purchase obligations, repurchase obligations, unfunded obligations,
and forward commitments to the extent such obligations are accounted for under
Total Liabilities and subject to specific enforcement.
With respect to purchase obligations, repurchase obligations, unfunded
obligations, and forward commitments that are not subject to specific
enforcement but have earnest money or similar payments subject to forfeiture,
the amount of the earnest money or similar payment will be included in the
calculation of Gross Asset Value -- Market, to the extent such obligations are
accounted for in Total Liabilities. With respect to any property that is being
developed or redeveloped pursuant a purchase agreement and that is not owned by
the Borrower or a Subsidiary, the amount of the purchase agreement will be
included in the calculation of Gross Asset Value -- Market, to the extent such
obligations are accounted for in Total Liabilities.
"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
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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" means 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.
"HPT" means HPT HSD Properties Trust, the purchaser-lessor
under the Sale- Leaseback Facility.
"Implied Debt Service" means, as of any determination date,
the annual debt service of a self-liquidating loan with an original principal
amount equal to the Maximum Availability Amount, as of such date, and amortized
over 240 months (20 years) (pursuant to regular and equal monthly installments
of principal and interest) at an annual interest rate equal to the lesser of:
(a) ten percent (10%) and
(b) the greater of (i) eight and one half
percent (8.50%) and (ii) the 10 year Treasury Rate (as hereinafter defined) at
such time plus three and one quarter percent (3.25%). "Treasury Rate" means the
annual yield on the Treasury Constant Maturity Series with maturity equal to ten
(10) years, for the week prior to the determination date, as reported in Federal
Reserve Statistical Release H.15 - Selected Interest Rates, conclusively
determined by the Administrative Agent. In the event Release H.15 is no longer
published, Administrative Agent shall select a comparable publication to
determine the Treasury Rate.
"Indebtedness" of any Person means, as of the date of any
determination thereof, without duplication:
(1) 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;
(2) all rental or other obligations under leases required to be capitalized
under GAAP;
(3) all Guarantee Obligations of such Person;
(4) 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
<PAGE>
(5) 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 the
Administrative 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 C
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 Administrative Agent) showing
the amounts budgeted for the Total Costs (including contingencies) for such
Mortgaged Property, provided and to the extent such budget and the amounts set
forth thereon reasonably conform, in the Administrative Agent's sole discretion,
to the Regional Prototypical Budget applicable to such Mortgaged Property.
"Intellectual Property" has the meaning set forth in Section
4.12.
"Interest Expense" means (without redundancy) the sum of all
accrued, paid or capitalized interest costs of Borrower and its consolidated
affiliates (excluding capitalized interest funded from an interest reserve) plus
Borrower's pro rata share (based on the higher of its nominal ownership interest
or the ownership percentage used in the calculation of Gross Asset Value --
Cost) of interest expense in its Unconsolidated Affiliates, plus 100% of any
accrued, paid, or capitalized interest incurred (without redundancy) on any
obligation for which Borrower is wholly or partially liable under repayment,
interest carry, or performance guarantees, or other relevant liabilities; minus,
to the extent included in the foregoing, financing costs and fees related to (i)
Indebtedness which has been incurred before the Effective Date, (ii) the Sale
Leaseback Facility, and (iii) the Loan.
"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.
"Lender" or "Lenders" has the meaning set forth in the
introductory paragraph of this Agreement, and any successors and assigns.
"Lending Office" means, 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 Arranger and the Administrative
Agent and the Borrower.
"Leverage Percentage" means, 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 the aggregate Eligible Costs for all Mortgaged Properties,
expressed as a percentage. In no event shall such Leverage Percentage be
permitted to exceed thirty eight percent (38%).
"LIBO Rate" means, with respect to any Interest Period, the
average rate of interest per annum (rounded upwards, if necessary, to the next
highest 1/16th of 1%) at which deposits in immediately available funds in
dollars are offered to Wells Fargo Bank National Association (at approximately
12:00 noon (New York time), two Business Days prior to the first day of such
Interest Period) by first class banks in the interbank Eurodollar market, for
delivery on the first day of such Interest Period, such deposits being for a
period of time equal or comparable to such Interest period and in an amount
equal to or comparable to the principal amount of the Advance to which such
Interest Period relates. Each determination of the LIBO Rate by the
Administrative Agent shall, in absence of demonstrable error, be conclusive and
binding.
"LIBOR Applicable Margin" means, 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%), two hundred (200) 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 fifty (250) 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%), three hundred (300) basis points.
"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 D: (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 December 31, 2000, and any extensions
thereof.
<PAGE>
"Maximum Availability Amount" means, as of any date of
determination, the least of:
(a) the Commitment,
(b) thirty eight percent (38%) of the
aggregate Stabilized Appraised Value of all of the Mortgaged Properties;
(c) thirty eight percent (38%) of the Eligible
Costs of all of the Mortgaged Properties; and
(d) the sum of the Property Amount for each Mortgaged
Property, as hereinafter defined.
As used herein, the "Property Amount" with respect to any Mortgaged Property
means, as of any date of determination, the least of :
(i) the sum of: (A) forty five percent(45%) of the
aggregate Eligible Acquisition Costs for such Mortgaged Property, plus (B)
thirty five percent (35%) of the aggregate Eligible Direct Costs and the
aggregate Eligible Indirect Costs for such Mortgaged Property; and
(ii) with respect to any Mortgaged Property which is
a Stabilized Project, forty five percent
(45%) of the Estimated Operating Property Value of such Mortgaged Property.
"Merrill Lynch Facility" means the credit facility in the
original amount of $122,028,471 arranged by, and secured by mortgage liens held
by, Merrill Lynch Mortgage Capital, Inc.
"Mortgaged Properties" means, collectively, each Property of
the Borrower or any Subsidiary Mortgagor which is located in a Suburban Area and
which is (and for so long as same is) mortgaged to the Arranger 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 leases,
rents, operating agreements and management agreements and fixture filings
delivered by the Borrower or any Subsidiary Mortgagor in favor of the Arranger
and covering the Mortgaged Properties, substantially (i.e., with such
modifications as may be required by, or, in the Arranger's and the
Administrative Agent's reasonable judgment, appropriate for, the jurisdiction in
which a particular Mortgaged Property is located) in the form attached hereto as
Exhibit E, as the same may be amended, modified, or otherwise supplemented from
time to time.
<PAGE>
"Net Operating Income" or "NOI" means, with respect to any
appropriate period and any Properties, the gross revenues from such Properties
for such period less all direct operating expenses of such Properties,
including, without limitation, expenses for the following to the extent same
relate to such 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 on or after the
Effective Date.
"Non-public Information" means any information delivered by
the Borrower to the Arranger or the Administrative 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 Administrative Agent
located at 2120 E. Park Place, Suite 100, El Segundo, California 90245.
"Percentage" means 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).
<PAGE>
"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 thirty (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" means reimbursement to the Borrower of a
portion of the Total Costs with respect to each Mortgaged Property and general
working capital purposes (other than the purchase of Capital Stock).
"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).
"Preferred Dividends" means, without duplication, the
dividends accrued, paid or declared under the Convertible Preferred Securities.
"Presence" means, when used in connection with Hazardous
Materials, treatment, use, storage, handling, repair, encapsulation, disposal,
transportation, spill, discharge and release.
<PAGE>
"Prime Lending Rate" means the rate at which the
Administrative Agent announces in San Francisco, California 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 by the Administrative Agent or any Lender. The
Administrative Agent and each Lender may make commercial loans or other loans at
rates of interest at, above or below the Prime Lending Rate.
"Prime Rate Applicable Margin" means, 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.
"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 F 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 Administrative 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 G 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 Arranger and the Administrative Agent with respect to such
Mortgaged Property.
"Project under Development" means a Property (a) on which
construction of an extended stay facility has commenced and (b) which has not
been open as an extended stay facility for at least four (4) months.
"Promissory Notes" means the promissory notes made by the
Borrower to each Lender substantially in the form annexed hereto as Exhibit H.
"Properties" means all land owned or leased by the Borrower
and/or any of its Subsidiaries, all buildings, structures, improvements,
fixtures and equipment, and parking areas located thereon and therein, and all
easements, rights, interests, privileges and other appurtenances thereto, of any
nature whatsoever. An individual "Property" is a portion of land owned or leased
by the Borrower and/or its Subsidiaries which is bound by a perimeter containing
no land not owned or leased by Borrower and/or any of its Subsidiaries, together
with all buildings, structures, improvements and parking areas fixtures and
equipment located thereon, and all easements, rights, interests, privileges and
other appurtenances thereto, of any nature whatsoever.
<PAGE>
"Purchasing Lender" has the meaning provided in Section 7.18.
"Regional Prototypical Budget" means, for any Mortgaged
Property, the prototypical budget in the form set forth in Exhibit I hereto with
respect to the region in which such Mortgaged Property is located.
"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.
"Required Lenders" means the Lenders holding at least sixty
six and two thirds percent (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.
"Sale-Leaseback Facility" means the lease dated February 23,
1999 between HPT, as lessor, and HVI (2) Incorporated, a Delaware corporation,
as lessee.
"Stabilized Appraised Value" means appraised value reasonably
acceptable to all of the Lenders, but at least satisfying the requirements for
an acceptable real estate appraisal imposed from time to time on each Lender by
the applicable Governmental Authority.
"Stabilized Project" means a Mortgaged Property which is (a)
Construction Complete and is open for business as an extended stay facility and
(b) has been either so open for at least twenty four (24) weeks or has, at any
time, been at least eighty percent (80%) occupied for at least one (1) week.
"Stockholders' Equity" means stockholders' equity as reflected
on the balance sheet of the Borrower determined in accordance with GAAP.
<PAGE>
"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, partnership,
limited liability, trust or other entity 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 wholly-owned Subsidiary of
Borrower, any wholly-owned Subsidiary of a wholly-owned Subsidiary of Borrower,
or, with Lenders' consent, 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).
"Suburban Area" means an area outside a major metropolitan city.
"Tangible Net Worth" is defined as the tangible net worth of
the Borrower, calculated on a GAAP basis, plus increases in accumulated
depreciation and amortization that occur subsequent to the Effective Date.
"Taxes" has the meaning provided in Section 2.17.
"Total Costs" means, with respect to any Property, the sum of
(i) the Acquisition Costs with respect to such Property, (ii) the Direct Costs
with respect to such Property, and (iii) the Indirect Costs with respect to such
Property.
"Total Liabilities" includes all GAAP liabilities and certain
non-GAAP (off balance sheet) liabilities with no redundancy. Included are the
following: non-recourse mortgage debt; letters of credit; binding purchase
obligations; repurchase obligations; forward commitments; unsecured debt;
accounts payable; accrued expenses, capitalized lease obligations, and to the
extent required under GAAP to be reported as a liability, any other lease
obligations (including ground leases); guarantees of indebtedness; subordinated
debt; unfunded obligations of Borrower and its Subsidiaries; forward equity
commitments (but excluding forward equity subscriptions for which stock is
issued within thirty (30) days of receipt of equity proceeds); Derivative
Exposure (as hereinafter designed); and any other non-GAAP liability that the
Security and Exchange Commission has determined, either currently or in the
future, should be treated as debt. Total Liabilities will include (without
redundancy): (a) one hundred percent (100%) of the recourse liability of
Borrower and its Subsidiaries under (i) guarantees of indebtedness or (ii) loans
where Borrower or a Subsidiary of Borrower is liable for debt as a general
partner and (b) Borrower's and its Subsidiaries' share of non-recourse debt in
their Unconsolidated Affiliates based on the greater of its nominal ownership
interest or the percentage of ownership interest used to calculate Gross Asset
Value -- Cost. As used herein, "Derivative Exposure" means the maximum liability
(including costs, fees and expenses), based upon a liquidation or termination as
of the date of the applicable covenant compliance test, of any Person under any
interest rate swap, collar, cap or other interest rate protection agreements,
treasury locks, foreign currency exchange agreements, commodity purchase or
option agreements or other interest or exchange rate or commodity price hedging
agreements.
<PAGE>
For purposes of purchase obligations, repurchase obligations and forward
commitments, the amount of Total Liabilities of a Person at any given time in
respect of a contract to purchase real property shall be determined as follows:
(x) if, at such time, the seller of such real property would be entitled to
specific enforcement of the contract against such Person, then the amount of
Total Liabilities shall equal the total purchase price payable by such Person
under the contract, otherwise, (y) the amount of Total Liabilities shall equal
the aggregate amount of due diligence deposits, earnest money payments and other
similar payments made by such Person under the contract which, at such time,
would be subject to forfeiture upon termination of such contract.
For purposes of purchase obligations, repurchase obligations and forward
commitments, the amount of Total Liabilities of a Person at any given time in
respect of a contract to purchase a property being renovated or developed by a
third party shall equal the maximum amount reasonably estimated to be payable
under such contract during the remaining term of such contract.
"UCC" means the Uniform Commercial Code as from time to time
in effect in the relevant jurisdiction.
"Unconsolidated Affiliate" means, with respect to any Person,
an unconsolidated affiliate of such Person (determined in accordance with GAAP).
"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
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 during the period from the
Effective Date to but excluding the Maturity Date.
b) The aggregate principal amount outstanding of all Advances made pursuant
hereto by the Lenders, at any time, shall not exceed the lesser of the
Commitment or the then Maximum Availability Amount. 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.
<PAGE>
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.
Sectioni 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.
Section 2.3. Whenever the Borrower desires to receive an Advance hereunder,
it shall give the Arranger and the Administrative 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
J, 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. The Administrative 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
specified for the Advance, each Lender shall make available to the
Administrative Agent at the Payment Office no later than 12:00 noon. (New York
time) in immediately available funds an amount equal to such Lender's Percentage
of such Advance. No later than 3:00 p.m. (New York time) on the date of each
Advance, the Administrative Agent will make available to the Borrower at the
Payment Office the full amount of the Advance.
<PAGE>
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 Administrative 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, repayment and reborrowing hereunder shall be recorded by the
Administrative Agent and the entries in such records shall, except for patent
error, be final, conclusive and binding on the Borrower; 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 Administrative 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 LIBOR Applicable Margin plus the relevant Adjusted
LIBO 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, in arrears, with respect to each Advance, (i) on the first day of each
calendar month, (ii) at maturity (whether by acceleration or otherwise), and
(iii) after maturity, on demand. Notwithstanding the foregoing, interest on each
Advance bearing interest at the Alternate Rate pursuant to the terms of this
Agreement shall be payable in arrears (i) on the first day of each calendar
month during the Interest Period applicable to such Advance, (ii) at maturity
(whether by acceleration or otherwise), and (iii) after maturity, on demand. No
later than five (5) Business Days prior to an Applicable Margin Adjustment Date,
Borrower shall furnish the Administrative Agent with calculations of the LIBOR
Applicable Margin, Federal Funds Applicable Margin and Prime Rate Applicable
Margin as of the Applicable Margin Adjustment Date, together with sufficient
detail to allow the Administrative Agent to review the Borrower's calculations.
The LIBOR Applicable Margin, Federal Funds Applicable Margin and Prime Rate
Applicable Margin shall be recalculated by the Administrative Agent (which
calculation shall be binding on all parties, absent patent error), 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.
<PAGE>
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 (3%) 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 Administrative Agent, upon determining the Adjusted LIBO Rate for any
Interest Period, shall promptly notify by telephone (confirmed in writing) or in
writing the Borrower thereof. All such determinations shall be binding on all
parties, absent patent error.
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 judicially 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 Administrative 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, then 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
<PAGE>
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 Administrative 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 Administrative 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." An interest period (each an "Interest
Period") shall be applicable with respect to each Advance, 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:
(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 K, to the
Administrative 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 Administrative 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 Administrative 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;
<PAGE>
(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
Administrative 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 Arranger and the Administrative Agent,
the Borrower may terminate the Commitment by prepaying all outstanding Advances
and all other amounts and fees due to the Administrative 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.
<PAGE>
Section 2.10 "Fees." The Borrower shall pay to the Administrative Agent for
the account of the Lenders a commitment fee (the "Commitment Fee") equal to
three eighths of one percent (0.375%) per annum of the Average Undrawn Balance
of the Commitment. The amount of the Commitment Fee shall be calculated by the
Administrative Agent and, absent patent error, shall be binding on all parties.
The 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 or earlier
termination of the Loan. Each payment on account of the Commitment Fee for a
period which is less than a full calendar quarter shall be prorated. The
Borrower agrees to pay to the Administrative Agent such fees for services
rendered by the Administrative Agent as shall be separately agreed upon in
writing between the Borrower and the Administrative Agent.
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 Administrative 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
Administrative Agent after such time shall, for all purposes of this Agreement,
be deemed to have been paid on the next succeeding Business Day. The
Administrative 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. Notwithstanding the foregoing, any payments received by the
Administrative Agent after 12:00 noon (New York time) shall be distributed to
the Lenders on the following Business Day.
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 LIBO 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.
Section 2.12 "Interest Rate Not Ascertainable, Etc." If the Administrative
Agent shall have determined (which determination shall be conclusive and binding
upon the Borrower) that on any date for determining the LIBO 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 LIBO Rate, then, and in any such event, the
Administrative Agent shall forthwith give notice (by telephone confirmed in
writing) to the Borrower of such determination. Until the Administrative 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
Arranger and the Administrative Agent and the Borrower of such determination.
<PAGE>
b) Upon the giving of the notice to the Arranger and the Administrative 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 implementation 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 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
Administrative Agent, pay to the Administrative 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 Administrative 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.
<PAGE>
b) If the Required Lenders shall notify the Borrower in writing (with a copy to
the Administrative Agent) 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, the
then applicable Adjusted LIBO Rate, as determined by the Administrative 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 Required Lenders shall notify the Borrower in writing (with a copy to
the Administrative Agent) 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
Arranger and the Administrative 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 Administrative Agent and the
Administrative 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.
<PAGE>
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 Administrative
Agent a certified copy of an original official receipt received by the Borrower
showing payment thereof. If the Borrower fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to the Administrative 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 Administrative Agent and each Lender for
any incremental taxes, interest, or penalties that may become payable by the
Administrative Agent or any Lender as a result of any such failure. 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) The Administrative Agent and each Lender shall furnish Borrower and the
Administrative Agent, at least thirty (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 an Eligible Assignee reasonably acceptable to the Arranger
and the Administrative Agent, which assignment shall be effected pursuant to
Section 7.18 hereof.
<PAGE>
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 Effective
Date, all obligations of the Borrower hereunder to the Administrative Agent, the
Arranger and the Lenders incurred prior to the Effective Date and any amounts
payable to the Administrative Agent, the Arranger or the Lenders on the
Effective Date (other than legal fees payable pursuant to the last paragraph of
subsection 3.1(a)), shall have been paid in full. In addition, the following
conditions shall be satisfied:
a) Receipt of Documents. The Administrative Agent and the Arranger shall have
received the following, each dated as of or prior to the Effective Date, in form
and substance satisfactory to the Arranger and the Administrative Agent:
(i) an officer's certificate, dated the Effective 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 L with appropriate insertions,
together with copies of the Articles of Incorporation of Borrower certified, as
of a recent date, 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 Affirmation of Environmental Indemnity;
(iv) opinions of counsel to the Borrower addressed to the Administrative
Agent and the Lenders as to the matters set forth in Exhibits M and N; provided
that local counsel opinions shall be limited to the modifications of Mortgages
except for states where New Mortgaged Properties are located;
(v) financial statements in the forms prescribed by Sections 5.2(a) to (d)
for fiscal year 1997, the fiscal quarter ending September 30, 1998 and the most
recent Accounting Period; provided that prior to March 31, 1999, Borrower will
deliver audited financial statements for the year ended December 31, 1998;
(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;
<PAGE>
(vii) such consents or acknowledgements, with respect to such of the
transactions hereunder, from such Persons as the Arranger 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) duly executed, delivered and acknowledged modifications of the
Mortgages, in recordable form, sufficient to protect the Liens of Arranger in
such Mortgaged Properties;
(x) title policy endorsements which have the effect of redating the title
policies insuring the Liens of the Mortgages with no additional exceptions; and
(xi) duly executed and delivered Subsidiary Guaranties.
Execution and delivery of this Agreement by Borrower shall constitute Borrower's
agreement and covenant to pay to the Administrative Agent and the Arranger,
promptly upon demand (together with a reasonably detailed invoice(s) in respect
thereof), all reasonable fees and disbursements of counsel to the Administrative
Agent, the Arranger and the Lenders incurred prior to or on the Effective Date.
b) Receipt of More Documents. The Arranger and the Administrative Agent shall
have received the following, each dated as of or prior to the Effective Date, in
form and substance satisfactory to the Lenders:
(i) originals of an estoppel letter executed by HPT; and
(ii) appraisals on the forty five (45) of the Mortgaged Properties
designated by the Arranger.
(c) Sale-Leaseback. Borrower shall have evidenced to the satisfaction of
Arranger that the Merrill Lynch Facility has been repaid through the execution
of the Sale-Leaseback Facility.
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 Arranger and the Administrative Agent shall have received a timely Notice
of Borrowing from the Borrower in accordance with Article II;
<PAGE>
b) No Default or Event of Default shall have occurred and be continuing;
c) Such Advance shall not cause the aggregate principal amount of all
outstanding Advances to exceed the lesser of (i) the Commitment, and (ii) the
then Maximum Availability Amount;
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 Effective 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;
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) the Administrative Agent shall have received, in form and substance
satisfactory to the Administrative Agent:
(i) prior to any Advance 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 Administrative Agent shall have
received): (1) such supporting documentation for Total Costs and Estimated
Operating Property Value of the Mortgaged Properties as the Administrative 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 the
Administrative Agent, which endorsement shall have the effect of redating such
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 an amount equal to at least 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
<PAGE>
Section 3.3(a)(iii) dated the date of any such Advance, (4) a Project Cost
Report for such Mortgaged Property, dated as of the date of the Notice of
Borrowing, and (5) evidence that (A) the Borrower's sources and uses of funds
are in balance with respect to Borrower's business in general, which evidence
may be in the form of Exhibit U (B) the Borrower has adequate sources to make
each Project under Development Construction Complete and (C) the Borrower has
adequate sources to satisfy the Borrower's cash requirements;
(ii) prior to any Advance 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 Administrative 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 the Administrative 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, including 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, including ancillary facilities related thereto, on
such Mortgaged Property have been obtained and are in full force and effect; (3)
Borrower's certificate to the effect that the building permit and all other
permits, authorizations and approvals required to be obtained under any
Requirements of Law or Use Requirements for the construction and operation of an
extended stay facility, including 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, including 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 (4)
Borrower's certification, and evidence reasonably satisfactory to the
Administrative Agent, that Borrower is in compliance with subsection 5.3(v)
hereof; and
(iii) prior to any Advance 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 Administrative
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, including 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 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, including 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, including 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.
<PAGE>
(iv) prior to the first Advance 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 Administrative
Agent shall have received): (1) with respect to any Mortgaged Property which is
not a Stabilized Project, 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 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
(30) days to commence construction on such Mortgaged Property. In the event
construction is not commenced with one hundred twenty (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 Administrative Agent shall have received such other documents or legal
opinions as the Administrative Agent or counsel to the Arranger may reasonably
request, all in form and substance reasonably satisfactory to the Administrative
Agent; and
j) (1) The Administrative 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 the Administrative 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 Administrative 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 the
Administrative Agent all advice respecting, such items, actions, conditions and
requirements.
<PAGE>
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 furnish, with respect to each request for an Advance,
all documents referred to in Sections 3.2(g)(i)(3), 3.2(g)(ii)(2), 3.2(i),
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 the Administrative Agent
and the Arranger'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 Arranger 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
Administrative Agent to receive any such documents), and (ii) copies of all of
the foregoing documents delivered to such counsel shall also be given to the
Administrative Agent as provided herein.
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 to the Administrative Agent's satisfaction (after
consultation with Arranger's counsel) with respect to each such New Mortgaged
Property:
a) Receipt of Documents. The Administrative Agent shall have received the
following in form and substance satisfactory to the Administrative Agent:
(i) a Mortgage for the New Mortgaged Property duly authorized, executed,
acknowledged and delivered in recordable form and evidence of the recording of
such instrument as may be necessary or, in the opinion of the Administrative
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, in
Administrative Agent's determination, recorders and filing offices, with
evidence of the recording and filing of each such Financing Statement in such
offices;
<PAGE>
(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 Administrative Agent, in form and substance
satisfactory to the Administrative Agent, (x) insuring the Arranger and the
Lenders in an amount acceptable to the Administrative Agent with respect to the
New Mortgaged Property, that 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 1 attached hereto and such other
endorsements and affirmative coverage as reasonably required by the
Administrative Agent to the extent available under applicable law and with such
reinsurance (with direct access provisions) as the Administrative Agent may
reasonably request; and the Administrative 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
Arranger and the Administrative Agent and such title insurance company,
containing the certification set forth on Schedule 2 attached hereto and
certified to the Arranger, the Lenders, the Borrower, and the title insurance
company, showing no state of facts reasonably unacceptable to the Administrative
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) (A) studies, in each case reasonably satisfactory to the
Administrative Agent (and conducted by an experienced and reputable engineering
firm as demonstrated to the Administrative Agent by evidence reasonably
satisfactory to the Administrative 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 Administrative Agent in its sole discretion; and
(B) an appraisal for the New Mortgaged Property satisfactory to each Lender in
its sole discretion;
(v) UCC lien searches with respect to the Borrower in the county and state
where the New Mortgaged Property is located and in the state of organization of
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 Arranger and each Lender as an
additional insured thereunder, accompanied by a certification of Borrower
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 Arranger and
the Lenders as to the matters set forth in Exhibit M and N and in form
reasonably acceptable to the Administrative Agent;
(viii) copies of Market Studies acceptable to the Administrative Agent in
its reasonable discretion with respect to the New Mortgaged Property;
(ix) a Proforma Operating Statement acceptable in form and substance to the
Administrative Agent in its sole discretion for each New Mortgaged Property,
dated as of a recent date;
<PAGE>
(x) certificates of occupancy for the New Mortgaged Property and such other
evidence satisfactory to the Administrative Agent that the New Mortgaged
Property is Construction Complete;
(xi) evidence that the New Mortgaged Property is a Stabilized Project;
(xii) such consents or acknowledgements from such Persons as the
Administrative Agent or the Arranger's counsel may reasonably determine to be
necessary;
(xiii) such other documents, instruments and material as the Administrative
Agent or the Lenders may deem reasonably necessary or appropriate, as a
condition to the granting of the Borrower's request to add New Mortgaged
Properties to the Collateral, including information addressing environmental,
market and market concentration concerns; and
(xiv) (1) the Administrative 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 the Arranger and the Administrative 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 Administrative 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 the Arranger and the
Administrative Agent all advice respecting, such items, actions, conditions and
requirements.
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 Administrative Agent shall have received the following in form
and substance satisfactory to the Administrative Agent: (x) a guaranty of the
Indebtedness hereunder in the form of Exhibit O 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)(ix) 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) Lender Approval. The Administrative Agent shall forward to each of the
Lenders, with respect to each New Mortgaged Property, copies of each document,
instrument and other material described in Sections 3.2(g) and 3.2(i). All of
Lenders shall have given their approval to the New Mortgaged Property, which
approval may be withheld for any reason or no reason at all. No New Mortgaged
Property or portion thereof which is not owned in fee simple by Borrower or a
Subsidiary Mortgagor shall be deemed to be a Mortgaged Property or a portion
thereof for the purposes of computing Maximum Availability Amount, without the
unanimous consent of Lenders, which consent shall not be unreasonably withheld.
<PAGE>
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 Effective 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." The execution, delivery, and
performance by Borrower of this Agreement and of the Loan Documents (i) are
within the Borrower's powers, and (ii) have been duly authorized by all
necessary action.
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)(vi)
and 3.1(a)(vii) 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 3 hereof.
<PAGE>
b) Since December 31, 1997, there has been no Material Adverse Change, except as
otherwise disclosed in writing to the Arranger in the press releases dated
February 4, 1999 and March 15, 1999 and the reports on Forms 10-Q and 8-K filed
by the Borrower with the Securities and Exchange Commission.
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 Certificate 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 Administrative Agent.
<PAGE>
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 any 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.
<PAGE>
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.
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 "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
ten (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 4.14 "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.
Section 4.15 "Security Capital." Security Capital Group Incorporated
directly or, through a wholly-owned Subsidiary, indirectly owns no less than (a)
fifty one percent (51%) of the voting stock in Borrower before dilution due to
the conversion of the mortgages in favor of Archstone Communities Trust shown on
Schedule 3 and (b) forty six percent (46%) after such dilution.
Section 4.16 "Insurance." Subject to the provisions of Section 5.5 hereof,
the Borrower keeps the Mortgaged Properties insured in the manner and in the
amounts set forth in subsection 5.1(k) hereof.
Section 4.17 "Properties." Subject to the provisions of Section 5.5 hereof:
a) Borrower and each Subsidiary Mortgagor, as the case may be, 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
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.
d) The Collateral is now, and so long as the Commitment remains in effect or any
monetary obligation to the Administrative 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 or a Subsidiary Mortgagor, as the case may be,
and said Collateral, including the proceeds resulting from the sale or other
disposition (other than as permitted by Section 5.3(k)) thereof, is and will
remain free and clear of any Liens except the Liens granted pursuant to the Loan
Documents to the Arranger, which Liens 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) Except for portions of any Mortgaged Property which are to be demolished in
the course of construction of an extended stay facility, 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 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 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) Except as set forth in Schedule 4 hereto, 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
easements or connections available on publicly dedicated roadways directly
abutting such Mortgaged Property), parking, 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 4.18 "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 Administrative Agent, the Arranger or any Lender 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.
Section 4.19 "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 4.20 "Not Foreign Person." The Borrower is not a "foreign person"
within the meaning of Section 1445(f)(3) of the Code.
<PAGE>
Section 4.21 "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 4.22 "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 4.23 "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 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 4.24 "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
related ancillary facilities thereon, each Mortgaged Property is being operated
and maintained in accordance with the Borrower's usual and customary business
practices.
Section 4.25 "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 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 4.26 "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.
<PAGE>
Section 4.27 "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
Effective 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 4.28 "Loan Documents." The provisions of the Loan Documents are
each effective to create, in favor of the Arranger, 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
Arranger or the Administrative Agent), the Loan Documents will constitute a
perfected first Lien on and security interest in all right, title, estate and
interest of the Borrower or a Subsidiary Mortgagor, as the case may be, in the
collateral described therein, prior and superior to all other Liens except for
Permitted Encumbrances and as otherwise permitted under this Agreement.
Section 4.29 "Balloon Payments." Except as reflected on Schedule 3 hereof,
as of the Effective 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.
Section 4.30 "Subsidiaries."
(a) Each Subsidiary Mortgagor is a Subsidiary of Borrower.
(b) Each Subsidiary of Borrower has guaranteed the Indebtedness hereunder
pursuant to a guaranty in the form of Exhibit P attached hereto, except for (i)
any Non-Guarantor Subsidiary which has no other Indebtedness other than
non-recourse debt to third parties and inter-company Indebtedness to the
Borrower and (ii) the bankruptcy remote Subsidiary which was formed for the
purpose of entering into the Sale Leaseback Facility. A "Non-Guarantor
Subsidiary" shall mean a Subsidiary of Borrower that all of the Lenders agree
(i) is prohibited from providing a guaranty or (ii) would not be an appropriate
Person, for reasons acceptable to Lenders, to provide a guaranty of the
Indebtedness hereunder.
Section 4.31 "Nature of Business." Neither the Borrower nor any Subsidiary
of Borrower is engaged in any business other than the ownership, construction,
development, operation and management of extended stay hotel facilities (other
than businesses and investments incidental to the development, operation and
management of extended stay hotel facilities), the management for a fee of other
lodging facilities or the licensing of the operation of extended stay facilities
under the "Homestead" name, which licensing business does not have start-up
costs in excess of one million dollars ($1,000,000).
<PAGE>
ARTICLE V. COVENANTS
Section 5.1 "Certain Affirmative Covenants." So long as the Commitment
remains in effect or any amounts due to 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 Arranger 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 ten (10) days after Borrower's notice of such Lien (unless the
taxes, 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.
<PAGE>
f) Visitation, Inspection, Etc. Permit any representative of the Arranger 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 Arranger 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, including 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 or a Subsidiary of Borrower shall directly operate and manage the
business of the Borrower at each of the Mortgaged Properties; provided, however,
that with the prior written consent of all of the Lenders, 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, maintain upon or
in connection with each of the Mortgaged Properties:
(i) 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 one hundred
percent (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 subsection (ii) below) and such other hazards
(including "collapse" and "explosion") as the Lenders may require for each of
<PAGE>
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 this subsection
5.1(k) shall be with companies and in amounts and with coverage and deductibles
satisfactory to the Lenders. All insurance required under this subsection
5.1(k)(i) with respect to the Mortgaged Properties shall include endorsements
naming the Arranger as loss payee, and shall have endorsed thereon the standard
mortgagee clause in favor of the Arranger. All companies issuing policies
required under subsection 5.1(k) 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 subsection 5.1(k) shall provide that (A) 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 Arranger and the Administrative Agent, or, in
any other circumstance, at least thirty (30) days' prior written notice from the
insurance carrier to the Arranger and the Administrative Agent; and (B) 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 subsection 5.1(k) and
requested by the Administrative Agent, together with written evidence that the
premiums are paid current, at least ten (10) days prior to the expiration of the
then current policy.
(ii) earthquake insurance provided for in subsection 5.1(k)(i) only for the
Mortgaged Properties and only to the extent (A) any Mortgaged Property is
located in an earthquake prone area and (B) such insurance is available at
commercially reasonable rates.
(iii) 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 (A) commercial
general liability (including contractual liability) covering each of the
Mortgaged Properties and the Borrower's and its Subsidiaries' 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; (B) 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 (C) worker's compensation
insurance covering all of the Borrower's and its Subsidiaries' 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."
<PAGE>
(iv) 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 ancillary facilities related thereto on each Mortgaged Property,
including all materials in storage and while in transit during construction.
(v) flood insurance with respect to any Mortgaged Property which is at any
time identified by the Secretary of Housing and Urban Development as having
special flood hazards.
(vi) On and after April 30, 1999, the insurance coverage set forth in
Schedule 8, to the extent such coverage is inconsistent with the requirements
set forth above.
l) Further Assurances. The Borrower agrees upon demand of the Arranger or the
Administrative 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
Arranger or the Administrative Agent to confirm the Lien of the Loan Documents
or to exercise or enforce its rights under this Agreement, the Promissory Notes
or the Loan Documents and to realize thereon, and (ii) to execute and deliver to
the Administrative Agent and/or the Lenders such additional documents and to
provide such additional information as the Administrative 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) Final Budget; Major Trade Agreements. If the Borrower commences development
on a Mortgaged Property after the Effective Date, the Final Budget for each such
Mortgaged Property shall be received by the Arranger and the Administrative
Agent no later than one hundred twenty (120) days after the first Advance
relating to such Mortgaged Property is made, and, with respect to all Mortgaged
Properties which were mortgaged to the Arranger prior to the date hereof and
which are not Stabilized Projects, all agreements with the general contractor
and all major trade contractors and subcontractors required for the construction
of an extended stay facility on such Mortgaged Property shall be duly executed
and delivered by all parties thereto no later than one hundred twenty (120) days
after the first Advance relating to such Mortgaged Property shall have been made
and such agreements shall remain (or substitutes therefor shall be) in full
force and effect until such Mortgaged Property is Construction Complete.
n) Application of Proceeds From Equity Offerings. Except as provided in the
March 15, 1999 letter between the Borrower, Arranger and Administrative Agent
attached hereto as Exhibit Q, Borrower shall pay (i) to the Arranger for the
benefit of the Lenders, upon receipt, all net proceeds from its equity offerings
to repay on a pari passu basis the Loan and the Indebtedness under the amended
and restated credit agreement dated as of this date, as amended, between
Borrower, the Arranger and one or more lenders with regard to a revolving credit
facility of up to an aggregate principal amount of $30,000,000 secured by
mortgage liens on metropolitan downtown properties; and (ii) to the
Administrative Agent all other amounts and fees due to the Administrative Agent
and the Lenders under this Agreement and the other Loan Documents.
<PAGE>
o) Year 2000 Compliance.
(i) Borrower has reviewed its business and operations and has developed a
plan (the "Y2K Plan") to address on a timely basis the risk that computer
applications used by it in performing date sensitive functions and involving
dates prior to December 31, 1999 and thereafter (such risk being herein referred
to as the "Y2K Problem") would reasonably be expected to have a Material Adverse
Effect.
(ii) Pursuant to the Y2K Plan, Borrower is taking and will take reasonable
efforts to address the Y2K Problem on a timely basis.
Section 5.2 "Reporting Covenants." Reporting Covenants. So long as the
Commitment remains in effect or any monetary obligation to the Lenders hereunder
or under the Promissory Notes or the other Loan Documents shall remain unpaid,
the Borrower will furnish to the Arranger and the Administrative Agent at the
Borrower's sole cost and expense (unless expressly waived by the Arranger and
the Administrative 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 ninety (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 Arthur Andersen or other independent public accountants of
comparable recognized national standing acceptable to the Arranger, 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, and a statement of sources and uses of
funds in the form of Exhibit U, indicating to Arranger's satisfaction, that (A)
the Borrower's sources and uses of funds are in balance with respect to
Borrower's business in general, (B) the Borrower has adequate sources to make
each Project under Development Construction Complete and (C) the Borrower has
adequate sources to satisfy the Borrower's cash requirements.
b) Quarterly Financial Statements With Respect to the Borrower. As soon as
available and in any event within sixty (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
<PAGE>
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, 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), and a statement of sources and uses of
funds in the form of Exhibit U, indicating to Arranger's satisfaction, that
evidence that (A) the Borrower's sources and uses of funds are in balance with
respect to Borrower's business in general, (B) the Borrower has adequate sources
to make each Project under Development Construction Complete and (C) the
Borrower has adequate sources to satisfy the Borrower's cash requirements.
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 Administrative 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 R
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) Monthly Financial Statements With Respect to the Operating Mortgaged
Properties. As soon as available and in any event within thirty (30) days after
the end of each Accounting Period, a statement with respect to each of the
operating Mortgaged Properties as at the end of such Accounting Period, each of
which statements shall (i) be in the form of Exhibit R 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 Accounting
Period, in accordance with GAAP (subject to normal, year-end audit adjustments).
e) Semi-annual Proformas. Detailed twelve month forward proforma balance sheet,
operating statement, and cash flow projection together with proforma financial
covenant calculations acceptable to the Arranger and the Administrative Agent.
These should be provided, as soon as available, but in any event by December
31st for the calendar year projections and by June 30 with respect to the
mid-year projections covering the period from July 1st to June 30th.
<PAGE>
f) 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 L to this Agreement and shall certify
thereon that the Borrower is in compliance with all financial covenants under
this Agreement.
g) Notice of Default or Events of Default. Promptly after acquiring knowledge of
the occurrence of a Default or an Event of Default (or the occurrence of any
event or existence of any condition which but for the application of Section 5.5
would constitute a Default or 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.
h) 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).
i) Adverse Change. Immediately after the Borrower 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.
j) 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.
k) Other Information. With reasonable promptness, such information about the
Borrower, Realty and the Mortgaged Properties as the Arranger, the
Administrative Agent or the Lenders may reasonably request from time to time.
Section 5.3 "Certain Negative Covenants." Neither Borrower nor, with
respect to subsections (a), (i), (k) to (r), (u) and (v), any Subsidiary of
Borrower will:
<PAGE>
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 3;
(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;
(iv) non-recourse Indebtedness to third parties ("Permissible Assumed
Indebtedness");
(iv) 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 or by
a Subsidiary to Borrower; and (7) subject to Lenders' prior written consent,
which consent shall not be unreasonable withheld, and provided no Default or
Event of Default has occurred, Indebtedness arising from the refinancing of the
Indebtedness referred to in Schedule 3; provided:
(A) such refinanced Indebtedness is not secured by any of the
Collateral;
(B) then existing non-recourse Indebtedness is not exchanged for
recourse (however limited) Indebtedness;
(C) Borrower, prior to and following the closing of such refinancing,
is in compliance with the covenants set forth in this Article V;
(D) such refinanced Indebtedness does not make any change in, the
condition or affairs of Borrower which, in any Lender's opinion, increases
its credit risk; and
(E) the eight (8) properties which are being released from the Lien
granted in connection with the Merrill Lynch Facility through the execution
of the Sale-Leaseback Facility are financed only with the Indebtedness
governed by this Agreement.
b) Total Liabilities. Permit there to be Total Liabilities of Borrower
(excluding, through April 23, 1999, liabilities under the Bridge Facility), at
any time, in excess of the amount equal to the lower of fifty five percent (55%)
of
<PAGE>
(i) Total Liabilities to Gross Asset Value -- Market; and
(ii) Total Liabilities to Gross Asset Value -- Cost.
c) Aggregate Indebtedness. Permit there to be aggregate Indebtedness of the
Borrower (excluding, through April 23, 1999, liabilities under the Bridge
Facility), , at any time, in excess of the amount equal to the lower of fifty
percent (50%) of
(i) Indebtedness to Gross Asset Value -- Market; and
(ii) Indebtedness to Gross Asset Value -- Cost.
d) Interest Expense Ratios. Maintain a ratio of EBITDA to Interest Expense in
less than:
(i) including the Bridge Facility, for the first calendar quarter of
1999, 1.25:1.0;
(ii) excluding the Bridge Facility, for the first calendar quarter of
1999, 1.60:1.0;
(iii) for each of the second, third and fourth quarters of 1999,
1.60:1.0;
(iv) for the first calender quarter of 2000, 1.75:1.0; and
(v) for each of the second, third and fourth quarters of 2000,
1.90:1.0.
e) Debt Service Ratios. Maintain a ratio of Adjusted EBITDA to the sum of Debt
Service plus the amount of Preferred Dividends less than:
(i) including the Bridge Facility, for the first calendar quarter of
1999, 1.00:1.0;
(ii) excluding the Bridge Facility, for the first calendar quarter of
1999, 1.10:1.0;
(iii) for each of the second, third and fourth quarters of 1999,
1.10:1.0; and
(iv) for each of the four quarters of 2000, 1.25:1.0.
<PAGE>
f) Implied Debt Service Ratios. Maintain a ratio of Adjusted Property Net
Operating Income to Implied Debt Service less than:
(i) for the first calendar quarter of 1999, 1.40:1.0;
(ii) for each of the second, third and fourth quarters of 1999,
2.25:1.0; and
(iii) for the first quarter of 2000, 2.00:1.0; and
(iv) for each of the second, third and fourth quarters of 2000,
2.25:1.0.
For the purposes of this subsection (f) only, the Adjusted Property Net
Operating Income ("APNOI") shall be calculated based only on the NOI of the
Mortgaged Properties and shall be determined, as follows. With respect to any
Mortgaged Property which:
(A) has been open as an extended stay facility for less than
three (3) full calendar months, the APNOI shall be deemed zero,
(B) has been so open for at least three (3) full calendar months
but less than six (6) full calendar months, the trailing quarter APNOI
will be annualized,
(C) has been so open for at least six (6) full calendar months
but less than nine (9) full calendar months, the trailing two quarter
APNOI will be annualized,
(D) has been so open for at least nine (9) full calendar months
but less than twelve (12) full calendar months, the trailing three
quarter APNOI will be annualized, and
(E) has been so open for at least twelve (12) full calendar
months, the trailing twelve month APNOI will be utilized.
g) Tangible Net Worth. Maintain, at any time, a Tangible Net Worth less than
eighty five percent (85%) of its Tangible Net Worth as of December 31, 1998,
less any reduction required by SOP 98-5, adjusted upwards (but not downwards) by
eighty five percent (85%) of the net cash proceeds and other value derived form
the Borrower's issuance of equity securities after the Effective Date.
h) 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.
i) Dividends and Distributions. Make any dividend or distribution to the
shareholders of Borrower, without the prior written consent of the Required
Lenders, which consent may be withheld in the Lenders' sole discretion, except
that payments may be made, if no Event of Default has occurred, on account of
the coupon payable on up to $250,000,000 of the Convertible Preferred
Securities.
j) Security Capital. Permit Security Capital Group Incorporated to directly or,
through a wholly-owned subsidiary, indirectly own less than (a) fifty one
percent (51%) of the voting stock in Borrower before dilution due to the
conversion of the mortgages in favor of Archstone Communities Trust shown on
Schedule 3 or (b) forty six percent (46%) after such dilution.
<PAGE>
k) Sales, Transfers. Sell, transfer or enter into any agreement for the sale or
transfer of any of the Mortgaged Properties, other than:
(i) 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 or
(ii) in connection with the sale of any unimproved land which is
a part (or all) of a Mortgaged Property which is not a Project under
Development or a Stabilized Project, without the unanimous consent of
Lenders, which consent shall not be unreasonably withheld. If Lenders
do not reject any such sale within fifteen (15) days of receipt of
written notice thereof from Borrower, and such notice is clearly
marked "URGENT -- THIS NOTICE MUST BE RESPONDED TO IN FIFTEEN (15)
DAYS," the sale shall be deemed approved.
l) 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.
m) 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 or such Subsidiary's assets, as the case may be, 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 such Subsidiary, as the case may
be, or the adoption of a plan by the stockholders of the Borrower or such
Subsidiary, as the case may be, relating to the dissolution or liquidation of
the Borrower or such Subsidiary, as the case may be, (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.
n) Changes in Property or Business. Except in connection with the development of
an extended stay facility and ancillary facilities related thereto or with the
prior written consent of the Required Lenders:
(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
<PAGE>
(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.
o) 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 Effective Date and described in
Schedule 4 attached hereto, and (ii) any such transactions between the Borrower
and any of its wholly-owned Subsidiaries and between wholly-owned Subsidiaries
of Borrower).
p) Use of Proceeds. Use the proceeds of the Advances for other than any
Permitted Purpose.
q) Change of Business. Make or allow any material change in the nature or scope
of the business of the Borrower or any Subsidiary, except as permitted under
Section 4.31.
r) 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.
s) Projects under Development. Permit the Total Costs of Projects under
Development, at any time, to exceed:
<PAGE>
(i) during the first quarter of 1999, twenty percent (20%) of GAV -- Cost;
(ii) during the second quarter of 1999, fifteen percent (15%) of GAV --
Cost; and
(iii) thereafter, twelve and one half percent (12.5%) of GAV --Cost.
For the purposes of this section, if a Project under Development is owned by an
Unconsolidated Affiliate of Borrower, then the Total Costs shall be deemed to be
the greater of:
(iv) the product of (A) the greater of Borrower's nominal ownership
interest in such Unconsolidated Affiliate or its ownership interest used in the
calculation of GAV -- Cost and (B) the amount of the Construction Budget for
such Project under Development and
(v) the recourse obligations of Borrower relating to the Indebtedness of
such Unconsolidated Affiliate.
t) Land and Projects. Permit the sum of the Total Costs of Projects under
Development and the GAV -- Cost with respect to unimproved land, at any time, to
exceed:
(i) during the first quarter of 1999, thirty two and one half percent
(32.5%) of GAV-- Cost;
(ii) during the second quarter of 1999, twenty seven and one half percent
(27.5%) of GAV-- Cost; and
(iii) thereafter, twenty percent (20.0%) of GAV -- Cost.
u) Guarantors. Except as provided in Section 4.30(b), permit or suffer any
Subsidiary of Borrower to not guarantee the Indebtedness hereunder.
v) Investments. Owns or holds any direct or indirect interest in any Capital
Stock (other than in a Subsidiary of Borrower) or any mortgages or other debt or
security instruments, except as set forth in Schedule 5 hereto. Borrower and its
Subsidiaries will not in the aggregate own or hold any direct or indirect
interest in excess of (a) twelve and one half percent (12.5%) of GAV -- Cost
with respect to unimproved land or (b) twenty five percent (25%) of GAV -- Cost
with respect to, collectively, (i) any interest in Persons in which Borrower
owns less than 75% beneficial interest therein and (ii) any interest in Persons
not managed by Borrower.
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
<PAGE>
Arranger'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 Arranger's written request, direct that the insurance proceeds
from the casualty be delivered over to the Administrative Agent, to be applied
by the Administrative 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, 4.13, 4.15, 4.16, 4.17, 4.21, 4.23, 4.24,
4.26, 4.27, 4.30, 4.31 and 4.32 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), (m) and (o) and 5.3(r) (or any covenant
contained in any other Loan Document which is substantially similar to any of
the foregoing covenants) are breached, then, 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 Arranger'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 by the Administrative Agent
or the Arranger 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, thirty (30) days after such notice is given
plus, if such circumstances cannot reasonably be remediated within thirty (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 Arranger and the Administrative 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 the
Arranger and the Administrative Agent in writing (Borrower hereby agreeing to so
certify such amount promptly upon the Arranger or the Administrative Agent's
request) as being Borrower's reasonable estimate (determined in a manner
reasonably acceptable to the Arranger and the Administrative Agent, the basis
for which determination shall be set forth in reasonable detail in such
<PAGE>
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) three percent
(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 Lenders in
their 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.
Section 5.6 "Appraisals and Environmental Reports." Within forty (40) days
of the Effective Date, the Arranger shall deliver to Administrative Agent
appraisals of all of the Mortgaged Properties. Administrative Agent shall
forward copies of the appraisals to the Lenders. Within sixty (60) days of the
Effective Date, and following Lenders' comments on the appraisals (which
Administrative Agent shall be sent and shall thereupon send to the Borrower),
the Arranger shall cause the appraisals to be finalized to the satisfaction of
Lenders. If the aggregate Stabilized Appraised Value of the Mortgaged Properties
is less than the aggregate Eligible Direct Costs thereof, and the Maximum
Available Amount is therefor reduced, then Borrower, within thirty (30) days of
the date of such appraisal, shall increase the Maximum Available Amount or shall
repay a portion of the Loan and reduce the principal balance thereof to no more
than the Maximum Available Amount.
Section 5.7 "New Subsidiaries." In the event any Person becomes a
Subsidiary after the Effective Date, the Borrower shall deliver to the
Administrative Agent within twenty (20) Business Days of such event, each of the
following items, in form and substance satisfactory to the Administrative Agent:
(a) an accession agreement in the form annexed hereto as Exhibit S executed by
such Subsidiary;
<PAGE>
(b) the articles of incorporation, articles of organization, certificate of
limited partnership or other comparable organizational instrument (if any) of
such Subsidiary certified as of a recent date by the Secretary of State of the
State of formation of such Subsidiary;
(c) a Certificate of Good Standing or certificate of similar meaning with
respect to such Subsidiary issued as of a recent date by the Secretary of State
of the State of formation of such Subsidiary and certificates of qualification
to transact business or other comparable certificates issued by each Secretary
of State (and any state department of taxation, as applicable) of each state in
which such Subsidiary is required to be so qualified;
(d) a certificate of incumbency signed by the Secretary or Assistant Secretary
(or other individual performing similar functions) of such Subsidiary with
respect to each of the officers or other representatives of such Subsidiary
authorized to execute and deliver the Loan Documents to which such Subsidiary is
a party;
(e) copies certified by the Secretary or Assistant Secretary of such Subsidiary
(or other individual performing similar functions) of (i) the bylaws of such
Subsidiary, if a corporation, the operating agreement, if a limited liability
company, the partnership agreement, if a limited or general partnership, or
other comparable document in the case of any other form or legal entity and (ii)
all corporate, partnership, member or other similar action taken by such
Subsidiary to authorize the execution, delivery and performance of the Loan
Documents to which it is a party;
(f) an opinion of legal counsel to such Subsidiary, regarding the due formation
and good standing of such Subsidiary, the authorization, execution, delivery and
enforceability of the Loan Documents to which it is a party, and such other
matter as the Administrative Agent may reasonably request; and
(g) such other documents and instruments as the Administrative Agent may
reasonably request.
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.
<PAGE>
c) Other Covenants. The Borrower or any Subsidiary of 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
three (3) days after notice from the Arranger of the Administrative Agent, (ii)
in the case of covenants or agreements contained in Section 5.2(a), (b), (c) and
(d) of this Agreement, for fifteen (15) Business Days after the occurrence
thereof; or (ii) in all other cases, for thirty (30) days after the occurrence
thereof. In the event that a breach of a covenant described in clause (ii) above
cannot be cured within thirty (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 sixty (60) days after the occurrence
thereof.
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 Administrative 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 or any Subsidiary of
Borrower shall fail to make any payment of principal of or interest on any
Indebtedness of the Borrower or any such Subsidiary (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 Administrative 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 three (3) days after notice from the Arranger or the
Administrative 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 fifteen (15) Business Days after the occurrence thereof; or (iii)
in all other cases, thirty (30) days after the occurrence thereof. In the event
that a breach of a covenant described in clause (ii) above cannot be cured
within thirty (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 sixty (60) days after the occurrence thereof.
<PAGE>
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 ninety (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 ninety (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 ninety (90) days;
or the Borrower makes a 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 of
Borrower.
h) Money Judgment. A judgment or order for the payment of money in excess of
$5,000,000 shall be rendered against the Borrower or any Subsidiary of Borrower
and such judgment or order shall continue unsatisfied (in the case of a money
judgment) and in effect for a period of thirty (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 or such Subsidiary is appealing or
otherwise contesting such judgment in good faith).
i) Cessation. Borrower or, without the prior consent of all Lenders, which
consent may not be unreasonably withheld, any Subsidiary of Borrower which is
not an Urban Subsidiary (as hereinafter defined) ceases, or threatens to cease,
to carry on all or a substantial part of its business. As used herein, an "Urban
Subsidiary" is a Subsidiary of Borrower which has mortgaged property to the
Arranger, as agent, pursuant to the credit facility referred to in subsection
(j) below.
j) Urban Credit Facility. An Event of Default shall have occurred under the
Amended and Restated Credit Agreement of even date herewith among Borrower,
Commerzbank AG, Los Angeles Branch and other lenders as set forth therein, and
Arranger, as agent, governing a certain credit facility secured by mortgage
liens on properties in central business districts.
(k) Sale-Leaseback Facility. A default shall have occurred under the
Sale-Leaseback Facility.
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 Required Lenders may, by written notice to the Borrower, take
any or all of the following actions, without prejudice to the rights of the
<PAGE>
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 Arranger 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
Administrative Agent, the Arranger 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 Administrative 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 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
Arranger 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 Arranger, in its reasonable
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 Arranger, in its sole and absolute discretion, shall
determine, (iii) the Arranger 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 Arranger and the Lenders under
this Agreement and the other Loan Documents shall remain in full force and
effect until the Arranger 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 Arranger 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.
<PAGE>
Section 6.4 "Application of Proceeds." All proceeds received by the
Arranger 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 Arranger, 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 Arranger 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
Arranger shall have no further liability with respect to such proceeds. All
costs and expenses of the Arranger in connection with such action may be
deducted or charged by the Arranger against such excess proceeds and shall
otherwise be reimbursed by the Borrower upon demand. The Arranger shall have the
right, but not 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 Arranger, 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 Arranger, and
to cause such mail to be delivered to such designated address where the Arranger
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 Arranger 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 Arranger shall have the further right and power to endorse the
name of the Borrower on any documents otherwise relating to such Collateral, and
<PAGE>
(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
Arranger 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 each of Commerzbank AG, New York Branch and Wells Fargo Bank National
Association as the contractual representatives of such Lender under the Loan
Documents, and each such Lender irrevocably authorizes Commerzbank AG, New York
Branch and Wells Fargo Bank National Association , to act as the contractual
representatives 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 Arranger and the
Administrative Agent, as the case may be, by the terms of this Agreement and the
Loan Documents, together with such other powers as are reasonably incidental
thereto. The Arranger and the Administrative 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 Arranger or the Administrative Agent shall be read into any of
the Loan Documents or otherwise exist against the Arranger or the Administrative
Agent. The provisions of this Article VII are solely for the benefit of the
Arranger, the Administrative 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 respective functions and
duties under the Loan Documents, the Arranger and the Administrative Agent shall
act solely as the contractual representatives of the Lenders and do not assume
nor shall the Arranger and the Administrative 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.
Section 7.2 "Delegation of Duties." The Arranger and the Administrative
Agent may execute any of their duties under the Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
(including their internal counsel) concerning all matters pertaining to such
duties. The Arranger and the Administrative Agent shall not be responsible for
the negligence or misconduct of any agents or attorneys-in-fact selected by it
with reasonable care.
Section 7.3 "Exculpatory Provisions." The Arranger and the Administrative
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 gross negligence or
willful misconduct of the Arranger or the Administrative Agent, as the case may
be), or (b) responsible in any manner to any of the Lenders for (i) any
recitals, statements, representations or warranties made by the Borrower
<PAGE>
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 (ii) the value, validity, effectiveness,
genuineness, enforceability or sufficiency of any Loan Document or any such
certificate, report, statement or other document, or (iii) any failure of the
Borrower, or any Lender to perform or observe its respective obligations
hereunder or thereunder. Except as expressly required to do so under the Loan
Documents, the Arranger and the Administrative 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 each of
the Arranger and the Administrative Agent, on the one hand, and the Lenders, on
the other.
Section 7.4 "Reliance by Arranger and the Administrative Agent." Each of
the Arranger and the Administrative 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
Arranger and the Administrative Agent, as the case may be. The Arranger and the
Administrative 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 "Notices." Neither the Arranger nor the Administrative Agent
shall be deemed to have knowledge or notice of the occurrence of any Default or
Event of Default unless (i) such party 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) such
party, in its capacity as the Arranger of the Administrative Agent, has actual
knowledge of such Default or Event of Default. In the event that the
Administrative Agent or the Arranger receives such a notice or obtains such
actual knowledge, it shall promptly give notice thereof to the Lenders. The
Arranger 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
Arranger shall have received such directions, the Arranger 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 Arranger shall deem advisable and in
the best interests of the Lenders. The Administrative Agent shall take no action
with respect to a Default or Event of Default except as directed by the Arranger
in writing and shall have no liability to the Borrower or its Subsidiaries or
any Lender for acting on and carrying out any such direction.
b) Each Lender agrees that it shall promptly notify the Arranger and the
Administrative 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
Administrative Agent shall give a copy of any such notice received by the
Administrative Agent to the other Lenders. c) The Arranger shall promptly give
copies of the financial reports it receives pursuant to Sections 5.2(a) and (b)
hereof to the other Lenders. The Administrative Agent shall promptly give copies
of the financial reports it receives pursuant to Sections 5.2(c) to (e) hereof
to the other Lenders.
<PAGE>
Section 7.6 "Non_reliance on the Arranger, the Administrative Agent and the
Other Lenders." Each Lender expressly acknowledges that neither the Arranger,
the Administrative Agent, nor any of their officers, directors, employees,
agents, attorneys-in-fact or affiliates has made any representations or
warranties to it and that no act by either of the Arranger or the Administrative
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 Arranger or the Administrative Agent. Each Lender represents and warrants to
the Arranger and the Administrative Agent that it has, independently and without
reliance upon the Arranger and the Administrative 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 Arranger, the Administrative Agent or any other
Lender, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit 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 Arranger or the Administrative Agent to the Lenders, the Arranger and the
Administrative Agent, as applicable, 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
Arranger, the Administrative Agent or any of their officers, directors,
employees, agents, attorneys-in-fact or affiliates.
Section 7.7 "Indemnification." The Lenders agree to indemnify each of the
Arranger and the Administrative Agent (in their capacities as such) and their
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 Arranger, the Administrative Agent or such Person in connection
with any investigative, administrative or judicial proceeding commenced or
<PAGE>
threatened, whether or not the Arranger, the Administrative Agent or such Person
shall be designated a party thereto) that may at any time be imposed on,
incurred by or asserted against the Arranger, the Administrative 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, suits,
costs, expenses or disbursements resulting solely from the gross negligence or
willful misconduct of the Arranger, the Administrative 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 "Individual Capacity." The Arranger, the Administrative Agent
and their Affiliates may make loans to, accept deposits from and generally
engage in any kind of business with the Borrower and any of its Affiliates as
though it were not the Arranger or the Administrative Agent hereunder. With
respect to Advances made or renewed by it and any Promissory Note issued to it,
the Arranger and the Administrative Agent shall have the same rights and powers
under this Agreement as any Lender and may exercise the same as though they were
not the Arranger or the Administrative Agent .
Section 7.9 "The Arranger's Resignation." The Arranger may resign at any
time by giving notice thereof to the Administrative Agent, the other Lenders and
the Borrower. If the Arranger's resignation is given in conjunction with an
assignment of the Arranger's interest in the Promissory Note held by the
Arranger to another Person or Persons, the Arranger, with the consent of the
Required Lenders, shall have the right to name a successor Arranger by giving
notice thereof to the Administrative Agent, the Borrower and the other Lenders.
Otherwise, upon the resignation of the Arranger, the Required Lenders shall
designate within forty five (45) days in writing another Person as the successor
Arranger. If such proposed successor Arranger agrees in writing to act as the
Arranger in accordance with the terms hereof, such successor Arranger shall
thereupon succeed to and become vested with all the rights, powers, privileges,
duties and obligations of the resigning the Arranger, and the resigning Arranger
shall be discharged from its duties and obligations as the Arranger under this
Agreement. After any retiring Arranger'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 Arranger under this Agreement.
Section 7.10 "Appointment of a Substitute Administrative Agent." Wells
Fargo Bank National Association shall be the initial Administrative 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 the
Administrative Agent determines that it is not in the best interest of the
Administrative Agent to continue to act as the Administrative Agent, then the
Administrative Agent may, at its option and upon thirty (30) days' prior written
notice to the Borrower and the Lenders, request a substitute Administrative
Agent be selected in accordance with the terms of this Section to act as the
<PAGE>
Administrative 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 Administrative Agent, may elect to appoint a substitute
Administrative Agent in the event that the Administrative 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 Administrative Agent shall have all the rights, powers and
duties of the Administrative Agent and the term "Administrative Agent" shall
mean such substitute Administrative Agent, effective upon its appointment. In
the event that the substitute Administrative Agent wishes to resign, it may do
so upon thirty (30) days' prior notice to the Borrower, the Administrative Agent
and the Lenders, and a new substitute Administrative Agent shall be appointed in
accordance with this Section. After any retiring substitute Administrative
Agent's resignation hereunder as substitute Administrative Agent, the provisions
of this Section 7.10 and Section 8.4 hereof shall inure to the benefit of such
retired substitute Administrative Agent as to any actions taken or omitted to be
taken by it while it was substitute Administrative Agent under this Agreement.
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
Administrative Agent may (but shall not be obligated to), and each Lender
authorizes the Administrative 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 Administrative 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 Administrative Agent shall have made such amount available on behalf
of any Lender, such Lender shall also pay interest thereon to the Administrative
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 and 7.24 hereof.
Section 7.13 "Books and Records." The Administrative Agent will keep
customary books and records relating to the Advances, and such books and records
shall be available at the Administrative Agent's office for the Lenders'
reasonable inspection during the Administrative Agent's normal business hours.
The original Loan Documents shall be kept at the New York office of the
Administrative Agent or at such other office of the Administrative Agent or at
such other place as may be designated from time to time by the Administrative
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." 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 Arranger 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 Arranger (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
<PAGE>
long as such consent, exercise or waiver would not, in the Arranger's judgment
reasonably exercised, represent a departure from the standards followed by the
Arranger in the administration of loans held by the Arranger entirely for its
own account. The Arranger 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 Arranger 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 Arranger's
possession or under its control. The requested Decision shall be deemed approved
by the Lenders if and when the Arranger 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 Arranger a
written objection thereto within ten (10) Business Days after hand delivery,
mailing or delivery to an express courier service of the request by the
Arranger, the Arranger shall make a second written request for a Decision from
that Lender. If the Lender does not deliver to the Arranger or the
Administrative 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 Arranger is unable to contact the usual representatives of a
Lender for any reason, the Arranger 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 Arranger reasonably deems necessary, any
such Decision may also be requested telephonically by the Arranger from each
Lender with such telephonic request to be confirmed in writing by the
Administrative Agent. Any Decision as to which the Arranger has made telephonic
requests for approval shall be deemed approved by the Lenders after the
Administrative 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 "Approvals by the Lenders."
(a) No amendment, supplement, modification or waiver shall be effective unless
consented to in writing by the Required Lenders; provided, however, that any
amendment, supplement, modification or waiver which adds, deletes, changes or
waives any provisions of the Loan Documents the effect of which is to (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 or extend the due date of any such fee; (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) forgive
any Indebtedness of Borrower or any Subsidiary of Borrower; (viii) change any
allocation of payments among the Lenders, (ix) change any provision of this
Section 7.15 or Section 7.16 or the definition of Required Lenders; (x) modify
any financial covenants or waive any Default or Event of Default (except as
provided in Section 7.16), (xi) release any guaranty, (xii) waive or release any
lien on any of the Mortgaged Properties (except as provided in Section 8.11)
<PAGE>
or (xiii) commence any judicial or nonjudicial foreclosure proceeding (except as
provided in Section 7.16), shall be ineffective in each case without the written
consent of all the Lenders. Furthermore, no amendment, supplement, modification
or waive shall amend, modify or waive any provision of any Loan Document, if the
effect thereof is to affect the rights or duties of the Arranger or the
Administrative Agent, without the written consent of the Arranger or the
Administrative Agent, as the case may be. Any such amendment, supplement,
modification or waiver shall apply to each of the Lenders equally and shall be
binding upon the Borrower, the Lenders, Arranger, the Administrative Agent and
all future holders of the Promissory Notes. In the case of any waiver, the
Borrower, the Lenders, the Arranger and the Administrative 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." Upon the Arranger's
receipt of a notice of default (as defined in Section 7.5(a) hereof) with
respect to an Event of Default, the Arranger 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 Arranger
shall pursue any such course of action approved in writing 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 Arranger 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.
b) The Borrower hereby consents and agrees to the provisions of Sections 7.14
through 7.16 and any modifications thereof entered into by the Arranger 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 Arranger is
hereby empowered to act on behalf of the Lenders in accordance with the
provisions hereof and the authority of the Arranger with respect to any action
taken by the Arranger 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").
Notwithstanding any such sale by a Lender of participating interests to a
Participant, 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
<PAGE>
purposes hereunder (except as expressly provided below), and the Arranger and
the Administrative 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 other Eligible Assignee (each a "Purchasing Lender") all or any
part of its Credit Exposure in amounts not less than $10,000,000. The Borrower,
the Arranger 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 Arranger and the Administrative 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 Arranger and
the Administrative 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 T 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, the Arranger and the
Administrative 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 the Administrative 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 Administrative 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 Administrative 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 and the Administrative Agent, 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.
c) Commerzbank AG, New York 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, New York Branch's Percentage shall be less
than twenty five percent (25%), unless its failure to do so shall (or in
<PAGE>
Commerzbank AG, New York 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, New York 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 Arranger and the Administrative Agent acting as the
contractual representatives 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 "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
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 7.24 "Limitation of Liability." No claim may be made by the
Borrower or any other Person against the Arranger, the Administrative 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
<PAGE>
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 5 annexed hereto or such other
address or telecopier number as such party may hereafter specify by notice to
the Arranger, the Administrative Agent and the Borrower. No notices, requests,
and other communications given to any Person other than the Arranger or the
Administrative Agent (including, without limitation, any Affiliate thereof)
shall be deemed to have been given to the Arranger or the Administrative Agent,
as the case may be. 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
Arranger, the Administrative Agent or the Lenders shall operate as a waiver
thereof, nor shall any single or partial 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.
<PAGE>
Section 8.4 "Payment of Expenses, Etc." The Borrower shall: whether or not
the transactions hereby contemplated are consummated, pay all reasonable
out-of-pocket costs and expenses of the Arranger, the Administrative Agent and
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 Arranger, the
Administrative 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 Arranger, the Administrative Agent and the Lenders);
b) to the extent permitted by applicable law, pay and hold the Arranger, the
Administrative 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 Arranger, the Administrative 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." Subject to the Arranger's written consent,
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.
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
<PAGE>
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." 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.
. Section 8.10 Entire Agreement
(a) The provisions:
(i) the letter agreements among the Borrower, the Arranger
and Administrative Agent dated as of March 18, 1999, March 15,
1999, February 4, 1999, January 25, 1999, and September 3, 1998,
and
<PAGE>
(ii) the letter agreement dated as of August 25, 1997 among
the Borrower, Commerzbank AG, Los Angeles Branch and Arranger,
each of which letter agreement is attached hereto as Exhibit Q shall survive the
execution of this Agreement and shall be deemed incorporated herein. The letter
agreement referred to in clause (i) above provides, inter alia, that Borrower
may effect a single issuance of convertible preferred securities with gross
proceeds not to exceed $250,000,000, provided (x) the first $200,000,000 or the
lesser amount raised of net proceeds of such issuance is used solely to repay
the sums due under the Bridge Facility, and (y) the Bridge Facility is repaid on
or before April 23, 1999, even if such net proceeds are insufficient for the
purpose thereof. The letter agreement further provides that Security Capital
Group may fund its obligations under a certain Subscription Agreement by
purchasing convertible subordinated debentures issued by the Borrower and that
such debentures may be refinanced with the proceeds of an offering of Borrower's
common, but not preferred, stock.
(b) Except as set forth in subsection (a) above, 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, waiver letters, agreements, letter 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." Arranger agrees that,
upon Borrower's request (a "Release Request") to the Arranger and the
Administrative Agent, Arranger will deliver to Borrower a form of release, duly
executed and acknowledged by the Arranger, 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 Administrative Agent to cause a Release in recordable form to
be prepared and shall be given at least ten (10) 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
Administrative Agent's satisfaction that (a) no portion of the extended stay
facility and 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 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 the Arranger and the Administrative 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;
<PAGE>
(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 Effective 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 the Administrative
Agent, at Borrower's expense, any and all documents and instruments reasonably
required by the Administrative Agent to preserve and maintain Arranger's, the
Administrative Agent's and Lenders' rights, upon and following any such Release,
under and with respect to the Loan Documents; and
(vi) (1) The Administrative 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 Arranger and the Administrative Agent in
connection with such Release, including, but not limited to, all title insurance
premiums arising as a result of endorsements required by Arranger and the
Administrative 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 Administrative 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 Release, the documents and instruments described in this Section,
and all other documents relating to, and rendering at the request of the
Administrative 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 Administrative Agent shall furnish
such Release for execution by the Arranger and for recordation to the title
company insuring the Lenders' interest in the Mortgaged Property affected by
such Release or as otherwise designated by Borrower.
Section 8.12 "Subordination of Certain Mortgaged Property." The Arranger
and the Administrative Agent agree that, upon Borrower's request (a
"Subordination Request"), it will deliver to Borrower a form of subordination,
duly executed and acknowledged by the Arranger, 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 Administrative Agent to cause a Subordination in
recordable form to be prepared and shall be given at least ten (10) Business
Days prior to the requested date of such Subordination;
(ii) The Administrative 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 the Administrative 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 the Administrative 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;
<PAGE>
(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 Effective 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;
(v) Borrower executes, acknowledges and delivers to the Administrative
Agent, at Borrower's expense, any and all documents and instruments reasonably
required by the Administrative Agent to preserve and maintain the Administrative
Agent's and Lenders' rights, upon and following any such Subordination, under
and with respect to the Loan Documents; and
(vi) (1) The Administrative 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 the Arranger and the Administrative Agent in
connection with such Subordination, including, but not limited to, all title
insurance premiums arising as a result of endorsements required by the
Administrative 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 Administrative 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 the Administrative Agent all advice respecting, each
Subordination.
Section 8.13 "Confidentiality." The Administrative Agent, the Arranger and
the other 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 Administrative 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
Administrative Agent or the Lenders (including, without limitation, employees,
counsel, accountants, engineers, advisers, experts and consultants to the
Administrative Agent or the Lenders). Except as provided for in the next
sentence, in the event that the Administrative 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 Administrative 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
<PAGE>
Section 8.13 shall not apply to (a) the disclosure or sharing of any
Non-public information among the Administrative Agent and the Lenders, (b) the
disclosure by the Administrative 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 Administrative 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 Administrative Agent or the
Lenders by the Borrower.
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 Arranger
By
Name:
Title:
And by
Name:
Title:
COMMERZBANK AG, Los Angeles Branch,
as a lender
By
Name:
Title:
And by
Name:
Title:
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as a lender and the Administrative Agent
By
Name:
Title:
<PAGE>
PROMISSORY NOTE
$25,000,000 May 3, 1999
- ------------------------------------------------------------------
1 . On or before the Stated Maturity Date (as hereinafter defined), HOMESTEAD
VILLAGE INCORPORATED ("Homestead"), for value received, promises to pay to the
order of SECURITY CAPITAL GROUP INCORPORATED (the "Security Capital"), at its
office in Santa Fe, New Mexico, or at such other location as Security Capital
may direct, the lesser of TWENTY FIVE MILLION DOLLARS ($25,000,000) or the
aggregate unpaid principal amount of all advances made by Security Capital to
Homestead under this Note. Homestead also promises to pay interest on the
principal amount outstanding hereunder from time to time at a rate per annum
equal to the Applicable Interest Rate (as hereinafter defined). Accrued interest
shall be paid monthly in arrears on the last Business Day (as hereinafter
defined) of each calendar month this Note is outstanding at the same location as
designated for principal payments, provided that all accrued and unpaid interest
shall be paid on the Stated Maturity Date. Notwithstanding the foregoing, during
any period in which a Default (as hereinafter defined) shall have occurred and
be continuing, Homestead promises to pay to Security Capital from time to time
on demand interest on any amount payable by Homestead hereunder at a rate per
annum equal to 15%. All interest shall be computed for the actual number of days
elapsed on the basis of a year consisting of 360 days. Homestead may request
Security Capital to make advances from time to time under this Note, provided
that (i) such advances shall be in an integral multiple of $1,000,000, (ii)
Homestead shall have given notice of such request to Security Capital in
accordance with Section 9 hereof no later than 10:30 a.m. (Santa Fe time) three
days prior to such requested advance, (iii) such advances shall be used only for
a Permitted Purpose (as hereinafter defined) and (iv) together with the notice
for request of an advance, Homestead shall provide Security Capital with a
certificate in form satisfactory to Security Capital which is signed by an
Authorized Officer (as hereinafter defined) of Homestead, describes the
Permitted Purpose for which such advance shall be used and includes such other
information as Security Capital may request, in its sole and absolute
discretion. Homestead shall have the right to prepay this Note, together with
all accrued interest to the date of any such prepayments, in full or in part at
any time, provided that (i) if any such prepayments are in part, they shall be
in an integral multiple of $1,000,000 and (ii) Homestead shall have given notice
of such prepayment to Security Capital in accordance with Section 9 hereof no
later than 10:30 a.m. (Santa Fe time) on the date of such prepayment. Security
Capital shall maintain records of the date and amount of each advance made
hereunder, each repayment thereof, and of accrued interest thereon, and such
records shall be conclusive for the purposes hereof absent manifest error.
<PAGE>
2. When used herein the following terms shall have the following meanings:
"Applicable Interest Rate" shall mean (i) the rate of interest
(rounded, if necessary, to the next higher 1/16 of 1%) of the rate per
annum at which Dollar deposits in immediately available funds are
offered from time to time by the Lending Office of Wells Fargo Bank,
National Association, in the London interbank market, in the
approximate amount of $25,000,000 and having a maturity approximately
equal to one month plus (ii) 3.25%.
"Authorized Officer" shall mean any of the President, the
Chief Executive Officer, the Chief Financial Officer, any Vice
President, the Treasurer and the Secretary.
"Business Day" shall mean any day on which commercial banks
are open for business in New York City.
"Bridge Facility" shall mean the Credit Agreement, dated as of
June 15, 1998, among Homestead, Commerzbank AG, Los Angeles Branch, and
certain other lending institutions.
"Change in Control" shall mean the occurrence of any of the
events described in Section 5.3(i) of the Working Capital Facilities or
Sections 8.2 and 9.9 of the Bridge Facility.
"Credit Facilities" shall mean, collectively, the Working
Capital Facilities and the Bridge Facility.
"Default" is defined in Section 7 hereof.
"Investor Agreement" shall mean the Investor Agreement, dated
as of October 17, 1996, between Homestead and Security Capital, as
amended from time to time.
"Letter Agreement" shall mean the Letter Agreement, dated
April 22, 1999, among Homestead, Commerzbank AG, New York Branch,
Commerzbank AG, Los Angeles Branch, Wells Fargo Bank, National
Association, Chase Bank of Texas, N.A. and BankBoston N.A.
"Liabilities" shall mean all obligations of Homestead under
this Note and all other obligations of Homestead to Security Capital,
howsoever created, arising or evidenced, whether direct or indirect,
absolute or contingent, or now or hereafter existing, or due or to
become due.
"Permitted Purpose" shall mean payment of (i) construction
costs of properties under development, (ii) maintenance and repair
costs of properties, (iii) salaries and other employment costs, (iv)
severance expenses, and (v) other working capital and general corporate
expenses specifically approved by Security Capital.
<PAGE>
"Representative" is defined in Section 5 hereof.
"Rights Offering" shall mean one or more issuances of common
stock of Homestead in accordance with the terms of paragraph 3 of the
Letter Agreement.
"Senior Indebtedness" means at any time, collectively, all
obligations howsoever created, arising or evidenced, whether direct or
indirect, absolute or contingent, now or hereafter existing, or due or
to become due of Homestead under the Credit Facilities and any and all
renewals or extensions and refinancings thereof (including, without
limitation, any interest accruing subsequent to the commencement of
bankruptcy, insolvency or similar proceedings with respect to
Homestead).
"Stated Maturity Date" shall mean the earlier to occur of (i)
October 31, 1999 or such later date to which repayment of the
outstanding principal amount and other amounts owing under the Bridge
Facility is extended, (ii) the consummation of a Change in Control or
(iii) the consummation of a Rights Offering in the aggregate amount of
$200,000,000 or more.
"Working Capital Facilities" shall mean (i) the Credit
Agreement, dated as of May 6, 1997, among Homestead, Commerzbank AG,
Los Angeles Branch, Commerzbank AG, New York Branch, and certain other
lending institutions and (ii) the Credit Agreement, dated as of April
24, 1998, among Homestead, Commerzbank AG, Los Angeles Branch,
Commerzbank AG, New York Branch, and certain other lending
institutions.
Unless otherwise defined herein, all capitalized terms used
herein shall have the meanings assigned to such terms in the Credit Facilities.
3. All obligations of Homestead, and all rights, powers and remedies of Security
Capital, expressed herein shall be in addition to, and not in limitation of,
those provided by law or in any written agreement or instrument (other than this
Note) relating to any of the Liabilities. In addition to all other rights
possessed by it, Security Capital may, but shall not be obligated to, from time
to time, whether before or after Default, at its sole discretion and without
notice to Homestead, extend or renew for one or more periods (whether or not
longer than the original period) this Note or any obligation of any nature of
any obligor with respect to this Note, and grant any releases, compromises or
indulgences with respect to this Note or any extension or renewal thereof or to
any obligor hereunder or thereunder.
4. On the date hereof, Homestead shall pay Security Capital an arrangement fee
of $31,944.
5. So long as any amount remains outstanding under this Note, Homestead shall,
unless Security Capital otherwise consents in writing, (i) allow any person
identified by Security Capital to Homestead in writing (the "Representative"),
access to Homestead's books and records, (ii) allow the Representative to be on
the premises occupied by Homestead during normal business hours, (iii) provide
the Representative with adequate and reasonable working space and conditions in
order to perform work, and (iv) consult with the Representative on any financial
or business decisions being made or considered in connection with the business
of Homestead.
6. Homestead shall use the proceeds of any advance made by Security Capital
under this Note only for a Permitted Purpose.
7. All Senior Indebtedness, including all interest and fees and any other
payments due or to become due pursuant to the terms of the instruments
evidencing such Senior Indebtedness, shall be paid in full before any payment is
made on account of the principal, interest, fees or other amounts on or with
respect to any of the Liabilities; provided, however, that Homestead may make
payments of principal and/or interest to Security Capital with respect to the
Liabilities so long as no Event of Default (as defined in the Credit Facilities)
has occurred and is continuing. Upon any distribution of the assets or the
properties of Homestead or upon any dissolution, winding up, liquidation or
reorganization involving Homestead (whether in bankruptcy, insolvency or
receivership proceedings or upon an assignment for the benefit of creditors or
otherwise), the holders of the Senior Indebtedness shall first be entitled to
receive payment in full of the principal of and interest on the Senior
Indebtedness and all fees and any other payments (including all costs and
expenses) due pursuant to the terms of the instruments evidencing such Senior
Indebtedness before Security Capital is entitled to receive any payment on
account of any of the Liabilities.
<PAGE>
2. If (a) Homestead shall fail to pay, when due, any amount payable with respect
to any of the Liabilities or to perform any other obligation to Security Capital
(including, without limitation, under the Investor Agreement), or (b) Homestead
shall default in the payment when due of any debt or other amount owing by
Homestead under the Credit Facilities and such default continues beyond the
applicable grace period, or (c) any event shall occur in relation to any debt or
other amount owing by Homestead to Security Capital or under the Credit
Facilities which entitles the obligee in relation to such debt or amount to
cause such debt or amount to become due prior to its stated maturity or payment
date, and such event shall continue beyond the applicable grace period, any such
event (a)-(c) shall constitute a Default (a "Default") hereunder. Upon Default,
subject to Section 7 hereof, (1) this Note and all other Liabilities may
(notwithstanding any provisions thereof), at the option of Security Capital and
without demand or notice of any kind, be declared, and thereupon immediately
shall become, due and payable, (2) Security Capital may from time to time,
without demand or notice of any kind, appropriate and apply toward the payment
of such of the Liabilities, and in such order of application, as Security
Capital may from time to time elect, any and all deposits, credits or money of
or in the name of Homestead then or thereafter with Security Capital, (3)
Homestead agrees to pay all expenses, including reasonable attorneys' fees and
legal expenses, incurred by Security Capital in endeavoring to collect any of
the Liabilities, and (4) Security Capital may exercise from time to time any
rights and remedies available to it under the Uniform Commercial Code as in
effect in the applicable state or otherwise available to it. Homestead hereby
expressly waives presentment, demand, notice of dishonor, protest and, to the
fullest extent permitted by applicable law, any and all other notices,
advertisements, hearings or process of law in connection with the exercise by
Security Capital of any of its rights and remedies upon Default. No delay on the
part of Security Capital in exercise of any right or remedy shall operate as a
waiver thereof, and no single or partial exercise by Security Capital of any
right or remedy shall preclude other or further exercise thereof or the exercise
of any other right or remedy.
7. All notices delivered by Homestead to Security Capital hereunder shall be in
writing and shall be sent to Security Capital by courier and facsimile
transmission at the following address:
Security Capital Group Incorporated
7777 Market Center
El Paso, Texas 79912-8112
Attention: Roger Allen
Fax: (915) 877-6306
8. This loan shall be governed by and construed in accordance with the laws of
the State of New York. If this Note is not dated when executed by Homestead,
Security Capital is hereby authorized, without notice to Homestead, to date this
Note as of the date when the loan evidenced hereby is made. Wherever possible,
each provision of this Note shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Note
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision of the remaining provisions of this
Note.
9. Homestead hereby expressly waives any right to a trial by jury in any action
or proceeding to enforce or defend any rights (i) under this Note or under any
amendment, instrument, document or agreement delivered or which may in the
future be delivered in connection herewith or (ii) arising from any banking
relationship existing in connection with this Note, and agrees that any such
action or proceeding shall be tried before a court and not before a jury.
HOMESTEAD VILLAGE INCORPORATED
By:
Name:
Title:
Address: 2100 River Edge Parkway, 9th Floor
Atlanta, Georgia 30328
<PAGE>
Commerzbank AG, New York Branch
2 World Financial Center
New York, New York 10038
April 22, 1999
Homestead Village Incorporated
2100 River Edge Parkway, 9th Floor
Atlanta, Georgia 30328
Re: Credit Agreement dated as of May 6, 1997, among Homestead Village
Incorporated ("HOMESTEAD"), Commerzbank AG, Los Angeles Branch ("LA
BRANCH") and other lenders as set forth therein, and Commerzbank AG,
New York Branch ("NY BRANCH") (as heretofore, and as may hereafter be,
modified, amended and/or restated, from time to time, the "SUBURBAN
FACILITY");
Credit Agreement dated as of April 24, 1998, among Homestead, LA Branch
and other lenders as set forth therein, and NY branch (as heretofore,
and as may hereafter be, modified, amended and/or restated, from time
to time, together with the Suburban Facility, the "WORKING CAPITAL
FACILITIES"); and
Credit Agreement dated as of June 15, 1998, among Homestead, LA Branch
and other lenders as set forth therein, and NY Branch (as heretofore,
and as may hereafter be, modified, amended and/or restated, from time
to time, the "BRIDGE FACILITY" and, together with the Working Capital
Facilities, the "CREDIT FACILITIES")
Ladies and Gentleman:
Homestead, NY Branch and Wells Fargo Bank, National Association
("WELLS"), executed letters dated as of March 15, 1999 and March 31, 1999
(together, the "WAIVER"), pursuant to which certain provisions of the Credit
Facilities were waived or modified. This letter, if agreed to and accepted by
Homestead, shall (a) supercede and replace the Waiver in its entirety and (b)
modify and amend the Working Capital Facilities. Unless otherwise defined
herein, all capitalized terms used herein shall have the meanings assigned to
such terms in the Credit Facilities.
<PAGE>
Notwithstanding anything to the contrary contained in the Credit
Facilities and the Waiver, the signatories hereto, in consideration of Ten
Dollars ($10.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, hereby agree as follows:
1. The term "Expiry Date" as defined in Section 1.1 of the Bridge
Facility shall mean the earliest of (i) October 31, 1999, (ii) the date
of the merger of Homestead with any other Person, (iii) the date of the
sale, assignment, lease, transfer, conveyance, or other disposition (in
one transaction or a series of transactions) to any person or group (as
such term is used in Section 13(d)(3) of the Exchange Act of all or
substantially all of Homestead's assets, (iv) the date of the
acquisition by any Person or group (as such term is used in Section
13(d)(3) of the Exchange Act), other than Realty or its Affiliates of
more than 50% of the voting power of the capital stock of Homestead by
way of purchase, merger, consolidation or otherwise or (v) the 45th day
following the later of (A) the termination of negotiations initiated in
April 1999 between Homestead and Party A on Schedule I, (B) the
termination of negotiations initiated in April 1999 between Homestead
and Party B on Schedule I, and (C) the termination of negotiations with
other potential merger partners commenced no later than May 15, 1999.
2. Homestead may incur unsecured, subordinated Indebtedness in the
aggregate principal amount of $25,000,000 (the "SCG Loan") to Security
Capital Group Incorporated ("Security Capital"). Homestead may not
create, incur, assume or suffer any other Indebtedness of any nature,
other than (a) the Loan under each Credit Facility, (b) as in effect on
March 19, 1999, the guaranty of the Sale-Leaseback Facility and (c) the
Indebtedness outstanding pursuant to the Funding Commitment Agreement,
dated as of October 17, 1996, among Homestead, PTR Homestead Village
Limited Partnership and Archstone Communities Trust in the maximum
principal amount of $221,333,620.00.
3. Homestead shall be permitted to effect one or more issuances of
common stock, provided:
(a) the first $200,000,000 or lesser amount raised of net
proceeds of such issuances are used solely to repay the Bridge Facility
(it being agreed that the Bridge Facility shall be repaid on or before
the Expiry Date even if such net proceeds are insufficient to effect
such repayment in full);
(b) any remaining net proceeds of such issuance are used (i)
to repay the Working Capital Facilities in proportion to the
outstanding principal balances thereof, (ii) to fund the construction
and development of the Mortgaged Properties (as defined in each of the
Working Capital Facilities), (iii) to repay the SCG Loan, or (iv) to
provide for working capital purposes and other general corporate
purposes,
(c) all payments due under such stock are subordinate to the
prior and full payment of the Working Capital Facilities; and
(d) Homestead is, and continues to be, in compliance with
the terms of both of the Working Capital Facilities.
4. If Homestead has not repaid all amounts outstanding under the Bridge
Facility by the Expiry Date Security Capital may fund its obligations
under the Subscription Agreement by purchasing convertible subordinated
debentures issued by Homestead, provided:
(a) the net proceeds of such debenture offering are used only
to repay the Bridge Facility, if not then repaid (but nothing in this
paragraph shall be construed as a consent to the extension of the
Bridge Facility's maturity or expiry date beyond the Expiry Date);
(b) the convertible debentures shall automatically, and
pursuant to their terms, be converted into common stock of Homestead
within 90 days of their issuance, but in no event later than January
29, 2000, unless the debentures were previously refinanced with the
proceeds of an equity offering consistent with the terms of such
debentures; and
<PAGE>
(c) Homestead is, and continues to be, in compliance with the
terms of both of the Working Capital Facilities.
After the Expiry Date, Homestead may complete an offering of common stock and/or
convertible preferred securities, provided:
(w) the aggregate gross proceeds of an offering of convertible
preferred securities do not exceed $225,000,000;
(x) the net proceeds of the offering of common stock and/or
convertible preferred securities are first used to retire the convertible
debentures and repay the SCG Loan;
(y) any remaining net proceeds of such offering are used to
repay the Working Capital Facilities in proportion to the outstanding principal
balances thereof; and
(z) Homestead is, and continues to be, in compliance with the
terms of both of the Working Capital Facilities.
For purposes of the financial covenants in the Working Capital Facilities, the
convertible debentures issued to Security Capital Group Incorporated and
otherwise satisfying the conditions of this Section 4 shall, through January 29,
2000, be deemed equity, and payments made under the convertible debentures shall
be excluded from calculations made under such covenants.
5. For purposes of the financial covenants in the Working Capital
Facilities, until the Expiry Date, the principal amount of indebtedness
under the Bridge Facility Loan shall be deemed equity and payments made
under the Bridge Facility shall be excluded from calculations made
under such covenants.
6. Homestead shall provide at least 10 days prior notice of the
consummation of any transaction described in Section 1(a)(ii), (iii) or
(iv) of this letter, and shall provide prompt notice of the
termination, including the date of termination, of negotiations
described in Section 1(a)(v) of this Letter.
7. Homestead agrees to promptly initiate an offering of equity
securities in conformity with Section 3 of this letter upon the later
of the terminations described in Section 1(v) and agrees to use its
best efforts to consummate such offering within 45 days of initiation
or as soon as reasonably possible thereafter.
8. Until the Bridge Facility is repaid in full and terminated, if an
Event of Default under the Bridge Facility has occurred and is
continuing, Security Capital authorizes NY Branch, as agent for the
Banks under the Bridge Facility, to notify Wells Fargo Bank, National
Association ("Wells Fargo"), as agent for the Lenders under the Credit
Agreement, dated as of June 5, 1998, among Security Capital, Wells
Fargo, as agent, and the financial institutions party thereto from time
to time (as amended from time to time, the "SCG Credit Agreement"), to
fund amounts to the lenders under the Bridge Facility to repay the
outstanding Indebtedness under the Bridge Facility, provided that NY
Branch shall not request a funding of greater than $200,000,000 under
the SCG Credit Facility. Upon any such funding, Homestead shall, as of
the date of such funding, issue convertible debentures under the
Subscription Agreement to Security Capital in the principal amount of
such funding. Until the Bridge Facility is repaid in full and
terminated, Security Capital shall keep at least $200,000,000 available
for borrowing under the SCG Facility and shall take all actions
necessary and appropriate to provide for any funding authorized by this
Section 8. Security Capital's obligations to purchase securities of
Homestead under the Subscription Agreement shall be reduced to the
extent of the principal amount of any funding requested by NY Branch
and funded from proceeds of the SCG Facility.
9. This letter shall constitute a Loan Document for all purposes under
each of the Credit Facilities.
10. Except as expressly modified herein, all provisions of the Credit
Facilities and of all other instruments, documents or agreements
delivered by Homestead in connection therewith, including all letter
agreements incorporated therein, shall remain in full force and effect.
<PAGE>
11. Except as otherwise specifically set forth herein, the failure of
NY Branch and other lenders to insist upon strict compliance with any
terms or conditions of the Credit Facilities shall not be considered a
waiver or release of such terms or conditions nor limit the right of NY
Branch and other lenders to insist upon strict compliance with such
terms and conditions and any other terms and conditions of the Credit
Facilities and any other instruments, documents or agreements delivered
in connection therewith. No provision of the Credit Facilities may be
amended or modified, except by an instrument in writing signed by the
party to be charged.
If this letter correctly sets forth your understanding, please so
indicate by signing below.
Very truly yours,
with respect to all of the Credit Facilities:
Commerzbank AG, New York Branch
By:______________________________
Name:
Title:
And by: _________________________
Name:
Title:
Commerzbank AG, Los Angeles Branch
By:______________________________
Name:
Title:
And by: __________________________
Name:
Title:
<PAGE>
with respect to the Suburban Working Capital Facility
and the Bridge Facility only:
Wells Fargo Bank, National Association
By:______________________________
Name:
Title:
with respect to the Suburban Working Capital Facility only:
Chase Bank of Texas, N.A.
By:______________________________
Name:
Title:
BankBoston N.A.
By:________________________________
Name:
Title:
AGREED TO AND ACCEPTED
WITH RESPECT TO ALL OF THE CREDIT FACILITIES:
Homestead Village Incorporated
By:_______________________________
Name: David C. Dressler, Jr.
Title: Co-Chairman
AGREED TO AND ACCEPTED
WITH RESPECT TO ALL OF THE CREDIT FACILITIES:
Security Capital Group Incorporated
By:______________________
Paul E. Szurek
Chief Financial Officer
<PAGE>
March 18, 1999
Commerzbank AG, New York Branch Commerzbank AG,
Los Angeles Branch Wells Fargo Bank,
National Association Chase Bank of Texas, N.A.
BankBoston N.A.
c/o Commerzbank AG, New York Branch
2 World Financial Center
New York, New York 10038
Homestead Village Incorporated
2100 RiverEdge Parkway
Atlanta, Georgia 30328
Re: Subscription Letter Agreement (the "Subscription Agreement"), dated
June 16, 1998, from Security Capital Group Incorporated ("Security
Capital") to Homestead Village Incorporated ("Homestead"), including the
form of Homestead Village Convertible Subordinated Debenture attached as
Exhibit A to the Subscription Agreement (the "Debenture")
Ladies and Gentlemen:
This will confirm our agreement as follows:
1. If Homestead, prior to any purchase by Security Capital of Subordinated
Debentures under the Subscription Agreement, offers (an "Offering")
pursuant to a registered public offering or private placement, other than
pursuant to an employee or other stock option or incentive plan,
$200,000,000 or more of common stock, preferred stock or other equity
securities or combinations or units of equity securities (the AOffered
Securities@), Security Capital's obligations under the Subscription
Agreement shall be reduced to the extent that parties other than Security
Capital purchase greater than $20,000,000 of the Offered Securities.
2. The second sentence of paragraph 3 of the Subscription Agreement shall be
deemed to be amended and restated as follow:
"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 in accordance with the terms of the
Subordinated Debenture."
3. The penultimate sentence of Section 3.01 of the Debenture shall be deemed
to be amended and restated as follows:
<PAGE>
"The Company may redeem, or exchange, debentures prior to the
90th day after the Issue Date only with proceeds of, or with,
shares of Preferred stock or Common Stock."
4. Section 5.01(c) of the Form of Convertible Subordinated Debenture shall be
deemed to be amended and restated as follows:
"(c) The Conversion Price shall be equal to the lowest of (i)
$13.931 per share, (ii) the Fair Market Value of the Common
Stock on the Issue Date, and (iii) the Fair Market of the
Common Stock on the Mandatory Conversion Date."
Please execute a copy of this letter and return it to Security Capital
to acknowledge your agreement with this letter.
Sincerely,
SECURITY CAPITAL GROUP INCORPORATED
By:____________________________________
Name:
Title:
ACKNOWLEDGED AND AGREED:
HOMESTEAD VILLAGE INCORPORATED
By:_______________________________________
Name:
Title:
COMMERZBANK AG, LOS ANGELES BRANCH
By:_______________________________________
Name:
Title:
By:_______________________________________
Name:
Title:
<PAGE>
COMMERZBANK AG, NEW YORK BRANCH
By:______________________________________
Name:
Title:
By:______________________________________
Name:
Title:
WELLS FARGO, NATIONAL ASSOCIATION
By:_____________________________________
Name:
Title:
CHASE BANK OF TEXAS, N.A.
By:___________________________________
Name:
Title:
BANKBOSTON N.A.
By:___________________________________
Name:
Title:
<PAGE>
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. 333-67039, 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 March 31,
1999, which includes our report dated April 23, 1999 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
April 23, 1999
<TABLE> <S> <C>
<ARTICLE>5
<MULTIPLIER>1
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> MAR-31-1999 MAR-31-1998
<CASH> 16,943,000 20,205,000
<SECURITIES> 0 0
<RECEIVABLES> 7,036,000 2,900,000
<ALLOWANCES> 319,000 80,000
<INVENTORY> 0 0
<CURRENT-ASSETS> 23,035,000 23,460,000
<PP&E> 1,198,039,000 861,244,000
<DEPRECIATION> 42,444,000 23,450,000
<TOTAL-ASSETS> 1,257,332,000 927,897,000
<CURRENT-LIABILITIES> 250,080,000 128,456,000
<BONDS> 0 0
0 0
0 0
<COMMON> 382,000 382,000
<OTHER-SE> 438,697,000 484,931,000
<TOTAL-LIABILITY-AND-EQUITY> 1,257,332,000 927,897,000
<SALES> 0 0
<TOTAL-REVENUES> 49,022,000 27,528,000
<CGS> 0 0
<TOTAL-COSTS> 42,591,000 23,159,000
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 11,316,000 2,970,000
<INCOME-PRETAX> (4,731,000) 1,688,000
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (4,731,000) 1,688,000
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> (14,230,000) 0
<NET-INCOME> (18,961,000) 1,688,000
<EPS-PRIMARY> (.49) .05
<EPS-DILUTED> (.49) .05
<FN>
Certain amounts for the three month period ended March 31, 1998 have been
reclassified to conform to the 1999 presentation.
</FN>
</TABLE>
